The food business blog from Dean Best
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Counting the real cost of soaring food prices
12 Mar 2008 11:12
The price of wheat has soared 130% in the past year and with a global population expected to top 9bn by the middle of the century, pressures on the world's resources such as land, water and oil show no sign of abating.
Yet it’s not just the price of wheat that has risen in the last year. Other staples such as corn and soya are trading at well above their 1990s averages, with an 87% rise in soya and a 31% increase in corn.
As we have discussed on these pages before, a large cause of this is the rising price of oil and fears over climate change which have seen a tremendous uptake in the use of maize to make bio-fuels, which in turn has pushed food prices right up.
There is little doubt that food inflation has become an emotive topic in the world's media and the subject has the potential to be hijacked by any number of interest groups. It's useful then to be able to fall back on some hard facts every now and then.
That's just what the BBC has done this week as part of its look at the subject and these tables - the link is below - are worth bookmarking.
Innovation - it does work...
10 Mar 2008 12:00
Innovation, innovation, innovation. It’s an issue that goes right to the heart of any successful business, not just those within the food industry.
But innovation is hardly an exact science, is it? Trying to get it right must consume many of your working hours. In today’s economic climate, getting it right can seem as perilous as ever. Only a small proportion of new products last on supermarket shelves after a few months – and with consumer spending shaky and the financial outlook somewhat uncertain, can your business afford to waste thousands of pounds on a product that won’t last past the summer?
For some, taking that risk is a necessary part of business. Big or small, it pays to be ahead of the game when it comes to NPD and investment into niche segments or emerging markets.
Last week, innovation was the central theme running through our news pages. In the US, two of the country’s biggest brands joined forces in a bid to tap into one of the fastest-growing segments in the food sector – premium chocolate. As demand for upmarket chocolate continues to grow, Starbucks and Hershey have decided to launch a range of “artisan-style” products to try and carve their own niche in the category.
Hershey is playing catch-up to the likes of Mars and Lindt, who have stolen a march in high-end chocolate. On the face of it, the alliance with Starbucks looks a wise move. However, there will be no let up in the competition, with Cadbury Schweppes set to launch its organic chocolate Green & Black’s in the US this year.
Another US firm betting big on innovation is Hormel Foods, the sausage-to-spam group. The company is aiming to achieve US$2bn in sales from products created this decade by 2012. It might seem an ambitious target but Hormel would beg to differ; the company said it had met its previous goal two years early. Last month, Hormel also opened an innovation centre in China in a bid to develop products to appeal to consumers in that market. The meat maker, it seems, is banking on NPD to bring home the, er, bacon.
Innovation that has justified a heap of faith and investment was lauded last week in a league table of the top new products sold Stateside in 2007. According to industry analysts IRI, Campbell's reduced-sodium soup topped the list of the best-selling new food and beverage brands last year with sales of US$101m. Products from General Mills and Sara Lee also made the list and beat what IRI labelled the “abysmally low” odds of success for a new product.
This week, we’ll be talking to IRI to ask why it believes low-sodium soup and functional bread were winners in the US last year and for its forecast for the NPD trends to watch in 2008. It will make for interesting reading…
Laziness or convenience? The rise of online shopping
07 Mar 2008 12:55
just-food reporter Michelle Russell yesterday (6 March) heard UK retail watchers talk about the rise and rise of online shopping in the country. It got her wondering...
Have we become a lazy nation of shoppers or are we just too busy to fit a weekly shop into our now busy schedules?
I remember a time when I was a young girl and Thursday nights were grocery shopping night. My mum would bundle me and my two sisters into the car and we’d look forward to what we saw as a bit of an adventure – ok we didn’t get out much – but exploring this huge, overwhelming supermarket, picking up items we clearly weren’t allowed and diving for the toy section are all images embedded in my childhood memory.
Yet it seems this may soon be a thing of the past with online shopping now growing at such a phenomenal rate.
Ok I won’t be going shopping with my mom and sisters anymore but the family outing, choosing what you’re going to have for dinner, squeezing and smelling your fruit - it doesn’t quite offer the same experiences sat at a computer.
With obesity also on the rise, shouldn’t retailers be encouraging shoppers to get a bit of exercise, even if it is a walk from the car park to the store, and browse through the plethora of healthy-eating brands now hitting supermarket shelves in person rather than from home? Or are retailers just thinking of their pockets with the virtual basket offering a far greater capacity than the physical one?
Maybe we should take advice from the French who haven’t yet entered into the online grocery-shopping phenomenon. Visiting a local market surely offers a social element that gladly contributes to the food buying experience?
Before we know it, those grinning supermarket greeters will be out of a job and we’ll all be suffering from piles, but hey at least we’ll have more time to play on the Wii.
Hershey wakes up and smells the coffee
05 Mar 2008 15:35
Hershey has taken what it hopes will be another small step on the road to recovery in the US.
