Blog: Dean BestCautious investors fear supplier woes

Dean Best | 14 January 2008

Investor confidence in food retailing took a knock last week with a set of lacklustre results from UK retailer Marks & Spencer.

However, that confidence returned somewhat after robust numbers from UK rival Sainsbury’s and international retail giant Metro suggested that the grocery sector can withstand any economic turbulence in the weeks ahead.

Nevertheless, concerns over consumer confidence mean food retailing is set to be as competitive as ever in 2008, which could prove something of a headache for suppliers facing continuing cost pressure. Consumers will be looking for value as they tighten their belts and grocers will be reluctant to fully pass on these costs to shoppers.

And the market seems to be aware of that reluctance. Shares in Premier Foods, the UK's largest food group, tumbled after it warned that commodity costs will continue to bite this year. And elsewhere last week, there were further signs that food producers are leaving a bitter taste in the mouths of investors. On Friday (11 January), shares in European food giants Unilever and Danone slipped – again amid fears of rising commodity costs. Worryingly, it’s unlikely that Premier Foods, Unilever and Danone will be the only food manufacturers to find the going tough this year.

One company finding the going anything but tough is Swiss chocolate maker Barry Callebaut. 2007 was a key year in the company’s development; supply deals with the likes of Cadbury and Hershey has made Callebaut the leading business-to-business chocolate maker on the planet. And the opening weeks of 2008 have seen Callebaut’s momentum continue with two astute moves in Asia, a key emerging region in the chocolate business.


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