News

Sequoia thinks A2 can be as effective branding milk as Chobani has been marketing Greek-style yoghurt. Brendon Thorne

"While this is far from settled science, some researchers and nutritionists believe that because people have only been drinking A1-bearing milk for a relatively short period by evolutionary standards, our bodies have a harder time digesting it than 'pure' A2 milk," the manager wrote.

But for the purposes of mounting an investment case, Sequoia thinks A2 can be as effective branding milk as Chobani has been marketing Greek-style yoghurt.

Tesco briefed staff at dozens of stores throughout the UK on the wide-ranging measures. Among the changes are plans to close fresh food counters in about 90 stores.  DARREN STAPLES

"Whilst this turn-round continues, it does so in a competitive and challenging market," Tesco added. German discounters Aldi and Lidl continue to open about 100 stores between them each year, and seem content with low operating margins. Traditional rivals such as Wm Morrison and Asda have also improved their operational performance over the past two years. 

Tesco shares closed 1.3 per cent lower at 222p – about the same level they were when Mr Lewis took over as chief executive in September 2014. 

A McWilliam's advertisement from the 1970s. The new CEO says McWilliam's needs to modernise and he aims to be in a break-even position in 2018-19 after a $16 million injection from outsiders. Supplied

He also intends cutting up to $10 million in costs from McWilliam's operations and wants the winemaker to move further up the value chain to focus more on higher quality wines.

He said a new range under the MCW banner was showing good signs and was evidence of a more modern, consumer-focused approach, steering clear of "wines that we're making for ourselves rather than what consumers want".

British supermarket chain Tesco has announced a major revamp of its operations across the country.  supplied

About one third of the food eaten in the UK comes from the EU, and in March, 90 per cent of Britain's lettuce, 80 per cent of its tomatoes and 70 per cent of soft fruit will be sourced from the bloc and subject to new customs duties.

The statement, signed by the bosses of the Co-operative, Marks & Spencer, Lidl and Waitrose supermarkets, was published before key Brexit votes in Parliament set for Tuesday in London (Wednesday AEDT).

A spokesman for Prime Minister Theresa May said plans are in place to keep customs working and traffic flowing in the event of a hard Brexit. Alastair Grant

The signatories said they were stockpiling where possible, but noted that all of Britain's frozen and chilled storage is already being used, with very little general warehousing space available.

Tesco, which employs more than 300,000 people says it may be able to redeploy about half of the 9000 positions that it is going to eliminate, a move that would "limit the impact" on its workforce.

The main change in its supermarkets across the country would be to its fresh meat, fish and delicatessen counters. It expects to close counters in about 90 stores, with the remaining 700 trading with either what it called "a full or flexible counter."

Tesco's move shows its operation diverging from rivals such as No. 4 player Morrisons, which emphasises its army of trained butchers, fishmongers and other specialists who prepare food in-store.

All of Britain's big four food retailers - including No. 2 Sainsbury's and No. 3 Asda who want to combine - are chasing efficiency savings to fund price cuts so they can better compete with discounters Aldi and Lidl, who are still winning market share.

Tesco set out a plan in October 2016 to reduce operating costs by £1.5 billion pounds ($2.8 billion) over three years through efficiencies in its distribution network and stores and from procurement savings.

It needs the cost savings to help achieve its target of a group operating margin of 3.5 per cent to 4.0 per cent by financial 2020, up from 2.9 per cent in fiscal 2018.

Subway on Monday announced a strategic partnership with Uber Eats, making it the latest national quick-service restaurant (QSR) business to embrace third-party delivery apps.

The deal will see more than 700 Subway restaurants offer on-demand delivery, as the company seeks to tap into the growing demand for convenience.

“With almost 14,000 searches on the Uber Eats app for ‘sandwiches’ each month, we know Subway delivery will be a game-changer for Subway fans,” Kate Brody, Subway ANZ director of marketing, said.

This is in line with a spate of national QSR chains, including McDonald’s, Hungry Jack’s and KFC, that have started offering delivery of online food orders through third-party apps like Uber Eats, Deliveroo and Menulog.

