The food business blog from Dean Best
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Is investing in India all it's cracked up to be?
21 Nov 2007 17:07
India remains a long-term prize in the ambitions of many food and retail multinationals.
In recent months, the likes of Cadbury, Ferrero and Nestlé have unveiled plans to expand either their brand portfolios or manufacturing footprints in India.
The prize is India’s burgeoning middle classes, growing by the year and with rising disposable incomes to spend on Western-style goods in Western-style stores.
However, for all the optimism, foreign firms would be wrong to ignore the perils of operating in India. Overseas retailers are facing fierce opposition to their expansion. Sections of India are even against the growth of domestic retailers – just ask Reliance Retail.
And don’t be too pleased when you secure that (hopefully) lucrative contract with a local partner. Investing in emerging markets like India and China is fraught with unknown problems and what can at first seem a fruitful partnership can turn sour. Just ask Danone.
Binning bags is a waste of effort
19 Nov 2007 16:04
Gordon Brown announced today (19 November) that he is to meet with UK supermarkets to discuss ways to cut the use of disposable carrier bags.
A decent cause but there are better ones for the Prime Minister to champion if he serious about cutting waste.
Reducing carrier bag usage resonates with many in the UK and just last week, the body that represents the London’s local authorities called for a ban on free disposable plastic bags in the city.
However, carrier bags represent a tiny fraction of the waste sent to landfill and calls for a ban are just “greenstanding” – pandering to perceived concerns among consumers by advocating an action that would have a minimal impact on the environment.
The Prime Minister should focus attention on food packaging, which accounts for a far greater proportion of the waste sent to refill. Government-backed schemes like WRAP have played a critical role in getting the UK's largest grocers and food producers to commit to cutting waste but more needs to be done.
More of the UK’s food producers should be encouraged to sign up to the Courtauld Commitment – a pledge to cut the amount of waste reaching UK homes by 5% in three years.
In the UK, households dispose of 30m tonnes of rubbish a year. Some 6.7m tonnes of that is estimated to be food waste. And it’s there, rather than on bags, where the real issue is.
Will Ralcorp thrive in new Post?
15 Nov 2007 14:26
Cereal gave a good kick-start to the day for both Kraft Foods and US private-label firm Ralcorp Holdings this morning (15 November).
Ralcorp has snapped up Kraft’s US cereals business Post in a deal worth US$2.6bn.
For Ralcorp, a purveyor of private-label products, the deal gives it a stable of popular US brands. For Kraft, the sale represents another move to shed businesses it no longer sees as key to its future success.
However, for all Ralcorp’s optimism, there will be questions over how its retail customers in the US will view a brand now belonging to one of their key private-label suppliers.
One analyst asked Ralcorp today how the company thought Post would fare under its ownership; would retailers be “amenable” to a private-label firm running the brand?
Ralcorp co-CEO and president David Skarie said he “couldn’t speak for our customers” but added that the company would look to manage Post as a “distinct business”.
Ralcorp sees the acquisition of Post, the third-largest branded cereals business in the US, as “transformational”. It will hope it can soon transform its reputation as a seller of strong branded goods in the eyes of US retailers.
"Erotic store" falls foul of food rules
14 Nov 2007 11:47
It seems Europe’s health officials are getting a little over-zealous in their quest to make sure we all know exactly what is in the food we buy.
Although, when I say “we”, I mean those who like to add a little "spice" to their lives.
Health officials in Norway paid a surprise visit to the country’s largest erotic store and told the outlet to change the labelling on products to comply with local health rules.
Labelling on products like candy cuffs and, ahem, penis pasta had to be marked with a Norwegian label listing all the ingredients in the products.
"We were a bit surprised to have the food safety authority on inspection. Food is not really our core product," Kjersti Antonsen, a sexual adviser in the store, reportedly told Norwegian tabloid VG.
Of course, we should all applaud Norway's food inspection officials for the, er, dedication they obviously show to their work.
