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UK Food & Drink Industry had a good year says FDF

Sat, 24 Dec 2011 13:50:32 +0100

UK food and drink manufacturers have shown their resilience by launching more than 8,500 new products this year, despite the toughest economic trading conditions in decades, the latest Business Confidence Survey from the Food and Drink Federation (FDF) has revealed. Its third-quarter survey showed that this year’s product launches had increased by about 500, signalling that the sector is on course to its growth target of 20% by 2020.

Angela Coleshill, FDF director of competitiveness, said: “Food and drink manufacturing is a strong growth area and we have just launched our vision to grow the sector by 20% by 2020. While members are cautious about the overall economic picture, their confidence in their growth strategies holds firm and they are pressing ahead with new product launches, research and development (R&D), capital investment and training.

Food and drink export sales strengthened as firms moved into new markets where demand for western goods has increased, according to the survey. Exports totalled £8.8bn during the first three quarters of this year; up 12% on the same period of last year when they topped the £10bn mark for the first time. Of those surveyed, 72% reported an increase or static export sales in the third quarter. 24% of respondents predicted a fall during the next three months. On the domestic market, 80% of respondents reported that sales were up or static. Also, 96% expected them to either rise or remain the same during the fourth quarter of this year.

Although key food commodity prices have fallen slightly, that has rarely been reflected in manufacturers’ costs. Nearly 70% of respondents reported an increase in their average costs during the quarter, with further rises expected in the final quarter.

Respondents identified both rising commodity prices and increases in materials and fuel costs. “Despite the on-going economic uncertainty, food manufacturers are continuing to grow their businesses,” according to an FDF statement. More than one third (36%) of those surveyed reported increased spending on R&D while 8% reported a fall. Nearly a half (48%) of respondents expected to invest in the fourth quarter of this year. Developing employees’ skills attracted growing priority with 84% of firms expecting to invest more or the same in training during the third and fourth quarters of this year.
But the survey also revealed an 11% fall in business optimism from the second quarter of the year. Only 12% of respondents expressed ‘more optimism’ with concerns about the economy and the continuing European financial crisis.

Cloetta and Leaf merge to build the largest confectioner of Scandinavia

Sat, 24 Dec 2011 13:36:54 +0100

Cloetta and Leaf have sealed a €753m merger as the companies eye market leadership in the Nordic region.
Cloetta said the deal would bring together 2,800 employees and would be financed through a cash payment of
€166m and the rest in company shares. It will mean the new Cloetta starts with a net debt of €343.4m.
The company said it was aiming to become the market leader in Sweden and the Nordic region while also
maintaining a presence in Italy and the Netherlands. Cloetta said that the merged business will have combined net sales of €630m and earnings of around €73.6m.

Current Leaf CEO Bengt Baron will become the new company’s CEO while former Cloetta nomination committee member Lennart Bylock is to become chairman of the board of directors. Baron said the merger was “the perfect match” as it would unite “brands from complementary categories with very few overlaps” giving the new company a “very strong route in the Nordic countries as well as in Italy and in the Netherlands”.

Cloetta has estimated that within two years the synergy potential as a result of deal will be in excess of €7.2m.
The new company’s brand portfolio will include Kexchoklad, Cloetta, Läkerol and Polly, which will be sold in 50
markets worldwide The company has issued a 24-page press release that gives more in depth detail of the deal and can be found here .

The companies said the timing of the deal was right as both had undergone restructuring in recent years. Cloetta said that it had been adapting its operations over the past three years after a demerger with Finish firm Fazer in 2008.Over the same period Leaf was refocusing its operations following the appointment of Baron as the company’s CEO. Cloetta said that moving forward as a single entity would improve supply chain efficiency of both firms and give each a stronger route into the markets in the Nordic region. Leaf is set to close its factory and Slagelese, Denmark and move production to Levice, Slovakia in the first quarter of 2012, in a move it said would save it €4.9m annually. Cloetta said the annual cost saving for the companies would be a combined €12.1m.

Euromonitor’s senior research analyst in Scandinavia Pasi Hannonen told that the merger was a good opportunity for the new company to strengthen its position in its core markets following Cloetta’s previously unsuccessful merger with Fazer.
“The joint company can be deemed as a kind of failure. Although the company itself was successful, some opportunities were probably lost due to the owners of Cloetta and the Finnish Fazer family not agreeing on the ownership and direction of the company,” he said. Unlike with Fazer with whom Cloetta‘s product portfolio was relatively similar, the new company will combine the strengths of both Cloetta and Leaf. Cloetta is strong in chocolate confectionery while Leaf‘s strength lies in sugar confectionery and gum. The two companies complement each other very well,” Hannonen continued. He said the potential synergy benefits and savings from the merger may lead to a lower number of production facilities. “In the short time, this can be somewhat risky – when Leaf closed one of its production facilities in Finland a few years ago, the initial local reaction to the relocation of the production of long established Finnish brands abroad was negative,” he added.

