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How Nestle CEO Bulcke hinted at more disposals

11 Apr 2014 15:29

Nestle CEO Paul Bulcke has indicated the world's largest food manufacturer, which has offloaded assets in recent months, may continue to trim its portfolio.

Speaking at Nestle's AGM in the Swiss city of Lausanne yesterday (10 April), Bulcke said the world's largest food manufacturer was scrutinising its business so that company "continues to grow strongly into the future" in a "world that is changing so fast".

"We are looking at our product and brand portfolio and analysing it through a sharper, stricter lens. We are making choices about where we want to invest, where we want to improve and the areas we want to divest," he said.

In February, Nestle agreed a deal to sell sports nutrition assets, including the PowerBar and Musashi brands, to US food group Post Holdings.

That transaction came three months after Nestle announced it would sell the bulk of its Jenny Craig weight management business. In between times, in December, Nestle sold its stake in Swiss food ingredients group Givaudan, a move said to have brought in around CHF1.2bn (US$1.33bn).

"Making such choices enables us to put our people and resources behind our best opportunities. We can focus investment more precisely, move faster and be more agile and responsive. This results in a product portfolio which is stronger and more profitable," Bulcke told the AGM.

The Nestle boss told shareholders the company had, for example, "implemented several acceleration plans for instance for [coffee businesses] Nespresso, Nescafé Dolce Gusto and petcare".

Nestle faced something of a slowdown in 2013, even if its performance compared favourably with some of its peers.

Nonetheless, Bulcke and the management team have demonstrated they will make tough decisions about their portfolio and, with murmurings in the market about the future for assets like Lean Cuisine, it is likely more could follow.

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Discounters in the UK: The story is old ..... but it goes on

08 Apr 2014 15:59

Fresh data by Kantar Worldpanel issued today (8 April) again showed the inroads discount retailers are making in the UK.

Aldi saw its "highest-ever growth" in sales during the 12 weeks to 30 March, Kantar Worldpanel said. The German retail giant saw its sales jump over 35%, taking its share of the market to 4.6%.

Kantar's sales data includes the impact of store openings but, even so, the latest figures again demonstrate the success Aldi is having in the UK - and the effect it and discount peer Lidl is having on the country's larger grocers. Lidl's sales were up over 17% - taking its market share to 3.4% - and in a sector that, as a whole, inched up by only 1.5% year-on-year.

"Amid a challenging market backdrop, individual retailer growth might be expected to be restricted. This is certainly not the case for Aldi. Lidl also experienced strong growth in a record breaking month," Kantar Worldpanel director Ed Garner said.

Each of the UK's so-called Big Four - Tesco, Asda, Sainsbury's and Morrisons - saw their sales and market share fall.

Asda, Garner said, was the most "resilient", with its sales only 0.5%. Wal-Mart, the owner of Asda, will be pleased, the data coming amid challenging conditions in the US and after announcements it would invest a hefty amount of money behind its prices in the UK.

For Morrisons, the data is another blow. Its sales dropped 3.8% year-on-year. It is early days in Morrisons' attempts to focus more on price after another year of falling sales but the numbers underline the challenge ahead of the UK's number four grocer.

And for Tesco, which according to Kantar now sees its market share stand at 28.6%, the data provides more colour of how it is faring in its domestic market ahead of the publication of its annual results next Wednesday.

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How Parmalat has received another boost in Australia

03 Apr 2014 15:46

Days after Parmalat announced it had acquired Australian dairy and fruit juice firm Harvey Fresh comes news of a deal of another sort for the Lactalis-owned Italian dairy giant.

Parmalat has secured a new, ten-year contract to supply milk to stores in the Australian state of Queensland owned by Woolworths Ltd, the country's largest retailer.

The milk processor was already Woolworths' nominated supplier in the state but the existing contract was for two years. The new deal is for an initial five-year period, with an option for a further five.

Woolworths also said it had awarded Parmalat a two-year contract further south in New South Wales.

The agreements, among a batch of contracts announced by Woolworths today (3 April), will cheer Parmalat, although, before the deals were announced, one industry watcher suggested the company may have been after more agreements.

