Blog: Dean BestWhat a year...

Dean Best | 22 December 2008

What a year. For all the hope generated by the election of the first black US president, 2008 will be remembered as the year in which the world narrowly avoided economic meltdown.

As the economic storms battered all sectors, the foolhardy, almost arrogant, view that the food industry was recession-proof quickly gave way to the realisation that the grocery landscape had been transformed. Eighteen months ago, UK food manufacturers and retailers were happily looking on as growing interest in food provenance and home cooking drove demand for premium food. Just a year later, with credit squeezed, unemployment rising and nervous consumers keeping their purses shut, the UK grocery sector has become a battleground , with Tesco frantically flagging its discount credentials as local rivals Asda and Morrisons gained ground - and the encroachment of the discounters became a full-on invasion.

The likes of Aldi and Wal-Mart were the undoubted winners of 2008, luring consumers with lower prices, while Tesco posted its slowest sales growth in over a decade. Elsewhere, Carrefour also suffered as fierce competition at home hit its sales. Last week, the French retail giant saw its shares slump after admitting that revenue would not grow as much as it had earlier thought. New CEO Lars Olofsson will have plenty on his plate when he takes up the reins at Carrefour on New Year's Day.

2008 has also been a year to forget for some food manufacturers on both sides of the Atlantic. Here in the UK, the country's largest food maker, Premier Foods, continues to face questions over its future, with the company saddled with around GBP1.7bn (US$2.5bn) in debt. Last week, Premier admitted it was in talks with potential investors over a possible cash injection. On 13 January, the company is due to issue a trading update; perhaps then we will know whether those talks have been successful.

In the US, while the business headlines have focused on the fallout from the collapse of Lehman Brothers and the turmoil in the auto industry, anxiety in the food sector has centred on the country's meat processors. Poultry giant Pilgrim's Pride entered Chapter 11 after months of battling soaring feed costs, low chicken prices and high debts. Tyson Foods may be in better financial health - and has spent much of 2008 expanding overseas - but, last week, even the meat sector's largest player was moved to secure a fresh credit agreement with its lenders - and put all its business up as collateral for the loans.

There was good news to be had elsewhere last year, however. Kraft Foods, Unilever and Associated British Foods showed signs of promise, while HJ Heinz continued to perform strongly. And Mars (Wrigley) and The Co-operative Group (Somerfield) struck company-changing acquisitions. Even in the last week, there was some good news to be had on the M&A front with the completion of the long-anticipated merger between dairy giants Campina and Friesland Foods.

Before we rush to do our last-minute Christmas shopping and prepare for a day of stuffing ourselves silly, playing Wii with our younger siblings and then falling asleep on the sofa, just-food would like to thank you all for your support in 2008. It's been a rollercoaster of a year and, while there is some pessimism about the prospects for 2009, it's clear that those of you offering consumers the right mix of quality and value will prosper.


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