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The ongoing shift in the balance of power between developed and emerging economies was highlighted last week by two announcements from General Mills, the US food giant.
On Tuesday (22 May), the Haagen-Dazs maker announced plans to cut 850 jobs. The move comes as consumer packaged goods companies battle tough markets in the West. General Mills is a case in point. In February it, issued a profit warning after admitting volumes in the US had been "weak". However, there are few signs trading conditions are improving and so, with growing the top line proving a challenge, companies are looking to cut costs to bolster profits.
Tellingly, General Mills also said its move would "support future growth strategies" and, 48 hours later, came proof of one area in which it sees growth - emerging markets. On Thursday, General Mills announced a deal to buy Brazilian food manufacturer Yoki Alimentos, a transaction that, it said, would almost double its annual sales in Latin America.
Reappraising your business in the face of challenging trading conditions in the West and the buoyant growth of the BRICs markets will be vital for CPG multinationals. General Mills' US peer Heinz has already undertaken such a process. Last year, it announced plans to drive profits through increased productivity, which involved the closure of a number of manufacturing sites. Heinz has also continued its investment in emerging markets and, last week, as it announced its annual results, the company said it was "actively" seeking to expand further in markets like Brazil and China.
Elsewhere last week, it was underlined how vital Brazil and China are and will be to the production of one of the world's most important agricultural commodities - soy. Industry executives met in London to discuss the progress of the Round Table for Responsible Soy, an initiative set up to encourage the sustainable cultivation of soy. It remains early days for the scheme, with delegates at the latest RTRS annual conference outlining a number of challenges - not least the cost of encouraging soybean producers to switch to the form of the soy certified by the initiative.
The RTRS was in part set up to tackle deforestation in Brazil, one of the largest producers of soy and, despite progress, campaigners warn damage is still being done. The WWF said China and India, which cultivate their own soy, need to be encouraged to up production to make them less dependent on Brazil. The logic is clear: with richer consumers in those markets increasingly eating more meat and dairy, global soy demand is set to jump and more sustainable production and more diversified sources will be vital.
The dairy sector, meanwhile, threw up one of the industry's major news stories last week, with the deal to create what will be the UK's largest dairy processor. Arla Foods and UK milk co-op Milk Link plan to combine to create a company with annual revenues of over GBP2bn.
After Arla and Milk Link announced their plans, we interviewed the executives central to the transaction - Peter Lauritzen, head of Arla's UK operations, and Milk Link boss Neil Kennedy - who outlined the benefits they insist the deal will bring to the companies and the farmers that own both businesses. Later this week, we will take an in-depth look at the challenging UK liquid milk sector in our latest Category Crunch column. Dairy Crest, for one, will testify to how tough it is to operate in that industry after it reported annual losses last week.
Until next time...