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Supermarket giant Woolworths appears to have learned a thing or two from the unprecedented success of its rival Coles’ Little Shop promotion and is now launching a Christmas campaign of its own to lure shoppers through the doors.

Woolworths Christmas Pop-Outs, which is available from this Wednesday, features 12 Christmas-themed cardboard characters that shoppers can build themselves. The characters ‘pop-out’ of a cardboard frame and shoppers can follow the instructions at the bottom of the board to build them.

Characters including Santa, Reindeer, Elves, Gingerbread Man, Snowman and more will be offered to customers as a festive gift with every $30 spent on eligible purchases in store or online.

Three characters will be released each week, for the next four weeks and a collector Christmas tree stand to house the characters will be available to purchase for $3.

Unlike Coles Little Shop, which featured miniature plastic grocery items, eco-conscious shoppers will be glad to hear that Woolworths pop-outs are fully recyclable and Australian-made.

Customers will also be able to see the characters they are getting to help avoid duplication or disappointment and to minimise waste.

Managing director of Woolworths supermarkets, Claire Peters, said that the collection adds something “a little magical” to the supermarket’s Christmas offerings.

“We are really excited to be able to offer Australian families a small gift that captures the fun, imagination and festive spirit of the season with the ‘Woolworths Christmas Pop-Outs’. Christmas is all about spending quality time with family, friends and loved ones and this is a great way for everyone to get together to workshop, build and play with their favourite Christmas characters,” Peters said.

“We believe that kids, parents, grandparents and individuals will be captured by the wonder and imagination of the range and will find ways to make them their own this Christmas – whether that’s as a place card for the dining table or an additional festive ornament around the Christmas tree.”

Chester Osborn has been selling wine in China for about 20 years but in the last year sales have soared 300 per cent.

Osborn's family winery d'Arenberg exports about $4 million worth of wine a year into the country from its winery based in South Australia's McLaren Vale.

d'Arenberg, which turns over more than $40 million a year, joins a growing number of Australian wineries selling to China with export value hitting $1.05 billion earlier this year.

Chester Osborn is the chief executive of d'Arenberg which exports to China.
Chester Osborn is the chief executive of d'Arenberg which exports to China.
Wine Australia's figures show these sales were based on 19.5 million 9 litre cases - a 9 litre case is the measurement unit generally used in the industry and is the equivalent of 12 750ml bottles of wine, putting Australia's exports to China last year at 234 million bottles of wine.
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Exports to China were equal in value to Australia’s next three most significant markets combined: $424 million to the United States, $384 million to the United Kingdom and $199 million to Canada.

"There are a lot of thirsty people over there and Australia makes a lifestyle they really quite enjoy," Osborn says. "We are actively working the market and doing a lot of tastings and dinners there. It's a huge market and there are a lot of premium buyers out there."

Strong end market
A Morgan Stanley report published last month highlighted the strong market in China for Australian wine exports.

The report focused on wine giant Treasury Wine Estates and found Australian export growth to China slowed in the September quarter to $949 million but Morgan Stanley said the drop appeared to be only temporary and reflected specific issues including stricter border controls.

In May, the winemaker reported delays to some of its shipments to China being cleared by customs authorities. It said it had been affected by new “verification requirements” in China that came into force in April and were holding up its shipments.

"The earlier Chinese New Year should drive an acceleration in December exports growth," the report found.

The report found an increasing number of Australian wineries are exporting to China but when broken down by value the amount of more expensive wines being exported to China was still relatively small.

Australia shipped $71 million worth of wine last year priced at less than $2.49 a litre and more than $231 million worth of wine priced at $2.50 to $4.99 a litre, making it the most popular price point for Australian wine.

The wine exported by d'Arenberg to China is at the premium end of the market but Osborn is not surprised at the low price point of a lot of Australian wine exported to China.

"There always is, that's just normal, you look at any country in the world the average price is really quite low as most peoples income is," he says. "There are only 48 million Chinese drinking wine right now which is amazing because they drink quite a bit but there are 1.8 billion people there so the potential is huge."

Winemaker Chris Pfeiffer has been exporting wine from his Rutherglen winery Pfeiffer Wines to China since 2002 but says demand fluctuates from year to year.

Some years Pfeiffer Wines exports up to three containers of wine with a value of around $250,000 and other years it is only half a container.

Pfeiffer says in a good year, exports to China makes up to 4 per cent of Pfeiffer Wines turnover of more than $20 million.

Australia's diplomacy with China comes in from the cold. Finally.
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"From a small producers perspective it is not easy," Pfeiffer says. "I find China an extraordinarily difficult region to understand."

