- 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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Auchan claims success with French hypermarkets
20th November 2009 16:58
The deterioration of the French hypermarket sector is well documented.
Casino and Carrefour have both witnessed falling sales and profitability in their hypermarket businesses.
The trend, which began as sky-rocketing fuel prices prompted consumers to eschew out-of-town hypermarkets for more local supermarkets and convenience stores, continues to deepen as recession and still-rising unemployment forces French consumers to cut back on discretionary spending on non-food.
Nevertheless, both Casino and Carrefour remain dependent on the hypermarket channel, which brings in a significant proportion of their domestic sales.
In a bid to rejuvenate the hypermarket sector, Casino and Carrefour have both looked to reorganise management of their hypermarket businesses.
After posting “weak” third-quarter sales at the unit, Carrefour confirmed that it plans to replace the head of its hypermarket business, Alain Souillard, last month.
In a similar move, earlier this week Casino said it will replace Jean Duboc as head of Géant Casino in a bid to create a single management team to "broaden" relations between its hypermarket and supermarket divisions.
However, a rare interview with Auchan, an arch-rival of Casino and Carrefour, suggests that not everyone is having difficulties with hypermarkets.
Auchan, owned by the publicity-shy Mulliez family, has insisted that its hypermarket business is in good shape.
"Unlike some of our rivals, we continue to believe strongly in hypermarkets, even very big ones," division head Arnaud Mulliez told Reuters.
Indeed, Mulliez said that Auchan's hypermarket business had seen a 3% year-on-year rise in sales during October. And prospects for the Christmas season are bright, he insisted.
Although it is difficult to gauge Auchan's performance against its rivals in France, as the country's second-largest retailer does not publish its financials, if indeed its hypermarket business is going great guns, then this raises some serious questions about what Carrefour and Casino are doing wrong.
In order to regain momentum in their hypermarket businesses, both retailers will need to experiment with store layouts, loyalty schemes, categories and product ranges while also investing in price, promotion and advertising.
And if Mulliez's interview is anything to go by, perhaps they should also take a long, hard look at Auchan's recipe for success.
Katy Humphries, deputy editor
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Notes from the EU - a new customs code?
20th November 2009 15:16
The latest proposed reforms to create a harmonised and modernised EU customs code could increase duties on branded food imported from outside the EU.
They could boost the customs valuation of these goods, inflating ad valorem tariffs; one change would ban the use of the ‘first sale for export’ for valuations, where importers declare the price a foreign exporter paid to a local supplier before shipping the goods to Europe.
This could be less than the price paid by the eventual European customer, with a correspondingly lower duty.
Another change would force exporters to include royalties and licence fees covering permissions to exploit intellectual property rights in their customs valuations. These are currently excluded when exporters source from suppliers not directly demanding their payment – essentially a third party.
Under the new system, royalties and licence fees would be included in valuation of any goods attracting some kind of trademark, patent or copyright.
Any changes would - naturally - need to be discussed at length by EU officials but the impact of any reforms is worth bearing in mind.
Keith Nuthall
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Frankfurt FIE bids farewell to visitors
19th November 2009 16:00
"As we are in the B2B environment, this is the most important show of the year for us."
The words of a top executive from chocolate giant Barry Callebaut as he talked to just-food on the final day of the Food Ingredients Europe exhibition in Frankfurt.
Expectations of the event, held every two years, were perhaps a little low this year, coming as it did at the end of the most tumultuous 12 months the business environment has seen since the 1930s.
However, the exhibition halls were packed with food manufacturers looking for suppliers, ingredients and technology that would help them gain a march on their competitors.
The decision to hold this year's show in Frankfurt - a location at the heart of Europe - undoubtedly helped, with some exhibitors comparing the accessibility of the event favourably with the last edition, which was held in London in 2007.
And, despite concerns over EU health claims regulations and uncertainty over how long the downturn will last, there was an upbeat feel to the event and a feeling that the food industry, though undoubtedly challenged this year, remains resolute in its pursuit of
development.
