The food business blog from Dean Best
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Food and health dominates media spotlight
05 Mar 2014 15:59
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.
Now Buffett wades into PepsiCo debate
03 Mar 2014 17:40
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.
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.
Morrisons murmurs rumble on
20 Feb 2014 10:25
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.
Why Weight Watchers has shed sales
17 Feb 2014 22:49
Weight Watchers' current plight is symptomatic of two trends.
The US-based group saw its shares plunge more than 27% on Friday (14 February), the day after it posted a drop in 2013 profits and set 2014 earnings forecasts below Wall Street estimates. The fall in Weight Watchers was also just the latest drop; its share price was down by more than 35% in 2013.
How consumers are managing their weight is changing. There is, as analysts at UK industry watchers Leatherhead Food Research have noted, a growing interest in health and wellness more generally over, simply, diet.
"With consumers' personal memories of failed weight loss attempts and with the media delving into the science behind weight loss, diet is becoming a dirty word. Rather than compartmentalising healthy eating to a particular part of their lives, consumers are looking for more balanced approaches to weight loss and weight management," Emma Gubisch, strategic insights manager at Leatherhead, said recently, while outlining her trends to watch in 2014.
And Weight Watchers has also been squeezed by the rise of the Internet, enabling those interested in keeping their weight down to find alternative ways of staying trim. Free, online tools have lured consumers away from companies like Weight Watchers that offer paid-for meetings and subscriptions.
These trends have provided the context for Nestle's sale of the bulk of its own weight management business, Jenny Craig, in November, while there has been talk Unilever could sell Slim-Fast (although the company has declined to comment).
Notably, speaking to analysts on Thursday after Weight Watchers issued its full-year results, which were filed after the closing bell in New York, chairman and CEO Jim Chambers said the start of 2014 had been just as tough.
"The start of the year is proving to be every bit as challenging as we thought, if not more so. The headwinds from free apps and activity monitors have only continued to intensify and are significantly impacting consumers," Chambers said.
Weight Watchers has set in train plans to reduce costs, including lowering its marketing spend. Chambers, however, said the company is looking to "maximise our consumer activation", with re-shot ads, including one featuring US singer Jessica Simpson airing that will air in the US this week.
The Weight Watchers boss said the company also plans to focus on markets "with the highest near-term potential" and, for example, closed its business in China.
However, Chambers admitted Weight Watchers is "seeing softness across all of our large markets".
It faces a challenge in convincing consumers why they should, one, turn to their weight management products and, two, pay for them at all.
Kantar data adds to City nervousness over Morrisons
11 Feb 2014 15:34
The latest Kantar Worldpanel data on the market shares of the major UK grocers underlined trends that have been in train for months now - Tesco suffering, Sainsbury's holding firm and Aldi, Lidl and Waitrose continuing to make inroads. However, the fresh erosion in Morrisons' market share caught the eye.
The UK grocery market is very subdued. Kantar said today (11 February) the sector was seeing "the slowest industry growth since 2005", emphasising how tough trading conditions are.
Much of the data echoed what has been seen in recent months. The till roll figures for the 12 weeks to 2 February showed Tesco's sales fell year-on-year by 0.4%, taking its share of the UK grocery market down from 30% a year ago to 29.2%.
Asda's sales were up (0.5%) but its share dipped from 17.7% to 17.3%. The Co-op was another to see its share decline, sliding from 6.2% to 6.1%.
Sainsbury's held firm, its sales up 2.7% and its market share inching up from 17% to 17.1%.
At opposite ends of the value spectrum, Waitrose, Aldi and Lidl continued to gain ground. Aldi's share went up from 3.2% to 4.1% after a 32% jump in sales.
However, the data for Morrisons highlighted the challenge facing Dalton Philips and his colleagues.
Sales at the UK's fourth-largest grocer slid 2.5%, Kantar said. Morrisons' market share fell from 11.8% to 11.3%.
Shore Capital analyst Clive Black said this afternoon Morrisons performance was "a major cause for concern" following the retailer's Christmas trading update, in which it said like-for-like sales were down more than 5%.
