- The food business blog -
Dean Best's unique web log on the global food industry, key events, people and his own daily experiences. If you would like to offer your comments, opinions, suggest topics or just have a good rant, please feel free to email: Dean Best. |
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Kirin looks to milk overseas growth
26th August 2008 15:40
The reputation of Kirin Holdings as one of Asia-Pacific's more dynamic food and beverage companies has been enhanced further after it moved a step nearer buying Australia's Dairy Farmers.
Kirin's local unit, National Foods, has agreed a deal with Dairy Farmers following a protracted takeover battle that, at different times, included rival interest from the likes of Fonterra and Parmalat.
The A$910m (US$774m) deal remains subject to approval from Dairy Farmers' farmer-shareholders and chief executive Rob Gordon was keen to point out the benefits that the deal will bring to the co-operative's members.
"The proposal will allow shareholders to reap the rewards of significant sector rationalisation. In turn, this will lead to a stronger and more vibrant dairy industry - one that provides ongoing benefits for suppliers," Gordon said.
For Kirin, the deal would give it yet more exposure overseas as it battles a stagnant domestic market, particularly in beer. Two years ago, Kirin said it wanted to see a "quantum leap" from its business by 2015, with increasing emphasis being placed on expanding its overseas operations. Last year, the company snapped up National Foods and now, with a deal in sight over Dairy Farmers, Kirin looks set to milk the Australian market once again.
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Could food scare blow Maple Leaf off course?
22nd August 2008 19:21
Michael McCain, boss of Canadian food giant Maple Leaf Foods, calls it "Destination 2010".
Destination 2010 is the company's project to overhaul its business, restructuring its meat and bakery businesses in a bid to focus on its brands and boost growth.
The overhaul has proved problematic in the face of soaring commodity costs and last month, after a slump in first-half earnings, analysts were speaking of a “very challenging” short-term outlook for the company.
This week, that outlook has got cloudier amid speculation that the company could be involved in a listeria outbreak in its domestic market. Listeria has been detected in two Maple Leaf products and the company has closed a plant in Toronto as it reviews its food safety procedures. More than a dozen people have fallen ill and there has been one confirmed fatality – although there has yet been no confirmed link to Maple Leaf.
Nevertheless, the episode could shake consumer confidence in Maple Leaf, just when it is going through its major restructuring process.
The threat to Maple Leaf could be much worse if a link is identified and, although the company should be praised for its proactive steps so far, it remains to be seen just how much the outbreak could dent its reputation among consumers.
(Editor's note: just-food is closed on Monday 24 August. Public holiday here in the UK. Best get the raincoat out).
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Retail giants look to Russia with love
20th August 2008 18:44
It may be August but speculation over who is next looking to tap into the world's emerging retail markets continues to rumble on.
Last week, it was India's turn in the spotlight after Tesco's announcement of its tie-up with local conglomerate Tata Group.
This week, it's Russia's turn to take the headlines with rumours of further investment from Germany's Rewe and the ongoing speculation over who will buy a stake in local retailer Lenta.
The companies involved are perhaps naturally keeping their cards close to their chests but the speculation demonstrates how attracted the multinational retailers are to Russia's potential.
And with Russia's retail sector forecast to grow by 20% a year between now and 2010, no wonder the world's retail giants are watching the country with more than just a passing interest.
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Emerging markets tempt Tesco; when will Heinz nibble?
18th August 2008 12:59
The highly-anticipated news that Tesco is entering the Indian retail sector came last week, when it emerged that after three years of searching the UK retailer finally found its ideal match in local partner Tata Group.
“We’ve spent a long time looking for the right partner, and we believe that we have found it in Tata,” a spokesperson for Tesco told just-food on Tuesday (12 August).
Tesco has entered into an agreement with Trent, the retail arm of Tata, which will see it provide backroom support for the expansion of the Star Bazaar hypermarket chain.
Tesco has taken a double-pronged approach to its assault on Indian retailing. It will also open its own wholesale cash-and-carry business to provide a range of fresh food, grocery and non-food products to small retailers, restaurants, kirana stores and other business owners.
