JUST FOODS EDITORIAL: NEWS FROM AROUND THE FOOD WORLD...(August 30, 2011)

Issue 587

August 30, 2011

Editorial


It's been clear for some time that UK businesses and consumers are being buffeted by some severe economic headwinds.

However, last week, one of the country's top retail executives, with some characteristic plain speaking, highlighted just how tough he believed the environment is. 

Peter Marks, chief executive of The Co-operative Group, the UK's fifth-largest food retailer, said trading conditions were "the worst I have seen in over 40 years of retailing".

Marks made his comments as The Co-op reported a drop in half-year profits from the company as a whole and from its food business, which suffered amid the intense promotional activity in the sector. Of course, with profits from its food retail stores down by 21%, it would suit Marks to paint a negative picture of the sector and of the UK economy. 

However, his comments were supported by data from UK business organisation the CBI and from rival retailer Asda, which said yesterday that rising costs were making UK families worse off than a year ago.

US food manufacturers and retailers are facing similar economic headwinds - as evidenced by comments from Heinz last week when it reported its financial results for the three months to 27 July - but, as news reports worldwide showed this weekend, some have battled real, rather than metaphorical, storms in recent days.

Hurricane Irene hit the US mainland on Saturday when it reached North Carolina and, although the intensity of the storm did not meet some projections, millions of people lost power and homes and businesses were damaged.

 As of yesterday, Wal-Mart and Belgium-based retailer Delhaize (which runs chains including Food Lion and Hannaford in the US) still had dozens of stores closed.

 Already, analysts are looking at what Irene has meant for the retail sector, with some predicting that there were winners and losers from the storm.

The storm appeared at a time when US retailers and manufacturers are facing weary consumers. 

Dutch retail giant Ahold, one of the grocers that closed stores due to Irene, faced questions over its US performance last week. 

Ahold's identical-store sales excluding fuel in the US increased 1.2% in the second quarter of 2011 but admitted that inflation was over 4%. Ahold, which also runs chains including Stop & Shop and Giant Carlisle in the US, also saw its margins across the Atlantic fall due to the change in timing of Easter, partial success in passing on higher fuel costs to consumers and increased promotional costs. 

Nevertheless, Ahold CEO Dick Boer said the retailer had  performed better than its rivals in the US. "Compared to our competitors, we outperformed them again in the second quarter," he told analysts.

Heinz, which reported its first-quarter numbers last week, faced questions over consumer sentiment in the US and warned that some consumers in its domestic were "really struggling". 

The ketchup maker's comments on Australia, where it generates around US$1bn in sales each year, were also illuminating. 

CFO Art Winkleblack said Australia, where the country's two main food retailers, Woolworths and Coles, are in an intense battle for market share, had become "an inhospitable environment for grocery manufacturers".

Goodman Fielder, one of Australia's largest domestic food makers, will agree. The company said today that its annual underlying profits were down 17%.

Until next time...

Dean Best
Managing Editor
Web: http://www.just-food.com
Email: editor@just-food.com
Twitter: http://twitter.com/just_food

FROM THE DESK OF FOOD NEWS: AUGUST 26, 2011

From the desk of Foodnews


Friday August 26 2011

The national papers remark that it has been a summer without the usual “silly season” news. For once, the sleepy holiday period simply failed to take place, and there have been plenty of big stories for journalists of all walks to wrestle with, from threatened financial meltdowns, London riots and Tripoli under siege... to soaring Chinese apple prices and the “McDonalds effect” on the banana puree market.

But this week, FOODNEWS’ editorial column takes a break from discussion of current affairs (food-related or otherwise) to glance ahead at what is in store from the magazine for the last quarter of the year. We begin with one of the most important events for processors, manufacturers, marketers and buyers the world over: the ANUGA trade show in Cologne.

As in previous years, FOODNEWS will be producing a special edition to coincide with the fair. But this year, we are putting a special emphasis on representing you, our readers, within its pages. We are now accepting submissions of stand details, company information and announcements, as well as news on new products to be showcased at ANUGA. Whether you are a trader, a packaging supplier or a group representing one sector or country, we want to hear from you. Our reporters will also be roaming ANUGA’s halls for the duration of the fair in order to provide you with news on all the deal-making and emerging price trends.

In addition to our ANUGA special, following the success of a number of “Spotlight on...” issues during 2011, we are pleased to announce that two more will be published this year: Spotlight on China (9 September), Spotlight on Germany (28 October). They will contain the usual FOODNEWS blend of hard data, up-to-the-minute news coverage and analysis.

The FOODNEWS Chile supplement, out on 9 September, takes a whistle-stop tour around the key food sectors in the country. Neil Murray examines the Chilean juice industry’s coming of age, the country’s booming nut industry and the resurgence of the cranberry industry as its emphasis moves from juice concentrate to dried cranberries.

By popular demand, 2011 also sees the re-launch of the FOODNEWS Canned Foods World Trade Yearbook, which will be available to purchase separately later in the year. Packed with the latest data on canned goods from sardines to sweet corn, this is a bible for the canned food industry and an indispensable tool for studying import and export trends in detail.

For more information on the Canned Foods World Trade Yearbook or to submit company information for our ANUGA special edition, contact us at    FNeditorial@agra-net.com.

AHOLD JOINT VENTURE (ICA) BACKS OUT OF NORWAY...

