Blog: Dean BestIt's summer - but it's ugly

Dean Best | 4 August 2008

Summer. A time to unwind, relax and switch off from the pressures of business - at least for a couple of weeks.

For some, however, there is, right now, precious little respite from some of the most uncertain economic conditions we have seen for a generation.

These uncertain conditions are causing concerns on both a macro- and a micro-economic level. Last week, after a brief period of optimism, came the almost inevitable news that the Doha trade talks had collapsed. A protectionist cloud hung over the negotiations, with developing countries like China and India unable to strike a deal with the US over their right to protect their food producers from cheaper imports.

On a more micro level, the likes of Tyson Foods and Pilgrim's Pride continue to suffer from the pain of rising commodity costs. Even Cadbury, which booked a set of decent first-half numbers last week, admitted that it may have to make yet more cuts to its business in the face of more expensive commodities. "The world out there is uglier and we have to adapt," admitted Cadbury boss Todd Stitzer.

Analysing that ugly economic landscape is becoming tricky with the market and analysts seemingly at odds over who is dealing best with the pitfalls. Shares in Unilever slumped despite the company maintaining its full-year guidance after restructuring charges and the strength of the euro hit earnings. In the US, analysts praised Kraft Foods after its second-quarter profits rose, although others were less than convinced about the longer-term performance of the business.

Uncertainty of a different kind was felt in the global retail sector last week. In the US, the merger between natural and organic retailers Whole Foods Market and Wild Oats Markets was dealt a blow after a US appeals court overturned a ruling that had cleared the deal last year. Whole Foods has already sold off and closed a number of Wild Oats stores and its argument that regulators could not unravel the deal has been dismissed - at least for now.

And in Australia, the country's retail giants are awaiting the publication of the government's inquiry into the sector - a probe that could have potentially significant ramifications for those operating - and who wish to operate - in one of the most mature markets in the West. The publication of the report is due this week; the world's retail giants will be watching with interest.


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