The potential offered by the US$202.6bn Indian food retail sector is huge, making it a tempting prize for international corporations. However, the country’s stringent rules on foreign direct investment (FDI) have barred multinationals from entering in a manner of their choosing.
It is likely that Tesco would have preferred to debut in India by starting up or acquiring a consumer retailer and it is no secret that the group hopes to establish a consumer retailing business in India if and when the country’s rules on FDI change.
This deal represents the next best option. It provides a platform for future growth, an opportunity to learn about the market and enables it to establish a supply chain in the country. By entering the wholesale market and forming links with Tata, Tesco is setting the stage for future growth.
In other news, Heinz CEO William Johnson created some waves last week when he revealed that the US ketchup giant is targeting a 6% increase in sales over the next two years. This, Johnson said, would drive operating income growth of 6-7% and EPS growth of 8-11%.
Addressing investors at Wednesday’s AGM, Johnson unveiled Heinz’s two-year growth plan. The company said that emerging markets were going to become increasingly important to fuel growth, while innovation in the health and wellness category would drive sales gains in developed markets.
Johnson also said that the company has built up a sizeable war chest to fund value-added acquisitions in both developed and emerging markets. In particular, Johnson’s hint that Heinz would be interested in buying Campbell Soup Co. created quite a stir.
While Campbell’s products would fit neatly in Heinz’s portfolio and a merger of the two companies would allow the group to leverage economies of scale, it remains to be seen whether Heinz is seriously considering making a move on Campbell. Regardless of whether this particular deal materialises, with a bullish outlook and a sizeable acquisition fund, we can expect to see considerable acquisitive activity coming out of Pittsburgh in the months to come.
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Double+ Britain
15th August 2008 16:00
According to a leading UK government advisor, the threat to the nation posed by obesity is as great as that of terrorism.
The BBC reported yesterday (14 August) that Durham University public health expert Professor David Hunter said ministers should be taking "bold action" now, before we become a nation of fatties and the NHS is overwhelmed.
And, if Hunter had his way, this action would include forcing manufacturers to cut salt, fat and sugar from products.
"The government was quick to move for things like ID cards or 42-day detention without trial - now it needs to show similar leadership in public health. The threat to our future health is just as significant as the current security threat," Hunter said.
So, according to Hunter it isn’t enough that the government is eroding our civil liberties to ‘protect us’ from terrorism. The government should also have control over what we put in our bellies.
Responding to criticism being levelled at the food industry over rising obesity levels, companies have voluntarily reformulated many of their products and introduced low salt, fat and sugar alternatives.
But ultimately, what consumers choose to eat should remain in their hands. If the government is going to take action on obesity, it should raise public awareness of dietary issues and educate people about the evils of trans fats etc in an accessible fashion.
To legislate what can and cannot be eaten is a draconian measure that pushes the idea of the nanny state a little too far. Are we destined for an Orwellian future where The Ministry of Plenty dictate what we eat? Double plus good though!
To read the BBC's full report, click here.
Katy Humphries, Deputy Editor
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Cinema snobs snub popcorn
13th August 2008 17:48
I was quite surprised to learn yesterday (12 August) that increasing numbers of independent cinemas are banning popcorn.
The move comes in a bid to win audiences who are supposedly put off by the strong smell and noisy munching produced by the traditional movie accompaniment.
Picturehouse, which operates 19 cinemas across the UK, is experimenting with the idea of banning popcorn at selected showings. Going one step further, Everyman Cinemas has decided to stamp out popcorn from the 18 venues it operates.
Indeed, Everyman owner Daniel Broch, told The Telegraph: "I will de-popcorn every new venue I acquire. It has a disproportionate influence on the space in terms of its overwhelming smell, the cultural idea of it and the operational problems created by the mess it produces."
I love popcorn: salty not sweet. Can’t get enough of the stuff. But I can appreciate that not everyone finds the smell as appealing as I do. The noise of rustling bags and loud chewers can be a bit irritating in the tenser parts of a film. And I’m sure that for the cinema employees it isn’t much fun to get it out of the carpet after each showing.