But I'm not sure visitors to the store are that concerned about the additives in the chocolate body paint.
Don't over-do it this Christmas
13 Nov 2007 10:00
As we approach Christmas and the festivities the holiday season brings, a warning emerges from Australia.
According to reports, Woolworths, Australia’s largest retailer, has sacked a manager for having two beers over lunch with a work colleague.
Apparently, Tony Selak, 36, who had worked for Woolworths for 18 years, was reported to managers by a third colleague who had spotted the two employees drinking beer in a local restaurant at lunch.
Woolworths sacked Selak in May; two weeks ago, Selak’s claim of unfair dismissal fell on deaf ears when Australia’s labour relations body backed the retailer.
Woolworths insisted Selak and his colleague broke the company’s “zero tolerance” policy on drinking alcohol during working hours.
That seems over-zealous. Sure, alcohol shouldn’t be consumed if one is operating heavy machinery backstage away from the shop floor. However, Selak was a store manager taking a colleague to lunch, a colleague who, by all accounts, was considering leaving the business.
Two beers at lunch would not have prevented Selak from performing his duties that afternoon. The punishment does not fit the crime.
During my university days, I worked for one well-known UK retailer; if they had pursued Woolworths’ strict guidelines, I would have been shown the door very early on.
So, a lesson for us all this Christmas. Study the small print of your contract and don’t over-do it. Or perhaps, more pertinently, don’t get spotted by a snitch of a work colleague.
Are dairy prices returning to normal?
12 Nov 2007 12:40
From Kraft to Cadbury and Dean Foods to Danone, dairy bills have been a strain this year. It’s been an unprecedented few months. Some have faced difficult discussions with retailers reluctant to raise prices, while others have been forced to cut jobs to boost margins. Boardrooms around the world must be eyeing the horizon for some respite.
Arla Foods, for one, sees some light at the end of the tunnel. Last week, the company’s boss told Denmark’s dairy farmers that dairy markets were starting to return to normal. Peder Tuborgh’s comments were something of a surprise, especially when others remain under pressure. And for instance, Dean Foods, the largest dairy firm in the US, sees little sign of that pressure abating.
Perhaps a more significant sign of the state of the dairy sector is Danone’s tentative plan to create several giant dairy farms. Safeguarding future milk supplies is vital with the sector remaining in a state of flux, with the industry being at the mercy of vagaries in the climate and, most significantly, with demand surging as diets in Asia change.
A dairy company in a state of flux is one of the sector’s biggest, Australia’s National Foods. Last week, Japanese brewer Kirin agreed to pay A$2.8bn (US$2.5bn) for National Foods. The drought in Australia looks to have forced the hand of National Foods’ former owner, Philippines conglomerate San Miguel, and there will be questions as to whether Kirin, keen to expand overseas amid stagnation in Japan’s beverage market, will succeed Down Under.
And how will Coles Group, one of the biggest retailers Down Under, fare under new ownership? New owners Wesfarmers has secured support from Coles shareholders and named the retailer’s management team but the conglomerate faces an uphill task competing with rival Woolworths, which pulled away while the future of Coles remained up in the air.
Brand-owners! Don't be seduced by Facebook!
08 Nov 2007 14:31
Social networking sites like Facebook and MySpace are the new frontier for consumer goods companies.
Marketing execs wax lyrical about how such sites can broaden the reach of their products and how brands can get closer to consumers than they can through “old” media like TV and newspapers.
This week, Facebook announced a plan to allow users to seemingly advertise products on behalf of companies on the site. For instance, if I was to buy a product on Blockbuster’s website, I will have the option of sending a message to my “friends” on the site telling them all about it.
According to UK newspaper The Times, over 60 companies – including Coca-Cola and Sony – have already signed up to join the scheme.
Of course, the plans gives marketers the chance to further tailor their advertising to a potential market of over 50m – currently the number of users on Facebook.
