The food business blog from Dean Best, just-food.com

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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When business is like a trip to the dentist
8th February 2010 12:13

"I would liken it to a root canal."

Kraft Foods boss Irene Rosenfeld clearly did not enjoy her meeting with Peter Mandelson last week. The UK Business Secretary asked to meet Rosenfeld in a bid to extract assurances over UK jobs after the US food giant sealed its takeover of Cadbury.

As you'd expect, Rosenfeld gave no such assurances - why should she? - although when she addressed Cadbury staff later in the week, she did publicly admit for the first time that jobs would be lost as Kraft absorbs the Dairy Milk maker.

With hundreds of millions of dollars in synergies to pursue, the prospect of redundancies comes as little surprise. Rosenfeld tried to rally the troops by setting her sights firmly on the "knuckleheads" at her nearest competitor - and dubbing 2010 the year of "BMW" - Beat Mars Wrigley.

The big question (and, while we're here, a big thanks to all those who took part in our survey on the Kradbury deal) will be whether Kraft's pursuit of synergies means cuts to brand-building, sales and marketing - key elements in the company's bid to fend off Mars and Wrigley and remain the world's largest confectioner.

Food makers the world over sometimes likely compare meeting their retail customers to a trip to the dentist. In the UK last week, a new code designed to govern relations between suppliers and retailers went live - and some on both sides were not happy.

While the boss of frozen food retail specialist Iceland labelled the code a "complete waste of time", the head of the National Farmers Union claimed grocers had used the run-up to the dawn of the new code to pursue "bully-boy tactics".

In the days leading up to the introduction of the code, NFU president Peter Kendall said he had heard claims of retrospective payments and changes to trading terms that all added up to some of the most "unreasonable demands" he had seen. The possible launch of an ombudsman to oversee the code will be just as controversial.

One of 2009's most public supplier-retailer spats was between Unilever and Belgium-based retail giant Delhaize. After a row over pricing led to hundreds of Unilever products being delisted, the two sides called a truce and Delhaize reinstated the company's brands. All's well that ends well?

Unfortunately for Unilever, the Delhaize delisting was the least of its problems in Western Europe in 2009. Volumes in the region slipped and margins fell, with Unilever attempting to boost sales through higher marketing investment.

Of course, certain markets in Western Europe have been hit hard by the recession but some industry watchers were disappointed that Unilever's marketing spending had seemingly failed to pay off. Unilever chief Paul Polman himself admitted the company has a "long way to go" in the region when he published the group's annual results on Thursday.

Analysts gave Polman a resounding thumbs-up for his first year in charge but revitalising the Flora-to-Knorr maker's business in Western Europe will be key to whether the Dutchman's second year is seen as a success.

Canadian retail's big fish takes lead on sustainability
5th February 2010 14:02

Sustainability may have slipped down the list of priorities at some food manufacturers and retailers during the downturn but there is regular evidence that parts of the industry are still very committed to the issue.

This week, Loblaw, one of Canada's largest retailers, has made another move to encourage consumers to opt for sustainably-sourced fish.

Last year, the company said it would sell only sustainably-sourced fish by 2013 and told just-food it was pursuing some of the most "aggressive" practices seen among North American retailers.

As part of that programme, Loblaw will leave empty seafood-counter trays where fish identified as "at risk" was once stocked.

It's an interesting move and one that should have a striking visual impact for consumers, who, NGOs argue, are increasingly confused at how retailers and manufacturers label sustainable seafood.

Green campaigners the WWF is watching the issue of sustainable seafood very closely. Last month, the pressure group slammed seafood labelling schemes for being too confusing for consumers.

And even the Marine Stewardship Council's programme, which scored the highest scores from the WWF, was not exempt from criticism.

The WWF has welcomed Loblaw's move. "Loblaw is showing globally significant leadership on this critical issue," admits Gerald Butts, president and CEO of the Canadian office of the WWF.

However, as the WWF and other NGOs would argue, a lot of work is needed on issues like transparency and standardisation to give shoppers more confidence that the fish they buy has been sustainably sourced.

Kraft buys Cadbury - but what do YOU think?
2nd February 2010 19:45

And so, with a 200-word formal statement, comes the end of Cadbury as an independent company.

The UK confectioner, owner of brands from Dairy Milk and Wispa chocolate to Halls candy and Trident gum, is now part of US food giant Kraft Foods.

