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Coles customers are flocking to own-brand goods as prices rise and households feeling the pinch of rising interest rates are tightening their grocery budgets.

But relief is in sight, says Coles chief executive Steven Cain, with the pace of price rises at its supermarkets easing since the start of the year.

The supermarket giant revealed on Tuesday it had appointed the first female chief executive in its 109-year history, with the boss of its commercial and express division, Leah Weckert, to take the top job when Cain retires in May.

Weckert, who joined Coles in 2011, had been mooted for the role after being appointed chief executive, commercial and express, last April, making her responsible for business units including grocery, non-food, dairy, fresh produce and meat and deli, as well as Coles’ own brand, its food manufacturing facilities and Coles Express shops.

She said many exciting projects were on the horizon for the grocery giant, which is making major automation investments at its distribution centres along the east coast.

“I’m really looking forward to working with our 130,000 team members to deliver,” she said.

Presenting his last set of results on Tuesday, Cain said own-brand sales jumped 12 per cent in the December quarter and kept increasing. But the business was catering well for households under pressure as well as those who hadn’t yet changed spending habits but may in the coming months struggle after more rate rises.

He said trading conditions were showing the resilience of the supermarket business model.

“Supermarkets are a very resilient business,” he said. “For [some] consumers, they’re thinking hard about what they’re eating. They’re managing their waste, they’re cooking in bulk, and they’re moving out of proprietary brands into own brand.”

“At the other end of the scale, some people haven’t made changes. The changes they might make is to maybe not go to restaurants, they might choose to eat from the supermarkets.”

Cain said prices across the company’s supermarkets had increased to 7.7 per cent in the three months to December, up from 7.1 per cent in the September quarter. Packaged goods and dairy price rises drove that inflation, with more suppliers increasing costs.

But he flagged inflation was expected to cool later this year, with price growth starting to ease in this quarter.

“We expect headline inflation to moderate throughout the remainder of the [June] half, particularly in relation to anything from farms,” he said.

Revenue across Coles rose 3.9 per cent to $20.8 billion for the first half of the 2023 financial year, and profits jumped 11.6 per cent to $616 million.

Supermarkets revenue rose 4.6 per cent to $18.8 billion, though sales in its liquor business were down by 2.4 per cent to $1.9 billion compared with the previous half, which was heavily affected by people staying at home because of the pandemic.

Fresh food inflation moderated from 8.8 per cent in the first quarter to 7.1 per cent in the three months to December, as growing conditions improved for a range of produce.

MST Marquee analyst Craig Woolford said the company’s numbers showed an improvement in sales momentum and higher gross profit margins. “However, the timing of the departure of Steven Cain may influence the share price reaction,” he said.

Shares had declined by 1.6 per cent in early afternoon trade to sit at $18 just after 1.30pm.

Coles and Woolworths have teamed up to explore a recycling solution for RedCycle’s soft plastic stockpile after its collapse last November.

An investigation by Sydney Morning Herald revealed that the soft-plastic recycling scheme left millions of bags and soft-plastic items “secretly stockpiled” in warehouses for months without being recycled.

Although RedCycle hasn’t responded yet, the supermarkets have extended an offer to safely store the collected materials, in accordance with necessary safety requirements of relevant state environmental protection agencies (EPAs), until they are processed.

Brad Banducci, Woolworths Group CEO, said: “We were very disappointed to learn that RedCycle hasn’t been recycling the soft plastics they collected from our stores, and we are working to make it right.

“Coles and Woolworths have taken this step to provide reassurance to the public that the soft plastics they took the effort to deposit in RedCycle’s bins won’t be unnecessarily sent to landfill.”

Matt Swindells, Coles’ chief operations and sustainability officer said the retailer is “deeply disappointed by the unrecycled stockpiles” as collectively Coles and Woolworths have paid more than $20 million to RedCycle over the last decade to recycle plastics.

