News

16 Jan, 2020
Higher prices for food, but supermarkets warned to help farmers
The Sydney Morning Herald

Australians can expect higher prices for fresh food and meat as a result of the bushfire crisis, but supermarkets have been warned to not put more pressure on devastated farmers.

Bushfire-affected farmers will also be given up to $75,000 to immediately repair their properties,  with Prime Minister Scott Morrison promising at least $100 million to rebuild Australia's primary production farmland.

Agriculture Minister Bridget McKenzie estimated there were 19,000 farmers, foresters and fishers in the regions hard-hit by the fires and said customers would have to accept higher prices for some produce.

"In terms of prices of food, you might have seen reporting that supermarkets are letting the Australian public know that they'll have to pay more for their red meat. Yes, you will," she said on Tuesday.

"That they'll have to pay more for their fruit and vegetables because of the bushfires and the drought. Yes, you will.

"Well, then, the supermarkets also need to let the Australian public know that because of the bushfires and the drought, you will have to pay more for your milk."

Senator McKenzie said milk processors were doing the right thing by paying cheques to farmers even when they were not getting the product, but retailers should be just as understanding.

"It's up to the supermarkets to not just talk about being the fresh food people but get on with supporting [farmers] in a very real and tangible way," she said.

"Farmers don't grow food for free, it's a business. I know we like to get all a bit romantic about it but the reality is it's a business and they need to make a living and that means we need to pay the cost of producing the food."

Mr Morrison said the spending on the recovery did not threaten the structure of the budget.

"I've made it really clear that my focus is on delivering the recovery and support and what is needed now, and paying the price and the cost that is needed to be met here and now and at least over the next two years," he said.

"The impact on that budget will be very clear."

On the $100 million farm relief grants, he said it was an estimate "not a cap".

"This will be a demand-driven program. If more is needed under the demand, then more will simply be paid without the need for any further decision," he said.

The money will be sent to state governments and distributed through them to affected farms.

The funding will be backed up with $15 million for 60 rural financial counsellors, who will help farmers prepare for the coming rebuild.

 

10 Jan, 2020
Diageo invests in US non-alcoholic drinks company
Inside FMCG

Liquor company Diageo has invested in US company Ritual Zero Proof, via independent drinks accelerator, Distill Ventures. The new deal will expand Ritual in the US and have access to Distill Ventures’ non-alcoholic drinks. It’s the first public non-alcoholic drink from the US to join the liquor giant’s international non-alcoholic brands.

Marcus Sakey, GG Sakey and David Crooch own Ritual which creates non-alcoholic versions of liquors. Ritual Zero Proof Gin Alternative mimics the taste of gin with cucumber, juniper berries, mint and basil, served with tonic. While the whiskey alternative has notes of oak and vanilla, the perfect match for orange and bitters.

“This is a movement. Just like almond milk and veggie burgers, spirit alternatives are changing the landscape,” Sakey said. “In 18 months, we predict non-alcoholic options will be on every menu and the shelves of every grocery store. Americans want more choice, and Ritual Zero Proof is all about more – more flavour, more moments, more life, that is. It’s the only American-made spirit alternative to echo the taste, smell and burn of a spirit – without the alcohol or calories.”

According to a 2019 Distill Ventures data study, 58% of consumers drink low-ABV drinks than in 2018, and 55% of bartenders in New York, Los Angeles and London believe this non-alcoholic trend will continue to grow within the next 12 months. Google Trends reported that consumers mention “non-alcoholic” 81% more often compared to a year ago. Whole Foods named it as part of the top 10 food trends for 2020.

“We are thrilled to welcome Ritual Zero Proof and its seasoned team of drink entrepreneurs into the Distill Ventures portfolio as we build the future of non-alcoholic drinks, a category we have proudly supported since our investment in Seedlip back in 2015,” said Heidi Dillon Otto, portfolio director and non-alcoholic lead, Distill Ventures North America.

“We are excited to support such an interesting new brand in the vibrant non-alcoholic space,” Eugene Khabensky, Ventures director, Diageo, said. “We put the consumer at the heart of our business, and Ritual Zero Proof is a fantastic offering that provides consumers with more choices of the highest quality,”

Diageo said it will hold a minority stake while Ritual will retain majority ownership. It will continue to run the business independently. Ritual gin and whiskey alternatives are sold in major beverage retailers, bars and Michelin-starred restaurants in Chicago. They are also available on the brand’s website and on Amazon.

10 Jan, 2020
Caltex fields rival takeover approaches, including EG
SOURCE:
AFR
AFR

A British petrol station group started by two brothers in Manchester in 2001 is just one of several suitors now in talks with Caltex Australia on a takeover or asset purchase, in parallel with negotiations with Canada's Alimentation Couche-Tard over its $8.6 billion cash offer.

The line-up of suitors for Caltex could also include its former 50 per cent shareholder Chevron, which is re-entering the fuels market in Australia and could be acting together with retail-focused EG, suggested respected energy analyst Mark Samter at MST Marquee.

Caltex on Wednesday confirmed that EG Group, which last year acquired the Woolworths petrol station network in Australia for $1.73 billion, was among "a number" of parties to approach it to voice interest in its business since Couche-Tard's proposed $34.50 a share offer was disclosed in late November.

The approaches, some of which are only for parts of the fuel supplier's business, are understood to be serious enough for Caltex to be exploring at the same time as the talks with Couche-Tard.

Caltex had made a point of not granting Couche-Tard's request for full due diligence and exclusivity on negotiations, a decision that is now allowing the other approaches to be followed up and paving the way for a potential bidding war.

After gaining 2 per cent on Tuesday in the wake of a Bloomberg report that EG Group was considering an offer for Caltex, shares in the Sydney-based company gained a further 1.9 per cent to $35.70, the highest close for almost 23 months.

The stock is now trading comfortably above the $34.50 a share proposed by Couche-Tard, which was rejected as inadequate by Caltex's board led by Steven Gregg.

"There are clearly a number of potential players, and a number of different paths for this to play down," Mr Samter told clients in a note.

"Given all these interested parties came in after the $34.50/share Couche-Tard bid was made public, it is clear that plenty agree that there is value on the table above that rejected A$34.50/share bid."

The confirmation by Caltex of the approaches points to a further shake-up in the sector, which is already in a state of upheaval following Chevron's surprise $425 million purchase of Puma Energy's Australian network in December. Chevron will also take back the Caltex brand from Caltex Australia, which will rebrand to Ampol over the next three years.

Also still up in the air is the sale process under way for ExxonMobil's downstream business in Australia, including its Altona refinery, which is understood to have attracted a range of bidders that could also include Chevron.

Mr Samter said it was "almost unfathomable" that Chevron would stop at 3 per cent – the market share of Puma – after re-entering a developed and fairly small market.

"Big oil moves slowly, so whether Caltex Australia was, or can quickly come, on their radar, given the time constraints, is a fair question," he wrote.

"The probability that they make a further move in the country looks highly likely though."

EG, owned by billionaires Zuber and Mohsin Issa and backed by TDR Capital, is said to have hired Jefferies as its advisor on its Caltex play. EG's Australian business is run in Australia by Mike McMenamin, a former long-term Caltex executive who later headed up the sale process for the fuels business at Woolworths.

A challenging market

Airlie Funds Management's Terry Couper said that Chevron buying Puma and now multiple parties identified as interested in Caltex highlights how difficult it is to enter the market organically.

"This reinforces the privileged nature of the Caltex integrated assets – they can’t be replicated, only bought," he said.

The future of Caltex's Lytton refinery is expected to emerge as a central issue in any takeover deal for the Australian company given it is one of only four oil refineries remaining in the country, where security of supply in liquid fuels has become a hot political topic.

Both Couche-Tard and EG, neither of which own refineries in their global portfolios, would need approval from the Foreign Investment Review Board to complete a takeover of Caltex.

EG's ownership of the 540 Woolworths petrol stations is also expected to raise concerns within the Australian Competition and Consumer Commission, although Citigroup energy analyst James Byrne said he expected those could be addressed by a requirement by the competition watchdog to divest individual sites.

However, Mr Samter said an EG acquisition of Caltex's retail business would need "an enormous amount of divestments" to resolve competition issues.

"Since announcing receipt of an unsolicited, conditional, confidential, non-binding and indicative proposal from Alimentation Couche-Tard Inc to acquire all of the shares in Caltex, Caltex confirms it has had approaches from a number of parties, including EG Group, who have indicated that they are potentially interested in making a proposal to acquire Caltex or some of its assets," Caltex said in its statement.

It added it had not received any proposal to acquire its business since Couche-Tard's offer, which it disclosed on November 26, a day after announcing plans for a spin-off of a 49 per cent stake in 250 key retail sites.