And, as a weary just-food boards its flight to Heathrow, the aching in its feet is a sure sign of a productive few days in Germany's business centre.
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All the ingredients for a hectic Wednesday
18th November 2009 16:03
And I thought it was busy here in Frankfurt.
Earlier this afternoon, in a brief break between meetings, I nipped into the press room for a quick look at our news pages. And it seemed things have been just as hectic back in the UK.
Confirmation of Ferrero and Hershey's interest in Cadbury and the surprise announcement that Morrisons boss Marc Bolland is set to take the top job at upmarket rival Marks and Spencer grabbed the headlines.
Both stories throw up numerous questions. What will Cadbury's reaction be to the prospect of a second bid for the business? How will Kraft Foods, which has an offer on the table, respond?
And what now for Morrisons, the star of the UK high street in the last 12 months? Its shares tumbled by more than 5% today after the news that Bolland - who in September declared his "love" for the company - is to move to M&S. Shares in M&S, meanwhile, jumped by almost 6%, a sign, perhaps, that the market hopes Bolland will improve the company's performance in a similar fashion to his work at Morrisons.
Meanwhile, back here in Frankfurt for day two of this year's Food Ingredients Europe show and the crowds have grown from yesterday with the main hall housing the likes of Barry Callebaut, Cargill, DSM and Glanbia, packed out. Will the likes of Arla Foods and Danisco rue their decision not to exhibit at the event this year?
The show has been a pleasant surprise. Some of the events attended by just-food this year have had a downbeat air but this exhibition has felt pretty buoyant.
The number of visitors at the show suggests that, while not everyone is optimistic about the business and economic climate, they are determined to remain active in looking for the latest products that could help their business save money - or gain vital market share.
Cost has ranked alongside health as two of the most-mentioned themes among food ingredient suppliers. In the last year, their manufacturing customers have placed greater emphasis on cost in a bid to protect their own margins. And all the while, health remains the key trend determining investment in NPD, with ingredient suppliers facing demands to develop products to improve memory and manage weight - to name just two key trends.
However, for all the talk of recession and recovery, the industry's ingredients suppliers remain concerned about the impact that EU regulations on the health claims brand-owners can make will have on their businesses.
Speaking to exhibitors, I get the impression that, while ingredients suppliers recognise the benefits of having robust, science-backed regulations in place, they still have concerns that the guidelines will be too strict and stifle innovation.
And, as Rabobank argued on our pages yesterday, cause a hike in costs, too.
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UK...an attractive place to set up shop?
17th November 2009 11:47
Sitting on the runway at Heathrow's Terminal 1 this morning - with bright blue skies and milky white clouds overhead - reminded just-food of the pleasant surprise that was Arla Foods' announcement yesterday (16 November) - the company's plans to build a super-dairy on the outskirts of London.
In the UK, we've become used to FMCG companies either taking their investment plans elsewhere - or deciding to move production overseas (Cadbury and Diageo being two FTSE 100 firms to decide to look outside the UK in recent years - although the latter's whisky workers are revolting).
We've become used to being told that, for reasons of cost or skills, you can't make stuff in the UK.
Arla's decision proves the UK can be an attractive place to set up shop - and, while the weak pound would have helped, dairy remains one of the sectors in which the country's infrastructure is competitive.
Nevertheless, the fact that it was Denmark's Arla - and not a UK co-op - that announced the multi-million pound investment does indicate that, while the UK can still attract some FDI, its own firms can sometimes lack the scale to match their foreign counterparts.
UK co-ops First Milk and Milk Link aborted a planned merger in February 2008, a transaction that would have brought the necessary scale to deal with the country's multiples - and to compete with the likes of Arla.
Last year's merger between Friesland Foods and Campina only underlined the need for a UK-grown dairy giant and, while just-food has heard industry watchers maintain consolidation is vital for UK dairy processors, there, as yet, appears few signs of movement.
Until then, UK dairy firms will remain in the shadow of their Continental counterparts.
