Opinion from global food and drink experts, Zenith Global
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53 ACQUISITIONS IN JUNE

July 4th, 2019 | Posted by Richard Hall in Richard Hall - (0 Comments)

53 food and drink industry transactions were added to the bevblog.net mergers and acquisitions database in June.

Only 2 reached the $500 million mark:

•  €475 million in foodservice for UK-based Compass to buy Fazer Food Services in Nordics

•  $500 million in spirits for Asia’s Hillhouse Capital private equity to purchase a majority of Loch Lomond Group in UK.

Of the 53 deals, 8 were in dairy, 7 in alcohol, 6 in soft drinks and 4 each in equipment and ingredients.

Among the newer categories, there were 2 in vertical farming, 1 in alcohol-free, 1 in CBD, 1 in dairy-free and 1 in liquid food.

27 were within national borders, with 14 of these in the United States and 4 in the United Kingdom. 26 were international.

19 countries featured overall, with the US involved in a total of 22, the UK in 11, France in 5, Germany in 5, Australia in 4, Italy in 4 and Switzerland in 3.

It’s extraordinary how much tap water we use, compared with what we drink. According to the European Commission, the average EU citizen consumes 106 litres of bottled water per year. Most of us use more tap water than that in a DAY. The average in Italy, Bulgaria, Croatia, Greece, Ireland and the United Kingdom is 150 litres or more per day.

A European Commission public consultation in 2015 identified the proportion of Europeans always using tap water for particular purposes as:

• 95% for washing and personal hygiene

• 84% for cooking, directly from the tap

• 53% for drinking, directly from the tap

• 10% for drinking, after filtering it.

Over 80% said there is good access to quality drinking water where they live.

“Only 20% find drinking water outside of their home country acceptable.”

The previous European Parliament voted to improve drinking water quality and access, including free fountains in public spaces and free tap water in restaurants.

A European Parliament news statement dated 19 October 2018 states: “According to the European Commission, access to better quality water could reduce bottled water consumption by 17%. Less bottled water would help people save money and also have a positive impact on the environment, by reducing CO2 emissions and plastic waste.”

It’s great to improve tap water quality and access, but not to target bottled water.

• Bottled water has a far lower environmental impact than all other packaged drinks as well as being healthy.

• I have also long contended that the full comparable cost of tap water for drinking is not dissimilar to that of cheaper, local bottled waters.

Out of all food and drink new product launches in the US that completed their first full year in 2018, drinks accounted for 8 of the top 10 in convenience stores, according to the latest IRI Pacesetters analysis.

The other 2 entries were confectionery launches, which also topped the supermarket rankings, where only Gatorade Flow on $78.1 million and Mountain Dew Ice on $59.9 million featured in the top 10.

Rising stars launched more recently and contending for the 2019 top 10 include Bubly water, Corona Premier beer, Eight O’Clock K-Cups coffee and Michelob Ultra Pure Gold beer.

As a reflection of increasing market fragmentation, it now takes less than $50 million of sales to reach the top 10, whereas the threshold used to be $70 million. Most of the top 100 now sell less than $20 million in their first full year. More of today’s entries are new brands rather than brand extensions, though larger companies still dominate the tables.

PepsiCo and General Mills each owned 7 of the 2018 top 100.

The trend is clear. The name is not.

The trend is towards adult taste drinks with less or no alcohol. It’s there in:

• spirits, from 30% alcohol by volume sugar-free Smirnoff Infusions to distilled non-alcoholic Seedlip

• wines, from 9-10% alcohol by volume Barefoot Refresh to organic non-alcoholic Zéra

• beers, from 0.5% alcohol by volume BrewDog Nanny State to alcohol free Heineken 0.0. It’s also growing in soft drinks, such as:

• mixers from Fever-Tree to Coca-Cola Signature

• cordials from Bottlegreen to Robinsons Fruit Creations • carbonates from Purdey’s multivitamin juice drink to South Africa’s The Duchess non-alcoholic gin and tonic

• plus kombucha and so much more. So, what should the category be called ? Is it

• Alcohol-free ?

• Zero alcohol ?

• Zero proof ?

• Non-alcoholic drinks ?

• Adult drinks ?

• Adult soft drinks ?

• Craft soft drinks ?

• Low and no alcohol ?

These names all represent different aspects, with different limitations. How about NOLO ? It’s terrible, but it might work. It’s short and embraces the full spectrum. I’d be interested in other views.

It seems yes, to some extent, in:

• encouraging product reformulation with less sugar

• increasing price differentiation according to sugar levels

• accentuating consumer behaviour change towards lower sugar products

• raising money for government.

It seems no, to an arguably greater extent, in :

• not materially reducing obesity

• distracting attention from whole diet change

• creating product substitution at extra cost without extra health benefit

• hurting poorer consumers more.

The latest analysis of the Philadelphia tax shows local ‘sugary beverage’ sales fell by 51%, but:

• Local supermarkets also lost out on other food and household sales.

• “Supermarkets bordering Philadelphia, however, had an increase of similar magnitude in combined sales.”

• “The tax has also created a black market” with “white trucks and vans parked all over …”

• This has led to a “zero shift in what people are drinking.”

Ironically, Seattle City Council is expecting its soda tax revenue to increase in 2019. If the tax rate hasn’t risen, that must mean sales have.

Bottle and can designs have always been vital to the branding of their contents.

Yet dispense ‘fountains’ are also a key part of the tradition and these have translated into homes as well as vending.

Free dispense of water has been added in recent trials.

It is almost as if soft drinks have been trying to reinvent themselves beyond their packaging.

Now, the industry has taken a new twist with reusable bottles for PepsiCo’s Tropicana in Paris.

This is a truly radical and inventive approach, using Terracycle’s Loop ‘circular shopping platform’.

The idea is that I can order my orange juice, alongside my Quaker Cruesli, online. The products are delivered in packs specially designed for durability. When I receive my next order, I return my used packs for cleaning and reuse by PepsiCo.

Once scaled up, the logistics would be very demanding, but one can imagine all kinds of synergies with a wider range of products and ultimate environmental benefit despite the delivery factor.

Back in the 1980s, I was the Liquid Milk Director of the Dairy Trade Federation with responsibilities for Britain’s doorstep deliveries of milk, which accounted for more than 80% of national sales using electric vehicles.

Plus ça change …

US organic up except dairy

June 13th, 2019 | Posted by Richard Hall in Richard Hall - (0 Comments)

US organic food sales rose 5.9% to $47.9 billion in 2018 and now account for almost 6% of all food sales, which grew by 2.3%.

Reasons highlighted by the Organic Trade Association include “clean, transparent, fresh, sustainable … environmentally friendly, animal humane, high quality, social activism.”

Fruit and vegetables were the biggest segment at $17.8 billion, up 5.6% compared with a 1.7% increase for all fruit and vegetables.

Dairy and egg sales were $6.5 billion, a rise of 0.8%. Organic eggs jumped 9.3% to $858 million, meaning organic dairy fell back.

The Association emphasised the need for continuing dairy innovation to combat the advance of plant-based products, acknowledging 2018 successes for “milk beverages with increased protein, more full-fat dairy products, new flavours and grass-fed products.”

New analysis from the US-based International Bottled Water Association finds that: “Since 2006, approximately 69% of the growth in bottled water consumption has come from people switching from carbonated soft drinks and fruit drinks.”

An IBWA survey of consumer views shows:

• 93% want bottled water available where other drinks are sold

• 89% drink bottled water on the go

• 82% of employed Americans drink bottled water at work

• 75% drink bottled water at home.

These figures speak volumes.