"Parmalat ranks as the sixth-largest in terms of milk intake and is one of the two major milk processors in Australia. Its current business model has it very focussed on fresh milk and dairy products, which has meant a high level of exposure to the supermarket duopoly – probably not a strength. Parmalat hold the private-label supply contracts in New South Wales and Queensland. Woolies are to announce its next set of contracts tomorrow, and it wouldn't be surprising if Parmalat pick up a couple more," Jo Bills, director of food industry consultants Freshagenda, said yesterday. "Parmalat have taken a bit of hit from Coles awarding east coast contracts to Murray Goulburn and Norco, so I reckon would have been pretty keen in their negotiations."

Woolworths' latest contracts show Parmalat has not picked up new states - with deals elsewhere with Brownes Group, Fonterra and Lion.

However, its new agreements with Woolworths will provide a boost to Parmalat, which, through private-label contracts and M&A, bolstered its business in Australia.

Click here for our analysis of Parmalat's acquisition of Harvey Fresh, which includes the views of Freshagenda's Jo Bills and Rabobank's Michael Harvey.

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Food security - the debate rages on

01 Apr 2014 10:52

The IPCC said climate change was already affecting crop yields

The IPCC said climate change was already affecting crop yields

The UN's latest report on climate change grabbed headlines around the world yesterday (31 March) with claims of the "pervasive" impact of global warming, a higher risk of flooding and changes to crop yields. But the report simply refuelled the debate over the precise impact of climate change on food security.

The study from the Intergovernmental Panel on Climate Change (IPCC) led news bulletins here in the UK yesterday, underlining the way environmental issues are now mainstream concerns.

The IPCC sought to detail the impacts of climate change to date, the future risks from a changing climate and the opportunities for effective action to reduce those risks. Over 2,400 experts contributed to the report, which called for action now to help mitigate the consequences of what it called "man-made climate change".

Since the last IPCC report from 2007, climate change is said to present a more direct threat.

"In many cases, we are not prepared for the climate-related risks that we already face. Investments in better preparation can pay dividends both for the present and for the future," Vicente Barros, co-chair of the working group behind the report, said.

Within the food sector, of course, manufacturers and retailers would have thumbed to the section on the impact on crops. The food industry has long believed the issues of climate change and food security are "intrinsically linked".

Concern over commodity prices is high, with a warming world housing an ever-rising population - and a population that, in emerging markets, is increasingly eating more dairy and meat products.

The report stated that for "the major crops" - wheat, rice, and maize - "in tropical and temperate regions, climate change without adaptation is projected to negatively impact production for local temperature increases of 2°C or more above late-20th-century levels".

The IPCC acknowledged "individual locations may benefit". It said: "Projected impacts vary across crops and regions and adaptation scenarios, with about 10% of projections for the period 2030-2049 showing yield gains of more than 10%, and about 10% of projections showing yield losses of more than 25%, compared to the late 20th century."

However, the report added: "Climate change is projected to progressively increase inter-annual variability of crop yields in many regions. These projected impacts will occur in the context of rapidly rising crop demand."

Speaking to the BBC, one of the contributors to the report, Professor Andrew Challinor of the University of Leeds, agreed the impact on crops of a warming planet could be worse than had been previously thought.

"We tried to look at the whole area of food security - not just production but access to food, we looked at fisheries, we looked at crops. Certainly for crops but whether that is true for the whole area of food security is a more difficult question," he said. "We've had indications that we expect year-to-year variations in food production to increase - more of these instances of yields going down due to heatwaves such as happened in Australia and Russia in the last five to ten years. There is emerging evidence of more negative impacts than we had previously thought."

He added: "There is a new environment in which we see food price spikes, rapid increases in prices associated with climate change. That association isn't 1:1 but certainly there is a relationship there."

There was some dissent in academic circles. Professor Richard Tol at the University of Sussex pulled out of the team writing the report, claiming it was "alarmist" about the threats posed by climate change.

Tol told Reuters the report emphasised the risks of climate change more than it did the opportunities for the world to adapt.