Philips and his colleagues have pointed to the fact its rivals have larger businesses in two key channels in the UK market - convenience and online. Morrisons has been investing heavily, with c-stores opening across the country and its home delivery service starting last month.
However, for Black, Morrisons' problems go deeper. "Morrisons has stated that convenience and online have been important factors behind its under-performance yet with steps forward on these fronts, its relative and absolute performance is, if anything, deteriorating," he said. "Accordingly, after inflation and new space, it is not inconceivable that Morrisons' LFL volumes continue to fall at mid-to-high single-digit percentage rates. If such momentum persists then we cannot rule out further considerable downgrades to earnings; earnings expectations that have fallen by over 30% for 2014/15F over the last two years. Whatever way one characterises Morrisons' current trading strategy, which embodies considerable promotional participation still, it is clearly not working and one senses that fundamental change is necessary, which cannot revolve just around base price, although it probably needs some attention."
In the face of pressure on trading, there has been speculation Morrisons is facing investor pressure to sell off property to boost returns for shareholders. Morrisons' review of its balance sheet could be published alongside its annual results in March, although Black cautions against significant property transactions.
"Indeed, we argue that a major property deal and accompanying Opco-Propco structure, could lead to a considerable deterioration in Morrisons' profitability if the trajectory of trading profitability remains on its present course by introducing a material new rental stream to the operating lines," he said. "Indeed, we assert that the freehold estate of Morrisons is the key support for its shares at present. With downside support to the shares from its freehold asset base for now we nervously retain our hold stance on the group's shares.
Shares in Morrisons were down 1.46% at 236.78p at 15:33 GMT. The stock has fallen more than 9% since the start of the year.
Green shoots? Or another challenging year?
10 Feb 2014 15:01
Over the next fortnight, we'd like to hear how you see the outlook for your business in 2014.
Now in its third year, the just-food Confidence Survey provides a snapshot of how you and your colleagues in the industry see the year unfolding. The latest survey is live and takes just a few moments to fill in.
In the coming weeks, we'll be reporting on the highlights from the survey in a free webinar live on just-food.com.
As a thank you for filling in the survey, you'll receive an executive summary detailing the results.
Lenta joins Metro with plan for Russian retail London listing
03 Feb 2014 16:00
Lenta has ambitions to further expand in Russia
Russian hypermarket operator Lenta has set out plans for a listing in London. If successful, Lenta will join Russian peers X5 Retail Group and Magnit with shares trading in the UK capital - although it will be competing for attention with Metro Group, which plans to float its Russian cash-and-carry arm here.
Lenta has 77 hypermarkets in 45 cities across Russia, plus ten supermarkets in and around Moscow.
The retailer, in which private-equity firm TPG Capital owns a 49.8% stake, said it is the second-largest hypermarket operator in Russia and has plans to expand further.
Today's (3 February) announcements comes two weeks after German retail giant Metro said it would float part of its Russian cash-and-carry business in London.
Metro, which had been looking at options for funding for expansion, said it would look to list 25% of the division during the first half of the year.
Lenta CEO Jan Dunning said the float was a "major milestone" for the business. The retailer has shown signs of strong performance after a tumultuous year at the start of the decade that saw a public spat between its then major shareholders over who should be its CEO - a dispute that saw Dunning, then Lenta's CEO, leave the retailer in 2010.
However, a deal in 2011 brought an end to the saga when the two warring shareholders reached an agreement. PE firms TPG and VTB, which owned 30% of Lenta through a venture, teamed up with the European Bank for Reconstruction and Development to buy out their sparring partner and the retailer's largest shareholder, the Svoboda Corporation.
Reports emerged last summer that Lenta could be floated. One Russia-based analyst then told just-food the retailer had a number of attributes that could make it an attractive proposition for investors.
"It could attract a good amount of interest. It has decent growth and good margins compared to its peers. It is exposed to a high growth market and it could - at some point down the road - become an acquisition target itself, given the acquisitive nature of Russian retail," the analyst said on the condition of anonymity.
Sugar on everyone's lips at ISM
28 Jan 2014 10:15
It's January so, for the global confectionery industry, that means ISM, the annual trade fair in Cologne that pulls in visitors and exhibitors from around the world. However, the heightened scrutiny on sugar in recent weeks is giving everyone here plenty to think about.