"There is no certainty that any binding proposal will be made by any of the parties who have expressed potential interest," it added.

Caltex and Couche-Tard are expected shortly to hammer out confidentiality agreements and logistics for a presentation to take place by Caltex senior management to their counterparts at Couche-Tard.

10 Jan, 2020
Coca-Cola Amatil donates 250,000 beverages to bushfire victims
Inside FMCG

Soft drinks giant Coca-Cola Amatil (CCA) has donated 250,000 bottles of water and Powerade to bushfire emergency crews and families who are in disaster recovery centres or are evacuated from fire zones in NSW, South Australia and Victoria. CCA donated 10,400 cases of bottles of water and Powerade to Foodbank, Australian Defence Force units and air ambulance services.

“The loss of lives and homes in these fires is heartbreaking. Business has a role to play in emergency situations, alongside government and others in the community. Bottling and distribution are our strengths, so we think can play an effective role with donations of water and other beverages to displaced families and those on the front line. Many of our own team are also volunteer firefighters and Defence Reserves, and we’re looking after them with paid leave and personal support,” managing director of CCA Australia, Peter West, said.

West said Amatil made a Matched Giving Appeal with the Salvation Army for donations to employees to recover from bushfire.

“Water donations and matched giving are a step forward, but there’s more to be done. We’ll continue working with governments and communities on further support as recovery operations roll out,” added West.

Late last year, Amatil also donated bottled waters and Powerade to Southern NSW emergency services (45 cases), Kulnura RFS (30 cases), Maclean Red Cross (60 cases), Port Macquarie, Grafton and Glen Innes evacuation centres (2160 cases) and Casino RFS (170 cases).

 

7 Jan, 2020
Coles has filed a trademark for a new logo featuring Chinese characters, as it ramps up its export business
Business Insider Australia

Coles has doubled down on its Chinese growth strategy, lodging a new trademark as part of its expansion plans to lure more affluent Asian buyers to its meat products while focusing on vegan options locally.

The grocery giant filed a trademark for a Coles logo that includes three Chinese characters (客澳市), that translate to “customer Australia market”, earlier this month. The trademark’s goods and services categories included vitamins and supplements, coffee, preserves and meat.

The submission marks a firming of Coles’ long-held strategy for Chinese food exports, which it plans to ramp up over the next five years. China has been one of the supermarket’s largest markets for some time, and Chinese demand for high-quality Australian goods has been increasing.

The company told the AFR in November it planned to open an office in Shanghai by March next year, with the goal of selling prime cuts of local meat to middle-class Chinese shoppers.

“There is a huge demand with a growing middle class in China; a very fragmented industry; pork consumption is declining and beef consumption is growing; and the demand for premium quality Australian food is there,” Coles export chief Thinus Keeve told the AFR at the time.

A Coles spokesman confirmed the trademark registration was part of the company’s export strategy.

“Coles has been exporting Australian food for 20 years, selling Australian grown meat, wine and other products across the Asian market,” they said

“As part of our smarter selling strategy, we aim to grow this significantly over the next five years, with an initial focus on meat exports.”

The supermarket giant does not plan to open any stores in China but said it would consider exporting in other categories such as milk powder and oat products.

This comes as Coles has continued to diversify into the growing vegan market in Australia. In October, the supermarket giant applied for trademarks of the term “100% Plant Based. 100% Delicious”, “Deliciously Vegan” and “100% Vegan. 100% Delicious” that are part of its in-store range.

Coles launched a vegan Christmas roast in early-December and over 2019 steadily introduced product lines from vegan meat and cheese suppliers such as The Alternative Meat Co, which was added to store shelves in May.

Rival Woolworths Group in December submitted trademark applications for “W food you feel good about” and earlier this year filed for the terms “Plantology” and “Plantitude”. The Plantitude range, which is in store, includes vegan desserts like chocolate cake.

Woolworths was unavailable for comment.

7 Jan, 2020
'We're agile and quick': How Bondi Sands is successfully selling an Aussie tan
SOURCE:
The Age
The Age

Self-tanning business Bondi Sands is a global success but the business got off to a rocky beginning when its first batch of products turned customers green.

"It was not the greatest start," co-founder Shaun Wilson says. "The quality control of one of the ingredients was not up to scratch and we had to do a recall. We faced up to it and were honest with our wholesaler Priceline and they gave us another chance."

It was a rare misstep for the Melbourne-based business founded by Wilson and Blair James in 2012 which turned over more than $100 million last year.

Bondi Sands products, which include tanning foams, sunscreens and body wash, are sold in 4500 stores across Australia and stocked in 20,000 stores globally.

Changing attitudes

It is one of a number of businesses tapping into changing attitudes towards tanning and skin health which has seen the self-tanning industry valued at $US1.47 billion ($2.10 billion) by business consulting firm Grand View Research. The firm predicts further growth with a compound annual growth rate of 5.9 per cent from 2019 to 2025.

"Rising concerns about skin diseases and other health risks associated with sun exposure will boost the demand for self-tanning products," Grand View Research found.

'Bondi from a positioning point of view was fantastic, Port Melbourne or St Kilda was not quite the same.'

Shaun Wilson

The pair started the business after meeting through James' beauty and tanning salon in Port Melbourne where they spotted an opportunity for self-tanning after solariums were banned in Australia, due to the heightened risk of skin cancer.

Bondi Sands unashamedly trades off the global reputation of the world's most iconic beaches and an aspirational Australian beach lifestyle.

"Bondi is one of the most famous beaches in the world and is known for its beach culture," Wilson says. "We were looking at brand names and Bondi from a positioning point of view was fantastic, Port Melbourne or St Kilda was not quite the same."

Bondi Sands' point of difference is its affordable price point and products manufactured in Australia.

Wilson says turning customers green was "not the greatest start" but the pair had persistence and belief in themselves.

They have funded the business themselves along with the help of Wilson's father, Darren Wilson. They mortgaged their homes to fund the early days and built Bondi Sands from a startup to multinational business with 50 staff.

"We feel like we are agile and quick to market and that shows we can compete against L'Oreals and Unilevers of the world," Wilson says.

The pair are continuing to expand the business with plans to launch more than 40 new products across four different categories including sunscreen in the next 12 months.

Instagram inspiration

Drawing inspiration from Bondi Sands' global success, local business Spray Aus is also focusing on the self-tanning market.

Friends Ellie Pearson and Emily McKay launched the business in 2014 once they realised the solariums they used to visit were on the way out.

"We did a tanning course and then we tanned all our friends and they put it on Instagram," Pearson says.

The pair are well connected, with Pearson the former partner of footballer Josh Hunt, McKay the partner of AFL star Majak Daw and their friends including influencers and entrepreneurs Rebecca Judd and Nadia Bartel.

Judd and Bartel joined the business as co-owners after they "blasted it onto the map" through social media.

"Bec and Nardia were advertising for us as friends and we thought it was only fair to bring them on in the long-term," Pearson says. "We all bring different things to the table, the girls are so powerful with social media and marketing ."

Spray Aus has expanded to four studios across Melbourne and launched its own self-tanning products which are sold online and in salons with turnover of more than $1 million.

Pearson says growing demand for self-tanning products has meant the quality has increased with customers opting for natural ingredients which are quick-drying.

"Back five years ago you had to marinate in it for so long," she says. "Women now are very busy."

It's been a steep learning curve for the four women.

"Not having any knowledge in the industry and no business background, little things like you have to save for tax, we had no idea we were so fresh," Pearson says. "We have made very many mistakes and issues and things happen along the way."

Building business acumen and capitalising on changing attitudes to tanning have helped drive the business' growth with Spray Aus preparing to launch into retail stores early next year.

"Back when I was using solariums quite a lot there was not really awareness of looking after your skin," she says. "Now people are a lot more health-conscious and skin-conscious I look back now and think 'I can't believe I did that'."

23 Dec, 2019
Brexit boost? Exporters hope UK election result will spur free trade deal
SOURCE:
smh
smh

The managing director of one of Australia's biggest fruit producers says a free trade agreement with the United Kingdom would be a "crucial" victory for the nation's horticulture sector.

UK Prime Minister Boris Johnson's decisive election victory last week has lifted hopes that Australia could be the first nation to sign a post-Brexit trade deal with the UK. Mr Johnson has said Britain will leave the European Union on January 31.

Victoria-based apple grower Montague sends about 20 shipping containers of its 'pink lady' apples to the UK each year, representing about one third of its total apple exports. The apples are sold at the high end department store Marks & Spencer.

But under EU trade rules the company's apples are slugged with a 9 per cent tariff after their 35 day boat journey, before hitting the shelves in October and November. The company's managing director Scott Montague said any trade deal that removes these tarrifs would be a boost for the company, and the wider export sector.