A multi-million dollar Soft Plastics Recycling Contribution Fund, provided by both Coles and Woolworths, will assist in the storage and management of the stockpiled material.

Australian Retailers Association CEO, Paul Zahra, commended the move and added: “The commitment by two of the country’s biggest grocery competitors for a worthy cause is a fantastic demonstration of leadership and the success that can be attained from collaboration around sustainability efforts.”

In a LinkedIn post, the CEO & founder of eco startup Single Use Ain’t Sexy, said the situation is a “further reminder of how important it is that we use less plastic in the first place and invest in the circular economy, rather than relying on recycling.”

Incoming Coles chief executive Leah Weckert says fresh food price rises will begin to moderate this year, but the cost of other products will continue to increase, with shoppers already switching to its cheaper home brand for staple goods.

Ms Weckert, an Adelaide native who has worked at the company since 2011, will become the first woman to run a major supermarket chain in the country after Coles announced she would succeed Steven Cain on May 1.

Her appointment came as Coles’ net profit from continuing operations rose 11.4 per cent to $616 million for the six months to December 31, while revenues gained 4 per cent to $20.59 billion. Sales rose to $20.02 billion, up 3.9 per cent, once its Express store business, divested last year, was removed.

The company said inflation had hit 7.7 per cent for its products in the three months to December 31 – compared with 7.1 per cent one quarter earlier – and 8.4 per cent excluding tobacco and fresh foods.

Ms Weckert said Coles had seen strong growth “in areas like pasta and rice and oil where we have seen home-brand trade particularly strongly and shoppers trade out of proprietary (brands). That’s probably the key ones that we’re seeing that are indicating that some customers are definitely moving (down),” she said.

Some shoppers are also trading to cheaper cuts of meat from more expensive cuts like steak, she added.

The number of price-rise requests from suppliers appeared to have peaked in the second quarter, Ms Weckert said, warning pressure remained in some categories like dairy, given higher farmgate prices for milk. Others, like tomatoes and broccoli, had seen prices decline.

“We are expecting pressures to remain, but we are expecting them to start to moderate. The pressures we think will continue to stay are in areas like dairy, energy and wages, but we would expect some moderation starting to come through in areas like freight, wheat and packaging,” she said.

Suppliers such as fresh fruit grower Costa Group confirmed on Tuesday input cost inflation pressures were expected to moderate this calendar year, as normal growing conditions returned.

Mr Cain said he expected inflation to moderate, however, in the six months to June 30. Volume growth returned to modestly positive from mid-January, he said, and customers would increasingly rein in spending at cafes and restaurants to the benefit of the supermarket business.

Over the past five years Mr Cain has steered the nation’s second-largest supermarket chain through its demerger and the COVID-19 pandemic.

Mr Cain, who turns 60 next year, told The Australian Financial Review he promised himself he would be gone by this milestone.

“It’s been 35 years in the making, and even five years as it was – was no ordinary five years either,” he said, noting bushfires, extreme flooding disrupting supply chains and the global impacts of the pandemic.

Eventually, Mr Cain looks forward to taking on some non-executive roles and spending time with family. He will stay on board for a handover period.

Ms Weckert has a background in engineering, science and business, having spent her early career at consulting firm McKinsey & Co, and earned an MBA from Harvard as part of a McKinsey fellowship program.

The 43-year-old mother of two grew up in retail: her father owned a grain and fodder store where she would help out mixing up the bird seed and doing chores. She later worked as a pharmacy assistant, but always harboured dreams of being a CEO. Coles chairman James Graham said her appointment was an important moment in the company’s 100-plus-year history, describing Ms Weckert as a “standout in a very busy business”.

Supermarket gross margins rose 0.43 percentage points largely as a result of reduced COVID-19 costs in the first half, but the cost of doing business also climbed 0.15 percentage points. Coles, like all retailers, faced higher wages bills and supply chain costs over the December half as well as investment in e-commerce. Earnings before interest and tax rose 10.6 per cent to $991 million. Coles’ capital expenditure program over the next two years is forecast to be more than $2.7 billion, with the biggest projects being distribution centres and Ocado customer fulfilment centres.

