Blog: Dean BestFood industry flocks to the summer sales

Dean Best | 30 June 2008

The height of the summer usually means several things: rain at Wimbledon, mud at Glastonbury – and a period of serenity on the business pages.

Well, wouldn’t life be boring if it were so predictable. While the world’s top tennis players thrashed it out in the sun last week, and thousands of music revellers basked in sunshine at Glasto, a series of deals were struck in the food industry, as companies in sectors from ingredients to meat moved to reshape their businesses in the face of rising costs.

The biggest deal was among two of the biggest agribusinesses in the US. Bunge pounced to buy Corn Products International, a move, it says, that will give it a key foothold in corn products, like starches and sweeteners, as well as a greater presence in emerging markets like Mexico and India.

Despite Bunge’s bravado, the deal was initially greeted by a cool response from the market and sent the company’s share price tumbling 9%. However, analysts were quick to praise the move, which will create a more powerful supplier for all you food manufacturers out there.

Two more US-based firms – meat processor Smithfield Foods and produce-to-seafood group Del Monte Foods – have also been busy looking to the future by selling off parts of their businesses.

Smithfield has agreed to sell its European venture to Spanish processed meats giant Campofrio, a deal that will create the largest company in the sector in Europe. The enlarged firm will have sales of US$3bn and a presence in markets across the Continent and into Russia.

Del Monte, meanwhile, has found a buyer for its seafood business after deciding to offload the unit due to mounting costs. South Korea’s Dongwon Enterprise Co. will stump up $363m for a business that includes the Starkist brand but which has seen tuna costs jump 70% this year.

Del Monte boss Rick Wolford said the company had decided to focus on businesses with better margins. With costs mounting, it’s likely we’ll hear similar sentiments from industry boardrooms around the world in the coming months.


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