"Anything that can help us be more competitive on a world scale is crucial," Mr Montague said. "9 per cent is a lot, it's most people's produce margins in Australia...So any sort of FTA would help us and our competitiveness, and with that would help our ability to grow the market".

The UK market is not an easy one to crack, Mr Montague said. But it is worth the effort and could prove lucrative for other exporters. "It's consistent and profitable and sustainable," he said.

"We send out the best fruit that we grow to the UK, and that's the only way you can play in the international space, with our high cost of labour".

Australia's high commissioner in the UK George Brandis recently told The Age and The Sydney Morning Herald that a FTA between Australia and the UK was "probably less difficult than the other agreements the UK is looking to do, for instance with the United States".

The Australian Fresh Produce Alliance, which represents 14 of the nation's largest fruit and vegetable growers, says Australia has a chance to capitalise on a "first mover" advantageby striking a trade deal with the UK.

"If we're one of the first countries to secure a trade agreement with the UK we we'll be very well positioned to take advantage of any opportunities available, in front of our key competitors," says the group's chief executive Michael Rogers.

Mr Montague said his company's apples fill a gap in the UK market that cannot be met by competitors. "Our fruit goes to Marks and Spencer, they're top end over there and they want the best fruit," he said.

"With Pink Ladys so popular in the UK they cannot afford to not have them on the shelf. So they need them 12 months of the year".

23 Dec, 2019
'Day zero' for Woolworths as it embarks on $10b pubs and pokies spinoff
SOURCE:
the age
The age

Supermarket giant Woolworths is poised to take a significant step forward with plans to spin off its $10 billion-a-year Endeavour unit, which includes bottle shop retailer Dan Murphy's and hundreds of pubs and pokie operators.

Woolworths shareholders on Monday will vote on the first stage of the mammoth restructure-cum-demerger that will ultimately form a new listed entity known as Endeavour Group.

The complex three-stage plan to spin off Endeavour was unveiled in July. "It's no doubt the biggest, most complex transaction in the company's history," Woolworths chief operating officer David Marr tells The Sydney Morning Herald and The Age. "We've got 50 dedicated team members from right across the group working on the process itself".

A plan 12 months in the making, a successful spin-off will see Endeavour become Australia's largest drinks and hospitality business, with an estimated $10 billion in revenue and $1 billion in earnings.

In addition to Dan Murphy's and BWS, Endeavour will own beverages supplier Pinnacle Drinks (maker of libations such as Tun, Bowler's Run, and Mishka), and a slew of venues, hotels, nightclubs and pokies operators around Australia run by the ALH Group.

Woolworths will own 85.4 per cent of Endeavour, with the other 14.6 per cent in the hands of billionaire hotelier Bruce Mathieson due to his 25 per cent stake in ALH.

The ultimate goal for Woolworths is to list Endeavour separately on the ASX – a relatively common manoeuvre by big companies designed to unlock value for their shareholders. Woolies' main rival Coles was spun out of conglomerate Wesfarmers last year.

But some shareholders such as Pengana Capital's Anton du Preez argue there is a much simpler way for Woolworths to achieve that aim.  "I think if they can sell it at a very good price, that's the preferred way to do it," he says. "Because then you've got all the cash up front and you can do massive buybacks."

Complexities laid bare

One look at a typical suburban Woolworths store and the complexities of the deal are laid bare.

At 550 sites across the country, the supermarkets are joined at the hip with BWS stores, sharing rental footprint, entrances, back docks and even staff. To add a further layer of difficulty, around 35 per cent of Dan Murphy's and BWS stores are owned by ALH, and run under different administrative systems, such as payroll software.

Simplifying the structure of these businesses, while maintaining and formalising their close working relationship, forms the crux of the first stage of the process. It will see the drinks businesses and its 75 per cent ALH holding placed under the new Endeavour entity within the broader Woolworths Group.

"There are about 20 agreements [in place]...plus we've had to review property leases – of which there are 3000 – liquor licenses, all the material contracts, all the employee arrangements, and all the intellectual property" says Marr.

Following shareholder approval for stage one, Woolworths will then merge ALH into the new Endeavour entity, swapping Mathieson's 25 per cent stake in ALH for a 14.6 per cent stake in Endeavour.

Marr predicts this will be completed on or around February 4 next year. It does not require shareholder approval.

Finally, Woolworths will then seek to spin out the freshly formed Endeavour Group in calendar 2020, either through an ASX demerger or another "value accretive alternative" – in other words a trade sale.

Marr won't rule that out, but says the company's preference remains a de-merger.

"If we were to receive credible interest from a trade buyer then naturally we would look at that, but our plan on record for the moment is a demerger because we'd have much greater control of the process," he says.

Du Preez believes the split, in whatever form it ultimately takes, will allow each business to receive the capital and focus needed for growth.

"[Endeavour] has been playing second fiddle for some time, so now it can be on its own and get its own capital allocation," he says.

It will also remove the 'conglomerate discount' from Woolworths main business, he says, allowing it to run as a pure food business – aside from its Big W department store chain.

On announcing the plan in July, investors and anti-gambling advocates congratulated the retailer for taking steps to divest itself from its pokies investments, although chief executive Brad Banducci played down the role community pressure had played in the decision.

Both du Preez and Marr take a similar approach, noting while the move away from pokies was well-supported by shareholders, it was a secondary benefit for the transaction and far from the key driver.

"At the end of the day, the economics are the most important part. But it will be a positive, there's no doubt about it," du Preez says.

Two candidates for leadership

Earlier this month, Woolworths appointed experienced ASX50 director and ex-Pizza Hut president Peter Hearl as the chairman-elect of Endeavour Group.

Analysts believe Endeavour will be neither 'growth story nor cash cow' and suggest the company may take it slow in terms of reinvestment.

So far, Woolworths hasn't indicated who Hearl's running mate and chief executive will be, but according to people close to the deal, it's likely to either be current drinks managing director Steve Donohue, or Marr himself.

Marr wouldn't comment on the current status of Endeavour's potential leadership, saying only the process was under way.

Whoever the company picks to run its new division will have their work cut out for them, but it appears shareholders have tempered their expectations on Endeavour's growth as a separate entity.

Credit Suisse analysts believe Endeavour will be neither "growth story nor cash cow" and suggest the company may take it slow in terms of reinvestment, with a prospective dividend payout ratio of 54 per cent.

But a successful demerger would leave Woolworths' debt-free, the analysts believe.

Plenty of work ahead

Since announcing its intention to separate Endeavour, Woolworths' share price has risen nearly 14 per cent to trade around $37.50, adding to a year of stellar growth for Australia's largest retailer.

With all major proxy firms backing the spin-out, Marr is confident Monday's annual general meeting and following restructure scheme meeting will see the crucial resolution passed comfortably.

But for him, the work will be just beginning.

"That's what we call 'day zero'," he says. "While we've made great progress since July, there's still a lot more to do."

23 Dec, 2019
Woolworths grapples with awards and rewards
SOURCE:
AFR
AFR

Woolworths chief Brad Banducci says the award system makes it difficult to strike the right balance between rewarding ambitious salaried staff who want to get ahead and paying staff correctly under the law.

Woolworths expects the damages bill from almost a decade of underpaying more than 5700 salaried staff to be closer to $200 million rather than $300 million, even though, as expected, it has uncovered underpayments in divisions other than supermarkets.

After fully compensating staff, a process that is expected to take until the end of June, Woolworths needed to think about how best to reward ambitious staff while making sure it was complying with the award, Mr Banducci said.

"These are salaried people and they want to progress their careers and develop them and they're very proud of what they do," he told media after Woolworths annual meeting on Monday.

"We have to make sure we leave enough freedom in it for them to do that without inadvertently breaching awards and things like that - we need to think very deeply about it."

Mr Banducci's comments highlight the challenges facing retailers who are obliged to comply with the retail industry award and enterprise agreements, but have salaried staff who consider themselves semi-professionals and are prepared to do whatever it takes to make sure stores are ship-shape.

Woolworths revealed in October it had underpaid at least 5700 salaried store staff for almost 10 years by not factoring into individual salaries the number of hours worked and the times of hours worked.

After reviewing payments to about 12,700 employees, Woolworths repaid two years' worth of compensation to 70 per cent of affected staff in supermarkets and Metro stores last week and expects to compensate remaining staff in these divisions by December 23.

Over the next few months it will review payments to staff in other divisions and hopes to complete full remediation by the end of June 2020.

"As we go through it we have found while the overs and unders were there, there were more overs than unders," Mr Banducci said.

Chairman Gordon Cairns described the wage underpayments scandal "incredibly disappointing" but was proud of the way Woolworths responded, saying it was testament to the ethics underpinning the company's culture.