NORWAY: ICA to offload Maxi stores

By: Sam Webb | 17 August 2011


Sweden-based retailer ICA has decided to quit the hypermarket channel in Norway to focus on its supermarket and discount stores.

ICA, in which Dutch retail giant Ahold owns a 60% stake, will sell 24 Maxi stores in Norway. The stores employ around 1,500 staff.

The retailer said the move would allow it to focus on its Rimi discount chain and its ICA Supermarket network.

President and CEO Kenneth Bengtsson said: "In recent years, we have implemented a number of measures to reverse ICA Norway's negative results.

"A key point has been the launch of the new Rimi concept, which has generated marked sales increases. We have also initiated a successful modernisation of our ICA Supermarket stores. Now we choose to fully focus on these formats."

The announcement coincided with the release of ICA's half-year results. The retailer's operating income, excluding capital gains and impairments, for the first six months of 2011 amounted to SEK1.21bn (US$192.5m), down 7% on the year.

Net income was SEK686m, up from SEK55m a year earlier when ICA reported a one-off tax charge of SEK747m.

First-half net sales were up 0.8% at SEK46.25bn. At constant exchange rates, net sales increased 3.4%.

ICA did see some improvement in operating income and net sales the second quarter of the year. Operating income, excluding capital gains and impairments, was up 5.1% at SEK723m. Net sales increased 5.3% to SEK24.37bn. When the impact of foreign exchange is removed, net sales were up 7.3%.

Mr Bengstom added: "During the second quarter, our markets were still characterised by stiff competition and a lower growth rate. In spite of this, the ICA Group's sales continued to rise during the quarter, climbing 7.3 percent at constant exchange rates.

"The group's operating income improved during the second quarter due to strong operating income in Rimi Baltic, ICA Bank and ICA Real Estate, partially offset by a decrease in operating income at ICA Sweden and ICA Norway."

ICA has around 2,150 of its own and retailer-owned stores in Sweden, Norway, Estonia, Latvia and Lithuania.

http://www.just-food.com/news/ica-to-offload-maxi-stores_id116355.aspx

WHOLE FOODS HAS 60 NEW STORES IN DEVELOPMENT PHASE...

Stores in Development

Stores in Development

 Arizona

• Tucson

California

• Albany


• Del Mar


• Folsom


• Fremont


• Laguna Niguel


• Malibu


• Newport Beach


• Oxnard


• San Francisco (Castro)


• San Francisco (Ocean Avenue)


• San Jose (Alameda)

Colorado

• Basalt

Connecticut

• Danbury

District of Columbia

• Foggy Bottom

Florida

• Miami


• Pembroke Pines


• Tampa

Hawaii

• Kailua

Idaho

• Boise

Illinois

• Chicago (Hyde Park)


• Kildeer

Iowa

• West Des Moines

Maryland

• Riverdale

Massachusetts

• Jamaica Plain


• Lynnfield


• Wellesley

Michigan

• Detroit

Minnesota

• Edina


• Minnetonka

New Hampshire

• Nashua

New Jersey

• Closter


• Marlboro

New York

• New York (57^th Street)


• New York (Brooklyn)


• Yonkers

North Carolina

• Charlotte


• Greensboro


• Wilmington

Ohio

• Upper Arlington

Oklahoma

• Oklahoma City

Ontario, CANADA

• Ottawa


• Toronto


• Markham

Pennsylvania

• Concordville


• Wexford

South Carolina

• Columbia

Tennessee

• Knoxville

Texas

• Austin (Domain)


• Austin (Bee Cave)


• San Antonio


• South Austin


• Fort Worth


• Houston (Post Oak)

Virginia

• Virginia Beach

Washington

• Lynnwood

UNITED KINGDOM

• London, England


• Fulham, England


• Cheltenham, England


• South Glasgow, Scotland

http://wholefoodsmarket.com/content/company/real-estate/stores-in-development/

WHOLE FOODS SHARES RISE AS RUMORS OF A KKR / BAIN CAPITAL TAKE OVER SWIRL THROUGH CAPITAL MARKETS...

US: Private-equity firms "prepare bid" for Whole Foods Market

By: Petah Marian | 19 August 2011

Private-equity firm Kohlberg Kravis Roberts has remained coy on reports that it, and Bain Capital, may be preparing a bid for premium food retailer Whole Foods Market.

The two private-equity firms may make a cash offer at a substantial premium to the current stock price of around US$90 a share, according to a report citing unnamed sources in the UK's Daily Mail.

According to the reports, a potential deal would value Whole Foods at around US$6bn.

In late July, Whole Foods upped its full-year earnings target after third-quarter profits jumped 35% to US$88.5m.

It is forecasting diluted earnings per share to be US$1.91-1.92, up from its earlier forecast of $1.87-1.90.

Bain Capital has not yet responded to requests for comment.

Shares in the company were up 0.66% today to US$59.23 a share at 10:31 ET today.

http://www.just-food.com/news/private-equity-firms-prepare-bid-for-whole-foods-market_id116388.aspx

"CHANGE COULD BE ON THE HORIZON" AS INDIA LOOKS TO FREE UP OWNERSHIP OF FOOD COMPANIES...AND CHINA'S BATTLE FOR MARKET SHARE COULD BE WON IN THE EMERGING CITIES...

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