News

Superannuation giant Aware Super and a syndicate of elite Australian athletes have backed Mexican food chain Guzman y Gomez in a share sale which values the company at $1.5 billion.

Guzman y Gomez founder Steven Marks said the investments were a testament of the group’s recent past performance and plans for the future. “We’re well positioned to build and bring even more [Guzman y Gomez eateries] to life here in Australia and globally,” he said.

The investors have not disclosed the value of the secondary share sale, but the investment was led by Aware Super, which has $150 billion worth of Australians’ retirement savings under management.

The deal values the Guzman y Gomez at a fully diluted market capitalisation of $1.5 billion.

Athletic Ventures, the investment syndicate founded by recently retired Greater Western Sydney Giants player Matt de Boer, also made its third consecutive investment in Guzman y Gomez as part of the sale.

The group, which boasts 100 members including Test cricketer Mitchell Starc and Wallabies captain Michael Hooper, has been on the lookout for high-growth start-up businesses.

De Boer said the athlete group’s belief in the Guzman y Gomez business “grows stronger by the day”.

“Most importantly as an athlete community, we understand deeply what high-performance looks like, and continue to be blown away by the quality of the management team and their continued execution,” he said.

The United Nations food agency’s world price index fell for a sixth month in a row in September, receding from all-time highs posted earlier this year after Russia invaded Ukraine.

The Food and Agriculture Organization (FAO) said on Friday that its price index, which tracks the most globally traded food commodities, averaged 136.3 points last month versus a revised 137.9 for August.

The August figure was previously put at 138.0.

The index has fallen from a record of 159.7 in March. The September reading was, however, 5.5 per cent higher than a year earlier.

The latest drop was driven by a 6.6 per cent month-on-month fall in vegetable oil prices, with increased supplies and lower crude oil prices contributing to the decline.

Sugar, dairy and meat prices all slipped by less than one percentage point, relieving inflationary pressures.

By contrast, FAO’s cereal price index rose 1.5 per cent month-on-month in September, with wheat prices climbing 2.2 per cent because of concerns over dry crop conditions in Argentina and the United States, strong EU exports and heightened uncertainty over access to Ukrainian Black Sea ports beyond November.

Rice prices rose 2.2 per cent, partly because of worries over the impact of recent severe flooding in Pakistan.

In separate cereal supply and demand estimates, FAO lowered its forecast for global cereal production in 2022 to 2.768 billion tonnes from a previous 2.774 billion tonnes.

That is 1.7 per cent below the estimated output for 2021.

“A lower global coarse grain production forecast makes up the bulk of this month’s overall cutback, as adverse weather continued to curb yield prospects in major producing countries,” FAO said.

World cereal use in 2022/23 is expected to surpass production at 2.784 million tonnes, leading to a projected 1.6 per cent fall in global stocks compared with 2021/22 to 848 million tonnes.

That would represent a stocks-to-use ratio of 29.7 per cent, down from 31.0 per cent in 2021/22 but still relatively high historically, FAO said.

Cereal and snack company Carman’s has made its first-ever acquisition – of Adelaide-based snack brand Fruit Wise. Details of the purchase have not been disclosed.

Carman’s founder Carolyn Creswell said the purchase marked an exciting venture for the company as it brings together two like-minded businesses with a passion for delicious food.

“My kids have loved Fruit Wise fruit straps for over 15 years, so much so they were the number one school lunchbox request,” said Creswell.

“Given how much we all loved the product, I decided to pick up the phone to see if there was any opportunity to work together.” 

After a year of discussions, Creswell said the parallel similarities and outlook on healthy snacking helped finalise the deal. 

“It’s truly a moment that I’m so proud of, and I just can’t wait to watch Carman’s continue to grow,” she added.

Creswell explained she holds the Australian-owned brand close to her heart, which is why Fruit Wise will remain in its location at Adelaide Hills.

“With so much uncertainty in the world over the last two years, locally made products are becoming increasingly important to Aussie families,” she added. 

