Blog: Dean Best"Some of them were not only drinking milk"

Dean Best | 26 May 2009

While us Brits basked in Bank Holiday sunshine, some of our continental cousins had a far more stressful day yesterday (25 May).

Farmers in France and Germany again held protests over milk prices, while demonstrators met outside The European Commission in Brussels to voice their anger and call for EU help.

EU Agriculture Commissioner Mariann Fischer Boel met the demonstrators outside - "I am not scared ... although I did have the impression that some of them had definitely not only been drinking milk", she told reporters - and has indicated some financial help for farmers.

Fischer Boel did, however, reject the claims that the fall in dairy prices has been a result of last year's quota increases. Lower consumer demand has hit the sector, she insisted. And therein lies the issue for struggling dairy farmers. Any recovery in prices depends on economic recovery and it remains anyone's guess when that will happen.

An obvious consequence of the global economic downturn has been the drying up of M&A in our sector. Last week, however, saw the biggest deal for many a month with the announcement of the planned merger between two of Latin America's largest food groups - Perdigao and Sadia.

The rationale behind the merger is compelling - it will create the world's largest poultry company, after all - but, in many respects, it is a deal born out of necessity. The two sides previously considered a tie-up back in 2006 but, with the economic situation healthier and commodity prices at different levels, neither group was willing to cede to the other. Financial difficulties have, in many respects, brokered the agreement announced last week.

Tate & Lyle, the UK food ingredients group, and Bertolli olive oil maker Grupo SOS, have suffered their own kinds of financial problems in recent months. And, last week, both announced a change at the top.

Tate & Lyle named Reckitt Benckiser executive Javed Ahmed as its new CEO. Ahmed will replace Iain Ferguson in November and take the reins of a business rooted in the volatile commodities sector. Some industry watchers have speculated that the appointment of an outsider could herald a change in strategy at Tate & Lyle but Ahmed's lack of experience on food is unlikely to lead to a step-change at the sugar refiner.

Grupo SOS, meanwhile, shaken by a recent share scandal, has appointed a motor industry executive as its new CEO). The naming of Jose Manuel Muriel raised eyebrows and SOS's new boss will have a lot on his plate - renegotiating an almost EUR1bn loan package, implementing a EUR200m share issue, paying down debt and selling off non-core assets. And all this while SOS fights its former chairman and CEO, the two executives at the centre of the share affair, in the courts.

After a spell in the car industry, Muriel has plenty of distractions but it will be his job to keep the eyes of the business on the road ahead.


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