The company’s tie-up with Starbucks is a bid to gain a greater presence at the end of the market where US chocolate sales are booming – premium, upmarket chocs.
Industry watchers have forecast that it is at the high end of the US chocolate market where the growth is going to be in the years ahead – but it has also been an unfamiliar category to Hershey in recent years.
The company has been left behind as the likes of Mars and Lindt have launched a series of products to cater for growing demand for posh chocolate among Americans.
Under new CEO Dave West, Hershey is taking steps to rectify the situation and an alliance with a ubiquitous brand like Starbucks is a wise move.
However, there will be no let up in the competition, with Cadbury Schweppes set to launch its organic chocolate Green & Black’s in the US this year.
Why Italy is right on olive oil
04 Mar 2008 15:05
The Italians like a good debate – the tumultuous scenes in the country’s legislature in recent years is testimony to that.
And when it comes to food, there are fewer races more passionate than the Italians.
Right now, it’s olive oil – and the perceived heavy-handedness from the EU – that’s stirring growers throughout Italy into a frenzy.
The European Commission has written to the Italian government to complain about rules obliging olive oil producers to state the source of their olives on bottles.
Brussels says Italy’s rules on olive oil breaks EU law, which only permits a voluntary labelling system.
However, the Italians believe – with some justification – that their system has helped combat fraud in the sector and gives consumers greater awareness of what they are buying.
“I think it is legitimate that when you buy oil from Umbria, you want the olives to come from Umbria,” one Italian journalist wrote last week. "But Brussels couldn't care less about that. For them, it's good enough for the olives to be European, Europeanised olives."
With Spain breathing down Italy’s necks in the race to be the world’s largest exporter of olive oil, it is little wonder that the Italians are concerned about preserving the USP of their products and promoting quality.
And, if Italy’s winegrowers have to state where their grapes come from, why shouldn’t olive oil growers?
Fairtrade, M&S under the microscope
03 Mar 2008 12:00
Shall I buy organic? Shall I support my local farmer? Shall I buy Fairtrade? Right now, shoppers are more anxious about which retailer can help them meet the weekly food bill.
Nevertheless, despite ongoing unease over the economy, perhaps now is the best time for Fairtrade Fortnight, two weeks when the Fairtrade brigade tries to convince consumers to throw an ethical pound or two in their direction. Fairtrade products are experiencing something of a boom in the UK. Last year, sales jumped 81% to just under GBP500m (US$993m) and, in the UK, retailers of every colour are stocking Fairtrade coffee, chocolates and, of course, Fairtrade bananas.
But, just what impact is the Fairtrade scheme having on those it claims to benefit? Last week, a UK think-tank claimed the Fairtrade scheme is leaving Third World farmers worse off and does not aid economic development – assertions that then provoked a frenzied response from the Fairtrade Foundation.
Here in the UK, shoppers have taken readily to the concept of Fairtrade, sales are healthy and retailers have used their ad spend in the last week or so to promote their Fairtrade credentials. But how is the scheme faring overseas? Are consumers in Pittsburgh and Paris less swayed by Fairtrade? Keep an eye on our pages this week for an international perspective on the category.
One UK retailer that has been one of the most heavily involved in Fairtrade is Marks & Spencer. The company’s ethical programme – Plan A – has been held up as one of the most ambitious and wide-ranging in retail. Last week, however, the company’s credentials took a bit of a hammering after claims that it is not doing enough to stop "widespread discrimination" among workers in its meat supply chain. Predictably, M&S brushed off the accusations. Nevertheless, the allegations were another bit of bad news in a year that has started less than brightly at M&S. It seems 2008 could be a challenging year for the company and its chief executive, Sir Stuart Rose.
One key task for M&S this year will be to make inroads in the world’s emerging retail markets. Sir Stuart has identified China, India and Eastern Europe as offering the business a substantial opportunity for growth. Last week, it emerged that M&S is in talks with Reliance Industries over a possible tie-up with the Indian conglomerate but a deal has yet to be signed. Markets like India remain a long-term play with huge potential but, with larger rivals like Tesco, Carrefour and Metro either building or looking to build a presence in the world's emerging economies, M&S needs to move quickly.
Emerging markets are also focusing minds at Unilever, the Anglo-Dutch conglomerate behind brands from Knorr soup to Magnum ice cream. The company has decided to manage its businesses in Central and Eastern Europe alongside its operations in Asia and Africa. The move comes after a year in which Unilever’s sales jumped in developing and emerging markets. On the face of it, it seem a wise move from Unilever. Markets from Asia to Africa will have similar characteristics and there will be learnings to be gained. But will the new super-division, which also includes Eastern Europe, be too unwieldy to manage?
Want to pop the question? Go to Asda
29 Feb 2008 14:49
For some, today’s (29 February) burning question is – who in fact owns 29 February?
