News

15 Nov, 2022
COP27: Major food firms detail plans to eliminate deforestation by 2025
Inside FMCG

The world’s largest food trading companies detailed a plan on Monday to eliminate deforestation from their supply chains for soy, beef and palm oil by 2025, a step seen as essential to averting catastrophic climate change.

Destruction of forests – like the Amazon rainforest to make way for farm fields and ranches or Indonesian jungle for palm oil – emits huge amounts of greenhouse gas each year, helping to drive climate change.

The roadmap, launched at the COP27 United Nations climate summit in Egypt, comprises 14 firms including Cargill, Bunge, Archer Daniels Midland, Louis Dreyfus Company, Brazil’s JBS and China’s COFCO International.

The firms said the plan helps put the world on track to limit global warming to an increase of 1.5°C above pre-industrial levels, the threshold beyond which scientists say climate change risks spinning out of control.

The roadmap “represents a significant sector milestone in eliminating commodity-driven deforestation in line with a 1.5°C pathway,” COFCO International CEO Wei Dong said in a statement.

Many of the firms had previously committed to eliminating deforestation by 2025, with the plan establishing milestones along the way that vary slightly by sector.

The environmental advocacy group Mighty Earth CEO Glenn Hurowitz said that 2025 was not soon enough, calling for all deforestation to be ended immediately.

“The roadmap’s insistence that individual companies undertake best efforts to establish individual cut-off dates for deforestation no later than 2025 means the bulldozers will keep running and the destruction will continue,” he said in a statement.

The industry has a spotty record of meeting past deforestation commitments.

In 2010, hundreds of the world’s largest consumer brands as part of the Consumer Goods Forum pledged to reach “net zero” deforestation by 2020. But as the deadline approached, Cargill said that the food industry would fail to meet the goal.

The plan also calls on firms to establish targets for reducing their greenhouse gas emissions and to begin disclosing their emissions from land use change in 2024.

8 Nov, 2022
Fresh pet food subscription concept Lyka wins $30m investment
Inside FMCG

DTC pet wellness start-up, Lyka Pet Food, has raised $30 million in Series B funding. 

Led by Itai Tsidon – a lead investor in other startups such as Gcash, Frame.io, and Forter – the funds will be used for research and development, consumer education, and building manufacturing and distribution capabilities.

Investors include Craig Blair, (founding chairman of Pet Circle) and Paul Wilson (founder and former CEO of Petbarn).

“Lyka’s purpose-driven and innovative ethos are more than just an interesting idea, thousands of real-life examples of positive impact from their customers is a testament to that!”

Established in 2018 by CEO Anna Podilsky (pictured above) and integrative veterinarian Dr Matthew Muir, Lyka aims to deliver freshly prepared, researched-backed, wholefood pet nutrition direct to consumers nationwide.

The startup said its unique algorithm offers customers the opportunity to tailor meal plans specific to their dog’s age, breed, weight, activity level and sensitivities, with the pre-portioned, ready-to-serve meals delivered directly to customers. 

Podolsky said she was thrilled with the substantial backing, noting the capital injection will shine a bright light on the pet-care sector.

“Here at Lyka, dogs are much more than family and deserve to eat like it. There’s a reason why we feel better on a fresh food diet and the same goes for dogs”, she added.

8 Nov, 2022
The company moving to a four-day week by cutting meetings, emails
Australian Financial Review

The maker of Dove toiletries and Streets ice creams will allow 500 Australian employees to work shorter weeks after a pilot found staff could be just as productive in four days as five by removing low-value tasks such as meetings and emails.

Unilever Australia will test a four-day workweek for at least 12 months from November 14, and will base its trial on the 100:80:100 model, whereby employees retain 100 per cent of their pay but reduce their hours to 80 per cent, provided they maintain 100 per cent productivity.

All staff except for factory employees covered by existing enterprise bargaining agreements will take part in the trial, which comes after Unilever achieved good results with a four-day workweek experiment in New Zealand.

University of Technology Business School monitored the trial across the ditch. Based on three company-wide online surveys and 57 in-depth interviews between December 1, 2020 and June 30, 2022, it found that staff were less stressed, more productive and more committed to the organisation after the introduction of reduced working hours.

Staff took 34 per cent fewer sick days in 2021 than in 2020. And across the full 18-month trial period, stress fell by 33 per cent, work-life conflicts dropped by 67 per cent, and feelings of strength and vigour at work increased by 15 per cent.