He said farmers could grow new crops if the climate became hotter, wetter or drier. "They will adapt. Farmers are not stupid," he told the newswire.

Tol made similar comments in an interview with the BBC. He said the report had not accounted for the recent increases in crop yields from technological advances.

The BBC put Tol's claims of alarmism to Challinor, who replied: "Richard wasn't an author on the food production chapter and I think it is difficult to make broad statements about the data in that way. In the final summary for policymakers, I found the wording to be a little on the conservative side if anything. Within my field, I don't see any evidence of alarmism whatsoever."

On Thursday, just-food will be attending a conference in London on food security. The Westminster Food and Nutrition Forum will hear from Prof. Challinor, as well as representatives from the UK Department for Environment Food and Rural Affairs, the European Commission, the US Department of Agriculture, among others.

It is an opportune time to hear from academics and governments on the issue and we will bring the news and views from the event.

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just-food live from the CAGE investment conference

17 Mar 2014 11:11

Nestle, Danone, Kerry Group and Ebro Foods are among the multinational food manufacturers presenting over the next three days here at the Consumer Analyst Group of Europe conference in London.

The CAGE conference has become a key date in the industry calendar, with blue-chip companies outlining to the financial and investment community their plans for growth.

For the fourth year, just-food and sister site just-drinks are the media partners at the event. Today kicks off with Kraft Foods Group CFO Teri List-Stoll and Glanbia MD Siobhán Talbot discussing the latest developments and outlooks for their business.

Eighteen months after the split of Kraft Foods Inc created the US-focused grocery supplier Kraft Foods Group, the Cheez Whiz and Oscar Mayer owner will outline its strategy to an audience of European investors and analysts. Kraft will provide interesting insight into the state of mind of consumers in the US, where shoppers remain cautious.

Glanbia presents just days after reporting 2013 results and 2014 forecasts that pleased the market. Continued improvement at the Ireland-based group's performance nutrition arm offset a challenging year for its domestic dairy division. At CAGE, analysts will want to hear more about the outlook for both sides of the business and about Glanbia's plans for more M&A.

just-food will bring exclusive media coverage from CAGE across the three days, where the likes of Barry Callebaut, Givaudan, IFF and Symrise will join the packaged food groups in outlining how they see trading conditions in 2014 and beyond.

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All eyes on Morrisons

12 Mar 2014 11:45

Morrisons has had a tough year

Morrisons has had a tough year

Morrisons will come under the investor spotlight tomorrow (13 March) when the UK's fourth-largest grocer reports its annual results. One stockbroker has "rarely been so concerned" going into a set of full-year numbers. And the latest data from Kantar Worldpanel has shown another decline in Morrisons' sales.

Sales at Morrisons dropped 3.2% in the 12 weeks to 2 March, Kantar Worldpanel reported yesterday, with the retailer's share of the UK grocery market sliding from 11.8% a year ago to 11.1%.

Morrisons was not alone in reporting falling sales - Tesco saw its sales drop 0.6% year-on-year - but the data underlined the challenge facing the grocer as it tries to look forward after a challenging 12 months - a period when there has even been takeover speculation swirling around the company.

The nervous stockbrocker, Shore Capital, said the decline in sales will put pressure on Morrisons' profitability, with the retailer's operating model including a series of integrated manufacturing businesses.

"Morrisons' sales have been falling at an increasingly concerning rate in recent trading periods, with the implied contraction in a large operationally geared business implying further material downgrades to our profit forecasts," Shore Capital analyst Darren Shirley says.

And the stockbroker has indicated the pressure on Morrisons' profits could continue into the new financial year - and further out.

"The sustained (and accelerating) decline in in-store volumes is being compounded by the high levels of vertical integration, with circa 25% of volumes passing through the group's considerable manufacturing facilities. That vertical integration implies further accentuated pressure on margins from negative operational gearing, and so we foresee the scope for further substantial post results downgrades for FY2015 and beyond."

Some industry watchers believe Morrisons could, in a bid to fight back against discounters that have eaten into its sales, outline a series of bold moves on price. However, that in turn could put pressure on Morrisons' margins.