While delivery traditionally has been viewed by restaurants and consumers as a time-saving option for dinner, the ease of ordering through smartphones and ability to scale delivery fleets through the gig economy have redefined delivery for any time of the day.

According to Uber Eats, the number of lunch orders on the app more than doubled in 2018, which is just one more reason that delivery has become an attractive proposition for QSR chains like Subway.

While some restaurants have highlighted the large cut that such delivery platforms charge, Subway ANZ country director Geoff Cockerill told IR in a previous interview that they are definitely a win.

“There is a cost to it, but you can price your menu items accordingly. People purchasing products on third-party delivery apps are prepared to pay more than they are for normal menu items,” he said.

“If a menu item costs $10 and the delivery platform charges [the restaurant] a fee of 30 per cent – I’m making up these numbers – you would price your product somewhere in between. If you price it at $13, you’re probably going to lose your guest, but if you price it somewhere in the middle of $10 and $13, you’re likely to drive a profit because you’re utilising the resources you already have in the restaurant.

“What you’ve also got to remember is that it doesn’t matter if we’re a firm believer in this or if the restaurant is, it’s what the guests want. They want it now, so either you’re in it, or you’re not, and our view is you need to be in it.”

There was a strong demand for Australian wine overseas in 2018, with an increase in wine exports of 10 per cent in value to $2.82 billion.

Bottled wine shipments increased by 7 per cent in value to $2.24 billion and decreased in volume by 3 per cent. This saw the average value of bottled wine grow by 10 per cent to a record $6.20 per litre FOB.

“These figures demonstrate strong international demand and they highlight how Australian wine exporters have worked diligently to develop and maintain international markets”, Andreas Clark, CEO Wine Australia said.

“This demand translated into growth in almost all price segments.”

Unpackaged wine reached record levels in value and volume. The average value of unpackaged wine continued to grow, increasing by 14 per cent to $1.17 per litre.

Red wine continues to be the most popular wine style exported from Australia, and value increased by 12 per cent to $2.14 billion in the year ended December 2018. The value of white wine exports also grew – by 10 per cent to $607 million.

There was growth in Australian exports to nearly every region of the world last year. Exports to North America are starting to level out after more than 12 months in decline. The value of exports to the region declined by 0.1 per cent to $636 million.

Northeast Asia grew by 19 per cent to $1.23 billion, Europe grew by 7 per cent to $615 million, while Southeast Asia grew by 3 per cent to $171 million.

The Australian Ethical portfolio manager, who controls about 3 per cent of the drug wholesaler and pharmacy marketing outfit, said he struggled to see how the $1 billion-plus merger benefited API investors.

"We're not particularly comfortable with the bid in terms of we think Sigma was in a tough situation and it feels like API is kind of handing them a pretty reasonable opportunity, and to the detriment of API shareholders," he said. "We feel like we're giving away more than we're getting."

API and Sigma are competitors in the $14 billion pharmaceutical wholesaling business alongside a third ASX-listed player, EBOS. The three operate in a highly regulated, government-subsidised sector, to deliver prescription and over-the-counter medicines to pharmacies around the country. Each wholesaler has exclusive distribution and support agreements with different brands – such as API and Priceline, or Sigma and Amcal.

Sigma investors got a shock in mid-2018 when the pharmacy industry gorilla Chemist Warehouse pulled its agreement in favour of a new exclusive distribution contract with EBOS.

API shares collapsed in the weeks after the proposed merger was announced on December 14, but are back trading at the $1.48 level they were at previously. The shares are flat over the year and at current levels are trading well below a 12-month high of $1.935 hit in September.

Earnings target

Sigma shares are down 32 per cent in the past year, mostly due to concerns about its earnings prospects after losing the Chemist Warehouse contract. They jumped 44 per cent to 58¢ on the merger news and have traded around that level since. The stock, however, has lost 32 per cent in the past year.

Given that change to its business Mr Gracey said he is concerned that Sigma's 2020 earnings target of $40 million to $50 million is "overly optimistic". Similarly, estimates from Sigma that losing the Chemist Warehouse contract will free up about $300 million in working capital may underestimate what's required to run the remaining business, he said.

Under the proposal API is seeking to buy out Sigma investors in a mixture of 0.31 API shares and 23¢ cash for each Sigma share.