Mr Banducci has agreed to forgo a $2.6 million bonus, or 33 per cent of his total remuneration this year and Mr Cairns will take a 20 per cent reduction in his board fees.

The underpayments will also affect short-term and long-term incentives paid to key executives this year and further consequences will be considered once the review has been completed.

Mr Cairns said Woolworths had uncovered more underpayments in other parts of the business, such as BWS, Dan Murphy's and Big W, "but to nowhere the same extent as in supermarkets" and was comfortable with its original estimate of $200 million to $300 million in remediation costs.

However, an employee class action led by Adero Law alleges the wage underpayments are on a “far greater scale” than Woolworths claims and estimates the cost might be $620 million.

Mr Banducci said 2020 had started well, with strong sales momentum across the group, boosted by the success of collectible programs, online shopping and store refurbishments.

Same-store Australian supermarket sales grew at a record 6.6 per cent in the September quarter as shoppers flocked to stores for free Lion King  figurines and plant seeds. Group sales from continuing operations rose 7.1 per cent to $15.9 billion.

"We can’t comment on [the second quarter] in detail at this stage given we still have two very important trading weeks in the quarter to go, but are generally pleased with trading to date," Mr Banducci said, pointing out that Christmas falls on Wednesday this year, giving shoppers two days of shopping after the weekend to complete their purchasing.

Woolworths shareholders voted overwhelmingly in favour of the first stage of a restructure of the hotel, gaming and drinks businesses into a new entity known as Endeavour Group.

About 99.5 per cent of shares voted and 88.5 per cent of shareholders were in favour of the restructure, which is likely to be followed by another vote next year to spin off Endeavour Group as a separately listed company.

The vote was delayed by almost three hours by shareholder questions over the wage underpayments, Woolworths' efforts to reduce exploitation in the horticultural supply chain and ensure a living wage for Big W supply chain workers, plans to open a Dan Murphy's liquor store close to three Indigenous communities in Darwin and the social impact of Woolworths' gambling operations.

Anti-gambling campaigner Stephen Mayne estimates gamblers lose around $1.5 billion a year on the 12,800 poker machines operated by Woolworths' 85 per cent owned ALH.

Mr Cairns said the board was united on minimising harm from gambling but the proposed demerger was not aimed at distancing Woolworths from poker machines but freeing up the food and drinks businesses to pursue growth opportunities.

It would also enable shareholders to decide if they wanted to hold shares in both businesses or sell their shares in Endeavour Group.

Woolworths had received no approaches from potential buyers and any bid would have to value the group at significantly more than a demerger to compensate shareholders for "billions" of dollars in tax incurred in a sale.

23 Dec, 2019
Aussies to spend $14 billion in the next seven days: NRA
inside retail

Aussie shoppers are expected to drop $14 billion in the next week as the final stretch toward Christmas day begins, according to the National Retail Association. 

The news should come as a relief to retailers, NRA chief executive Dominique Lamb said, after an underwhelming year in retail. 

“Although there is a growing trend that sees consumers knocking off Christmas shopping earlier than in previous years, the final week is still the most frantic time for retailers across the country with $2 billion spent per day,” Lamb said. 

“The NRA is expecting the shopping frenzy to really ramp up as we kick-off the seven-day countdown until Christmas.”

New South Wales is set to bring in $4.6 billion of retail spending, while Victoria and Queensland shoppers will spend $3.7 billion and $2.6 billion respectively. 

Western Australia will see $1.5 billion in spending, while South Australia brings in $930 million, Tasmania $270 million, the ACT $250 million and Northern Territory $110 million.

More than half of this spend could go to groceries, according to Accenture retail lead Michelle Grujin, who told Inside Retail the shift in spending was due to Australians wanting to provide a more “abundant” Christmas.

In terms of online, the NRA expects $1 billion in sales across the next week – with $650 million going to omnichannel offerings and $350 million going to pure-play retailers.

Lamb had previously stated that omnichannel retailers are likely to outperform pureplay competitors, being able to offer a unique in-store experience coupled with a savvy online sales avenue. 

“Customers are now placing a greater emphasis on their experience at the shops, and not only traditional factors such as quality and price,” Lamb said.

“Those who are driving in modern retail offer interactive services that engage shoppers in new and exciting ways.”

In total, the Australian retail industry is expected to see $50.1 billion in sales across the entire holiday period – a 3 per cent bump on 2018’s figure of $48.6 billion.

However, the Australian Retailers Association and Roy Morgan said they expect the ongoing threat of bushfire to impact spending, with outgoing ARA executive director Russell Zimmerman expecting Christmas trade to be solid, if unspectacular. 

13 Dec, 2019
Restored a2 Milk kingpin gets back to basics
SOURCE:
AFR
AFR

The a2 Milk Company's interim chief executive, Geoff Babidge, is quickly implementing a back-to-basics approach for the infant formula group as he resumes the top job after an 18-month absence.

He held a series of top-level meetings with managers in Sydney on Tuesday and they included a handover session in a smoke-shrouded corporate office in the harbourside suburb of McMahons Point with Jayne Hrdlicka, who stepped down from the role on Monday.

She left amid tensions with the board over her heavy investment in brand building, and a personal issue which meant she needed to cut back on a punishing travel schedule.

Mr Babidge emphasised to staff generally that it was ''business as usual''.

Shares in a2 Milk gained 3.1 per cent to $14.40 on Tuesday as investors became increasingly satisfied that despite the ructions at the executive level, the company was still in a solid position, particularly with more emphasis on the pursuit of higher profit margins and keeping a tight rein on costs.

Milford Asset Management portfolio manager William Curtayne, who has been a backer of a2 Milk since 2012, said the exit of Ms Hrdlicka was a shock, but there was still strong upside for the business.

"We are fine on this. In the fullness of time we don't think it will change the opportunity for a2,'' he said.

The exact reasons for the departure were still unclear.

"In our view there could be a disagreement on the level of spending needed to take a2 where Jayne feels like it needs to go,'' Mr Curtayne said. "The board could have had a more moderate view.''

He added that Ms Hrdlicka had achieved "a hell of a lot" in the 18 months she held the top job.

High regard

As for the next chief executive, Mr Curtayne says he has a high regard for the company's Asia-Pacific boss, Peter Nathan, and would be happy if he snared the top job.

The company would not miss a beat by having Mr Babidge back at the helm, even though there were still questions over the exit of Ms Hrdlicka.

JP Morgan analyst Shaun Cousins said there were some puzzling aspects about the exit and also raised the prospect that there could be a question mark over some of the hires made by Ms Hrdlicka.

Mr Cousins said the a2 Milk board could have encouraged Ms Hrdlicka to resign from her other high-profile position, that of chairman and president of Tennis Australia, to ease the ''travel burden'' she cited initially as the main reason for her departure.

"Stepping down from other external commercial activities could have eased the travel burden, but does not appear to have been pursued strongly by the board,'' he said.

Ms Hrdlicka said late on Monday there had been sudden changes in her personal circumstances "and they must take priority at this time".

That statement came about nine hours after an initial company announcement to the ASX in which it said Ms Hrdlicka had agreed to step down from her role because of an increasingly onerous travel schedule, which made it too difficult to focus on the company's major growth markets of China and the United States.

UBS analyst Ben Gilbert said the change at the helm came as a surprise but having the experienced Mr Babidge as interim chief executive ''gives us comfort'', along with the company reassuring the market there would be no major change in strategy.

Investors have been told that while a2 Milk would continue to invest in growth, it would be tougher on costs to offset the extra spending.

Some analysts referred to Mr Babidge, who had been chief executive of the company for seven years until 2018 as a ''safe pair of hands'', but a2 Milk chairman David Hearn said he was so much more than that.

"Geoff built this business from the ground up,'' he said.

 

 

13 Dec, 2019
A new plant-based meat company has launched in Australia, backed by Atlassian's co-founder Mike-Cannon Brookes
Business Insider
  • Plant-based meat company Fable has launched in Australia, backed by Atlassian co-founder Mike Cannon-Brookes.
  • The company’s products are made primarily from mushrooms but are designed to have the same texture and taste as meat.
  • Fable’s products will be rolled out in restaurants in London, Australia, and in Singapore.
  • Visit Business Insider Australia’s homepage for more stories

Another plant-based meat company has launched in Australia.

Fable unveiled its plant-based pulled pork and beef brisket on Wednesday, joining a string of plant-based companies that are popping up in Australia such as v2foodSoulfresh and New Zealand’s Sunfed.

The product was launched at Dinner by Heston Blumenthal at Crown Towers in Melbourne, a fitting location as Blumenthal himself jumped on board to support Fable.