 “That’s why I place so much pride in the fact we’re 100 per cent Australian-owned and manufactured.” 

Bridget Beal, MD at Fruit Wise, said being family-owned for 15 years, the brand wanted to ensure it was in good hands before “passing over the reins”.

“After speaking with Carolyn, we knew straight away that this was the right move for Fruit Wise,” proclaimed Beal. “We can’t wait to watch Fruit Wise grow under the care of Carman’s!” 

Grocery retailers say consumers can finally expect better prices as fresh produce flows back into stores, even as growers continue to contend with mounting production costs.

After months of constrained supply, due to extreme flooding along the east coast, supermarket retailers said this week that conditions have at last stabilised and could improve further.

At Coles, an increased supply of strawberries, corn, capsicums and citrus have flowed through for the start of spring, while tomatoes have also rebounded as weather conditions improved along the east cost.

“We now have strong volumes across many lines, although some are still in restricted supply,” the supermarket giant said, noting that chillies continue to be impacted by cooler weather in Queensland.

Woolworths has noted the same trend, flagging that berry suppliers have forecast strong volumes in the lead-up to Christmas.

“Pleasingly, the warmer weather has brought with it a return to lower prices, with a range of produce including lettuce, berries, tomato, broccoli and cucumber back in strong supply,” a spokeswoman said.

An Aldi spokesman said consumers will continue to see an increased range of produce over the coming months, while categories that have been under pressure have now bounced back. “The supply of lettuce, loose-leaf greens and other fresh produce has stabilised as a new yield of crops have been picked and delivered to stores, resulting in a normalisation of prices and availability.”

Third La Nina not expected to dampen availability

But while the days of the $11 a head iceberg lettuce are over for now, produce growers are divided about future pricing and availability, with many reporting they are still facing uncertainties about the weather outlook and rising cost pressures.

Last week the Bureau of Meteorology declared a third consecutive La Niña in Australia, and while conditions aren’t looking as tough as previous years, the threat of more bad weather is hovering over producers.

Spokesman for industry group AusVeg, Shaun Lindhe, said it was hard to predict whether another season of heavy rains would once again impact vegetable growers, but hoped that in cases where one region was impacted, other states could pick up the slack.

“We have a national supply chain and it’s quite resilient,” he said.

While crop output has improved producers were still feeling the weight of increased supply chain costs, ranging from fuel to energy use and fertiliser, Lindhe added.

Other independent fresh produce growers and farmers are optimistic that the upcoming La Niña will be less severe than the previous two periods and won’t result in the same crippling food shortages.

The well-documented lettuce shortages were because Queensland and NSW, which produces 80 per cent of the leafy green vegetables for the entire country during winter, was decimated by flooding during June and July.

“The reverse now occurs in summer, where 80 per cent of produce [like] green leafy veggies, the ones that have been impacted during winter, are actually produced out of Victoria,” said Freshmark chief executive Meegan George. Freshmark represents the entire supply chain of growers, wholesalers, retailers across Flemington’s Sydney Markets and more.

“If we are having a weather prediction of a mild La Niña, it means that produce will not really be in lower supply … there will still be an abundance of availability.”

The milder winter also offers another opportunity for NSW and Queensland growers to plant another crop, she added, which is being sold in stores right now. Meanwhile, Victoria is preparing to harvest their crop in about two weeks.

“So we are going to see this lovely crossover of the three states all producing top-quality in the coming two weeks and for weeks afterwards,” George said.

“What that means for consumers is that they will have a huge abundance of quality, supply, variety and prices will come down as well.”

The only two types of produce that are yet to fully come online are beetroot and cabbage, but supply is expected to increase in the coming weeks.

While farmers have developed resilience to rapidly changing weather conditions, George said it was impossible to put a timeframe on how long good availability of fresh produce would last. “Farmers are incredibly used to the weather being a very capricious sister of theirs.”

Meanwhile, some industry voices are warning consumers to get used to food shortages and ensuing price rises occurring more frequently amid increasingly unpredictable weather patterns.