Morrisons could also tomorrow outline the results of a review of its property estate, although Shirley expects only "modest disposals of largely non-core assets".

The retailer, he says, should act in six areas - including being "assertive" on price - to try to improve its performance.

Shirley argues Morrisons' should also look to "be the cheapest fresh produce player in the market", bring back brands in areas like ambient and household and "reposition under-performing private label".

The Shore Capital analyst also argues Morrisons should "scrap" its online venture with Ocado. The stockbroking firm has never been a fan of Morrisons' tie-up with the online specialist and it believes the grocer's online business should be "fulfilled" from its stores.

It would be a surprise if Morrisons announced the end of the Ocado agreement but industry watchers will be expecting the retailer to make moves on price.

Keep your eye on just-food tomorrow for coverage of the results.

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Food and health dominates media spotlight

05 Mar 2014 15:59

UK government may need to introduce sugar tax, country

UK government may need to introduce sugar tax, country's chief medical officer said

A renewed call for a tax on sugar, claims of a link between between animal protein and bad health and fresh guidance from the WHO on sugar intake - what we eat has again grabbed mainstream media attention in the last 24 hours.

The UK's chief medical officer has said the country's government should introduce a tax on sugar as a way of helping to tackle obesity.

A study of over 6,000 people in the US has claimed to show a link between high consumption of meat, eggs, milk and cheese with cancer or diabetes.

And, in Switzerland, the World Health Organization has suggested people should halve their daily intake of sugar.

The hat-trick of headlines continues what has been a flurry of news stories in mainstream media outlets since the turn of the year that have focused on what we eat and the impact on our health.

Sugar has been in the spotlight in recent weeks. In January, academics in the UK, US and Canada launched Action on Sugar to try to pressure the industry to reduce the level of sugar in food.

UK TV channels have broadcast documentaries entitled 'Are You Addicted To Sugar?' and 'Sugar vs Fat' to look at the impact consumption can have on health.

January also saw a number of front pages in the UK carry headlines on the country's "obesity crisis" after a report from The National Obesity Forum has claimed previous forecasts that half the UK's population could be obese by 2050 may have underestimated the problem.

The flurry of headlines will raise consumer interest in what is in their food and in their diets more generally. There are, no doubt, some in the food industry that would welcome that.

However, others will be concerned that their sectors could be painted as the betes noires of the piece.

Above all, it raises the prospect of a PR battle for the food industry in the face of heightened scrutiny on what is in our food and the impact it can have on health.

Consumer interest can easily lead to consumer confusion - and that could lead to the wrong choices being made.

A balanced debate is vital, with a balanced diet at the heart of it.

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Now Buffett wades into PepsiCo debate

03 Mar 2014 17:40

PepsiCo on front foot over calls for split

PepsiCo on front foot over calls for split

Famed US investor Warren Buffett has become the latest big beast on Wall Street to comment on whether PepsiCo should split in two.

The pros and cons of whether the Lay's chips and Pepsi cola should divide is a hot topic in FMCG circles in the US at the moment.

Activist US investor Nelson Peltz is pushing for PepsiCo to become two businesses, one focusing on food, the other on drinks. PepsiCo has stood its ground and said it is a better business as one. (It is incidentally, embarking on a quiet PR battle, alerting us to Buffett's CNBC appearance, for example).

PepsiCo's shareholder base is said to be split over the split. Buffett and his Berkshire Hathaway investment fund does not own shares in PepsiCo but, in an interview on CNBC today (3 March), the so-called Sage of Omaha was asked for his opinion on Peltz's proposals.

"I don't think I'd split it up," he said. "I think that Frito-Lay is an extremely good business. It’s a better business than the soft drink business, but I think the soft drink business is a good business too and I don't see any reason to split them up."

Peltz last week told CNBC he would take his case to the US food and drinks giant's shareholders.

On Thursday, PepsiCo issued a letter to Peltz and his investment fund Trian Partners in which it dismissed the US billionaire's plan as "financial engineering" that "erodes value for shareholders rather than creates value".