However, there is the danger that brand-owners could get a bit giddy at the thought of that potential, focus too much of their time and resources to this new media and ignore the “old” media.
Marketing teams behind big brands should be wary of fragmenting their efforts. The biggest challenge for brand-owners is not the battle to be at the forefront of these new media but to make sure their campaigns are integrated.
We all read newspapers and we all watch TV. An integrated campaign that works across all media would bear more fruit than a fragmented, hot-potch of ideas for TV, texts, Facebook, and print that could damage a brand’s credentials.
The food industry - it's tiring work
06 Nov 2007 17:03
We all burn the midnight oil every now and then. Keeping up the coverage on an international news service for the food industry can be just as tiring as late-night M&A discussions over that a company you just have to buy, I bet.
Executives at consumer goods giant Unilever must have put in a long shift last night, securing a late-night deal with striking workers in the Netherlands.
The agreement ended weeks of strikes and protests at Unilever’s plans to close three sites in the Netherlands as part of its worldwide restructuring.
Comment from the unions was hard to come by today. Frans van de Veen, lead negotiator at Dutch trade union CNV, was apparently taking a hard-earned rest after securing compensation for the affected workers and an improved pay deal for those who will remain. “He was up all night and he is now probably in bed,” an insider told just-food.
No doubt Unilever execs were also sleeping easy; the closures will go ahead and the agreement also averted possible supply issues with stocks running dangerously low.
Sainsbury's should breathe a sigh of relief
05 Nov 2007 16:55
Investors in UK retailer Sainsbury’s would have been disappointed that suitor Delta Two has abandoned plans to buy the company.
Shares in the UK’s third-largest retailer slumped today (5 November) after the Qatar-backed fund decided not to proceed with plans for a GBP10.6bn (US$22.1bn) bid.
Indeed, at the current share price, Delta Two faces a loss on its investment in Sainsbury’s, in which it holds a 25% stake and is the company’s single largest shareholder.
Nevertheless, perhaps after the months of talks and speculation, Sainsbury’s is in a stronger position as an independent company, than if Delta Two’s backers had stumped up the extra funding needed to convince its sceptical pension trustees.
Would Delta Two have had the resources to invest further in the company and to fight the likes of Tesco and Asda head on? I doubt it.
Why we should rethink the "emerging market" tag
02 Nov 2007 16:14
The world’s emerging markets have been a topic of conversation high on the agenda in the office this week.
It was interesting then to read two articles in The Business magazine, which I picked up at Glasgow airport and read on the plane on the way home from a conference this week.
The first highlighted the fact that a Chinese company, PetroChina, has just become the world’s second-largest company, with a market capitalisation of US$434bn, compared to the US’s General Electric which is valued at $420bn.
The article went on paint a picture of a global economy in great flux. “It is perhaps the most dramatic overhaul of corporate and economic clout witnessed for a generation or more…Whichever way you slice the numbers, the change is striking. Of the top five companies in the world, three are now Chinese…Of the top 10, five are Russian or Chinese.”
The conclusion is that we are seeing a decisive shift in power and The Business argues that it may soon be necessary to drop the “emerging” tag from these markets.
The conclusions I drew from that article ran into the second piece rather well. All the talk at various events I have been at recently concerning emerging markets has centred on the potential for Western companies to take advantage of growth in these economies.
However, they have failed to look at the consequences of the emergence of companies based out of these BRIC markets with serious financial clout and international aspirations.
The acquisition of US meat processor Swift by Brazil-based meat giant JBS this year could be the beginning of a shift in power.
The second article in this week’s The Business highlighted a speech by Hu Jintao, the Communist Party Secretary, which said China “must accelerate the growth of Chinese multinational corporations and Chinese brand names in the world market".
Such rhetoric would have been unheard of only a few years ago, but it demonstrates China’s aspirations to be an economic power of global scale but also one with an international reach.