Catherine Velisha, the managing director of Velisha Farms which supplies vegetables to Aldi stores across Victoria and NSW, is calling for consumers to re-evaluate the value of fresh produce and consider input costs like labour, packaging, fuel and fertiliser that have all increased.“The need is for us to be aware that [shortages are] going to happen, and [to] prepare our mindsets for not having all produce available so readily all the time … We’ve had it very good for a very long time,” she said.

Sean Hallahan, the CEO and MD of listed Australian vegetable grower and marketer Costa Group, has stepped down after five years with the company.

Harry Debney has been appointed interim CEO and Hallahan will stay with the company to support the transition. The company is recruiting a permanent replacement.

Hallahan was the company’s COO until March last year, when we stepped into the role of CEO and MD.

Neil Chatfield, chairman of Costa Group, says Hallahan has played a pivotal role in the company’s development and growth. 

“We understand that the last two years, particularly in Victoria, have taken a large toll on the business and personal lives of individuals,” said Chatfield.

“Despite a challenging period with the Covid-19 pandemic and extreme weather conditions, the company persevered and maintained its strong financial position thanks to Hallahan’s leadership,” he continued.

Hallahan said he is proud to leave the company in a strong position financially and operationally despite the challenges of “an intense couple of years in agriculture” and the overlay of the pandemic.

“It has been a privilege to lead Costa and to have been part of an outstanding team of people for five years,” he added. “I wish Costa and its employees all the best for the future”. 

Interim CEO Debney has been a non-executive director for the company since July last year, prior to which he was CEO from 2010 to 2021 and led the company through its IPO in 2015. 

“Harry has an intimate knowledge of the company and is regarded as one of Australia’s leaders in horticulture,” Chatfield remarked. “He is the right person to assist the company as it transitions to a new CEO”. 

Beer and soft drinks giant Asahi Beverages, which owns the Carlton & United Breweries business which makes Victoria Bitter and Carlton Draught, has acquired premium low-calorie soft drinks and mixers group StrangeLove nine years after it was established.

Asahi Beverages chief executive Robert Iervasi said StrangeLove had been growing fast in a broader category which would largely be immune from an economic downturn as consumers continued to trade up to higher-end products.

“We actually think the premiumisation trend will continue. People still want to treat themselves,” Mr Iervsai said.

“Beverages have been quite resilient to recessionary environments.”

StrangeLove was founded in Byron Bay in 2013 by James Bruce and Stafford Fox. It makes about 55 per cent of its sales in hospitality venues such as restaurants and bars, 35 per cent in retail, and 10 per cent from the online channel.

It has 25 products including Tonic No. 8, Lo-Cal Yuzu, Double Ginger, “Fancy Lemonade” and a range of premium sparkling mineral waters. The company, now based in Melbourne, uses outside contract manufacturers to make its drinks.

Co-founder Mr Bruce said revenue was up 100 per cent in the past two years despite the COVID-19 restrictions in 2021 which hurt the hospitality industry.

The business has expanded its presence in the supermarket channel, and is now stocked in the aisles of about 300 Woolworths supermarkets, along with traditional liquor retailers such as Dan Murphy’s, owned by Endeavour Group, and a range of Coles Group liquor stores such as First Choice.

Mr Bruce said StrangeLove’s Tonic No.8 was the biggest selling product line, but it was relatively even across the range. The company was set up in 2013 amid Byron Bay’s burgeoning “organic food scene”.

“I was having a bit of a mid-life crisis at age 30,” he said. The unique name came about as a reference to people wanting to drink healthier products with lower calories and lower sugar content.

“Originally it was about self-love and taking care of yourself,” he said. It was not a reference to the 1960s black comedy movie Dr Strangelove directed by Stanley Kubrick.

Mr Iervasi said retailers were allocating more shelf space to non-alcoholic premium beverages, while Asahi would also expand StrangeLove’s reach through its existing hospitality venues distribution network.

He declined to comment on the purchase price. “It was an exciting business that we had identified and we had been watching,” he said.