The experiment, which covered about 80 employees in New Zealand and has since been extended, also allowed for strong results against the company’s business objectives. Targets for overheads, market-winning share and sales and revenue growth were either met or exceeded.

The vast majority of employees embraced the change, with 72.8 per cent saying they were frequently sticking to reduced hours, and 88.5 per cent describing the trial as a positive experience.

Fewer emails, fewer meetings

Anish Singh, the head of HR for Unilever Australia and New Zealand, told The Australian Financial Review that moving to a four-day workweek was about giving staff greater autonomy as well as the opportunity to try different ways of working.

He said he hoped a shorter workweek in Australia would lead to happier and healthier employees at the same level of productivity – or even higher.

Key to the trial’s success in New Zealand, he said, was prioritising some tasks while eliminating those that added little or no value.

As a result, the company reduced the average time employees spent in meetings by 3½ hours per week, slashed the number of emails sent and adopted technology such as Microsoft Teams for video calls.

Bronwen Dalton, head of the department of management at UTS Business School, said one of the two big takeaways from the New Zealand trial was that companies had to change the way they worked for a four-day week to be successful.

“[You need] fewer emails, fewer meetings, less time on the phone and other distractions, and [you need to adopt] a practice of deeper work,” she said.

The second major takeaway was that companies should not make a four-day workweek compulsory for all staff, as this takes away the extra autonomy typically given to employees when moving to a work practice focused on outcomes rather than the number of hours worked.

Asked whether the study’s findings were reliable given they were based on surveys, Professor Dalton said the research would be subject to a peer review and used well-established academic techniques, known as “verifiable academic instruments”, to compensate for biases.

She added that employees were likely honest about their experiences, as the surveys were conducted by UTS rather than Unilever, and the university made the data it collected anonymous before sharing it with the company.

A six-month pilot program run by 4 Day Week Global that covered 73 organisations in Britain has also shown positive results for the four-day workweek.

At the UK program’s halfway point, companies were sent questionnaires to capture their experience. Of the 41 companies that responded, 88 per cent said the shorter week was working “well”; 46 per cent said productivity had stayed the same; 34 per cent said it had “improved slightly”; and 15 per cent said it had “improved significantly”.

8 Nov, 2022
The a2 Milk Co gains breakthrough US market access

The a2 Milk Company has been granted temporary access to sell its a2 Platinum infant formula in the United States as the country continues to face a significant shortage of baby formula after a contamination scare.

The US government has been dealing with a major crisis since February after Abbott Nutrition’s plant was closed following a contamination scare.

While multiple companies including smaller rival Bubs Australia was given special market access to help with the shortage, a2 Milk had missed out. In August, it received a letter from the US Food and Drug Administration (FDA) saying the regulator was deferring further review of its request to ship tins.

A2 Milk said on Thursday it now expects gross margins to be lower than average, and distribution costs to be higher due to potential air freight and rework costs in the near term, and incremental marketing and trade investment to enter the category.

Overnight, the FDA said a2 Milk will be able to import its a2 Platinum 0-6 months and 6 to 12-months ranges. Danone (Ireland) will also be able to import ​its Aptamil Stages 1 and 2 formulas.

“Both products will be sold at major US retail outlets,” the FDA said on its website.

The FDA added that the grant of special access follows a review of information provided “pertaining to the nutritional adequacy and safety, including microbial testing, labelling and additional information about facility production and inspection.”

The positive news sent the Kiwi company’s share price soaring on Thursday, gaining 29¢, or 5.5 per cent, to $5.56 each in afternoon trade on the ASX. It has been clawing back some ground since dipping just below $4 each in May.

The crisis continues in the US – while shipments of formula have landed, US media reports stores remain unevenly stocked, and officials in charge of the response blame hoarding, supply chain bottlenecks and manufacturers making fewer varieties.

A2 Milk chief executive David Bortolussi said on Thursday that the company has approval through to January 6, 2023 to import tins to the US.

The company can also supply Stage 3 toddler product in addition to Stages 1 and 2, which does not require enforcement discretion.

Mr Bortolussi added that the product to be supplied to the US has the same formulation as a2 Platinum but has different scoops, mixing instructions and labelling requirements to meet the FDA requirements.

This product is not currently available and will need to be manufactured as soon as possible, he said.