Review of the year for confectionery industry

Sat, 24 Dec 2011 13:24:55 +0100

An interesting and short presentation compiled by confectionery.com:

click here

Ferrero builds a new site in Turkey

Mon, 31 Oct 2011 19:55:17 +0100

Ferrero has announced plans to build a new factory in Turkey in the province of Manisa to strenghten its position in Turkish confectionery market that has grown 120% since 2004, according to figures from Mintel. The news comes just a few days after the Italian group opened a production site in India, another emerging confectionery market with huge potential. Turkey is not only a strategic country for Ferrero as a supplier of commodities but also as a growing domestic market. The investment is about €90m on an area of 36 acres, and will contain a production line for Nutella and chilled Kinder products. In Turkey 27% of the population is under the age of 14, meaning that the kids market is very attractive. Nutella and Kinder are strong brands for kids.Turkey is one of the most attractive markets in Europe for packaged food brands. Its retail market is rapidly evolving, it is a growing economy and the Turkish consumer's disposable income is leading to growth in packaged food sales. In 2010, Turkey's GDP per capita increased to €10,530m, just half the EU-average, but the highest ever recorded in Turkey. Total consumer spending also grew in 2010 by 14.5%, following a 2.7% rise in 2009. The country's economy is expected to maintain this growth driven by a growing middle class consumer, the growth rate for chocolate confectionery had been higher than anywhere in Western Europe over the last five years and further growth was expected. The Turkish retail market is also growing rapidly. A number of global food and drink manufacturers, such as Kraft Foods, Danone and Pepsico, already have a presence in the market in addition to strong local players like Ulker the owner of Godiva, Eti and Solen. However, other international conglomerates including Mars have also recently announced their intentions to invest. Turkey is also strategic as a low cost production base for export back into the rest of Europe - this may be just as important for Ferrero than the potential of the local market. Developing a local presence in Turkey will help Ferrero compete with the significant number of other multinationals also investing in the country and give it a lower cost production base near key raw materials. The factory should be finished by 2013 and will initially employ 200 people. Ferrero said another 200 jobs would eventually be created.

Best Brands of 2011: Coca Cola is #1

Thu, 06 Oct 2011 06:21:54 +0100

This years best global brands list compiled by Interbrands can be seen from this link. In the first 50 brands there are only 6 food and beverage brands! Coke keeps the first post like before...

Hershey and Godrej break JV in India

Fri, 08 Jul 2011 10:51:34 +0100

A four-year long partnership between chocolate powerhouse Hershey and the Godrej Group in India has been disbanded, according to media reports. Both sides mutually agreed to call off the joint venture, which was kickstarted in 2007; furthermore, the US confectioner will sell its 51 per cent stake to Godrej Consumer Products for an undisclosed sum, reports The Economic Times of India. However, Godrej’s general manager, Isha Iyer said the media reports were “speculative” and that, as a policy, it “did not comment on speculation”.

Four years into the partnernship, the US confectioner had only introduced its chocolate syrup brand through the tie-up. Last June, it was reported that the joint venture was set to launch chocolate brands from the Hershey's stable. Godrej had contributed a number of products through the partnership, including confectionery brands form the Nutrine. Hershey's will now operate on its own in India through a wholly-owned subsidiary, claims The Economic Times.

Competition from other international brands is fierce in India, particularly in the chocolate segment, where Kraft/Cadbury and Nestle dominate. India is a consolidated chocolate market, difficult to navigate for new entrants, and one that is much smaller than say China, despite the category being nascent there. In a market overview last month, Euromonitor International revealed that Indian confectionery retail sales grew by seven per cent last year, boosted by “key indulgence categories” such as chocolate and functional gum. Sugary confectionery, chocolate and functional gum in particular command higher unit prices and are particularly sensitive to an improvement in the economic climate, noted analyst Francisco Redruello. Improving consumer confidence and increasing disposable income played a positive role in the rising demand for sugar confectionery products, which grew by one per cent in constant retail value terms in 2010.

Nestlé acquires Hsu Fu Chiin

Fri, 08 Jul 2011 10:42:58 +0100

Nestlé is in talks to buy leading Chinese confectionery firm Hsu Fu Chiin, a deal that would cost about $2.6bn.

Nestlé confirmed that it "is engaged in preliminary confidential discussions with Hsu Fu Chi." but added that it has no further comments to make at this stage. "Strategically, we would view the deal positively since it would give Nestlé access to China’s fast-growth $6bn confectionery market and allow the group a number of international cross-selling opportunities,” claims MF Global analysts.