In an announcement this evening (2 February), Kraft said investors representing over 71% of Cadbury's outstanding shares had accepted the bid.

"The combination of Kraft Foods and Cadbury creates a global powerhouse in snacks, confectionery and quick meals," said Kraft chairman and CEO Irene Rosenfeld.

But what do you think? Eyes will now turn to what the mega-deal will mean for both businesses - and for the wider competitive landscape in confectionery.

How will Cadbury fare under Kraft's ownership? Will Cadbury transform the Kraft portfolio? What will be the impact on the rest of the confectionery sector? We're keen to hear your views.

We've put together a short questionnaire, which will only take a few minutes of your time. Once the responses have been compiled, I will send you the results.

The survey is live now, so please dive in and have your say.

M&S's May Day celebration
1st February 2010 16:32

And so, UK retail's favourite Dutchman will take the wheel at Marks and Spencer in May.

The news today (1 February) that Marc Bolland has agreed a release date with former employer Morrisons to join M&S enables both businesses to firmly look to the future.

Morrisons has Bolland's successor in place and M&S will be hoping the former Heineken executive can have a similar effect on its business as he had on its Bradford-based rival.

Bolland is likely to first address the media and the invest community in late May when M&S unveils its annual results, although retail watchers will most probably have to wait until later in the year to hear what the new boss has in store for the business.

A series of question marks hang over M&S, especially after its January trading update sent shares tumbling. Concerns remain over the impact M&S's value strategy is having on margins.

Nevertheless, there were no doubt smiles at M&S's London HQ at today's announcement, with the retailer expressing its "delight" that Bolland will be in the hot seat from 1 May.

And with staff at one UK M&S store facing proposals that could see them formally warned for not smiling at customers, perhaps the sight of Bolland in the weeks to come will bring some much-needed light relief to the shop floor.

Wal-Mart is making waves
1st February 2010 11:57

The giant has stirred. Wal-Mart, the world's largest retailer, has launched a swathe of initiatives to slash costs and drive margins - programmes that will undoubtedly put the spotlight on its supplier base.

The US behemoth is looking to consolidate how it sources products around the world, is shaking up its managment structure in the US in a bid to drive growth in 2010 and is creating a worldwide, e-commerce platform rather modestly dubbed Global.com.

Wal-Mart's worldwide sourcing plan is the most eye-catching initiative, with the company teaming up with sourcing giant Li & Fung, which will improve the retailer's knowledge of local suppliers.

Wal-Mart said its plans, which also include the formation of a number of merchandising centres, would help the business "leverage the company's global scale".

"The newly-established global merchandising centres represent the largest and most important element of our new sourcing strategy," Wal-Mart executive Eduardo Castro-Wright explained.

Suppliers may have concerns about the moves but Wall Street was happy. Analysts at Goldman Sachs upped their rating on Wal-Mart's shares and claimed the plans are "game-changers" that will see the retail titan cut costs and improve its route to market.

And, interestingly, a consequence of Wal-Mart's restructuring in the US could be a push into smaller stores, something the company has flirted with in the past, with its Marketside test stores in Phoenix.

The development of smaller stores is a central plank of strategy at Morrisons, the UK's fourth-largest grocer. Morrisons, the fastest-growing of the Big Four in the UK in recent months, has already opened a slew of smaller stores as it expands throughout the country. And the development of those outlets was likely to be a key factor in the appointment of its new chief executive last week.

Dalton Philips will join Morrisons from Loblaw next month and the Irishman's experience at the Canadian retailer - and its series of different formats - could prove a useful feather in the UK grocer's cap. The UK convenience channel remains fiercely competitive, with the growth of The Co-operative Group post-Somerfield and Sainsbury's well-publicised plans for expansion.

The investment community gave the appointment a relatively warm welcome, with analysts apparently not holding Philips' time at Wal-Mart's doomed venture in Germany against the 41-year-old.

However, with some questioning whether Morrisons can sustain its recent growth without significantly diversifying its business, it will be fascinating to see in which direction the company's new CEO will take the business.

Here's a snapshot of 2010
29th January 2010 14:34

Four weeks into 2010 and I can imagine you are as swamped as we are here at just-food.com.

Caution is the watchword despite the world's largest economies, including the UK (just), moving out of recession and into a technical recovery.

What will this mean for the food industry?