Fable’s “meat” is mostly made of shiitake mushrooms, and is designed to have the same taste and texture of pulled pork and beef brisket.

“In today’s world, we need to be mindful about what we eat,” Blumenthal said in a statement. “The new Fable product combines the natural benefits of shiitake mushrooms with fantastic innovation resulting in something that not only tastes great but can be used in a variety of ways as a meat alternative.

“Through the last months, we have been extensively testing the product with some of our recipes and realised that this product goes beyond replacing meat, it should be in a category of its own.”

Fable was co-founded by Michael Fox, the co-founder of former startup Shoes of Prey, together with Jim Fuller, a fine dining chef and mycologist – a “mushroom scientist” – and organic mushroom farmer Chris McLoghlin.

“We focus on taste and texture first,” Fuller said in a statement. “I’m Texan and grew up on BBQ. Our goal with Fable has been to re-create the taste and texture of pulled pork and beef brisket, two of my favourite meats.”

The launch comes as Fable raised $1.5 million in funding co-led by Blackbird Ventures and Grok Ventures – the venture capital company founded by Atlassian co-founder Mike Cannon-Brookes. The funds will be used to make more mushroom-based meat alternatives as well as expand Fable’s distribution in restaurants and stores.

“Blackbird and Grok are both really interested in this whole future of food and sustainability and the health benefits of reducing meat consumption,” Fox told Business Insider Australia. “We’re thrilled to have them on as partners and investors.”

Why name the company Fable?

Fox described a “fable” as a short story, usually with animals as characters that convey a moral, but added, “Not that we want to go out conveying morals”. He went on to say, that the name worked well with what the company was trying to achieve.

“The reason that we’re doing a plant-based meat company is because we want to help reduce our society’s reliance on industrial animal agriculture for a whole range of health, sustainability and ethical reasons,” he told Business Insider Australia. “We felt that definition of the name Fable sort of aligns nicely with what we’re doing.”

And mushrooms are part of it too. “We use mushrooms as the base for the Fable product and mushrooms also have this interesting, mystical, fantasy, storytelling element so the name Fable seemed to fit.”

As a vegetarian himself, Fox said “I’m not the target market” for Fable products.

“We want to help meat-eaters who want to reduce their meat consumption,” he said. He also mentioned it as an option for flexitarians and people who may not want to keep eating falafel or even mushrooms.

“They love the taste and texture of meat and they still crave that,” he said.

“The idea was to produce a product that has that taste and texture and deliciousness of meat” Fox added, with “minimally processed ingredients” and a mushroom base.

Getting Heston Blumenthal on board

When asked how famed chef Heston Blumenthal got involved with the company, Fox said it came after his fellow cofounders met with a mushroom professor in Thailand.

He said McLaughlin and Fuller went to Thailand to meet with a Thai mushroom professor. At the same time, Blumenthal had been looking more into mushrooms and reached out to the same professor.

It was that professor who eventually introduced Blumenthal to both McLaughlin and Fuller.

Once Fable eventually created their planted based product, they gave it to Blumenthal to try when they met him once again in Singapore.

“He was keen to work with the product,” Fox said. “And so he took some back to London with him and his development team have been developing dishes to go on the menus in his restaurants,” Fox said. “And he was kind enough to let us serve up some of those dishes … at Dinner by Heston for our launch.”

Fox said Fable’s product was designed with chefs in mind and will be launched in restaurants before going to retailers.

The plant-based meat will be heading to Heston’s restaurants, beginning with The Perfectionists’ Café in London Heathrow before making its way to Australia. It will be launching in at Kingsleys and The Winery in Sydney, The Esplanade in Melbourne and Glass House Brewery in Queensland.

Fox added that Fable will be rolling out across 50-60 restaurants in January and then it’s going to head into stores.

“Our goal is to be in retail by roughly the middle of next year,” he said.

 

13 Dec, 2019
A number of Aussie craft beer companies have been snapped up by big corporates. Here's who belongs to who.
Business Insider

The news last week that Mick Fanning-backed craft beer label Balter Brewing had been scooped up by Carlton and United Brewers (CUB) probably came as little surprise for the truly committed froth lords out there.

That’s because it has been something of a trend in recent years. The routine plays out the same way: A local label picks up steam, gets traction in the wider market, and then – wham! – it gets swept up by one of the big conglomerates which dominate booze distribution in Australia.

There are plainly great reasons why an independent brewer might want to be acquired – and it isn’t just the money. The beer titans, which include CUB and Lion — both of which are owned by international conglomerates — have far more developed brewing and distribution networks, which can enable formerly small breweries to develop and sell their product at a far greater scale.

In a letter to fans announcing the acquisition, Balter pointed to this increase in scale as their reason – while acknowledging many of their customers value independence.

“We’ve always believed that good beer is for everybody and this is a great way to continue that mission of sharing ‘good beer, with enjoyment’,” the letter reads. “It also means we’ll be able to manage the epic growth we’ve experienced since day one, in a way that won’t affect the quality of the beer, or sanity of the people in the business.”

The Independent Brewers Association (IBA), which represents and provides support for indie brewers in Australia, said in a statement to Business Insider Australia that Balter’s membership had lapsed anyway, but it’s new position under the CUB banner would obviously render it ineligible to be part of the organisation. A spokesperson for the IBA said its goal is to offer some of the benefits of scale for the smaller brewers who want to stay indie.

“The large multinational brewers and beverage companies have access to a vast amount of technical resources. They have a powerful seat at the table when it comes to advocacy, and they have well-resourced marketing programs and dominant distribution platforms,” the spokesperson said.

“Individually the independent brewers in Australia do not have access to that level of resource and therefore we have committed to a membership organisation that develops a strong collective voice, and collaboratively develops and provides resources which its members could never access on their own.”

However, it could be the case that the spate of craft beer acquisitions might be slowing. A report in the AFR in July said the near-meteoric growth of craft beer brands had slowed in recent months, making it a less enticing sector to help arrest the sideways – or negative – growth of mainstream beer brands.

Yet here we are six months later, with another plucky craft brand falling under the umbrella of the beer giants. On that note, here are six Australian craft beer labels which have been snapped up by a big corporate brewer.

Anyone who spends any time hanging around pubs – and there’s no shame in it! – would certainly have noticed 4 Pines is on tap all over the place now.

That’s no accident: 4 Pines, which started with micro-breweries in Brookvale and Manly on Sydney’s northern beaches, was acquired by multinational beverage giant AB InBev in 2017.

AB InBev also happens to own CUB – at least until the $16 billion acquisition of the latter by Japan’s Asahi is approved.

Like 4 Pines, Pirate Life was also an acquisition by AB InBev. In fact, it happened only two months later.

Not a bad result, considering Pirate Life only launched in 2014.

“The reality is we have run out of capacity at Hindmarsh,” brewer Jared “Red” Proudfoot told the AFR at the time, referring to the company’s existing brewery in Port Adelaide.

Australia’s first craft brewery was also one of the first to be acquired. We can’t quite place Matilda Bay’s acquisition in the same family as the recent spate of buyouts – it was picked up by Carlton & United Breweries in 1990. It had opened the doors to its main brewery a year earlier in 1989.

In October, the AFR reported CUB was making moves to rejuvenate the decades-old brand, tapping Aussie craft brewing pioneer Phil Sexton to open up a new Victorian boutique brewery to bring some focus back to Matilda Bay Brewing.

Little Creatures was established in 2000 by the original brewers from the Matilda Bay Brewing Company – who we’ll get to in a moment.

The parent company of the Fremantle-based label is Little World Beverages, which has been a wholly-owned subsidiary of Lion since 2012. Shortly after the acquisition in 2013, a second Little Creatures brewery opened up in Geelong, Victoria.

Lion already owned part of Little Creatures before the acquisition – with the final deal valuing the brewer at $381.6 million.

Another beer from the west, Feral Brewing fired up in 2002.

It too was scooped up in an acquisition, but by a fairly unique player: Since 2017, the company has been owned by Coca-Cola Amatil.

“We have acquired them in the interests of enabling them to distribute their products more widely around Australia,” a Coca-Cola Amatil spokesman said at the time, according to SBS.

Coca-Cola Amatil also owns craft label Yenda, based in New South Wales.

Another beer which seems to be everywhere these days is Mountain Goat, and for good reason.

The brewery, founded in Richmond, Victoria in the positively prehistoric era of 1997, was bought by Asahi back in 2015.

Prior to the acquisition, Mountain Goat partnered with Asahi for its international distribution.

12 Dec, 2019
Restored a2 Milk kingpin gets back to basics
Financial Review

The a2 Milk Company's interim chief executive, Geoff Babidge, is quickly implementing a back-to-basics approach for the infant formula group as he resumes the top job after an 18-month absence.