Angst levels are rising among the country's 5500 hotel owners at the e-commerce strategy of the owner of big beer brands Victoria Bitter and Carlton Draught.

On-tap beer sales inside hotels and bars by the two main players in Australia's beer industry, CUB and Lion, are still a major money-spinner for pub owners along with sales of packaged beer made through attached bottle shops and drive-through operations.

CUB and its parent AB-InBev, the world's biggest brewer, in November began a trial selling CUB products via eBay in a direct-to-customer push sweetened with sharp discounts.

This followed the separate acquisition in August of Australian-based online e-commerce platform BoozeBud which sells alcoholic products direct to consumers.

BoozeBud's current offerings include a promotion to buy three cases of "Aussie icons" beer to save 10 per cent, mostly featuring CUB products, although there are a handful of rival beers on offer too.

Australian Hotels Association chief executive Stephen Ferguson said concerns were being raised by hotel owners. They are worried about the blurring of the lines between supplier and retailer.

"This is a new channel," Mr Ferguson said. "We've had issues raised by some of our members".

Craft beer acquisitions

The AHA was trying to resolve the concerns initially through meetings with CUB.

"We're just trying to better understand what they're trying to achieve and to let them know of our concerns," Mr Ferguson said.

A CUB spokesman said on Tuesday that the brewer was in talks with the AHA to listen to their concerns. "We deeply value our relationships with local bottle shops and hotels across the country," the spokesman said.

The angst comes as all mainstream beer companies battle against declining beer sales, with consumers increasingly shifting towards smaller craft brewers.

The situation has close similarities to an angry stoush which flared almost two decades ago at the height of the dotcom boom in 2000. CUB's then parent, the ASX-listed Foster's Brewing Group, sparked outrage when it bought a 25 per cent stake in an online retailer, Wine Planet.

Big liquor retailing players were furious behind the scenes at Foster's daring to move into the retail space, and threatened to use their clout to undermine it by pulling CUB products off their shelves. Foster's subsequently sold its holding after Wine Planet suffered heavy losses and failed to make the inroads Foster's had hoped for.

Foster's in 2011 split into beer and wine divisions, with ASX-listed Treasury Wine Estates being spun off into a wine-only operation.

AB-Inbev acquired BoozeBud last year via its entrepreneurial division known as ZX Ventures. CUB became part of AB In-Bev in 2016 through a global mega-merger where AB In-Bev acquired SABMiller, which had bought the Foster's beer business in 2011 for $12 billion.

AB-InBev and CUB have been buying up craft beer brands such as Sydney's 4Pines and the Adelaide-based Pirate Life in 2017 to try to generate more growth.

The craft beer industry in Australia is worth an estimated $740 million annually and is growing at 15 per cent to 20 per cent a year, outstripping mainstream beer sales, which are going backwards.

CUB is the No.1 beer company in Australia, with a market share of about 46 per cent, ahead of big rival Lion, which has 42 per cent.

Coca-Cola Amatil's Australian beverages managing director Peter West says the bottler will use data analytics to help Pizza Hut franchisees double drink sales.  

It is the first time in Pizza Hut's 48 years in Australia that Coca-Cola Amatil has held the beverage supply contract. The Pizza Hut contract was previously held by Asahi/Schweppes, which owns the Australian bottling rights for Pepsi. (Pizza Hut was once owned by Pepsico.)

CCA's managing director of Australian beverages, Peter West, said the agreement reflected the strength and popularity of CCA's beverage range, which includes Coca-Cola, Sprite, Mount Franklin water and Barista Bros iced coffee.

An innovative Melbourne food manufacturing and distribution business owner has set his sights on global growth, starting with New Zealand, writes Nina Hendy.

Taking a business global isn’t for the faint hearted. But that doesn’t particularly faze Melbourne businessman Didi Lo, who believes his natural food products are exactly what the world needs to see on supermarket shelves.

“With the Australian arm of the business bedded down, international expansion is an exciting prospect for us,” Lo says today of Soulfresh, the $100 million venture he initially founded to take local Byron Bay produce to the southern states.

“Our natural product range sets us apart from others in the market, and we believe the New Zealand market offers a range of opportunities for growth.”