Extra grunt

Asahi Beverages intended to run StrangeLove as a stand-alone business, but use the Asahi distribution clout to bring it to more consumers.

“That helps us maintain the DNA of what it is,” Mr Iervasi said. Asahi already has a large softdrinks business in Australia and is the owner of the Schweppes range.

The Japanese-owned conglomerate bought Carlton & United Breweries for $16 billion in 2020, giving it ownership of beer brands Victoria Bitter, Carlton Draught and Crown Lager. Asahi has also been expanding in other drinks segments, buying Australasian coffee business Allpress in 2021.

CUB in the past few years has bought up several craft beer brands to add extra grunt, as the craft beer segment grows much faster than the mainstream beer category. It acquired Pirate Life, 4Pines and Balter Brewing in quick succession from 2017 to 2019.

StrangeLove’s Mr Bruce said one of the larger competitors in the premium softdrinks and mixers category was Fever-Tree, owned by a British company. “There’s competitive tension there for sure,” he said.

Mr Iervasi said StrangeLove being a home-grown Australian brand should help its penetration in the local market.

The move by nation’s supermarkets to lock in prices on everyday grocery items may be short-lived, with Woolworths and Coles yet to commit to extending their policies beyond the next few months.

Both Coles and Woolworths have moved to reduce and lock in prices on a range of common items this year, in a bid to give shoppers greater certainty over their bills at a time of product shortages and rising cost of living pressure.

Woolworths has launched a price drop program on common grocery items, which is set to end in November, as well as a policy to freeze the price of 200 essentials until the end of the calendar year. Meanwhile, Coles this week decreased the price of 150 items and locked these until the end of January 2023.

With the Reserve Bank’s decision on Tuesday to raise interest rates by 25 basis points to nine-year highs to exert further strain on household budgets, lower income households in particular would need to tighten their belts. Both major supermarkets have acknowledged that their customers are facing a cost of living crunch, and said they are keen to offer deals for budget conscious shoppers.

However, neither would confirm on Tuesday whether these policies will be extended beyond the end of this year.

“Like any of our promotions or value offers, we will continue to work with our supplier partners on whether these offers can be extended, as well as the potential to bring in other new and exciting offers,” a Coles spokesperson said.

Woolworths would not comment on future pricing decisions, but a spokesperson for the supermarket said the business was working on a range of offers to help its customers.

“Customers can also stretch their budget without sacrificing top quality by opting for our Woolworths brand products, which are available across a range of categories at competitive prices,” they said.

Retail analysts are tipping conditions will deteriorate for businesses, which sell their produce to the big supermarkets, as they tackle rising cost pressures and tightening margins. Pressure from these suppliers, could spell an end to product promotions and force the hand of big supermarkets on pushing through price increases.

A survey of 56 consumer goods makers by investment bank Jarden, carried out last month, revealed close to three quarters of the suppliers surveyed wanted to raise prices in 2022.

“This would suggest inflation will continue to accelerate in the coming months,” analyst Ben Gilbert wrote in a note to clients.

Retail expert and QUT professor Gary Mortimer said the prevailing market conditions put the major supermarkets in a difficult spot, as they manage their bottomline while providing relief to their customers.

Delivery price consistency, according to Mortimer, was an important tool for supermarkets during inflationary times, especially as discounting becomes more difficult.

“Consumers are certainly attracted to a supermarket that can hold prices at a consistent level for a period of time, particularly if it’s those core products that people buy,” he said.

Coles’ shares closed the session 1.35 per cent stronger at $16.52, while Woolworths was 1.5 per cent higher to $33.99.

Aldi has opened its first Corner Store concept, in Melbourne’s CBD, complete with a cafe serving barista coffee.

The company says the store is designed for inner-city customers stocking ready-to-eat meals, fresh produce, bakery items such as cinnamon buns, croissants and baguettes, and its discounted Special Buys products. The Corner Store concept was first tested on Sydney’s North Shore, a hybrid model of part convenience store, part supermarket.

Huw Longman, director of Aldi Corner Stores, said the new shop will meet the needs of customers in the surrounding high-density, urban area.