Peltz's plan has divided the market. Another PepsiCo shareholder, Don Yacktman of investment fund Yacktman Asset Management, told CNBC on Friday: "I'm yet to be convinced that Nelson Peltz's ideas are in the best interests for a long-term shareholder."

Yacktman pointed to the "synergy" between PepsiCo's food and drinks operations, although he added: "I don't see, when you have synergy, that the issue is splitting the company up. The issue is more in management and some changes that need to be made at that level. I would like to see improvement in the capital allocation process and objectivity. I don't see that [Peltz's plan] is the solution."

Today, analysts at Sanford Bernstein issued results of a survey of 100 investors on whether PepsiCo should split. It said 55% supported a break-up but most do not believe it will happen in the next year or two. It seems this one will run and run.

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Farms could go as Sutherland looks to revitalise Co-op

26 Feb 2014 23:11

The Co-operative Group is looking to sell its farms as part of plans to breathe fresh life into the UK company.

The Co-op, the UK's fifth-largest grocer, is a business under pressure from its declining share of the country's food retail market to the problems that have engulfed its banking arm.

Recently-appointed CEO Euan Sutherland is taking stock of The Co-op's business and looking to get the company on a sounder footing and improve a reputation dented in recent months.

Last week, Sutherland announced a national survey, allowing customers to "have your say" on the future shape of the business.

This morning, The Co-op indicated how it saw the future shape of the company with a brief announcement to confirm it expects to sell its farming division, which it has often said makes it "Britain's largest farmer".

"As part of the wider strategic review of all of its businesses, The Co-operative Group has decided that its farms are non-core and has started a process that is expected to lead to a sale of the business," The Co-op said.

In addition, it said it is "exploring options" for its pharmacy business, which could include the sale of that business, too.

The BBC reported this morning "well-placed sources" had told the broadcaster The Co-op will next month report annual losses of over GBP2bn.

It said the losses will come, in part, from write-downs on the value of the stores and goodwill The Co-op took on when it bough fellow UK food retailer Somerfield in 2009.

The Co-op, which has been a regular fixture in national UK headlines in recent months, looks set to been in the spotlight again in 2014. 

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Morrisons murmurs rumble on

20 Feb 2014 10:25

Morrisons

Morrisons' recent performance has been called into question in the City

Speculation over the future of Morrisons continues, with a fresh report claiming banks are working on finance to back a possible sale of the UK's fourth-largest grocer to private-equity funds.

Reuters said yesterday (19 February) bankers are looking at debt financing worth GBP5bn to support a potential sale.

"The size of the transaction, which could get as high as 10 billion pounds, could require a number of private equity players to team up, given the size of the equity cheque needed," an anonymous source described as a senior leveraged loan banker told Reuters.

The news agency said the Morrison family, which owns just over 9% of the retailer, had contacted private-equity houses after the retailer's disappointing Christmas.

That claim echoed one made by Bloomberg last week, which said the Morrison had held talks with buy-out houses Apax Partners, Carlyle and CVC Capital Partners. However, Morrisons founder Sir Ken Morrison, speaking to The Independent, promptly expressed "surprise" at the Bloomberg report.

Nevertheless, the Reuters report shows the speculation is continuing. Morrisons has seen sales come under pressure in recent quarters. Its sales fell in its last financial year, which ran until 3 February. Sales have also declined year-on-year in each of the first three quarters of Morrisons' current fiscal year.

Sir Ken has been a critic of Morrisons in recent years. In the summer of 2012, he warned Morrisons was losing relevance with core customers, a view echoed by some industry watchers.

Data issued by Kantar Worldpanel last week showed Morrisons had seen its share of the UK grocery market erode year-on-year, prompting criticism from the City over its performance and trading strategy.

Reflecting on the Bloomberg report last week, one critic, Shore Capital analyst Clive Black, said: "Given Morrisons' trading weakness and relatively low valuation, such headlines and potential initiatives are to be expected to some degree at this time, in our view. Indeed, we would expect a number of serious private-equity investors to be running the rule over Morrisons."

Shares in Morrisons spiked yesterday afternoon and closed the day up 4.83%.

This morning, at 10:24 GMT, the stock was down 1.60% at 240.10p.

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