But Broch goes on to say: "There is no way in which it fits with the culturally sophisticated brand I wish to sell."
To me, this seems a little snobbish to say the least. After all, if the giant vats of popcorn sported at the local multiplex lack sophistication isn’t that more about presentation rather than the product itself?
Much to my relief, it seems that this anti-popcorn sentiment won’t sweep the messy snack from nation’s movie theatres.
Quite simply, popcorn is a goldmine for cinemas. With moviegoers paying a fiver for a carton of those tasty popped kernels, the cinemas can purportedly make as much as 90 pence for every pound charged. With mark-ups like that, I think that I’ll be free to chow-down on my favourite salty snack to my heart’s content.
See The Telegraph’s full article here.
Katy Humphries, Deputy Editor
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Retail riptide
11th August 2008 17:38
Last week’s headlines were once again dominated by evidence that the global credit crunch is continuing to take effect.
The latest US retailer to issue a downbeat set of results is Whole Foods Markets, who posted a 30.9% drop in net income to US$33.9m. The up-scale natural and organic retailer said that the economic slowdown has hit earnings, with consumers looking to cut spending while fuel and food prices continue to rise.
In this climate, Whole Foods’ moniker of the “Whole Paycheque” and its reputation for offering expensive luxury items is proving a millstone around the company’s neck.
Whole Foods has responded to these troubled waters by battening down the hatches. The company will ditch its dividend and slow down spending and store expansion in the near-term.
While investors looking for quick gains may not welcome this news – and Whole Foods’ share price has dipped nearly 50% in the past year – it certainly makes sense in terms of the group’s long-term growth. Whole Foods is still digesting its Wild Oats acquisition and stepping down expansion during a period of consumer recession sounds like good common sense.
Meanwhile, last week our pages also featured news from the world of retail Down Under, when the Australian Competition and Consumer Commission handed down its long-awaited inquiry into the grocery market.
The ACCC concluded that Australia’s retail sector is “workably competitive”. The watchdog recommended a number of legislative changes to increase competition, including the introduction of unit pricing, changes at a federal level to the Horticulture Act and changes at state level to zoning and planning restrictions. The Australian government has also launched a grocery price comparison site.
The lack of any real criticism of Woolworths’ and Coles’ market dominance has opened the ACCC up to accusations that the report is a whitewash for the powerful supermarket duopoly.
Australian consumers have questioned the value of the GroceryChoice website, and already it is being redesigned by the government. Australian farmers and producers have chastised the ACCC for its failure to examine issues in the supply chain and revoked its claim that farm-gate prices have risen at a similar rate to retail prices. And today (11 August) a Senate hearing on unit pricing was addressed by independent supermarkets, who said that their businesses would suffer were the measure to be introduced.
While the ACCC inquiry into the sector has drawn to a close, it is clear that the issue is a political hot potato and the debate looks set to continue.
Katy Humphries, Deputy Editor
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High spirits in the low countries defy global downturn
8th August 2008 11:08
They're a cheery bunch, those Dutch.
Whether it's the vibrant support of the country's football fans, or the relaxed atmosphere of the country's capital Amsterdam, there is definitely something of a joie de vivre about the Dutch.
They're also apparently pretty relaxed about the global economic downturn. According to research giants Nielsen, the Netherlands is one of the few countries where consumer confidence is on the rise. Over the last six months, consumer confidence has risen by 5%: only the Taiwanese are more optimistic.
Alas, that confidence is in short supply around the world. Nielsen research claims that global consumer confidence has fallen to a record low, with 56% of online consumers believing their country is in a recession.
Alongside New Zealanders and Latvians, it seems the biggest pessimists are in the US. Consumer confidence across the pond is at its lowest level since 1992 and the days of Clinton's refrain: “It's the economy, stupid.”
As we've seen with the problems at Whole Foods, non-discount retailers are “feeling the pinch”, according to Nielsen. Private-label sales are growing but only as commodity cost rises fuel inflation; volume sales have dipped slightly.
