Opinion from global food and drink experts, Zenith Global
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NEW YEAR DETOX

January 21st, 2008 | Posted by Richard Hall in Health - (0 Comments)

More evidence appears daily that improving our diet can improve our health. A new British Cabinet Office report has produced some startling findings:

  • 69,400 premature UK deaths a year – a massive 1 in 9 – could be prevented by more balanced diets containing more vegetables and less fat, salt and sugar.
  • £10 billion a year is spent on diet related ill health in the United Kingdom.

Common sense and balance are so often the best solution. More sprouts please.

FOOD AND FUEL PRICE WARNING

January 10th, 2008 | Posted by Richard Hall in Economic - (1 Comments)

So the New Year has started with record highs in prices for oil and many agricultural commodities. Yes, indeed, choices will have to be made.

We are facing the confluence or rather conflict of four major trends:

1. Growing world population.

2. Rising prosperity in major emerging economies such as China and India.

3. Climate change disrupting agricultural supply patterns.

4. Governments disrupting market forces for fuel supply competitiveness.

One wish I have for 2008 is that biofuels should be developed on their own merit. Artificial subsidies will accentuate the overall problems and there are enough problems already.

SURPRISING FACT NO 243

October 29th, 2007 | Posted by Richard Hall in Economic - (0 Comments)

The Coca-Cola Company recently reported that it had installed 160,000 chilled drink display cabinets and reached 120,000 extra retail outlets.

This is more than most companies have in total from their entire history.

Yet Coke achieved it in just one quarter and one country – China.

US BOTTLED WATER BACKLASH

October 19th, 2007 | Posted by Richard Hall in Bottled water - (0 Comments)

The summer was sillier in the States than usual.

Restaurants and Mayors are perfectly entitled to prefer tap water to bottled water. Tap water is a great product.

But their antagonism towards bottled water is misdirected.

  1. All water is healthier than most other beverages. Few of us drink enough of it. It helps our mind, our body, our work, our attention, our comfort, our ageing.
  2. Water also fills us up without calories or caffeine or alcohol or fat and few other drinks do that. In an increasingly obese world, society should be encouraging water consumption wherever and whenever possible.
  3. Bottled water uses less packaging than most other beverages. PET is 100% recyclable. Still water uses much less material than sparkling drinks. In the US, packaging weights have been reduced by as much as 40% in the past five years. Large 20 litre cooler bottles are often used 50 times before recycling.
  4. Bottled water travels less distance than most other beverages. The majority of brands in the United States, Europe and other countries are local or regional, travelling less than 100 kilometres on average from their source to the shelf.
  5. Then there are principles of consumer convenience and choice, lifestyle and taste.

Policy makers should be doing more about health and the environment, not penalising one good product amongst thousands that may have less to offer.

Water is and should be a human right, but in the modern world it is certainly not free. Tap water needs infrastructures that cost money and affect the environment too. When these break down, what does everyone turn to ?

Wouldn’t it be better if the lobbyists gave just a little more weight to the other 99.7 per cent of waste produced in the United States ?

PS If silly isn’t enough and you’re looking for crazy, then go to Chicago where there’s a proposal to tax bottled water by as much as 50%, compared with 3% for soda.

GLOBAL FOOD PRICE INFLATION

August 3rd, 2007 | Posted by Richard Hall in Economic - (0 Comments)

I agree entirely with Nestlé’s Chairman and a growing chorus of others about food prices rising again in the future.

The fundamentals have indeed shifted. Food prices had been falling for years, through greater industry efficiency and generally improved management of the world’s economies.

Recently, there have been a series of developments that add up to a material reversal. Some of the key factors are:

  • Accelerating demand from emerging economies, most notably China and India.
  • Climate change putting pressure on fossil fuels and food production predictability.
  • A surge in the use of crops for biofuels, particularly in Brazil.

Biofuels are the biggest step change for a generation. Their consequences could be as far reaching for food as for energy. Their subsidies certainly need reviewing in the light of this impact and a better understanding of their full costs alongside their full benefits.

Even without biofuels, however, food prices would still be rising. The latest forecasts are for increases of 20-50% over the next ten years. I regret I concur. But much of this will go to production and distribution, while manufacturer and retail margins continue to be squeezed.

There are two items of business strategy news this year that I have been unable to reconcile in my own mind.

One was the linking of Canada’s Cott Corporation to a bid for Cadbury Schweppes Americas Beverages. Retailer labels and brands do not normally mix, but here the geographic focus seemed to be in conflict as well.

The second is San Miguel’s drive to relinquish its core strength of food and drink, to invest in the uncharted territory of power generation and other infrastructure sectors.

Most companies would seek to extend such influential national positions into broader related portfolios or regional expansion. Yet San Miguel has sold off its main soft drinks interests and now, despite accounting for a huge share of Philippine beer sales, it plans to bottle out of that too.

If there were a clear path to the power strategy, I might at least acknowledge a well thought out plan, but there doesn’t seem to be one. A reported investment programme of US $780 million is modest enough for food and drink these days, let alone energy provision.

I’d be delighted if anyone could enlighten me.

UKRAINE : COUNTRY TO WATCH

July 6th, 2007 | Posted by Richard Hall in Economic - (2 Comments)

The smartest investors have been looking beyond the large population emerging BRIC economies of Brazil, Russia, India and China towards the lower profile second tier. Ukraine has been high on Zenith’s list and is swiftly moving up other people’s rankings too.

The fundamental reasons are :

  • Geography – between central Europe and Russia.
  • Population – 46 million, bigger than Spain and Poland.
  • Growth – over 7% a year increase in economic output since 2000.
  • Democracy, independence and opening outlook.

The dairy sector has seen two recent acquisitions:

  • September 2006 – Danone buys Rodich for $10 million.
  • April 2007 – Bel takes over Shostka cheese producer for estimated $60 million.

In beverages, activity has accelerated this year:

  • April 2007 – Russia’s Wimm-Bill-Dann announces interest in Ukrainian juice market.
  • June 2007 – PepsiCo and PepsiAmericas acquire 80% of Sandora juice business for $542 million.
  • June 2007 – Orangina Group purchases Rosìnka mineral water producer with sales of 30 million euros.

Buy now, while stocks last ?

However Americas Beverages is sold or demerged, it will be unfinished business.

Cadbury Schweppes will leave its American operations in stronger shape than before. But whoever takes them on will still be number three to Coke and Pepsi, with relative weakness in some of the higher margin and faster growth sectors. The gaps will need filling.

Moreover, the bigger brands cannot avoid the question of international potential. Schweppes is already owned by other companies in most countries, as is 7 UP. Snapple may have the widest opportunity. Dr Pepper and others could be good candidates for expansion too.

There will also be unfinished business for the new confectionery based Cadbury plc, mainly because its Australian beverage activities will remain a strategic anomaly.

All this is confusing and ironic. Growing brands at some point need to explore new territories. They tend to need larger companies to sustain them. Cadbury Schweppes was once just such a worldwide player, but it has progressively retrenched in beverages towards narrower country based priorities. This is most evidently demonstrated by the Schweppes brand itself, which will be divided between four geographies.

  • Cadbury – Australia
  • Americas Beverages – US, Canada, Mexico
  • Orangina Group – Benelux, France, Iberia, Italy
  • Coca-Cola – Rest of world

So success for the new Americas Beverages will mean taking some beverages beyond the Americas. And success for the Orangina Group will mean taking more beverages beyond Europe. But Coca-Cola has the widest interests and Australia cannot remain isolated forever. There are also relationship complications for other brands such as Oasis and Orangina.

So the outlook for these lemonades will become cloudier before it becomes clearer.