It was dark clouds and drizzle that greeted just-food on arrival in Frankfurt, where we've travelled to visit this year's Food Ingredients Europe exhibition.
How have ingredients producers fared during the downturn? How have the demands of their customers changed? And how committed do suppliers remain to NPD?
These are the kind of questions we hope to answer this week. Keep your eyes peeled on the site for more.
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Commodity cost concerns
16th November 2009 15:08
Pressure from commodity costs have eased since the spikes seen in 2008 but a cursory look at the quarterly numbers issued in the last fortnight shows raw material prices remain a concern for food manufacturers of all shapes and sizes.
Companies may have been cheered by the tumbling cost of dairy commodities since last year's peak but food firms still face challenges across other raw materials. And UK firms bringing in ingredients from Europe have seen the appreciation of the euro drive up their raw material bill.
Moreover, on Friday (13 November), an analyst report crossed our desks that highlighted the problems the world's chocolate manufacturers will face in 2010. The report said confectioners will continue to have to walk a "tightrope" between high cocoa and sugar prices and a weak consumer environment, in which it will be difficult for manufacturers to pass along the higher costs.
With that in mind, food manufacturers and retailers will flock to this week's Food Ingredients Europe exhibition in Frankfurt to discover more about how their suppliers are faring in such a volatile economic environment. Food ingredients manufacturers from around the world, including the likes of ADM, Barry Callebaut, Cargill and Tate & Lyle will be present and they, among others, will seek to show just how they can add value to their customers' businesses.
But cost will not be the sole burning issue. Exhibitors will look to showcase a plethora of new products that they claim will generate revenue for brand-owners; ahead of the show, Tate & Lyle has issued research that it claims shows consumers are still looking for healthy products - and crucially will pay more - despite the downturn.
just-food will be one of the thousands of attendees at the exhibition; keep your eyes peeled on our news, blog and Twitter pages for the latest from the event.
The latest big news to reach us this morning is the announcement from dairy giant Arla Foods that it is looking to build the world's largest fresh milk dairy on the outskirts of London.
The planned investment is something of a surprise; Arla has restructured its operations throughout Europe this year, including in the UK, and scores of jobs have been affected.
The project is also a surprise boost for UK manufacturing; in recent years, dozens of foreign FMCG firms have tended to scale down or close their UK operations and take production to cheaper climes. Does the weakness of the pound mean that the UK is suddenly a more attractive place for investment?
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Is Cadbury's defence looking Flakey?
13th November 2009 17:00
UK blog number three:
I had a number of thoughts for the blog pages today - and one of which (don't yawn at the back) was on the ongoing takeover saga between Kraft and Cadbury.
Here in the UK, there is much nervousness about those allegedly big bad Yanks coming over and stealing - as some would have you believe - one of the country's business jewels.
What most of the nervy seem to miss is that there is already a significant (and apparently growing) US interest on the Cadbury share register.
Since Cadbury rejected Kraft's hostile approach on Monday, US hedge funds have snapped up shares in the Dairy Milk maker. According to the FT, up to 14% of the business is now owned by the hedge funds - or 'arbs' as they are otherwise known.
Hedge funds are renowned for their short-termism and, as the FT puts it, their presence as Cadbury shareholders could make it harder for the UK firm to "control its destiny". A higher bid from Kraft - even if not at the levels forecast by some analysts - could see the hedge funds sell. And sell fast.
Earlier this afternoon, I saw a blog on the website of UK regional newspaper the Birmingham Post. It also pointed out the arrival of the hedge funds could hit Cadbury's bid to remain an independent company.
However, one interesting strand the blog picked up upon was the fact that UK (now publicly-owned) bank RBS is providing Kraft with financial support - which is sure to add to the ire of both Cadbury's supporters and those exasperated at the bank bail-outs.
Here in the UK, there has been a growing perception that, even though the banks are owned by the state, the public can do little to influence their strategy, especially when it comes to freeing up lending to small business and individuals.
And the Birmingham Post blogger insists the association between RBS and Kraft provides the Cadbury saga with "one final twist".