Pfeiffer says there are plenty of opportunity for Australian winemakers in China but it is hard for small wineries to crack the market.

"There are a lot of people in China but how many of those have a lot of money is another question," he says. "Wine from a small winery is not cheap, a bottle from us sells for about $50 there but here it goes for $20. There seems to be a lot of hands in the way with people taking their cut going through."

Pfeiffer is optimistic that Australian wine exports to China will continue to grow particularly with a reduction in the cost of Australian wine as a result of China's free trade agreement with Australia.

"We are going back to zero duties on wine to China which will make us more competitive - it is a 14 per cent cost reduction," he says.

The sting is out of the battle for Capilano Honey with Bega Cheese abandoning any plans it had to launch a takeover to rival one supported by Rich Lister Kerry Stokes.

Bega said on Wednesday it would take the cash on offer from Albert Tse's Wattle Hill and Roc Partners Investment Fund for its 15.59 per cent stake in Australia's biggest honey supplier.

The move comes just days after the Wattle Hill-Roc consortium sweetened its offer from $20.06 a share to $21 a share and in doing so took a swipe at "competing interests" it blamed for creating recent headwinds for Capilano.

Mr Stokes, who holds 23.12 per cent of the stock, has backed the Wattle Hill-Roc consortium to the hilt and intends to convert his shareholding into scrip under the one-for-one terms of the cash or scrip takeover offer, which values Capilano at $198 million.

The Stokes camp will also take a seat on the board as Capilano transitions to an unlisted public company and pursues a strategy of growing its sales footprint in China, with the new ownership structure set to be confirmed with a shareholder vote next Thursday.

Capilano shares were trading at $15.65 before the original takeover offer was announced on August 13 but quickly shot past $20.06 to as high as $21.71, fuelling speculation about a takeover battle.

Both Mr Stokes' private companies and Bega had purchased stock at above the original offer price in recent months.

Capilano was seen as a tempting target for Bega as it looked to strengthen its position on supermarket shelves in the toast and sandwich spreads category. An acquisition would have added honey to its Vegemite and peanut butter brands.

In a trading update last week, Capilano revealed first-half profitability and sales revenue would be affected by negative publicity stemming from claims from prominent farm owner Robert Costa and privately owned honey maker Beechworth about impurity in some of its imported products.

Capilano said first-half results would also take a hit because changes in the domestic retail range, heightened product pricing competition and reduced exports to China attributed to uncertainty about distribution arrangements in light of the takeover offer.

The Wattle Hill-Roc consortium welcomed Bega's decision to support its bid for Capilano.

"This reinforces our view that we have put a compelling offer on the table, one that has the unanimous support of the Capilano board and of Capilano's two largest shareholders," a consortium spokesman said.

Domino's Pizza is sticking to its guidance for 10 per cent to 20 per cent earnings growth in 2019 even though same-store sales growth has slowed, new stores have fallen short of market expectations and it will have to pay more for cheese.

In a trading update at Domino's annual meeting in Brisbane on Wednesday, chief executive Don Meij reaffirmed guidance for earnings before interest and tax between $227 million and $247 million, up from $205.6 million in 2018.

However, Mr Meij revealed same-stores sales growth across the group had slowed to 2.91 per cent in the 17 weeks to October 28 compared with 4.4 per cent in the four weeks ending August 5, 5 per cent in the same period a year ago and Domino's 3 per cent to 6 per cent target for the year.

This suggests same-store sales will need to accelerate – especially in Europe, where an extraordinarily hot summer crimped pizza demand in July and August – to meet the target range.

"Sales grew in Europe, on a total and like-for-like basis," Mr Meij said, "but there has been a short-term effect, as we've seen in other Domino's European markets."

Mr Meij said Domino's was on track to open 225 to 250 new stores this year after opening 36 stores in the first 17 weeks of 2019, including 14 in Japan.

Citigroup's head of research Craig Woolford had expected Domino's to open 40 to 45 stores by the end of October.

​"This (36) is a run-rate of two stores a week and only half the rate the company needs to meet its guidance," Mr Woolford said in a note on Wednesday.

Mr Meij said more stores were due to open in the second-half than the first half. "Our store openings are typically skewed towards December and June, and this year will be no different," he said.

Domino's also expects to pay more for cheese and other ingredients in the second half due to the impact of the drought, but didn't say whether it would pass the increase onto customers.

Australia's largest pizza chain hopes to accelerate local sales growth this year by launching a new summer menu – with 30 new flavours, side dishes and products, including Turkish Delight thick shakes – and reducing the average delivery time to below 20 minutes, with stores increasingly using e-bikes.