“Shopping habits continue to evolve, and we are seeing a large audience of people who prefer shopping more frequently with a hyper-focus on convenience.”

He said the store meets these needs, taking convenience and creativity and combining it with quality and savings.

To commemorate the store opening, a unique limited-time Lazzio coffee cart pop-up will offer customers coffee for 37 cents. The coffee beans are hand-roasted in Victoria by Black Bag Roasters. Proceeds from the coffee sales will be donated to Aldi’s national charity partner, Camp Quality.

The new store is located at 501 Swanston St.

Pizza Hut Australia has introduced a late-night “surcharge” of 10 per cent for orders made after 10pm as it moves to combat inflation in pizza ingredients, chicken wings and fuel and labour costs.

Chief executive Phil Reed said it was part of enabling its franchise operators to manage escalating costs and a labour shortage in a business which had previously had many international students as delivery drivers.

“Historically, we’ve been very reliant on international students,” he said.

The surcharge applies to the whole order value, and doesn’t apply to orders received before 10pm.

Mr Reed said Pizza Hut has been winning market share as it stepped up digitisation of its stores and shifted to a delivery model. Sales July had been an all-time high of $25 million, and the group after the first eight months of calendar 2022 has achieved an overall same-store sales increase of 12 per cent compared with last year.

“A lot of the growth is organic sales,” he said. Pizza Hut, which has 256 outlets, is the No.2 player in the pizza market in Australia behind Domino’s Pizza Enterprises.

Domino’s Pizza last week said there were early signs that price pressures for key ingredients such as wheat and cheese are starting to flatten, but the company will have to lift some product prices to combat inflation.

Rising raw material costs ate into profit for Domino’s, which has extensive operations in Australia, New Zealand, Europe, Japan and Taiwan. Net profit fell 14 per cent to $158.7 million and its underlying net profit fell 12.5 per cent to $165 million for the year ended June 30.

Pizza Hut’s Mr Reed said his group had been selective in passing on price rises on menu items and had done comprehensive research on “price sensitivities” to keep ensuring that good value remained. He said in the past year input costs to franchise operators had risen 4.2 per cent. Long contracts for items such as cheese meant the group had been largely spared from the commodity price jumps in that ingredient.

Pizza Hut already has a 15 per cent surcharge in place for Sunday deliveries because of higher penalty rates.

Pizza Hut generated sales of $247 million in calendar 2021. Mr Reed said the group is aiming to reach between $275 million and $280 million for the 12 months to the end of December 31.

Domino’s chief executive Don Meij said last week his group hadn’t taken a blanket price rise approach across the board. Many menu items had price increases, but there was also a range of “inflation buster” products to reinforce value options to consumers, and to give them choice.

The price of many of what were originally the $5 range of value pizzas had gone up to $8, but Mr Meij said they now had more ingredients and still offered value.

Mr Reed said Pizza Hut had put through a small price increase on “bundle” offers comprising three large pizzas and three side orders which include the options of garlic bread, soft drink and dessert.

That had increased from $36.95 to $37.95. The late-night surcharge of 10 per cent, which was introduced last month, wouldn’t affect families who ordered earlier in the evening.

Mr Reed said the introduction of new menu items such as chicken wings had been very successful. New pasta dishes have also been introduced this week. Pizza Hut is selling about 2.5 million chicken wings a month.

Mr Reed said Pizza Hut is aiming to expand the number of outlets, but a roll-out plan has been curtailed somewhat in the past few months because of rising construction and building costs and a shortage of trades people.

Pizza Hut, which is a sponsor of the 2022 Supercars championship, has stepped up its advertising and marketing over the past year as the business accelerated. It had a one-off global fillip on Wednesday when many obituaries on former Russian president Mikhail Gorbachev mentioned his television ad for Pizza Hut in 1998. The clip went viral on the internet in the past 36 hours. Mr Reed posted the clip on his LinkedIn account on Thursday.

Pizza Hut Australia is owned by private equity group Allegro Funds.