The food business blog from Dean Best
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Hovis turns to flavour to lure UK consumers
22 Apr 2014 15:58
UK bread maker Hovis is rolling out flavoured loaves to capture consumer attention in a fiercely competitive category.
The company has developed a three-strong Hovis Taste Sensations line and argues UK consumers are "on the lookout" for new products in one of the most heavily-shopped categories in the grocery store.
Hovis, now controlled by Gores Group after the US private-equity firm and former owner Premier Foods set up a venture earlier this year, said it had an eye on lunch.
"Lunchtime is a key opportunity for us, especially as sandwiches remain the number one favourite lunchtime option in the UK," Tim Dummer, head of customer marketing, said.
Dummer also admitted UK retailers wanted more NPD from suppliers. "Innovation is rising in importance for retailers, with 45% identifying genuine NPD as a key focus, up from 24% in 2012, reflecting their desire to meet consumer demand for new products that will drive sales."
The launch of breads flavoured with sundried tomato, basil and pesto and sweet red pepper is likely to attract consumer interest and the non-white segments of the sector are in robust health.
Nonetheless, sliced white is still the most popular segment of packaged bread sales in the UK. And rival Associated British Foods has sought to grab consumer attention in that part of the fixture with its recent launch of Kingsmill Great White, which it says it is a healthier alternative to standard white bread.
Moreover, packaged sliced bread is under pressure in the UK - should bread makers like Hovis be instead putting more resource into products like pittas, wraps and bagels?
just-food takes a break for Easter
17 Apr 2014 17:53
We're off from Friday through Monday, trying to not consume our weight in Easter eggs. The site will be back, up and running on Tuesday 22 April.
For those also off, enjoy the extended break.
Why chocolate makers should note changing M&A priorities at ADM
16 Apr 2014 18:15
Potential cocoa deal had been set to create powerhouse to rival Barry Callebaut
US agribusiness giant Archer Daniels Midland had been looking to sell its cocoa and chocolate businesses - and had been in discussions with a suitor (reported to be Cargill) over a deal - but there have been some developments.
Last June, ADM confirmed it was in talks over a potential sale of its cocoa business. It did not confirm the interested party, although reports had claimed it was Cargill, another major international cocoa merchant.
The discussions - and link to Cargill - put food manufacturers on watch. Any combination of ADM and Cargill's cocoa businesses would have created a player better able to compete with world number one Barry Callebaut but would also have led to consolidation in the supply of the ingredient. Some estimated Barry Callebaut and a combined ADM/Cargill cocoa unit would have accounted for two-thirds of cocoa processing.
However, yesterday (15 April), ADM announced it had decided to hang on to the "majority" of its cocoa operations.
"We had extensive negotiations with a potential buyer regarding the sale of our global cocoa and chocolate business. In the end, we could not agree to an outcome that met ADM’s objectives," ADM chairman and CEO Patricia Woertz said.
When ADM confirmed it was in talks to sell its cocoa and chocolate units, analysts welcomed the move, pointing to the volatility of cocoa and, they argued, the better long-term prospects for the group's core grain operations.
There was also, industry watchers argued, the prospect that a combination of the cocoa and chocolate businesses of ADM and Cargill would have raised anti-trust concerns.
However, Woertz yesterday insisted the prospects for ADM's cocoa business were positive. "Over the last year or so, we've taken significant actions to improve our cocoa business, most notably by significantly reducing invested capital. At the same time, we have also seen industry conditions improve as crop supplies have returned to normal. Given improved underlying conditions and the success of our efforts to reduce capital intensity, we see a promising outlook for the cocoa press business and believe it will meet our returns objectives," Woertz said.
Nevertheless, ADM is looking to sell its chocolate operations, a smaller business than the cocoa processing arm. The company has chocolate manufacturing facilities in the US, the UK, Belgium and Germany. "ADM is moving ahead with a process to sell our global chocolate business while retaining most of our cocoa press operations. This approach will position ADM to realize the greatest overall value from these businesses," Woertz said.
The company has already appointed advisers to work on selling the chocolate arm, which supplies ingredients across sectors from confectionery and bakery, to dairy, drinks and desserts.
How Nestle CEO Bulcke hinted at more disposals
11 Apr 2014 15:29
Bulcke has sold off weight management and sports nutrition assets in recent months
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.
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.
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.
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.
Food security - the debate rages on
01 Apr 2014 10:52
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.
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.
All eyes on Morrisons
12 Mar 2014 11:45
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.
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.