Domino's, which calls itself a technology company rather than a fast food retailer, is also launching a new augmented reality version of its digital Pizza Chef, which enables customers to see the pizza they're designing on their mobile phone screen.

In the Netherlands, Domino's is even launching a dating app which enables customers to swipe on their favourite pizza and be matched to other pizza lovers.

"This is great example of our talented teams in multiple markets generating market-leading ideas that spark the imagination of customers and could well translate in to other markets," Mr Meij said.

Domino's shares rose 2 per cent to $55.68 before the trading update, taking gains this financial year to 6 per cent.

"In our view, Domino's shares are trading as if the company will beat its 2019 guidance - we are less convinced," Mr Woolford said.

It's taken more than two years, but Woolworths is finally close to securing a deal for its $1.5 billion-odd petrol business.

Sources said the retailer had honed in on an offer from British-based retailer EG Group, which was seeking to get a foothold in the Australian market by buying Woolies' chunky petrol station portfolio.

It is understood EG Group has been officially declared "preferred" and both parties are working towards a deal being announced as early as Tuesday.

EG Group's group counsel and company secretary Imraan Patel is said to be spearheading the talks and putting structures in place to turn the bid into a binding deal.

It comes after Woolworths had its bankers - Morgan Stanley and UBS - re-engage with trade bidders, following an unsuccessful attempt to sell the unit to BP. That deal fell over after running into stiff opposition at the Australian Competition and Consumer Commission.

Woolworths' thoughts immediately turned to an IPO, which was slated to happen as early as this year. However, it became apparent that a trade bid would enable a quicker and more smooth exit. When market conditions turned in recent weeks, it was full steam ahead on the mooted trade bid.

Street Talk first reported EG Group's emergence on the scene on September 25. The bidder is advised by Citi. Other strategic parties around the unit in recent weeks included another UK suitor, DCC.

Kathy Karbatsas was appointed managing director of Lion Dairy & Drinks in December 2017, having joined the business in 2006.

She shares the valuable lessons she has learned throughout the company’s evolution and recalls her break from corporate life to help the homeless in Melbourne.

Inside FMCG: Is there such a thing as a typical day in your role?

Kathy Karbatsas: Never! No day is typical in my role, and often my “to do” list by the end of the day looks vastly different to the one I started with. It’s important that I balance my time between working on the business as well as being there for our team, customers and our suppliers – so I need to be nimble depending on each day’s requirements.

Inside FMCG: What’s the best part of your job?

The fact that we make great products and have great brands that people enjoy consuming – every day! It’s exciting to work for a business that can contribute to people’s health and wellbeing. Seeing my team achieve great things and working with them to make a difference to the lives of so many of our consumers is also extremely rewarding.

Inside FMCG: How has lion changed and developed during your time there?

The business is constantly evolving, innovating and responding quickly to ever-changing consumer needs. One example of this is the growth of convenience foods – we know that Australians are increasingly eating on the go, so we seek to provide healthy options that our consumers can pick up and enjoy on the run, and we’re investing in developing new packaging and product design solutions to meet this need.

Inside FMCG: What do you think is the biggest challenge in the dairy business?

Our industry naturally faces supply chain disruption caused by environmental factors, and the current drought is obviously a challenge for many of our dairy farmers in New South Wales and parts of Queensland and Victoria. Ensuring we’re set up to support our farmers during these periods is a vital and extremely important part of our business.

We invest heavily in our farm services teams and support programs to limit the impact that environmental challenges can have on our farmer partners. Ever-changing consumer trends also provide an ongoing challenge for the business, and we’re focused on both responding to changing consumption habits and stimulating the market with new and innovative products.

Inside FMCG: How has Lion adapted to meet the demand for alternative dairy products and healthier options?

We’re committed to providing nutritious options for our consumers, and in 2014 we announced Our Goodness Promise, an ongoing commitment to celebrate the inherent goodness in our dairy and juice products as well as improving the nutritional quality of our products and making it easier for everyone to make good choices, every day.

Four years in, we’ve taken great steps in increasing the nutrition content of our products and educating consumers on making healthier choices. An example of this is our goal of reducing added sugar across the portfolio by 10 per cent by 2019. Our reformulation of the Yoplait Petit Miam range alone earlier this year has removed hundreds of tonnes of sugar from supermarket shelves.

Additionally, we’re taking steps to reduce added sodium by 5 per cent and fat by 10 per cent within the same period. As well as reformulating some of our products and adapting packaging sizes, we’re looking to invest in new products and innovations that deliver healthier options. We’re also proud of our 20-year joint venture with Vitasoy Australia, which has allowed us to offer nutritious plant-based milks as an option for Australian consumers who wish to include this in their diets.

