Blog: Dean BestA fractious food industry

Dean Best | 18 May 2009

Wherever you looked last week, there seemed to be a fractious mood in the food industry.

Let's face it, we in the media enjoy a bit of conflict but, that said, the recession is – understandably – causing, at best intense competition in some sectors, and, at worst, stakeholders openly at war.

The gloves are off in Ireland with the country's grocers firing their own salvoes on price as consumer spending power is eroded by the downturn.

Last week, Aldi and Lidl both responded to Tesco's price-cuts campaign with their reductions. Musgrave Group, the company behind the SuperValu and Centra banners across the Irish Sea, said it would continue to support its chains – despite that support hitting pre-tax profits in 2008.

And, all the while, Ireland's food suppliers have expressed disquiet – and, in some cases, outright anger – at some of the retailers' cost-cutting moves.

On the continent, the dairy sector is again proving anything but harmonious. Yesterday (17 May), German farmers ended their hunger strike at the offices of Chancellor Angela Merkel in protest at the falling price of milk. While in France last week, farmers held protests at plants owned by the likes of Danone and Sodiaal, again over milk prices.

A row over milk prices has led to the departure of the boss of Australian dairy firm Warrnambool Cheese and Butter Factory and has thrown question marls over the future of the company's planned cheese venture with National Foods. A change to the structure of the venture seems likely but, as Fonterra's monthly milk price auction suggested last week, it remains extremely hard to judge just how milk prices will move in the coming months.

Uncertainty also reigns at Bertolli olive oil owner Grupo SOS, which is still deciding who will replace CEO Jaime Salazar after a share scandal; forced his departure from the business. And, in the US, the boardroom battle at discount retailer Target rumbles on with the company and one activist investor clamouring for shareholder approval ahead of next week's AGM.

One man certain to be in the shareholder spotlight this week is Sir Stuart Rose, boss of UK retailer Marks and Spencer. The company unveils its full-year numbers tomorrow and its management team has come under fire in recent months. Given the robust figures published by Sainsbury's last week, it will be interesting to see if Sir Stuart has managed to breathe some fresh life into M&S.


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