Expansion in key Asian countries has long been earmarked as a strategy for Nestlé as a means of compensating for sluggish growth in developed markets.

Hsu Fu Chi is one of China's largest confectionary and bakery manufacturers. It was started in 1992 by four Taiwanese brothers.

Nestlé reported sales of CHF 2.8bn (€2.27bn) in China in 2010, due to the growth there of its global brands including Nescafé, Nan, Maggi, KitKat as well as a hike in demand for local brands such as Haoji and Totole.

In April, the global food giant announced that it has acquired a 60 per cent stake in Chinese food maker Yinlu Foods Group, expanding Nestlé’s instant-food offerings in a key growth market. Family-owned Yinlu is a well-established brand in China and a major distributor of ready-to-drink peanut milk and instant canned rice porridge. The deal extends cooperation between the two companies, as Yinlu is a co-producer of Nestlé's Nescafé coffee in China.

Nestlé CEO Paul Bulcke noted the collaboration with Yinlu demonstrated its “long-term investment in China and our commitment to further developing local brands.” However, that transaction, the financials details of which were not disclosed, is subject to regulatory approval by the Chinese authorities.

While Western companies are looking to gain a foothold in the growing Chinese market, government regulations on foreign ownership are not aiding such acquisition plans. In 2009, Chinese authorities, citing antitrust concerns, rejected a $2.4bn bid by Coca Cola to buy a leading Chinese soft drinks maker, Huiyuan Juice Group. Market watchers regarded the move as protectionist, though Chinese officials rejected such allegations.

Kraft modifies marketing strategy

Fri, 08 Jul 2011 10:34:41 +0100

Kraft is modifying the marketing strategy for a number of its brands, in a bid to connect with younger, digitally-engaged consumers.The company, which owns Cadbury, Kool-Aid and Oreo, is attempting to adopt a more interactive approach for ranges such as Athenos, Mac & Cheese and Miracle Whip. In an example of the organisation's new model, it will roll out a nationwide advertising campaign for Miracle Whip.

As part of this scheme, Kraft is to run a competition through which it plans to help couples pay for a divorce if they can prove their decision was at least partly related to conflicting views on Miracle Whip. Equally, a separate contest will offer $25,000 to pay for a wedding, where the winning betrothed couple provide the most compelling suggestions of how they intend to deal with their contrasting attitudes.

This idea resulted from consumer insights data, including that yielded by social media, showing deeply divergent opinions regarding Miracle Whip. It will build on previous ads which featured various spokespeople saying whether they liked or disliked Miracle Whip. One of these executions showed Pauly D, a star in the reality series Jersey Shore, saying he wouldn't want to have a girlfriend that enjoyed Miracle Whip. "We've seen Twitter posts about how people have broken up over this," Chris Kempczinski, Kraft's senior vice president, meals and enhancers, told the WSJ.

"Conventional wisdom would say that we were putting a spotlight on people who don't like Miracle Whip, but the discussion was happening whether we liked it or not."

A primary motivation behind this shift in tactics is a desire to attract younger shoppers, who typically do not perceive themselves as the core audience for the brand. Miracle Whip sales have declined by around 5% per year over the recent past, but as revenues stand at $260m, excluding Wal-Mart, it still constitutes an important part of Kraft's portfolio.

Prior efforts at attaining such a goal included youth-orientated ads, aiming to differentiate the product from alternatives through the "Don't be may" tagline, as well as transforming the label design. Elsewhere, the Twitter buzz surrounding Mac & Cheese on Twitter - often reaching thousands of tweets a day - revealed considerable untapped interest.

In response, Kraft ran the "Mac & Jinx" competition, meaning two members of the microblog making posts about the brand at the same time were sent a message telling them there had been a "jinx". The first user to reply was then given a free Mac & Cheese.

Similarly, Kraft has sought to modernise the image of its Athenos range, incorporating humus, feta cheese and yoghurt, through using a straight-talking Greek grandmother in several ads. "We weren't trying to be controversial," said Jill Baskin, Kraft's senior director, cheese marketing communication, after some groups claimed the spots had a slightly derivative tone.

In demonstration of the popularity these ads have achieved, one commercial lodged over 150,000 "likes" on Facebook, with many social network users commenting on the realism of the lead character. A dedicated channel on YouTube video-sharing platform featuring three ads has also received more than 3m hits to date, and now has 2,300 subscribers.

Data sourced from Wall Street Journal

Unilever announces reorganisation to further drive growth

Fri, 08 Jul 2011 10:30:39 +0100

Unilever announced changes to its category and go-to-market structure to further support its growth plans, especially in its fast-developing businesses in the emerging markets. The new structure allows for a more efficient rollout of increasingly bigger and more scalable innovations, and the optimization of resources behind strategic priorities.