As it expands Ocado, Coles is hoping to increase the average basket size of shoppers, create higher supplier returns, and improve online profit margins. Coles expects the project to cost about $330 million.

In January, the first Witron automated distribution centre – the largest in the southern hemisphere – in Redbank, Queensland, began receiving inbound deliveries. Store deliveries are expected to start in the fourth quarter.

Mr Cain said he was “highly confident” in handing over these major projects to Ms Weckert who has been at his side in the rollout and “knows just as much as I do”.

Barrenjoey Capital analyst Tom Kierath said Ms Weckert was a natural successor to Mr Cain, adding that Coles’ leadership planning was clearer than its larger rival, Woolworths.

“When she was CFO she was all over the numbers and could articulate the strategy. She has a financial background and has done the operating thing as well, so it’s a good combination,” he said. “For investors, Coles is making this huge investment program, they are worried about returns on that investment. Leah has been in there so the fact that she will be CEO to deliver on this over the next few years is a good outcome.”

Mr Kierath added that the half-year sales growth was intact, the cost base was being well managed, and it was apparent that Coles was not suffering against the backdrop of the weaker macro environment.

The Coles board declared a 36¢ dividend, from 33¢ a share a year ago and payable on March 30. Coles shares fell 0.9 per cent to $18.13.

Vitamin supplements prices are rising and could spike further due to inflation and higher costs for key ingredients such as fish oil.

Production costs increased in the sector over the past year, and raw ingredient prices have also jumped, including almost a two-fold rise in the price of fish oil exported from South America since 2020.

Alastair Symington, chief executive of major vitamin supplements maker Blackmores, said the price of raw materials for its products had risen between 15 and 20 per cent over the past six months.

A spike in costs prompted the ASX-listed company to increase prices across some of its products over the past six months, particularly products that relate to eye care, immunity and energy.

Prices increased between 5 per cent and 6 per cent in Australia and New Zealand, and between 7 per cent and 8 per cent in international markets.

Symington said the company would consider further increases in coming months because of continued inflationary pressures.

“It’s something that we’re looking at ... but it is not something that we would take unilaterally across our range, it would be selective,” he said.

He said some products could see additional price increases of more than 5 per cent if materials prices remained elevated. While global supply chains were stabilising, commonly used ingredients like fish oil have spiked in price over the past year, putting pressure on supplement makers.

“In the last six months, raw material commodity prices [have seen a] 15-20 per cent increase,” Symington said.

“We haven’t put through price rises that 100 per cent cover all of that.”

Blackmores is not alone in warning on increased costs for the consumer. Several other ASX-listed companies told investors this month that prices on a wide range of products, from dairy goods to kitchen appliances, had gone up to offset inflation.

Cheesemaker Bega said last week that it was confident the days of steep dairy price increases had come to an end – but flagged that more price increases in line with “normal inflationary pressures” would be seen this year.

Major supermarkets Coles and Woolworths were also optimistic that overall grocery price inflation would moderate this year, but both confirmed price growth had accelerated faster in the December quarter than in the three months to September last year.

Other consumer goods brands also flagged price increases in the six months to December: coffee machine maker Breville reported that it pushed through “specific price increases” on certain products, while discount retailer The Reject Shop said it was left with no choice but to raise selling prices in a “targeted way”.

Analysts expect inflationary pressures to moderate later this year, but some predict further price jumps, particularly in food.

“Channel checks with suppliers, assessment of global fast-moving consumer goods (FMCG) outlook statements and analysis of soft commodity prices point to significant food inflation over the coming two to three years,” Barrenjoey consumer analyst Tom Kierath said in a note to clients last week.