He held a series of top-level meetings with managers in Sydney on Tuesday and they included a handover session in a smoke-shrouded corporate office in the harbourside suburb of McMahons Point with Jayne Hrdlicka, who stepped down from the role on Monday.

She left amid tensions with the board over her heavy investment in brand building, and a personal issue which meant she needed to cut back on a punishing travel schedule.

Mr Babidge emphasised to staff generally that it was ''business as usual''.

Shares in a2 Milk gained 3.1 per cent to $14.40 on Tuesday as investors became increasingly satisfied that despite the ructions at the executive level, the company was still in a solid position, particularly with more emphasis on the pursuit of higher profit margins and keeping a tight rein on costs.

Milford Asset Management portfolio manager William Curtayne, who has been a backer of a2 Milk since 2012, said the exit of Ms Hrdlicka was a shock, but there was still strong upside for the business.

"We are fine on this. In the fullness of time we don't think it will change the opportunity for a2,'' he said.

The exact reasons for the departure were still unclear.

"In our view there could be a disagreement on the level of spending needed to take a2 where Jayne feels like it needs to go,'' Mr Curtayne said. "The board could have had a more moderate view.''

He added that Ms Hrdlicka had achieved "a hell of a lot" in the 18 months she held the top job.

High regard

As for the next chief executive, Mr Curtayne says he has a high regard for the company's Asia-Pacific boss, Peter Nathan, and would be happy if he snared the top job.

 

The company would not miss a beat by having Mr Babidge back at the helm, even though there were still questions over the exit of Ms Hrdlicka.

JP Morgan analyst Shaun Cousins said there were some puzzling aspects about the exit and also raised the prospect that there could be a question mark over some of the hires made by Ms Hrdlicka.

Mr Cousins said the a2 Milk board could have encouraged Ms Hrdlicka to resign from her other high-profile position, that of chairman and president of Tennis Australia, to ease the ''travel burden'' she cited initially as the main reason for her departure.

"Stepping down from other external commercial activities could have eased the travel burden, but does not appear to have been pursued strongly by the board,'' he said.

Ms Hrdlicka said late on Monday there had been sudden changes in her personal circumstances "and they must take priority at this time".

That statement came about nine hours after an initial company announcement to the ASX in which it said Ms Hrdlicka had agreed to step down from her role because of an increasingly onerous travel schedule, which made it too difficult to focus on the company's major growth markets of China and the United States.

UBS analyst Ben Gilbert said the change at the helm came as a surprise but having the experienced Mr Babidge as interim chief executive ''gives us comfort'', along with the company reassuring the market there would be no major change in strategy.

Investors have been told that while a2 Milk would continue to invest in growth, it would be tougher on costs to offset the extra spending.

Some analysts referred to Mr Babidge, who had been chief executive of the company for seven years until 2018 as a ''safe pair of hands'', but a2 Milk chairman David Hearn said he was so much more than that.

"Geoff built this business from the ground up,'' he said.

12 Dec, 2019
A new plant-based meat company has launched in Australia, backed by Atlassian's co-founder Mike-Cannon Brookes
Business Insider Australia

Another plant-based meat company has launched in Australia.

Fable unveiled its plant-based pulled pork and beef brisket on Wednesday, joining a string of plant-based companies that are popping up in Australia such as v2food, Soulfresh and New Zealnad's Sunfed.

The product was launched at Dinner by Heston Blumenthal at Crown Towers in Melbourne, a fitting location as Blumenthal himself jumped on board to support Fable. 

Fable’s “meat” is mostly made of shiitake mushrooms, and is designed to have the same taste and texture of pulled pork and beef brisket.

“In today’s world, we need to be mindful about what we eat,” Blumenthal said in a statement. “The new Fable product combines the natural benefits of shiitake mushrooms with fantastic innovation resulting in something that not only tastes great but can be used in a variety of ways as a meat alternative. 

“Through the last months, we have been extensively testing the product with some of our recipes and realised that this product goes beyond replacing meat, it should be in a category of its own.”

Fable was co-founded by Michael Fox, the co-founder of former startup Shoes of Prey, together with Jim Fuller, a fine dining chef and mycologist – a “mushroom scientist” – and organic mushroom farmer Chris McLoghlin. 

“We focus on taste and texture first,” Fuller said in a statement. “I’m Texan and grew up on BBQ. Our goal with Fable has been to re-create the taste and texture of pulled pork and beef brisket, two of my favourite meats.”

The launch comes as Fable raised $1.5 million in funding co-led by Blackbird Ventures and Grok Ventures – the venture capital company founded by Atlassian co-founder Mike Cannon-Brookes. The funds will be used to make more mushroom-based meat alternatives as well as expand Fable’s distribution in restaurants and stores.

“Blackbird and Grok are both really interested in this whole future of food and sustainability and the health benefits of reducing meat consumption,” Fox told Business Insider Australia. “We’re thrilled to have them on as partners and investors.”

Why name the company Fable? 

Fox described a “fable” as a short story, usually with animals as characters that convey a moral, but added, “Not that we want to go out conveying morals”. He went on to say, that the name worked well with what the company was trying to achieve. 

“The reason that we’re doing a plant-based meat company is because we want to help reduce our society’s reliance on industrial animal agriculture for a whole range of health, sustainability and ethical reasons,” he told Business Insider Australia. “We felt that definition of the name Fable sort of aligns nicely with what we’re doing.”

And mushrooms are part of it too. “We use mushrooms as the base for the Fable product and mushrooms also have this interesting, mystical, fantasy, storytelling element so the name Fable seemed to fit.”

As a vegetarian himself, Fox said “I’m not the target market” for Fable products.

“We want to help meat-eaters who want to reduce their meat consumption,” he said. He also mentioned it as an option for flexitarians and people who may not want to keep eating falafel or even mushrooms.

“They love the taste and texture of meat and they still crave that,” he said.

“The idea was to produce a product that has that taste and texture and deliciousness of meat” Fox added, with “minimally processed ingredients” and a mushroom base.

Getting Heston Blumenthal on board 

When asked how famed chef Heston Blumenthal got involved with the company, Fox said it came after his fellow cofounders met with a mushroom professor in Thailand. 

He said McLaughlin and Fuller went to Thailand to meet with a Thai mushroom professor. At the same time, Blumenthal had been looking more into mushrooms and reached out to the same professor. 

It was that professor who eventually introduced Blumenthal to both McLaughlin and Fuller.

Once Fable eventually created their planted based product, they gave it to Blumenthal to try when they met him once again in Singapore.

“He was keen to work with the product,” Fox said. “And so he took some back to London with him and his development team have been developing dishes to go on the menus in his restaurants,” Fox said. “And he was kind enough to let us serve up some of those dishes … at Dinner by Heston for our launch.”

Fox said Fable’s product was designed with chefs in mind and will be launched in restaurants before going to retailers.

The plant-based meat will be heading to Heston’s restaurants, beginning with The Perfectionists’ Café in London Heathrow before making its way to Australia. It will be launching in at Kingsleys and The Winery in Sydney, The Esplanade in Melbourne and Glass House Brewery in Queensland.

Fox added that Fable will be rolling out across 50-60 restaurants in January and then it’s going to head into stores.

“Our goal is to be in retail by roughly the middle of next year,” he said.

12 Dec, 2019
A number of Aussie craft beer companies have been snapped up by big corporates. Here's who belongs to who.
Business Insider Australia

The news last week that Mick Fanning-backed craft beer label Balter Brewing had been scooped up by Carlton and United Brewers (CUB) probably came as little surprise for the truly committed froth lords out there. 

That’s because it has been something of a trend in recent years. The routine plays out the same way: A local label picks up steam, gets traction in the wider market, and then – wham! – it gets swept up by one of the big conglomerates which dominate booze distribution in Australia.

There are plainly great reasons why an independent brewer might want to be acquired – and it isn’t just the money. The beer titans, which include CUB and Lion — both of which are owned by international conglomerates — have far more developed brewing and distribution networks, which can enable formerly small breweries to develop and sell their product at a far greater scale.

In a letter to fans announcing the acquisition, Balter pointed to this increase in scale as their reason – while acknowledging many of their customers value independence.

“We’ve always believed that good beer is for everybody and this is a great way to continue that mission of sharing ‘good beer, with enjoyment’,” the letter reads. “It also means we’ll be able to manage the epic growth we’ve experienced since day one, in a way that won’t affect the quality of the beer, or sanity of the people in the business.”

The Independent Brewers Association (IBA), which represents and provides support for indie brewers in Australia, said in a statement to Business Insider Australia that Balter’s membership had lapsed anyway, but it’s new position under the CUB banner would obviously render it ineligible to be part of the organisation. A spokesperson for the IBA said its goal is to offer some of the benefits of scale for the smaller brewers who want to stay indie.