"The thought of us as taxpayers bailing out a hopelessly run bank so that it can then support a US multinationals' attack on a well run British based firm would have beggared belief 18 months ago. Not now, given the weird and wonderful world we live in."
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M&S marketeers praised - by Waitrose
13th November 2009 16:55
UK blog number two -
We don't often read too much into the weekly sales figures at Waitrose, the upmarket UK grocer.
It really isn't worth looking at seven days' worth of sales if one wants to garner much insight into the performance of a business.
However, today (13 November), Waitrose's weekly press release contained some insight into their ongoing ding-dong with fellow "posh" food retailer Marks and Spencer.
Waitrose reported its "highest sales growth" for a "standard" trading week since 2006. Sales jumped by more than 17%, driven, it said, by its own-label Essentials range.
The Essentials line has been credited with breathing fresh life into Waitrose, which suffered in the early months of the recession.
"The range has been hugely successful since its launch earlier this year but last week's performance was particularly sparkling," Waitrose said.
It then mischievously added: "Maybe we should be thanking the M&S marketing department for highlighting both the quality and value of our essential Waitrose range in its high-profile advertising campaign."
Last week, M&S launched a campaign that targeted the prices of Waitrose's Essentials line and sought to promote its own Wise Buys range.
M&S executive chairman Sir Stuart Rose, never shy to give his tuppence worth on Waitrose, will be wondering whether that was indeed a wise move.
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Don't milk Dairy Crest share fall
13th November 2009 16:49
Prepare for three quick-fire UK-focused blogs:
First, Dairy Crest, the UK's largest dairy group and the company behind Cathedral City cheese and Country Life butter (the spread pushed by Sex Pistols frontman Johnny Rotten).
The company's shares curdled yesterday (12 November) despite a jump in half-year profits. The stock took a hit as the company announced it would slash its dividend - a decision it had already flagged to the market back in May.
So, it could be a little soon for the market to think the milk has turned sour at Dairy Crest. The company's cheese and spreads business is holding up well and, despite some weakness in dairy commodities and milk delivery, not all analysts are anxious about the company's performance to date.
"Overall, the group has produced a resilient result, with some modest half-on-half progress, despite the tough backdrop. We expect to see the same at the full year," insists Investec analyst Nicola Mallard.
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Asda stands strong in lion's den
13th November 2009 10:37
For the record, Asda's stood up well at yesterday's (12 November) Soil Association conference in London.
Corporate affairs director Paul Kelly admitted he felt like "Daniel in the lion's den" coming to events on sustainability.
But following a morning in which - on some occasions - big business was held up as the barrier preventing substantive change to the food industry, Kelly was keen to demonstrate how the Wal-Mart unit (and UK supermarkets in general) had sought to take a lead on the issues of climate change and sustainability.
It has been a mixed week for Asda. Yesterday afternoon saw the publication of some robust trading results for the third quarter of the year but, earlier in the week, a consumer lobbying group accused the company of being the "least green" of the UK's major multiples.
In fairness to Asda, the Consumer Focus report had its weaknesses (let's just say a study looking at just nine stores - one each for each of the nine largest food retailers in the UK - in one city is not the most robust investigation) and the retailer has been just as vocal on green issues as its local rivals.
Some could say that Asda is making more strides than others in putting its suppliers to the test on their environmental standards. Its parent Wal-Mart has been very vocal in putting pressure on manufacturers to sharpen up their act and Asda is looking to roll out a version of the US giant's sustainability index in the first quarter of 2010.
And Kelly argued yesterday that, while the media spotlight - and consequent public concern - is on the power of UK supermarkets and the allegations over the poor treatment of suppliers, retailers had made progress on making their businesses more environmentally friendly - and getting consumers to think green.
In contrast, Kelly claimed, the record of some suppliers on the environment was "woeful".
And Peter Melchett, policy director at the Soil Association, insisted more pressure needed to be brought on the mainstream agriculture sector, which, he argued, is subject to far less pressure to cut greenhouse gas emissions than other sectors of industry.
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