American fast food chain Wendy’s plans to roll out “hundreds” of restaurants in Australia and will consider offering franchisees incentives such as royalty abatement and co-investment to help speed up its quest for a lucrative share in the market.

Wendy’s president, international and chief development officer Abigail Pringle will this week host virtual talks with prospective master franchisee holders in Australia about different models that could be used, including the purchase of land for new restaurants.

“We believe Australia is a lucrative market for long-term growth. We think that the Australian market could be hundreds of restaurants,” Ms Pringle told The Australian Financial Review from Wendy’s headquarters in Columbus, Ohio.

“We have to be careful with what that timeline is exactly because we want to pick the right partner. And that takes a little bit of time. But we think that we can have hundreds of restaurants in the market over time.”

The Australian quick service market is expected to grow 32 per cent over the next five years to $8.7 billion, according to Euromonitor data, and Wendy’s wants a bite of that after having success in the UK market.

The $US4.8 billion ($7 billion) franchise chain, which differentiates itself from the likes of McDonald’s and Hungry Jack’s with a “made-to-order only” policy and “no heating lamps”, says it wants to increase its global restaurant numbers to 8500 by 2025 from 7000 now.

‘Built to suit’

It is a big ask, but Ms Pringle, who has been with Wendy’s for 21 years and started eating the burgers when she was a girl growing up on a beef farm in Maine, says it is achievable, especially if the company uses its own balance sheet to buy land and build restaurants to speed up new franchise roll-out.

“We have a very active new program that we launched last February, called ‘Own Your Opportunity’, where we are doing ‘built to suit’ to help us build out the US market.

“We are putting money on our balance sheet, we are finding the land, we are designing the building, building the building and handing you the keys.

“We haven’t yet said that we’re going to do that in Australia, but all I would share with you is we are actively doing that in the US and in Canada. And we may expand that. We are always open to looking at how a strategy that works in one market might work in another.”

So far, Ms Pringle is focused on getting the right partner in Australia. That could mean a listed group such as a Collins Foods, which operates KFC and Taco Bell, the Retail Food Group, which operates Donut King. It could also mean a family office getting involved.

“When we look at Australia, we look at what kind of franchise model do we want to use. And right now, our plan is to have a master franchise model in Australia,” Ms Pringle said.

“We’re looking for very specific candidates that are well capitalised, that are focusing on creating great teams and culture that might also have some infrastructure for other businesses that they may own.

“Private equity that wants to come in for five years, and then turn it – that we’re not interested in. But we are interested in folks that have patient capital that want to build a business over the long term and work with us together to grow the brand.

“We are absolutely open to private investors; there may be family offices that are interested – that’s something that is becoming more and more prominent,” she said.

Determining the master franchise partner would come hand in hand with the type of model used.

“We work with candidates to understand what they’re bringing to the table around their business and their know-how and their financial wherewithal, and then we work with them to understand what we think about things like incentives. For example, we often invest in new franchisees, perhaps with royalty abatement, or perhaps marketing investment.”

The average gross annual sales for a franchised Wendy’s restaurant in the US was $US1.75 million in 2020, with 4 per cent revenue royalty fees.

Getting the franchisee right will be one thing, but judging the customer appeal and loyalty is another.

Australians arguably have fresher fast food than Americans, and living up to standards could be tough.

In 2021, Wendy’s built a pop-up restaurant in Sydney to see what Australian consumers thought of the brand.

“That was a very big success. We had great fans, people loved our signature items. We sold our Dave’s Single [burger] and our signature frosty dessert,” Ms Pringle said.

“That really just gave us more encouragement that Australia was a market where customers want us to come that we’d have brand fans.”

Wendy’s also does fresh salads and there is a promise to use only local ingredients.

“We will have Australian ingredients. That’s an important thing – to really work within the market. And that’s what we believe can be done in Australia.”

Ms Pringle, who grew up on a beef cattle farm in the north-eastern state of Maine, has been eating Wendy’s all her life and says the quality of beef is crucial to a good burger.