Should we be allowed a day off? And is it just a way for businesses to wangle a day’s free work from us?
Today, however, is a day when some (un)lucky men around the world face an even more important question. For today – apparently – is the day when women traditionally ask their beloved: “Will you marry me?”
And bizarrely, Asda, Wal-Mart’s UK arm, has decided to lend a helping hand to those nervous women hoping that the man in their life will surrender, I mean, say "YES!".
First, the retail giant is selling men’s engagement rings for a whopping – wait for it – GBP37 (US$73).
Justine Reid, jewellery buyer at Asda, says: “Everybody knows that love shouldn’t cost anything but if we had to put a price on it, we think that GBP37 is the best deal around.
Yeah, when it’s a woman paying. What happened to an engagement ring being worth a month’s wages?
Asda is also offering “extra special” way for women to propose today – over the stores’ in-house tannoys.
What were they thinking?
Go easy on Fresh & Easy
28 Feb 2008 11:10
I’m British therefore I must dislike Tesco. That’s how it feels sometimes, judging from the brickbats thrown at the retailer here.
The company came under fire yesterday after allegations that it uses the Cayman Islands to avoid paying tax on property deals.
The financial press here also picked up on a broker’s report in the US, which warned that Tesco’s fledgling Fresh & Easy business is on-track to miss its financial targets.
Tesco told us they viewed the reports on Fresh & Easy as “scaremongering” and that it would be better to give the stores more time before coming to a conclusion on their performance.
I’m inclined to agree. The business has been up and running for just four months and, like every other new business, is facing teething problems.
Retail analysts in the UK have greeted Tesco’s US venture with enthusiasm, while, most tellingly, the launch of Fresh & Easy has stirred Wal-Mart into action.
The US retail scene has been a graveyard for UK retailers in the past but let’s give Tesco more time before writing Fresh & Easy’s obituary.
International success - like nailing jelly to a wall
25 Feb 2008 12:02
True international success is a grand ambition for the titans of the food industry but sometimes it can be as easy to achieve as nailing jelly to a wall.
Going global is often seen as a panacea to problems at home – US meat processors have been urged to look overseas for growth, while Hershey’s over-reliance on domestic chocolate-lovers is well-documented.
However, in the last fortnight, we’ve seen just how tricky it can be to succeed in foreign lands. Two weeks ago, we saw problems in Asia take the gloss off results at French food giant Danone. Sometimes, conservatism at home can stifle a company’s international ambitions before they have had a chance to bear fruit – witness the ongoing battle between New Zealand dairy giant Fonterra and its farmer members over the company’s future strategy.
And last week, the challenge of doing business abroad was brought sharply into focus at US group ConAgra Foods. The company was one of a slew of large US packaged food firms who gave an upbeat trading update to the analyst community last week. However, not all is well at the company. The performance of ConAgra’s food brands has been lagging behind its commodity business and, in a bid to revitalise its portfolio, the company is scaling back its operations internationally. Jobs are to go across Asia and in Europe, where cuts will be made in the UK. Brands like Slim Jim meat snacks, popular in the US, have not exactly proved a hit overseas.
But fear not. With the right mix of brands and investment in high-growth categories, international success can be achieved. Last week, Nestle unveiled a robust set of figures for 2007 with all its regions contributing to an almost 13% rise in annual profits. Input costs may be on the rise but the Swiss food giant has proved growth can be achieved in a number of markets despite a challenging economic environment.
In retail, Asda has also proved growth can be won despite concerns over consumer spending. The UK retailer’s buoyant sales gave parent Wal-Mart a boost last week and the company thumbed its nose at the notion that a slowing economy is not the best backdrop for bold measures. Asda is planning a wave of expansion in the UK, moves that will lead to the creation of 9,000 jobs.
As predicted, Asda looks likely to gain most from government moves to inject more competition into the UK grocery sector. It is an interesting time to study the UK grocery landscape but just how does it compare with the retail scene in Europe?
The UK is seen as a retail-friendly environment for the largest grocers and, in the last week, we have looked at how the sector compares to markets across the English Channel. There are signs of a more liberal retail environment emerging in some European countries but how far that trend is indicative of real convergence across the continent remains to be seen.
Why Asda is vital for Wal-Mart
21 Feb 2008 10:40
As predicted, Asda looks likely to gain most from the moves to inject more competition into the UK grocery sector.
It was telling that Asda’s announcement yesterday (20 February) of a wave of planned new stores in the UK – and the creation of 9,000 jobs – came just days after news that there would be changes to the regulations governing the grocery landscape in the UK.
The company’s planned expansion also speaks volumes of the confidence its parent, Wal-Mart, has in increasing its share of the UK market.
What’s more, it was Asda that boosted Wal-Mart’s performance in 2007, so any further growth in the UK is vital for the folks in Bentonville.