All is not doom and gloom however, says Nielsen. “There are opportunities in a slowing economy to lead the recovery,” the researchers say. “Category-specific opportunities exist to maximise in-store efforts. For products that are performing strong and showing immunity during a recession, manufacturers and retailers in these industries have the opportunity to increase product exposure even further.
“For products at the other end of the spectrum, companies would be well-advised to target their marketing efforts to shore up performance and maintain traction during tough times.
“Now is the time to plan for recovery.”
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Whole Foods in a hole
5th August 2008 12:43
As in the UK, there are signs that the more upmarket retailers in the US are coming under increasing pressure.
Marks & Spencer's problems in the UK are well-documented and, despite enjoying relative success, local rival Waitrose has made moves to publicise the fact that it too can do value.
Across the pond, natural and organics retailer Whole Foods Market has built a nationwide business on the back of growing demand for its wares.
That demand, however, has weakened in recent months amid the credit crunch, leaving Whole Foods fighting to throw off its nickname of 'Whole Paycheque'.
An article in the New York Times over the weekend highlighted how Whole Foods is trying to convince US consumers on a budget that they can find value in its stores.
“I'm getting a little tired of that tag around our neck,” Whole Foods co-president Walter Robb told the newspaper, referring to the Whole Paycheque moniker. “We are a lot more competitive than people give us credit for. We challenge anyone on like items.”
One challenge facing Whole Foods in the battle for price-conscious Americans could reach the courtroom after it emerged Ahold-owned chain Stop & Shop has filed a lawsuit claiming copyright violation.
Stop & Shop has accused Whole Foods of mimicking its 'Real Deal' campaign advertising a swathe of price cuts at its stores.
With its merger with Wild Oats also under a legal cloud and its UK unit posting an operating loss Whole Foods is clearly facing challenges on multiple fronts.
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Is localisation the new globalisation?
4th August 2008 15:38
Few terms can have become so synonymous with the rampant changes to the world community that we have seen in the last 25 years as ‘globalisation’. A product of the revolution in communications and the economic boom, at times it seemed that we would all eventually be speaking one language, whilst trading in one currency, shopping at the same supermarket, whilst wearing the same branded clothes.
The economic slowdown has already taken some high-profile casualties. Is the trend of globalisation likely to be next? That’s what a piece in today’s New York Times asks.
“The world economy has become so integrated that shoppers find relatively few T-shirts and sneakers in Wal-Mart and Target carrying a “Made in the USA.” label. But globalisation may be losing some of the inexorable economic power it had for much of the past quarter-century, even as it faces fresh challenges as a political ideology,” the piece says.
The argument is that cheap oil, which has quite literally greased the wheels of inexpensive transportation links across the world, may not return anytime soon, making the search for cheaper labour in far off locations pointless.
In addition “rising concern about global warming, the reaction against lost jobs in rich countries, worries about food safety and security, and the collapse of world trade talks in Geneva last week also signal that political and environmental concerns may make the calculus of globalization far more complex”, the New York Times article said.
Whilst we are unlikely to see globalisation go into complete reverse, there are already numerous examples of companies looking to move production of materials and goods closer to home to save on costs.
With the cost of shipping a 40-foot container from Shanghai to the US having risen to $8,000, compared with $3,000 early in the decade perhaps we are about to enter into a new phase of localisation.
The full New York Times article
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Maple Leaf Foods Canada Maple Leaf's Michael McCain's only destination should be out the door with no severance. Maple Leaf Foods has been tanking on the TSE since April while other corporations in this sector in Canada and the USA have been in favour. Now this already failing company has the death of several Canadians on its plate. Maple Leaf Foods is the same company that over the last several years has very aggressively lobbied the Feds for more stringent regulations in the meat and poultry business, eliminating hundreds of small farms and meat poultry processing businesses. Of course Michael McCain Of Maple Leaf Foods participated in that act for no other reason other than to protect their Brand. Health Canada must "shut Maple Leaf down"
steve, Canada