“My parents were physicians and working farmers and my dad would bring me to the Wendy’s in Portland, Maine, because he said it always had the freshest, highest-quality beef and that’s where you get a great hamburger.

“That’s a true story. That’s how I grew up and I’ve been at Wendy’s now 21 years now.” She admits her favourite meal now is the spicy chicken sandwich followed by Dave’s Double.

While Ms Pringle might be biased, one of the world’s richest people and a fast food aficionado, Warren Buffett, has also given Wendy’s a tick.

“I go to Kentucky Fried. I go to McDonald’s. I go the Burger King. I occasionally go to Wendy’s,” Buffett famously told CNBC’s Squawk Box.

Within a few years Australians will be able to decide for themselves.

It is hard to imagine a chief executive closer to the front line of the rising prices of energy, petrol, wages, raw materials and basic household goods than SPC’s Robert Giles.

The 100-plus-year-old Shepparton-based food processor – sold by Coca-Cola Amatil for $40 million in 2018 after a $22 million state government bailout in 2014 – pumps out more than 100 million cans of food each year, processing apples, apricots, peaches, pears, plums and tomatoes.

Giles’ supply chain – largely drawn from the Goulburn-Murray food bowl region on the Victorian border with New South Wales – is vulnerable to everything from floods to energy prices, wage claims, and steel and petrol prices.

Giles says the 10 to 20 per cent rise in household staples, such as SPC baked beans and spaghetti, Ardmona canned tomatoes and Goulburn Valley fruits, that SPC pushed through last year has stabilised, but warns input prices are yet to drop.

“We are seeing the heat of the increases dissipate. They are not coming back down, so it’s like it has normalised at a new high,” Giles tells BOSS from the group’s headquarters in Melbourne.

The SPC CEO is articulating the very concern which has Reserve Bank of Australia governor Dr Philip Lowe sweating.

“If inflation does become ingrained in people’s expectations, bringing it back down again is very costly,” Lowe told a parliamentary hearing last week.

It is not surprising that Giles, a 55-year-old father of four, is close to the ground in terms of what is going on. The CEO dropped out of high school after year 11 and started working the floors at Coles in Hobart, Tasmania.

“I went straight out of high school, year 11,” he says. “I’m a big advocate that your year 12 ATAR score doesn’t define you,” he says.

“I later on went and did my bachelor of business and accounting, and masters of marketing.

“I still look back and think [working at Coles] gave me a really strong work ethic [and] a consumer focus, but also [an] understanding [of] the process. Even though I was young, I learnt a lot of lessons about managing teams and labour utilisation. It gave me a real-life university of sorts.”

Giles moved from Coles to Nestle as a sales representative, before switching to Simplot, the company behind food brands Birds Eye, Edgell and John West, for 22 years, where he worked with customers such as McDonald’s, KFC and Woolworths.

Given his hands-on experience, it is hardly surprising Giles can reel off the rise in his input costs with more precision than most bean counters.

“Tomatoes have increased dramatically, over 30 per cent in a year, mainly due to fertiliser input costs. Peaches have had a 13 per cent price increase. The rest [have experienced] more around CPI increases,” Giles says in his strikingly open and unguarded style.

“Pasta for our spaghetti, which is locally sourced, has been affected by inflation. We just signed off new sugar contracts which are on the rise because of [last year’s] floods.”

Giles says the SPC factory in Emu Plains, NSW, which processes frozen meals, has been hit by high energy prices, as well as higher prices for chicken, which the country’s largest chicken producer, Inghams Group, blames on the need to recover the rising cost of feed, packaging and freight.

The high prices of petrol and steel are other big input costs for SPC.

“Diesel [petrol] remains stubbornly high. The steel can our product goes into remains high.”

Another major input is human capital. SPC employs about 500 workers, a figure boosted by about 400 during the picking season. Giles has just had their enterprise bargaining agreement approved by Fair Work after many months of negotiation.