While the US represents a significant opportunity to develop the a2 Milk brand in the formula category over the long term, Mr Bortolussi said it is early days.

“In the near-term, and prior to confirming distribution plans, sales during FY23 are expected to be up to 1 million cans all within 2H23, assuming enforcement discretion remains in place throughout the period,” he said.

“Actual sales will ultimately depend on customer demand, consumer offtake, supply shortages and market conditions at the time.”

A2 Milk will provide an update on US distribution gains and sales outlook when it presents its first half results early next year.

8 Nov, 2022
Woolies ‘cautiously optimistic’ for Christmas even as food prices surge
SOURCE:
The Age
The Age

Woolworths boss Brad Banducci says shoppers have returned to doing their weekly grocery shop on weekends, but must now face up to paying more as inflation makes itself felt in every aisle.

The supermarket giant revealed on Thursday that food prices across its Australian supermarkets rose 7.3 per cent in the September quarter, with fresh produce spiking even more as inclement weather and supply chain pressures hit fruit and vegetable producers.

“In the last month or so we’ve started to see Sundays become our major shopping day - which means customers have got far more routine and habit [than during COVID],” Banducci said.

But some of these shoppers have started to make tough choices about what goes in their trolleys, with signs people are trading fresh produce for frozen food, or moving to canned goods and cheaper home brand items.

The days of the $6 iceberg lettuce might be over, but the supermarket chain is still seeing price rises from producers and supply challenges across its fresh food range, Banducci added.

Challenges with corn and potato crops were also leading to issues with the supply of frozen products, and there have been delays to in-season fruits coming into stores at good prices, meaning consumers have to wait longer than usual for mangoes and cherries.

Banducci made his comments after Woolworths reported a 1.8 per cent rise in group sales to $16.3 billion for the 14 weeks to October 2 - the first quarter of its financial year. But Australian food sales weakened by 0.5 per cent compared with this period last year, when more shoppers were stuck at home due to the pandemic lockdowns.

Inflation continued to accelerate across the quarter, with the average price of food up 7.3 per cent in Australia, and 5.3 per cent higher in New Zealand.

The company did not specify the exact jump in fruit and vegetable prices during the quarter, but said there had been “double-digit” increases in this category.

Last week, Woolworths’s rival Coles confirmed it had seen inflation of 7.1 per cent across its supermarkets, with prices for fresh food up 8.8 per cent.

Woolworths’-owned discount department store Big W continued to benefit from the end of retail lockdowns, with total sales hitting $1.2 billion for the quarter, up 30.1 per cent on the same period last year. Online sales at Big W more than halved though in a sign that people have gone back to the shops rather than shopping on the internet.

UBS analysts said Woolworths’ numbers had come in below estimates, noting that Australian food sales had dropped 0.5 per cent despite inflation jumping during the quarter.

Despite the inflationary challenges, Banducci said that with 51 days to Christmas the company was focused on delivering customers an affordable festive offer.

“We are seeing strong early sell-through of seasonal lines, and we remain cautiously optimistic for the period ahead,” he said.

Woolworths shares opened lower amid a broader sell-off on the Australian sharemarket, and closed 3.5 per cent weaker at $32.05.

8 Nov, 2022
A2 Milk finds a way into US but sober about short-term gains
SOURCE:
The Age
The Age

Dairy giant A2 Milk chief executive David Bortolussi expects to send a plane full of its custom-made infant formula to the US by late December or early January, having finally found a way into the lucrative market.

However, he is sober about how much market share and earning gains the win will deliver in the short term, given the freight and reworking costs involved.

Dual-listed A2 is preparing to manufacture infant formula made specifically to US requirements after receiving the green light on Thursday morning from the US Food and Drug Administration (FDA) to export its product.

Bortolussi said he was delighted to be able to supply its product to the US as the country continues to grapple with a national infant formula shortage sparked in February after a major infant formula plant in Michigan was forced to shut down following the discovery of a fatal bacterial infection.

“It’s an important longer-term opportunity, but the near-term impact may not be as material,” Bortolussi said. “The longer-term success of our business will depend on how well we market our product and how well that is received by consumers in the marketplace.”

Investors cheered the update, with A2’s shares rising 4.2 per cent to $5.49.

While getting its product into the US is a win for the company, it will have to make a product almost entirely from scratch. The formula inside the tins will be the same as a2 Platinum formula sold elsewhere, it must have different scoops, mixing instructions and labelling requirements to meet US rules.