After working as a fruit picker and on the ski slopes of Thredbo, it was the independent spirit and produce Lo found in the kitchens of Byron Bay that propelled him to launch his distribution business in Melbourne in 2003.

Today, the company employs 120 staff and has cemented its place as a category leader in the health and wellbeing space, growing at more than 50 per cent year-on-year with its produce slowly but surely being stocked by supermarkets across Australia and now overseas.

“Many of the big multinationals have spent the past 100 years stripping out all of the processes that makes food real, adding in cheap fillers, such as sugar and fat to save costs,” he says. “My goal in life is to swap out the junk food on our supermarket shelves and replace it with better, natural alternatives.”

But he admits that growth into a new market doesn’t come easy. “We need to prove that we’re what the New Zealand shoppers want to see on their supermarket shelves. It takes time to understand a local market and prove that you’re a worthwhile addition.

“When undertaking an expansion, you need local eyes and ears on the ground to help introduce your product to the market. That’s far better than trying to go it alone.”

He is looking further afield, too. Lo also recently purchased a brewery in England, signalling ambitious plans for more product launches and further international expansion. But he’s not willing to spill the beans just yet.

“It’s early days, but we see plenty of potential for growth in Europe. Our successful expansion across Australia and now internationally is a direct result of the fact that we offer our employees the opportunity to become partners in Soulfresh. This shared commitment with a shared outcome has really delivered results.”

Putting his money where his mouth is

When starting the company, Lo wrote a basic business plan and borrowed $20,000 from his parents before simply traipsing between Melbourne cafes in search of customers.

“International expansion is an exciting prospect for us.”

In these early days he recalls one Elwood retailer who requested an order for five pies. “I presumed they meant five boxes, but they meant five individual pies. I remember going and getting the box and taking out five pies and charging them the $8.40 or whatever it was and thinking that this was going to be a hard way to make a living.”

His brother Hsiao joined the business and since then, driven by general manager Jeff Rubin, Soulfresh started on the ambitious plan for growth.

Tips to stay ahead of the trends

While there have been mistakes made along the way – notably a brand of healthier potato chip that never made it to market – products like his kombucha brand Lo Bros, Living Drinks sit proudly among his growing portfolio of successful food brands. The kombucha has sold more than 15 million bottles and is enjoying nearly 400 per cent year-on-year growth. Soulfresh is also working with the University of Melbourne on some food innovations that could make it to market in the near future.

“More and more Australians are eating in a way that we believe people should be eating,” he says. “We’re always looking at where food trends are going and for opportunities to get on board ahead of time. Having said that, we never rush to market. We’re focused on launching the right products at the right time and partnering with retailers as an innovation platform to drive change towards healthier eating.

“We’ve evolved on instinct and looked out for food trends that we believe Australians will want to be a part of. Our success comes down to being truly passionate and being really prepared to work for it.”

“Another one was launching Fiji Water in 2005. And while the product was a hit with consumers, he decided that importing water went against the Soulfresh ethos of supporting Australian. This led him and a couple of friends to the launch of their own brand of bottled water, called Another Bloody Water, sourced from Victoria.

But along with some of the more mainstream successes Lo is also an avid innovator, considering unusual ingredients many would never be prepared to.

“Crickets used in an insect bar have never been that popular,” he says. “But we believe that cricket powder is a good source of protein, making it a fantastic ingredient in the future.”

“You need local eyes and ears on the ground to help introduce your product.”

Vodafone General Manager of Business Enterprise Neelum Prakash says it is vital for small businesses to have the tools and support to triumph over their challenges and embrace their opportunities.

“Whether it’s unprecedented business growth, broadening their offerings to customers or the overseas expansion, having the right support and tools is so important. Vodafone’s dedicated account management for businesses with more than 10 connections can help steer businesses in the right direction and select the best tools for them to take the next step and continue to grow.”

International travel to bed down local markets is definitely on the cards for business owners expanding internationally. Look for services that make it possible for you to continue to do business while travelling, such as Vodafone – the only network with $5 Roaming.

Vodafone enables you to use your phone, tablet or mobile broadband plan for $5 extra per day in over 60 countries – ideal for regular business travellers*.