“We have agreed on an average 3.5 [per cent increase] over the next three years,” Giles says.

The rise is slightly higher than the 3.3 per cent increase in wages across the economy last year – which was the fastest increase in a decade.

Giles also faces the challenge of an ageing workforce. The average age is in the early 50s.

SPC’s three factories, including one in Thailand, are also big consumers of energy and face a large rise in costs once they come off their fixed price contracts at the end of the year.

”We are working on projects to put solar on our roofs, but that will only give us about 25 per cent of our energy requirements,” he says. “We’re also looking at hydrogen. There’s a study being done by Goulburn Valley Water, but that is some years off.”

As part of SPC’s efforts to become more environmentally responsible, Giles is also attending a Climate Leadership and Jobs Summit in Shepparton this week, convened by the local Nationals MP Sam Birrell, which aims to help drive the Goulburn-Murray region to its net-zero emissions target by 2050.

But Giles concedes that despite the goodwill, the major manufacturing hub – which includes players such as SPC, Unilever, Bega Cheese, Tatura Milk, Campbells Soups, Freedom Foods and Visy – faces a real challenge to ween itself off the reliable coal and gas plants that support such energy-intensive manufacturing.

Despite the energy and inflation challenges, Giles says SPC’s turnaround mission is largely complete.

“We were unprofitable under Coke, but have been profitable every year since,” he says.

“We had a real focus on keeping our cost inputs down, getting our labour and wages under control, some restructures to take labour costs out of the business and then getting the right contracts for volume.”

The company is now embarking on an ambitious growth strategy to increase annual revenue from $300 million to more than $1 billion within three years.

The new names on SPC’s share registry, including The Australian Meat Industry Superannuation Trust and the family office of Peregrine Corporation managing director Khalil (Charlie) Shahin, who joined as part of last year’s $45 million capital raising, are backing the growth plans for the business which started more than 100 years ago as a co-op owned by farmers.

After SPC and Ardmona merged during the ’90s, the enlarged group was bought by Coca-Cola Amatil in 2005, but was largely neglected and sold to the Sydney-based private equity firms Perma Funds Management and The Eights in 2019, which remain the majority owners.

“It’s a multi-focused approach,” Giles says of the expansion plans.

The strategy is to build SPC as a global food company based in Australia, with a focus on driving into new markets. The company entered the New Zealand market last year, has moved into Canada and South Korea, and will launch in Singapore, where it has built an international office, in April.

The plan also includes diving into the beverages category, which was restricted under Coca-Cola ownership.

“Under our new ownership, beverages is absolutely a category we want as part of our strategy,” he says.

“We have always produced beverages. We are one of the major juice manufacturers in the country.”

Giles also has the investors’ purse out to aggressively make acquisitions of companies that fit the business model and help the group expand into Europe.

“That will help us get to the billion [dollars revenue growth]. It’s organic – it’s new markets and it’s acquisitions, all at once, that will get us from $300 million to north of a billion.”

Health supplements company Blackmores has reported a marginal slump in sales after demand softened overseas.

For the six months to December 31, group sales fell 1.6 per cent to $338 million offset by a decline in international sales. Statutory tax-paid profit grew 19.6 per cent to $24.3 million.

In Australia and New Zealand, revenue rose 3.9 per cent to $150.8 million with the Blackmores brand maintaining its top spot in the markets.

To offset inflationary pressures, the company implemented supply chain cost-saving measures and average price increases of 5 per cent to 6 per cent.

Sales in China rose 6.1 per cent to $93.7 million while cross-border e-commerce channel sales stabilised. The company credits the Double 11 e-commerce festival as a “key contributor” to sales in this segment.

Blackmores’ international business was “lapped” by significant Covid-related surges in the prior corresponding period and revenue declines in Indonesia. Overseas sales fell 15.1 per cent to $93.5 million however market share and brand strength continued to increase.