“We don’t have that product in inventory at the moment. We’ll need to commence manufacturing that product as quickly as possible with [supply partner] Synlait Milk ... within the next couple of weeks,” Bortolussi said.

After the product is prepared, it will be subject to a 25-day quality assurance process before being ready to export to the US, in late December or January 2023.

US FDA’s approval comes more than five months after A2 Milk’s smaller rival Bubs Australia received the green light. On May 16, the US Food and Drug Administration (FDA) released a temporary measure that provided a fast-tracked regulatory process for global companies to help patch the shortage.

ASX-listed Bubs Australia was the first manufacturer in the world to submit its application, and secured approval from the FDA shortly after in late May. Australian brand Bellamy’s Organic secured approval on July 5.

A2 Milk submitted its application on May 26, but had to wait for months before being told by the FDA on August 10 that it had its submission delayed, along with a number of other applicants.

The company expects to sell up to 1 million tins of formula in the second half of the 2023 financial year. Despite gaining a foothold in the massive $6.1 billion baby formula market, A2 Milk expects earnings to be “incremental” as it will be offset by air freight costs, the cost of reworking the formula into new tins, and marketing and trade costs.

“We don’t underestimate the challenge in carving out a significant market share for our brand in the US market over time, but we’re up for that challenge, and we’re going to invest in that and execute the best that we can to achieve that,” Bortolussi said.

A2 Milk is awaiting to hear from the US FDA on whether it will send government-issued planes to collect product under ‘Operation Fly Formula’, through which Bubs was able to send millions of tins.

“We just haven’t received clarification from FDA,” said Bortolussi. “We would obviously like to be able to utilise that; it would be a big advantage and help expedite the process.”

Though global manufacturers have been able to enter the tightly held US baby formula market through the temporary FA measure, 95 per cent of the market is still held by the three dominant domestic players: Abbott’s, Reckitt and Nestlé.

A2 Milk is increasing production amid FDA’s approval and has assured that it would continue to meet regular supply to other markets, such as China. It will provide a market update about US earnings gains when it presents its half-yearly results or potentially earlier.

The FDA has published transition guidance that allows enforcement discretion-approved companies seeking a permanent pathway to the US to extend the temporary period until October 18, 2025.

Citi analyst Sam Teeger expects A2 Milk’s 1 million tins will add “low single digit upgrades” to the company’s 2023 earnings and said Bubs’ first quarter results demonstrated the US market may be more challenging than expected.

“Other brands that have also received enforcement discretion may have not yet made any sales in the US, suggesting execution is challenging despite product shortages,” Teeger said.

”While A2 may also face these same issues, the company’s existing US operations may be relatively better placed to oversee retail merchandising, and arguably it has a relatively more established brand in the eyes of consumers.”

A2 Milk currently sells liquid milk across major US supermarkets and retailers.

“However, A2 won’t have the same first mover advantage which essentially gave Bubs free marketing,” Teeger said.

It’s also unlikely the US will send government-issued planes to collect A2’s product, he added.

8 Nov, 2022
Woolworths posts marginal sales increase
Inside FMCG

Woolworths Group sales rose 1.8 per cent in the first quarter to $16.36 billion, but turnover in its retail food business fell on both sides of the Tasman.

Across its Australian food division, sales during the 14 weeks to October 2 fell 0.5 per cent to $12.2 billion while comparable sales declined 1.1 per cent. In Woolworths Retail (both stores and e-commerce), sales fell 0.6 per cent impacted by a decline in items as well as supply chain challenges.

Australian B2B sales increased by 26 per cent to $1.19 billion driven by a 36.1 per cent increase in B2B Food.

In New Zealand, sales declined by 2.5 per cent to $2 billion while comparable sales declined by 3.3 per cent. The retailer says customers put “fewer items” in their baskets with comparable items per basket declining by 14.3 per cent. E-commerce sales growth and penetration continued to increase by 5.9 per cent in the quarter.

Big W sales increased 30.1 per cent to $1.19 billion driven by customers returning in-store. All categories performed strongly with a shift back towards everyday and home and apparel products. Online sales dipped 51.8 per cent to $112 million.

Due to inflation, average prices across its Australian Food business increased by 7.3 per cent and 5.3 per cent in New Zealand.

Brad Banducci, CEO of Woolworths Group, said customer shopping behaviour and the trading environment continued to normalise during the quarter.