“The large multinational brewers and beverage companies have access to a vast amount of technical resources. They have a powerful seat at the table when it comes to advocacy, and they have well-resourced marketing programs and dominant distribution platforms,” the spokesperson said.

“Individually the independent brewers in Australia do not have access to that level of resource and therefore we have committed to a membership organisation that develops a strong collective voice, and collaboratively develops and provides resources which its members could never access on their own.”

However, it could be the case that the spate of craft beer acquisitions might be slowing. A report in the AFR in July said the near-meteoric growth of craft beer brands had slowed in recent months, making it a less enticing sector to help arrest the sideways – or negative – growth of mainstream beer brands.

Yet here we are six months later, with another plucky craft brand falling under the umbrella of the beer giants. On that note, here are six Australian craft beer labels which have been snapped up by a big corporate brewer.

 

5 Dec, 2019
Drinking up to four coffees a day has health benefits, finds study
Financial Review

Drinking up to four coffee a day can reduce the risk of type 2 diabetes and high blood pressure, according to a study.

However, the benefit is lost if more than four cups of coffee are consumed.

Researchers from the universities of Navarre in Spain and Catania in Italy found an "association between coffee consumption and a decreased risk of type 2 diabetes" and that "long-term coffee consumption is associated with a decreased risk of hypertension".

The study suggests a moderate consumption of both caffeinated and decaffeinated coffee may be associated with a reduced risk of metabolic syndrome.

Metabolic syndrome is a number of conditions that often occur together and increase the risk of diabetes, stroke and heart disease.

It affects one in four adults and is described by the NHS as "particularly dangerous".

The main components of metabolic syndrome include obesity, high blood pressure, high blood triglycerides, low levels of HDL cholesterol and insulin resistance.

The study found a link between coffee consumption and a reduced risk obesity is "less clear".

University of Catania assistant professor Giuseppe Grosso's research suggests polyphenols in coffee may be involved in the health benefits of coffee, specifically phenolic acids and flavonoids.

The research was conducted independently but was commissioned by the Institute for Scientific Information on Coffee, whose members are six of the big European coffee companies: illycaffe, Jacobs Douwe Egberts, Lavazza, Nestle, Paulig and Tchibo.

 

4 Dec, 2019
Caltex rebuffs takeover price but open to revised bid
Australian Financial Review

Takeover target Caltex has given its Canadian Suitor encouragement that its $8.6 billion takeover offer is not too far off the mark, offering it limited access to its accounts at the same time as rejecting the $34.50 a share price as inadequate.

The move came after discussions with investors, the feedback from whom was that the price was "skinny", representing just a premium calculated at 15.8 per cent, Caltex chief financial officer Matthew Halliday said.

It has left Quebec-based Alimentation Couche-Tard, which argues the premium is more than double that, well short of the full due diligence and exclusivity on negotiations that it wanted.

But it still leaves scope for a friendly deal and came as little surprise to the market, where investors and analysts have been signalling they expected a sweeter price would be needed.

RBC Dominion Securities analyst Irene Nattel said she expects the story "will continue to unfold", while adding Couche-Tard would likely remain "disciplined" on the price it offers.

Shares in Caltex closed down 0.78 per at $34.49 on Tuesday.

The Canadian convenience retailer, which has yet to respond to Caltex's move, lifted its initial approach from $32 and its appetite to increase its offer further is expected to be limited in the absence of a rival bidder.

But the value of its offer would be reduced by the expected payment by Caltex of a circa 50¢ dividend for this December half, while the value it has calculated to shareholders from the distribution of Caltex's pile of franking credits has emerged as a point of dispute.

Mr Halliday said Couche-Tard's use of $3.61 a share as the value to shareholders of franking credits assumes a shareholder with a tax rate of zero per cent, such as a charity. Caltex, in contrast, calculates the value based on a super fund shareholder with a tax rate of 15 per cent, putting the franking value per share as $1.66.

Others say, however, that market practice on franking is to show the maximum value of franking credits available to shareholders that can fully utilise them, being the zero per cent taxpayer.

The different calculations on the premium the offer is due to the timing of the base number. In calculating its lower figure, Caltex is using the closing share price on November 25, after it announced the partial spin-off of property assets, which caused a bounce in the price.

Couche-Tard is, however, using November 22, the day before the property IPO announcement. The premium was as high as 35.7 per cent immediately before Couche-Tard's initial $32 a share approach on October 11, or more with the franking credit attached.

Still, Caltex is using its figures. "It comes back to that 15 per cent premium: generally people look at that and it is skinny, that is consistent feedback," Mr Halliday said of discussions over recent days with investors.

"At the same time [investors] appreciate that the board has been constructive in offering a pathway to engagement with Couche-Tard to come back with what could be a more compelling proposal."

He said Caltex would outline to investors at a scheduled briefing in Sydney on Thursday the alternative value offered by the property IPO, the retail network review and other initiatives.

“Caltex has a well-developed strategy, privileged assets, strong leadership and compelling growth opportunities that the board believes will deliver attractive value for its shareholders over time," chairman Steven Gregg said in a statement.

“The Caltex board is focused on maximising shareholder value and will carefully consider any proposal that is consistent with this objective.”

The takeover action around Caltex, owner of the Lytton refinery in Brisbane, has heightened concerns about the security of supply of petrol and diesel in Australia, particularly as Couche-Tard's focus is firmly on convenience retailing. Any takeover would be subject to approval by the Foreign Investment Review Board, which could regard the Lytton plant as critical infrastructure, warranting heavier scrutiny.

Still, Caltex chief executive Julian Segal said he saw no impact on reliability of supply from the takeover action, pointing to the fuel industry's long-standing reputation for reliability and safety.

He said Caltex has demonstrated the value of the refinery within its supply operation and "that's something that any serious player would recognise".

Caltex's offer to provide Couche-Tard with "selected non-public information" to allow it to revise its proposal is subject to the Canadian company signing a confidentiality agreement.

4 Dec, 2019
Metcash books $237m impairment after 7-Eleven loss
Australian Financial Review

Metcash has slashed the value of goodwill and other assets in its food and grocery business by $237.4 million after losing a contract to supply convenience store chain 7-Eleven.

The writedown is non-cash in nature but will wipe out Metcash's bottom-line profits for the six months ending October, which are due to be released on Thursday.

Analysts expect Metcash's underlying net profit for first half to fall by 6 per cent to about $94 million. Weaker earnings from food and grocery distribution are expected to offset modest earnings growth in liquor and flat profits from hardware.

Metcash shares fell 2.4 per cent to $2.88 in early trade on Tuesday.

Metcash said the $237.4 million impairment was triggered by a review of the carrying value of assets ahead of the results and following the loss of most of its $800 million yearly supply contract with 7-Eleven.

7-Eleven last month confirmed it was moving to self-supply and would not renew Metcash's east coast supply contract when it expired next August.

Metcash said the loss of the 7-Eleven contract would cost it $15 million in annual earnings, after adjusting for cost savings.

Metcash also stands to lose about $17 million in earnings after losing its $270 million a year supply agreement with South Australian retailer Drakes Supermarkets, one of its biggest customers.

The latest goodwill writedown follows impairments of $345.5 million in 2018, when Metcash learned of the likely loss of the Drakes contract, and $640 million of impairments in 2015, mainly goodwill in the food and grocery business.

Metcash will need to step up cost-cutting to compensate for the loss of the two contracts.

Analysts say Metcash will need to step up cost-cutting to compensate for the loss of the two contracts. Contracts with BP and Foodworks may also be at risk.

Under its MFuture program, Metcash aims to cut costs by $50 million in 2020 and 2021 from supply chain, property, marketing and labour.

Citigroup analyst Bryan Raymond believes the cost-out program is required to offset underlying operating deleverage before the loss of the Drakes and 7-Eleven contracts.

"We estimate Drakes and 7-Eleven contribute a combined $37 million EBIT headwind over 2020 to 2022," Mr Raymond said.

"Management is expected to discuss the potential to further reduce costs, potentially through an expansion of the MFuture program, to address the substantial fixed costs which remain in the business following the loss of about $1 billion of sales in the food and grocery segment."

A Metcash spokesman confirmed the wholesaler was looking at ways to minimise the impact on earnings of the 7-Eleven contract loss but said it was too early to provide more details.

Metcash declined to comment on a Street Talk report it was in talks to buy fast-growing specialist national tool retailer, Total Tools, for around $250 million.

"We have a policy of not commenting on speculation," a spokesman said, "but we continue to look at opportunities for mergers and acquisitions if they make sense and add value for shareholders."