We've teamed up with Euromonitor to provide a briefing on the outlook for the industry, including the claim from Euromonitor that global retail sales by 2012 will be 5% lower than predictions made prior to the financial crisis.

To access the briefing, you need to be a full subscriber of just-food.com (it's just part of the service).

To sign up to just-food and receive a whole lot more, including daily news, analysis and comment on the latest news on the food industry, click here.

Plug over.

Morrisons, A&P ring the changes
28th January 2010 15:37

Raised eyebrows on both sides of the Atlantic over the last 24 hours with leading retailers in the UK and the US both appointing new chief executives.

First, under-fire US retailer A&P announced it had poached Ron Marshall, the CEO of bookseller Borders Group to try to breathe fresh life in the business.

Hours later, Morrisons, a retailer more over-performing than under-fire, named ex-Loblaw and Wal-Mart exec Dalton Philips as the man to try to continue the stellar growth at the UK's fourth-largest grocer.

Both appointments were a surprise. Marshall, who is leaving Borders after just a year, is waving goodbye to a business that has posted three straight quarterly losses and a company struggling to withstand competition from the likes of Amazon.

His task at A&P will hardly be any easier. The supermarket chain has been making losses since June 2008.

The business, in which German conglomerate Tengelmann and investment fund Yucaipa own significant stakes, has been run by Christian Haub, an executive from the European country, since the autumn following the departure of former president and CEO Eric Claus.

The retailer has struggled to integrate the Pathmark chain, which it bought in 2007 - with Haub then claiming the acquisition would "transform" A&P. And competition in the north-east of the US has been especially fierce.

Could it be a case of jumping from the frying pan into the fire?

Morrisons, meanwhile, is a business on fire. The UK retailer again posted market-leading sales figures after Christmas, although the investment community had been waiting for a successor to Marc Bolland - who is set for the hot seat at Marks and Spencer - to be named.

Dutchman Bolland was hired from Heineken and, once again, Morrisons has gone international.

Philips joins from Loblaw, the Canadian retail giant, in an appointment that surprised the City.

Loblaw president and deputy chairman Allan Leighton, a former top executive at Asda, praised Philips' tenure at the retailer and said the 41-year-old's move to Morrisons was a reflection on the "progress" made at the business.

Nonetheless, Philips was an executive at Wal-Mart's operations in Germany, a venture that ended in 2006. Almost four years ago, the world's largest retailer quit the market after deciding it could not make the inroads it wanted in the fiercely competitive market.

With Morrisons facing big decisions on whether to invest more in non-food or break into online retailing, investors will be watching the next stage in the retailer's development closely.

Sadness over Cadbury isn't wrapped up in the Union Jack
22nd January 2010 15:25

It's hard to describe the affection with which Cadbury is held by the UK public to those looking in from abroad. Continental Europeans, in particular, don't hold much respect for British chocolate, viewing it as an inferior version of their artisanal product.

But the British public does love Cadbury and you only have to read the press coverage of the company board's decision to sell up, to see that Dairy Milk is held as a national institution.

The media reaction to the news and the various vox pops that have inevitably accompanied the event have been overwhelmingly negative.

From abroad, I can see this might be viewed as simple nationalism. But that would be to misunderstand the British perception of free trade and its tolerance of once great British companies falling into foreign hands.

Maybe it's because I am a strong supporter of the free market and British myself, but in my opinion, there are few countries that really do back up their rhetorical support of free trade with actual action - or largely a lack of it in the case of tariffs and takeover laws - than the UK.

As Kraft Foods made its move on Cadbury, there were no speeches in Parliament calling for a change in the law to protect it - such as happened in France when it was mooted that PepsiCo may try and buy Danone. And, there were no outbreaks of hostility that bordered on the xenophobic, which have been a symptom of other recent cross-border deals elsewhere in the world.

What there was, if I can be so arrogant as to try and sum up the mood of a whole nation, was a sense of sadness and disappointment. Sadness that this particular brick of the UK's manufacturing past had been lost and now faces at least a degree of dismantling. And disappointment that Cadbury's board simply did not fight harder to stay independent.

As I say, neither of these sentiments were overwhelmingly driven by nationalism. We here in the UK have grown pretty used to seeing British companies move into foreign hands and many, we realise, are run a darn sight better as a result. Personally, it doesn't matter to me that the Scotch I drink is owned by a French company or the UK-branded car I drive is actually American. The sadness here is an isolated incident.