“We continue to see early signs of customer purchasing habits changing but it remains unclear how much of this relates to cost-of-living pressures compared to Covid normalisation,” he said.

“Ongoing supply chain volatility and the possibility of another wet summer will be key challenges to navigate but we are seeing strong early sell-through of seasonal lines and we remain cautiously optimistic for the period ahead.”

8 Nov, 2022
Big brands set to miss plastic sustainability targets
Inside FMCG

Some of the world’s biggest consumer goods companies, including PepsiCo, Mars and Nestle, are almost certain to miss a target to make plastic packaging more sustainable by 2025, according to a new report published on Wednesday.

The study by the Ellen MacArthur Foundation and the United Nations Environment Programme also revealed that some companies – including Coca-Cola and Pepsi – are using more virgin plastic despite a pledge to reduce its use.

The report comes as U.N. members are due to meet in Uruguay this month to start negotiations on the first ever global plastics treaty, which is aimed at reining in soaring waste pollution choking marine life and contaminating food.

Some U.N. members are pushing for a pact that includes legally binding targets to increase recycled content in packaging and use less petroleum-derived virgin plastic, rules that would have financial implications for the consumer goods and petrochemical industries.

Pepsi, Coca-Cola, Nestle and Mars did not immediately respond to requests for comment.

Dozens of major brands have in recent years set targets to increase plastic recycling and reduce the use of single-use packaging in partnership with the Ellen MacAurthur Foundation, as part of efforts to burnish their green credentials.

The headline pledge was that 100 per cent of plastic packaging would be reusable, recyclable or compostable by 2025, but this goal will “almost certainly be missed by most organisations”, the environmental group’s report said.

Greenpeace said the report is evidence that voluntary corporate targets have failed and called on the U.N. to forge a treaty that forces governments and companies to use less single-use plastic packaging.

“This underlines the need for governments to ensure that the global plastic treaty … delivers major reductions in plastic production and use,” said Graham Forbes, Greenpeace’s USA Global Plastics Project Leader.

“Anything less than this is a disservice to our communities and our climate.”

8 Nov, 2022
McDonald’s to invest $130m in new restaurants and renovations
Inside Retail

McDonald’s Australia is to inject more than $130 million into opening 19 new restaurants and renovating existing stores.

The fast food giant has already opened eight new stores in NSW, Queensland, and Tasmania this year and will open 11 additional stores across the country before the end of this year.

Aside from opening new outlets, the company said it would also renovate over 80 of its existing stores, including improvements in the design, efficiency and functionality of the drive-thru, deliveries, and dining rooms to provide a better customer experience.

David Howse, chief support officer of McDonald’s Australia, said that the company is focused on opening new stores in residential growth areas close to transport and infrastructure in both metro and regional locations.

“Most new restaurants will feature a McCafe, digital ordering kiosks, dual lane drive-thrus and McDelivery partner rooms, allowing customers to continue enjoying Macca’s how and when they like,” said Howse. 

He added that the company is also working to reduce its environmental impact on new restaurants by using LED lighting, solar panels, heat recovery water systems, and recycled material for wheel stops and dining room tiles.

“The restaurants we have opened to date have received an extremely positive response from the local community, which makes us excited for our plans to continue to invest across the country,” Howse concluded.

8 Nov, 2022
Lark Distilling appoints Satya Sharma as new CEO
Inside FMCG

Liquor company Lark Distilling has named Satya Sharma its new CEO, effective on May 1.

Sharma is presently the regional MD Southeast Asia and Australasia for William Grant & Sons, and a member of the company’s Branded Business Unit, which is in charge of the company’s global brands.

“The board has been working on CEO succession, and we are delighted to secure a CEO of Satya’s calibre and experience to lead the company through its next phase of growth and expansion,” said Lark chairman David Dearie. 

Sharma used to hold many roles during his 10-year journey with William Grant & Sons in Singapore, China, and the UK, including head of business strategy & development, interim finance director Apac, and head of commercial.

Prior to that, Sharma worked for Campbell Arnott’s and Pitcher Partners as a senior manager in corporate finance when he was in Australia. 

Laura McBain, the company’s current temporary MD, will remain CEO position until May 1, after which she will continue to serve as a non-executive director.

“According to IWSR data, William Grant & Sons have more than doubled its’ Asia Pacific sales over the last five years,” Dearie added. 

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