Group CEO Alistair Symington said the company’s teams continued to focus on improved customer service levels and new product and brand innovation which drove market share and distribution gains across Blackmores’ core geographies.

The company says it is on track to deliver $55 million of gross annualised savings by the end of this financial year.

“Productivity isn’t everything, but in the long run, it’s almost everything” – Paul Krugman, American economist. 

This quote sums it up well, if you want to be successful in the long run, you must be productive to be competitive. To be productive you must be focused and have a culture of continuous improvement.

This year presents us with some interesting challenges. In the face of a tight labour market, inflationary cost pressures, the desire for digital transformation and the importance of tangible ESG commitments many organisations are grappling with how to drive sustainable productivity in their operations. 

The last few years have proven that businesses that have focused on their people, strategically invested in technology advancements, and targeted sustainable operations have been more competitive and won market share.

There are some common themes or strategies that are being deployed by these successful organisations. Let’s explore the Top three we are seeing drive sustainable productivity in FMCG operations.

Operational excellence

As mentioned above, to be productive you must be focused and have a culture of continuous improvement. This culture is all about your people and your leadership. Driving sustainable operational productivity requires an understanding of the support and training your leaders and your team need to get to best practice levels of performance. You then need to take them with you, coach, train and develop the required standards to remove waste and embed sustained practices that consistently deliver performance efficiencies. Top performing organisations use lean methodologies to unlock and sustain operational excellence.

Automation of tasks

Technology is both a disruptor and an enabler. Digital transformation done well creates significant advantages, done poorly and you can go backwards.  It is important to recognise that it is not easy to understand and identify what technologies to invest in and when to do so – spending time upfront on a digital roadmap for operations is critical to ensure alignment and engagement for the journey ahead. Again, taking your people with you is fundamental, adoption of new ways of working is the foundation to sustained change. Automation of tasks – process, data, systems, or robotics will boost your productivity, build resilience, and focus your people on more value-add customer facing activity.  

The pursuit of sustainable success 

Operations is where the rubber hits the road for an organisation’s sustainability agenda. Being more productive means more efficient use of resources and results in less waste – this is a positive impact on sustainability that must be managed, measured, celebrated and continuously improved. But it is more than this: operations is where goods and services are transformed and moved through physical networks and infrastructure from suppliers to customers. To make real change, you need to ‘operationalise’ sustainability. Deciding where to start requires deep operational expertise to identify how to make effective interventions, measure performance, set targets and deliver improvements through your supply chain from supplier to customer. To truly drive sustainable success, you need to measure the whole picture and prioritise levers and recognise that reducing impact is all about operations.

The best time to start the journey is now, the gains can be significant and in the face of sustained challenges, driving sustainable productivity is fundamental to remaining competitive.   

Fable Food Co, an Australian food company that produces ‘meaty’ food made from mushrooms, has raised US$8.5 million in a Series A funding round.

Singapore-based global venture capital firm K3 Ventures is a leading investor alongside Greg Creed, former Global CEO of Yum! Brands (parent company of KFC, Pizza Hut, Taco Bell brands); Professor Peter Singer, Professor of Bioethics at Princeton University known for being one of the intellectual founders of the modern animal rights movement; and Frantz Braha and Adrien Desbaillets, the founders of Singapore based SaladStop!.

Existing investors Blackbird, AgFunder and Aera VC also participated in the round, along with vegan television personality and podcaster Osher Günsberg and his wife Audrey Griffen.

Fable launched in December 2019 and is renowned for having broken new ground in the meat alternative market with its mushroom-based meat products that are clean label, minimally processed and made with all-natural, plant-based ingredients.

The company previously had an A$6.5 million seed funding round in August 2021 and brought its meaty mushroom burger patty to market in partnership with Grill’d. It has since expanded its footprint in Australia following up with nationwide launches at Guzman y Gomez and The Coffee Club.