“Unilever now has over half its turnover in the emerging markets, where, over the last 10 years, growth has been close to double digits. We have an opportunity to better support this footprint of the business, to keep our strong momentum, with a more globally aligned country and category organisation.” said Unilever CEO Paul Polman.

As part of these changes Harish Manwani will be appointed as Chief Operating Officer, with effect from 1^st September, and will take responsibility for all markets, in order to drive speed-to-market behind further simplification and efficiency.

"Over the past few years we have seen a significant step-up in our innovation success rate and our speed to roll them out across markets. The new structure will further accelerate this," added Polman.

The Category organisation will be broadened to four categories reporting directly to the Chief Executive Officer Paul Polman.

Dave Lewis, currently President , Americas, will be appointed as President, Personal Care consisting of Skin, Deodorants, Oral and Hair.

Kevin Havelock, currently Executive Vice President Ice Cream, will be appointed as President of the newly established Refreshment category which includes Ice Cream and Beverages.

Antoine de Saint Affrique, currently Executive Vice President Skin, will be appointed as President, Food which includes Savoury, Spreads and Dressings.

In the Home Care category, Randy Quinn, currently Executive Vice President Laundry, and Sean Gogarty, Senior Vice President Household Care, will report directly to Paul Polman.

The new structures will be put in place during the third quarter and will be fully operational before year-end.

Michael B. Polk, currently President, Global Foods, Home and Personal Care and member of the Unilever Executive has announced his intention to leave Unilever after eight successful years with the company to become President & CEO of Newell Rubbermaid with effect from 18^th July.

Paul Polman said: “Mike is a great leader and has had a very successful career with Unilever since joining from Kraft eight years ago. In his current role, he has made a major contribution in sharpening our portfolio strategy and developing bigger and better innovations. He will leave a lasting impact on the company. I wish him success in his future endeavours.”

Mike Polk said: “I have thoroughly enjoyed every moment of my time at Unilever, especially the last few years working with Paul and the rest of the executive to really transform the company. Our global category organisation is now a real powerhouse that combines global brand and technology scale with local knowledge and execution.”

Nestlé Targets Africa

Fri, 08 Jul 2011 10:26:58 +0100

Nestlé, the food group, is heightening its focus on Africa in a bid engage the region's new generation of "emerging consumers". Speaking to Bloomberg, Frits van Dijk, the firm's zone director for Asia, Oceania, Africa and the Middle East, argued economic growth and associated trends were exerting a profound effect. "We are very bullish about the African continent," he said. "The continent will soon have a billion people, and while admittedly income levels are very low, they are rising."

Over the course of last year, when sales in mature markets rose by 2% or less, Nestlé posted $3.5bn in African revenues, following on from a "strong double-digit" lift in percentage terms.Although Africa only accounts for 3% of the Swiss multinational's total turnover, this figure is likely to increase going forward.

"More and more people are coming from the very lowest income levels, into what we call the 'emerging consumers' category," said Van Dijk."For the first time they can afford to buy basic packaged food and beverage products."

In an effort to drive growth, Nestlé plans to invest CHF1.2bn in importing its production capabilities, including plants located in Kenya and Zimbabwe. Having launched a second Nigerian plant in February, the organisation has also unveiled an equivalent in the Democratic Republic of Congo, with similar schemes in train for Mozambique and Angola.

Organic expansion is the priority, but van Dijk stated Nestlé would be open to making purchases should the right prospects arise. "We are continuously studying projects and looking at opportunities, but the bulk of our growth is coming from internal growth through innovation and renovation," he said.

One strategy the company has pursued is reducing the size of product packaging to ensure goods are accessible to the 46% of regional consumers living on less than $1.25 a day. Small servings of its Maggi seasoning powder are available in Kenya for 2 shillings - or 2¢ in the US - while Nescafé single-serve instant coffee sachets are priced at 5 shillings. As part of a global health and wellness push, many products are being augmented with constituents meeting the nutritional needs of shoppers across various different markets.

Its wider initiatives include buying increasing amounts of ingredients from local farmers, and working with Kenyan farmers to guarantee the milk they provide reaches the requisite standard. Trading in Africa is not always straight-forward, as shown by the fact that Nestlé's factories and R&D unit based in the Ivory Coast, a key source of cocoa, saw business patterns disrupted by political unrest. However, van Dijk suggested the potential offered by Africa means events such as this must be placed in a broader context. "If we would not be willing to take risks we would lose out on a lot of opportunities," he said.

Data sourced from Bloomberg