Sugar has grabbed the headlines since the start of the year. Earlier this month, 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.
In the UK, the ingredient has been the subject of a Dispatches programme entitled 'Are You Addicted To Sugar?' by Channel 4, while the BBC is set to broadcast its own look into the subject, 'Sugar vs Fat', tomorrow (29 January).
And this month a number of front pages in the UK have carried 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.
Among exhibitors at ISM, there was an acknowledgement the issue - already on manufacturers' radars - is growing in importance.
UK biscuit maker Macleans Highland Bakery said its customers are showing more interest in the company developing healthier products. "We're looking at it," a spokesperson says. Though she is coy on the company's plans, she adds: "For us not to react to that would be pretty silly."
In some quarters of the industry, there has been some frustration at the criticism levelled at manufacturers for their use of sugar and the claims about the ingredient's link to obesity.
Ahead of the Channel 4's Dispatches programme, UK industry association The Food and Drink Federation said the "recent media coverage around sugar" show "some still take an over simplistic approach to tackling obesity and its associated diseases".
UK confectioner Bon Bon Buddies, which sells products under licence agreements with entertainment brands from Disney to One Direction, said there could be unintended consequences from the recent attacks on sugar.
"We have to be careful. We're in the business of selling treats for kids and we should keep that in perspective," Bon Bon Buddies MD Chris Howarth told just-food.
"Also, there have been a number of drivers in the industry to find other solutions for sugar and then you could be into other additives that are more harmful. My view is that formulation should be kept as simple and original as possible."
With sugar in the spotlight, there is, of course, an opportunity for ingredients suppliers to offer brand-owners help in developing healthier lines.
B2B chocolate giant Barry Callebaut said it made tackling the issue a priority as far back as 2006.
Marijke De Brouwer, innovation manager at Barry Callebaut, said the B2B chocolate giant's customers had already reduced sugar in some of their products - but just had not communicated it to consumers for fear some would turn away.
"I do see with a lot of customers they have been reducing, they have been limiting the sugar in their finished products - but they have not been communicating it," she told just-food at ISM. "When we did research in the past, for consumers when you talk about a minus, if there is something missing, then to them it is less tasty, which is not the case."
However, she acknowledged the launch of Action on Sugar and the increased media interest in the issue had led more to more enquiries from customers. "When it was launched, we got questions. It had an impact."
Beneo, the food ingredients arm of German sugar giant Suedzucker, echoes Barry Callebaut's views. Thomas Schmidt, marketing manager at Beneo, said the scrutiny sugar was "in line with the mega trends" seen across the industry for healthier products. Beneo's sales of ingredients that can help develop products with less sugar were already increasing, he said.
However, Schmidt said the issue will only grow in importance. "Consumer pressure will increase and obesity will increase, we all know it. It will get worse and the pressure will get worse [on our customers]."
Chobani brushes off Yoplait US ad offensive
23 Jan 2014 16:00
Chobani has led the boom in US demand for Greek yoghurt in recent years but its success has attracted rivals - including those with deep pockets - to the category. One, General Mills, has this week targeted Chobani in taste test ads for its Yoplait brand. Chobani has brushed off the move.
On Monday (20 January), General Mills issued the results of what it called a "Greek yoghurt Taste-Off" and said its surveys had claimed Yoplait was "significantly preferred over Chobani".
General Mills said 65% of consumers preferred the taste of Yoplait Greek blueberry over the same Chobani Greek fruit-on-the-bottom flavour.
"We are focused on one thing – making Greek yogurt taste as good as it can be – so we asked yogurt fans if we had succeeded," Carla Vernón, marketing director for Yoplait Greek, said. "They overwhelmingly said yes."
Speaking to just-food, Chobani seemed relaxed about General Mills' claims. "Chobani has been directly challenged by its competitors before, but for us consumers matter most and we're proud they've made us America's number one Greek yoghurt. At Chobani, we've always believed how we craft our product matters. Chobani doesn't take shortcuts, which means always making the most delicious, nutritious, natural and accessible yogurt with no preservatives and nothing artificial," Peter McGuinness, chief marketing and brand officer at Chobani, said.