Last year saw Fable enter the UK market with burger chain Honest Burgers, meal delivery companies Gousto and Planty, and the UK’s first organic supermarket chain Planet Organic. The brand also launched into the United States with plant-based quick service restaurant chain Beatnic, New Zealand with Hell Pizza, and Singapore with SaladStop.

Fable also entered into new brand partnerships in North America, with the launch of its meaty pulled mushrooms into plant-based New York-based meal delivery service CookUnity, cult plant-based restaurant chain The Butcher’s Daughter, as well as Canadian cooked meal delivery service Ethey.

Fable will use the funding to accelerate research and development and the launch of new meaty mushroom products to market and accelerate the company’s growth and expansion in international markets and talent acquisition, with a focus on North America, the United Kingdom and Singapore.

“Thanks to the backing and support of K3 Ventures and all of our investors, we will be able to accelerate bringing our delicious, clean label, and sustainable meaty mushroom products to every market in the world,” Michael Fox, Co-founder and CEO of Fable, said.

“We want to inspire the world to make more sustainable food choices,” Fox added. “We believe that eating more delicious, meaty food made from mushrooms will help the world reduce global meat consumption – without compromising on taste, texture, or experience – and this is how we will be able to achieve a more sustainable food system.”

Infant formula maker A2 Milk’s marketing push in China has helped it post a double-digit jump in profit and allowed the company to ride out the harsh zero-COVID lockdowns imposed on its most lucrative market.

A2 on Monday posted a 22.1 per cent jump in net profits after tax to $68.5 million for the first half of fiscal 2023, with earnings for the period rising to $107.8 million.

Its results were largely driven by a 43.5 per cent growth in China label sales. However, the overall Chinese market shrank by 12.5 per cent during the half, due to declining birth rates in the country.

A2’s shareholders weren’t impressed sending the company’s share price down 8.6 per cent to $6.49 at the close of Monday’s session.

David Bortolussi, the chief executive of the infant formula maker, said while a range of marketing and distribution efforts had driven greater brand recognition of A2’s brand within China and lifted sales, the daigou (reseller) channel of its English-label business suffered 39.5 per cent because of China’s harsh zero-COVID lockdowns.

“No doubt [the lockdowns] had a significant impact,” Bortolussi told this masthead.

He also signalled a reassessment of the role played by the daigou channel – a network of shopping agents who buy things for residents on mainland China – in driving A2’s future growth.

The daigou channel was crippled at the onset of the pandemic, which cut off international travel and stopped resellers from bringing infant formula product in and out of the country. In August 2022, the dairy giant had signalled a renewed focus on building the channel back to its heyday, but the recent lockdowns have forced yet another rethink.

“It was starting to show signs of stabilisation, but it did decline,” Bortolussi said. The company has ramped up engagement with daigou resellers and has created a dedicated marketing team.

“We’re absolutely fully engaged in supporting [them] and it’s still an important channel for us. It’s just at a market level for the reasons we’ve discussed, there’s a lot of change and shift going on ... We’re considering ways that we can kind of change the model for them as well.”

China is the Auckland-headquartered company’s most important market, representing nearly half of A2’s total revenue. However, birth rates in China have been declining for several years, meaning the business will have to fight for a greater slice of a shrinking infant formula pie.

“It’s really a share game because there’s no volume growth in the market,” Bortolussi said. A2 Milk holds just 5 per cent of the China market.

“When you look at where we play in the market and how well we are positioned with that brand and execution, I think there is still significant opportunity for us to grow over time. But in essence, it’s a share game ... because the market is not growing.”

E&P Financial retail analyst Phillip Kimber said that A2 Milk’s business turnaround was “on track” after swinging back to profit late last year, but said investors expected more from the company.

“Given a strong share price and only modest consensus upgrades – we expect the share price to be flat (maybe down little) post the result,” he wrote in a note to clients.