Total Tools is Australia's largest independent professional tools retailer. It has earnings of about $25 million a year and a national network of more than 80 franchised stores and an online store.

Metcash is Australia's second-largest hardware wholesaler after buying Mitre 10 in 2010 and Home Timber and Hardware from Woolworths in 2016.

While the food and grocery division has been struggling to grow sales and profits amid intense competition from Coles, Woolworths and Aldi, hardware has been a solid performer in recent years and now accounts for 25 per cent of group profits.

However, JP Morgan analyst Shaun Cousins expects hardware profits to fall 1.6 per cent in the October half following tough trading in recent months.

 

 

 

4 Dec, 2019
How KKR cooked up a $3.2b Arnott's deal
Australian Financial Review

An elderly man walks into KKR Australia's glitzy Australian headquarters, perched 42 floors up a glassy office building that stares down on Sydney Harbour.

There's no suit, no pitchbook, no deal idea for the biggest name in leveraged buyouts globally. Just one question.

It's a question KKR has never been asked before, but an important one nonetheless.

Were there any plans to change the Scotch Finger biscuit?

It was a simple question, but also an important one for a global buyout giant that had just agreed to pay $3.2 billion for Australia's No.1 biscuit maker, Arnott's.

KKR is expected to take the keys to Arnott's in December, after one year circling the business and winning what it looked like an unwinnable auction. It is the storied firm' s biggest ever buyout in Australia.

Pressure valve

The story of how KKR bought Arnott's starts in Camden, New Jersey, where its owner Campbell Soup Company was under considerable pressure.

Activist shareholder Dan Loeb, who runs high-profile hedge fund Third Point, was seeking to break up Campbell and roll its board in an effort to unlock value for itself and other investors.

The 150-year-old Campbell responded with plans to re-focus on two core businesses and pay down debt. The two businesses were soups and other foods in North America. Campbell International, the arm that included Arnott's and the Campbell's soups and stock business in Australia and Danish snack company Kelson Group, would be up for grabs.

Bankers saw it coming a mile off. The likes of Goldman Sachs and Centerview Partners had been positioning for such a mandate for years and, after helping with a strategic review, were tapped to sell Campbell International.

Big teams of bankers were assigned to the case. Campbell's head office was crawling with American bankers – relationship bankers, M&A bankers and the like. Australian bankers were assigned to Campbell International HQ in Sydney. Goldman Sachs managing director Zac Fletcher and consumer banker Will Broughton led the charge.

The bankers were joined by lawyers. In the US, Campbell tapped Weil, Gotshal & Manges, who appointed pin-up New York lawyer – and the firm's corporate practice chairman – Michael Aiello to the case.

In Australia, it was local pin-up David Friedlander and his team at King & Wood Mallesons.

Auction under way

Campbell International was quickly ready for sale. Within a couple of months of Campbell's announcement, the bankers and lawyers had a data room ready for bidders, telling them the portfolio recorded $US1.05 billion ($1.43 billion) revenue and $US202 million EBITDA in the 2018 financial year.

Arnott's, which makes iconic Australian biscuits such as the Scotch Finger, Tim Tam and Mint Slice, was the No. 1 selling point, accounting for about three-quarters of Campbell International revenue and earnings.

The unit was pitched at big offshore consumer goods companies first and private equity firms second. Campbell International's best chance of getting a big bid was convincing Cadbury owner Mondelez or Italy's Ferrero to pay up for the snacking business. Both parties took the bait, bankered up and headed into the data room.

Despite the impression that strategic players had been given a leg up, KKR assembled its team. Australian private equity team head David Lang, then in the middle of a $2.2 billion tussle for listed accounting software business MYOB, ran point, flanked by Gareth Woodbridge and Rupert Pedler.

Lang hired Michael Stock, the head of investment banking newcomer Jefferies for strategic advice and funding. He brought in sponsors banker Paul Griffiths and leveraged finance banker Peter Colwell.

"Project Parrot" was born.

Lang later tapped law firm Allens, led by partners Emin Altiparmak and Tom Story, and had Simpson Thacher's Kathryn King Sudol, a long time KKR adviser, on the case in New York.

KKR was up against some familiar foes: buyout firms The Carlyle Group, Bain Capital, Affinity Equity Partners and Pacific Equity Partners, among others.

Indicative bids went to Goldman and Centerview in December, and a second round was established soon after. Modelez and Ferrero progressed to stage two, as did KKR and Bain. PEP, which at one point considering partnering with Carlyle and at another point Ferrero, took a back seat.

Going, going ... not gone

Binding bids were due in March, and bidders were asked to again confirm offers in May. It was a two-horse race, as Lang's KKR went head-to-head with Mondelez – the party most expected to win the auction from the beginning.

Mondelez, which had questions about competition clearance hanging over its bid, dropped out soon after, leaving KKR in pole position. (KKR had seen one of its former portfolio companies, RJR Nabisco, fail to buy Arnott's 20 years earlier on the same grounds.)

But with its bid well short of expectations, KKR started looking for other ways to make up the difference. It put forward a handful of structures to keep itself in the contest. It offered cash, cash and scrip, cash and a separate vehicle for Campbell's Soups, and cash with buyback options, and the like, in an effort to get the deal over the line.

But with the activists breathing down its neck, Campbell wanted more.

Campbell's camp cut a deal with Ferrero to take Kelsen Group - a mostly European business that didn't really fit with Arnott's biscuits or Campbell's soups and stocks – for $US300 million.

And, after much consideration, it decided it wanted an all-cash bid for the rest. It would draw up a licensing agreement to allow the new owner to continue to use the "Campbell's" name in Australia and cut ties altogether.

So Campbell and its bankers re-started the auction.

They had KKR in one corner and needed another bidder to make it a contest.

Campbell's team went back to Sydney-based PEP, Australia's biggest private equity firm for most of the past two decades, which has had plenty of success with corporate carve-outs and food businesses. PEP had just sold flour and baked goods maker Allied Pinnacle for close to $1 billion.

PEP signed Citi's investment bankers and jumped back into the auction.

Time for a shootout

Each bidder was told roughly what Campbell Soup Company wanted for the business. From there, it was a private equity shootout to see who could get there first.

There was fresh data, fresh management presentations, fresh financing plans, and fresh trips to Asia and New York.

Most of the action was happening in Sydney, but both sides pulled out all stops – rounds of meetings with Campbell, discussions with its family shareholders, calls with KKR firm founders George Roberts and Henry Kravis, and so on.

KKR entered the shootout with its nose in front. It had done plenty of work and felt like it had a good grasp of the business. But it wasn't over the line. It knew PEP was cashed up and re-energised.

So KKR decided to change its thinking to really push ahead. KKR was looking to bid out of its buyout funds, which includes Asia and global funds, and which would typically seek 20 per cent to 30 per cent returns on an IRR basis.

Instead, KKR decided it would write a cheque from its "Core" investment strategy, which typically seeks lower-risk and lower-returning assets, and holds them for longer. It realised Arnott's had the necessary defensive qualities.

So KKR surged back ahead and, at $US2.2 billion, had moved much closer to Campbell's asking price.

PEP, the stalking horse, was also in the ballpark.

It had funding lined up, a chief executive – understood to be former Allied Pinnacle boss James Ajaka – ready to take over the business, and its dealmakers were in New York in expectation of signing.

But PEP was still behind. Sources said the difference between the two bids was less than $50 million – or 2 per cent of the deal value.

KKR gets the bikkies

So after an auction that stretched about nine months – and a five-week shootout to end it – Campbell was finally ready to hit a bid.

KKR was nominated preferred bidder and the two sides headed to New York to work out the fine details.

For the next 10 days, lawyers worked around the clock in Weil, Gotshal & Manges' offices, just off Central Park, to document everything that had been agreed.

There was a detailed sale and purchase agreement and a licensing deal that would allow KKR to retain the Campbell's name for the soups and stock business. Bankers and principals went home, exhausted after a gruelling auction, and left the lawyers to nut out the details. It was signed in the first week of August, with little fanfare. Street Talk had revealed the deal 10 days earlier.

KKR is expected to take the keys in December. It is trying to sell three Arnott's properties in a sale and leaseback transaction that would help fund its acquisition  and wants both deals signed at the same time, which is never easy. UBS banker Tim Church is running the property transaction.

KKR has also lined up consultants Mckinsey & Co to get working on a "first 100 day" plan. It wants to turn Arnott's into a growth company, and is thinking about ways to expand its biscuit base into snacks more generally. There's plenty to think about.

In the meantime, one thing KKR will do with the 160-year-old Arnott's is keep making Scotch Fingers.

It has 3.2 billion reasons why.

 

 

 

 

 

 

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