I have already explained that I am a rampant free marketeer and I believe that the majority of the UK public are at least resigned to the inevitable consequences of being a part of the global community. And yet, there is something about this particular deal that rankles, which, I believe, has driven the public's distaste for it.

The answer lies in Cadbury's history, which has been well documented in recent weeks. The Quaker roots produced a company with its employees' interests at the heart of its business. The Bournville site in the centre of Birmingham remains a testament to that pioneering vision.

And yet, Cadbury's employees are likely to be the overwhelming losers in all this. Cadbury's shareholder will make a nice profit. Its board will no doubt be rewarded for holding out long enough to push up the final bid. And Kraft walks away with its prize - although whether it proves to be a wise acquisition for a company that has taken on a big lump of debt remains to be seen.

But with Kraft stretching itself to such an extent, cuts will have to be made and as the US company has shown in the past - notably with Terry's - it does not hold much value in local and national sentiment. If it makes sense to move production to Eastern Europe, I'd bet that's where we'll see our Wispa bars coming from soon enough.

Companies come and go. Job cuts are made and new job opportunities open up. But what has been lost here is a company founded upon a noble and at the time revolutionary principle that has been ignored and ultimately squashed in the pursuit of a quick buck.

But what rankles even more is the nagging feeling that it needn't have happened. Cadbury's board had done an excellent job in convincing the business press and the analyst community that it could successfully fight off this challenge.

It seems they did a less impressive job convincing themselves.

Chris Brook Carter, publishing director.

Your Comments

I wonder if we will ever find out exactly how much the Board members, their advisors and all the financial hangers-on personally made from this deal. I guess in the end, personal financial gain counts for more than the noble feeling that they kept a company independent. I also suspect the Board were under considerable pressure from the people in the City who would make millions in bonuses if the deal went through.
Neville Merritt

From Harry Ramsden's to 'Harry' Krishna?
21st January 2010 16:13

Fish and chips may be a distinctly British dish - but food lovers in Beijing or Bangalore could soon be swapping their Peking duck or curries for plaice or cod.

Harry Ramsden's, perhaps the best-known fish and chip shop chain in a sector swimming with independents, has been sold to UK entrepreneur Ranjit Boparan, who is eyeing the markets of India and China for expansion.

Boparan is best known in our channel for heading Boparan Holdings, the UK food group behind poultry business 2 Sisters, but he is a big fish in the restaurant trade, having bought the Fishworks chain last year.

Mr Boparan's wants to build Harry Ramsden's presence in the UK, where the business has 36 shops in a country of over 10,000 fish and chip outlets.

However, like many in business, he is looking east for further expansion.

"India and China are seen as ripe for growth," a spokesman told us this afternoon (21 January). "In India, for instance, the biggest protein is fish."

The spokesman said expanding east was very much a "medium-term" ambition. "We've got to get it right here first," he insisted.

Nonetheless, Boparan is aiming to hook consumers in China and India with a classic British dish.

Reasons to be cheerful - one, two, three
20th January 2010 15:20

With a film hitting screens in the UK chronicling the life of punk legend Ian Dury, just-food thought it time to cast aside the gloom seen on these pages in recent days and outline some reasons to be cheerful.

As the just-food team digested news of Kraft's successful bid for Cadbury yesterday (19 January), I was in Glasgow speaking to Scottish food and drink manufacturers at an event hosted by the Scottish Food and Drink Federation.

Now, our pessimism about the prospects for UK grocery in 2010 has been covered at length since the New Year.

However, as I told the delegates in Glasgow, while we believe 2010 will be as challenging as 2009, all is not lost.

it could be argued that shoppers have had enough of cutting back on food and see food as a way of treating themselves – while cutting back on everything else.

Demand for healthy food has not been dampened by recession and the convenience food makers among you will be heartened to hear that demand in that category is on the rise again.

Pressure on household spending in such challenging economic conditions means value will be vital for consumers. That said, value does not just equal price.

Morrisons, for instance, has been a winner in the recession not just because of its positioning at the value end of the spectrum but also because of its investment in range - and its success in communicating its commitment to local food and to the provenance of food.

Buying local remains key for consumers, perhaps even more so in times of recession. Some see buying local as a means of helping their local economy. And other so-called ethical considerations - Fairtrade and animal welfare - have withstood the recession and show no signs of abating.

So, while 2010 will be very tough, there are opportunities available for growth.

Now, let's put The Smiths on....

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