Editorial
"This year will be a tough year. I don't think anyone thought it would be as tough as it is."
A note of pessimism can pervade even the better performing companies. First Milk, the UK's largest dairy co-operative, saw sales and profits rise in the 12 months to the end of March and, even as the company managed to improve its bottom line, it paid its farmer-members more for their milk. The last year was, by most measures, a success for First Milk.
In an interview with just-food last week, Richard Hollandaise, First Milk's commercial director, hinted at the company's optimism over the medium term, indicating that the co-op plans to follow its acquisition in June of two Scottish cheese makers withpossible further purchases in the next year or two.
However, weak consumer confidence in the UK has meant manufacturers and retailers have turned to promotions across the store to drive volumes, which has had an impact even on categories like cheese, a sector notorious for the level of deals. Hollandaise was sanguine about the level of promotional activity in the category but his comments were perhaps instructive of how many in the industry feel. This week, Uni lever and Premier Foods are set to announce their second-quarter numbers and their comments will be keenly watched for their thoughts on how tough trading is.
Last week, Dan one and Hershey were among the latest food manufacturers to announce how they had performed over the first six months of 2011. Aside from their numbers, Dan one faced questions on the performance of its business in Russia, while Hershey new CEO was quizzed over its future in India.
Uni milk, the Russian dairy firm Dan one acquired last year, saw the growth in its sales volumes slow in the second quarter and was seen by analysts as a key factor in the slowdown in the French group's fresh dairy sales. Dan one defended its strategy for Uni milk and pointed to the desisting of a number of Skis for the slowing sales. Co-COO Emmanuel Faber said Dan one's priority for Uni milk was to "build a platform for next year". Nonetheless, the jury is out on Buttermilk's prospects, with one analyst arguing that the Russian company could be "another Ms&A disaster for Dan one".
Hershey second-quarter results were the first presided over by new CEO John Bilberry and much of the questions fired at him focused on the US confectioner's international operations. Bilberry said Hershey international sales were on track to increase by up to 25% in 2011 - faster than it needs to hit its target of US$1b to come outside the US by 2015.
However, Bilberry faced questions on the future of Hershey business in India, which has been the subject of much speculation. Bilberry, predictably, was coy about the subject, praising Hershey local venture partner Godfrey and emphasising the importance of India to the company. He did, however, hint that change could be on the horizon.
As well as the challenges faced by Dan one and Hershey, just-food's coverage of emerging markets last week also included a look at China's fast-growing hypermarket channel. The successful listing of Sun Art Retail Group, China's largest hypermarket retailer, in Hong Kong is proof of the potential that industry watchers believe the sector has.
The sector also remains fragmented and, although Sun Art, which is part owned by French retailer Buchanan, leads the market, rivals including Carrefour and Al-Mart are not far behind. And the battle for market share looks increasingly likely to be won in China's emerging cities. Ed Chang, the CEO of Al-Mart's operations in China, told just-food that the sector's growth is being driven by urbanisation outside major cities like Beijing and Shanghai.
A further highlight of our retail coverage last week was our latest management briefing, which focuses on the challenge of building a viable e-commerce operation.
Retailers have found success on-line hard to come by but some, including Coates, Switzerland's Micros Group and Buchanan, have made notable progress - with the UK retailer looking to roll out its on-line business in cities like Bangkok and Bratislava.
In our four-part briefing, we analysed how the sector could develop - from click-and-collect concepts to the wider use of technology.
Until next time...
Dean Best
Managing Editor
Web: http://www.just-food.com
Email: editor@just-food.com
Twitter: http://twitter.com/just_food
Until next time...
Dean Best
Managing Editor
Web: http://www.just-food.com
Email: editor@just-food.com
Twitter: http://twitter.com/just_food