Inside FMCG: What’s the most important thing to remember about meeting consumer needs?

It’s important to strike a balance between listening to the customer and pre-empting consumption trends. We invest heavily in R&D to ensure we’re ahead of these trends and that we’re leaders, rather than followers, across our portfolio. Similarly, we listen to customer and consumer feedback and adapt to demand, which can mean anything from bringing back a limited-edition flavour for our flavoured milks due to an overwhelming social media response, through to introducing a whole new item such as our Farmers Union Splits, a fantastic new yoghurt product we developed in response to customer demand for healthy and convenient breakfasts.

Inside FMCG: In 2002, you took a break from corporate life and managed crisis accommodation facilities for three years. Tell me about your experience with that.

I took a break to support my husband in our family business, running crisis accommodation across Melbourne, as our scale was expanding and we needed more hands on deck. I worked five days a week in the office of our largest facility and was on call 24 hours a day across all our facilities. At one stage, we had 250 rooms in Melbourne across three facilities, and were working with key charities to support vulnerable people with crisis accommodation.

The work taught me a lot about the importance of acting inclusively, listening to people, not having biases – either conscious or unconscious – managing complex challenges, and always anticipating the unexpected. Despite my current role appearing drastically different on the surface, these skills set me up well for my return to corporate life and I use them daily at Lion Dairy & Drinks.

My time away from the corporate world also gave me a self-awareness that I had a strength in coaching and a passion for helping people succeed in their lives. Re-entering the corporate world, I felt a greater sense of purpose and a renewed focus on making a difference to the organisation I work for and the people in it. My experience placed me in good stead to manage business problems and the complexities that come from working with a broad team.

The board of pet care company Greencross Limited is unanimously recommending that shareholders vote in favour of a proposed scheme implementation agreement that will see the 100 per cent of the business acquired by private investment firm TPG.

The scheme would afford shareholders $5.55 per share, with an implied equity value of $675 million; both below the rejected takeover offer made by TPG two years ago.

In 2016, TPG offered the business $6.45 per share, equalling a $736 million offer, which the pet care business turned down; stating it “fundamentally undervalues Greencross”.

However, shares in the company spiked after the announcement jumping from $4.54 a share late last week to $5.40 per share on Monday afternoon.

“In reaching our conclusion that the scheme is in the best interest of shareholders, the board has considered a number of alternatives, including standalone value creation opportunities and alternative proposals from other potentially interested parties,” Greencross chairman Stuart James said in a note to investors.

“Upon assessing the alternatives before it, the Board has unanimously concluded that the scheme is a compelling option which realises attractive value for our shareholders.”

Shareholders are expected to vote on the matter in early 2019, though the date may be subject to change.

Last month, Greencross confirmed it was considering an acquisition proposal from TPG after the company’s net profit dropped 51 per cent to $20.7 million in FY18.

Despite falling profits, the business maintains a healthy mix of retail and service-based offerings, as well as a highly engaged customer database with a loyalty program that touches 90 per cent of retail sales.

TPG’s head of Australia and New Zealand Joel Thickins said the investment firm is confident the Greencross business will continue to grow under private ownership.

US-based private equity firm TPG Capital will outlay at least $930 million to buy listed pet-care business Greencross, according to sources.

It is understood TPG Capital is offering at least $5.50 a share for the operation, as revealed online by DataRoom yesterday, after the company’s shares closed at $4.54 on Friday.

Greencross has been in the company’s data room assessing a purchase of the listed operation for several weeks and now a deal is expected to be announced by tomorrow.

DataRoom reported last week that TPG was about to embark on a $1 billion acquisition, thought to involve Greencross.

Greencross’s current market value is $547m and the acquisition price, including $268m in debt, is about $930m or more. It equates to 10.5 times earnings before interest, tax, depreciation and amortisation compared to its current 6.5 times EBITDA trading price.

Only a month ago, the stock was trading at $3.57 so any bid at $5.50 a share would be at a 50 per cent premium.

The bid comes as the money consumers are investing in pet care is increasing, although the industry is ripe for online disruption.

Shares in Greencross were worth more than $10 in 2014, but have fallen as the sector globally comes under pressure due to the growing dominance of online retailer Amazon.

Working for Greencross is Macquarie Capital and Allier Capital. TPG has UBS.

Greencross was a market darling in early 2016, when TPG made a bid to buy the business for $770m. This was only two years after the merger of Petbarn owner Mammoth Pet Holdings, of which TPG held a major stake, with Greencross.

Elsewhere, Westpac has hired Bank of America Merrill Lynch Australia managing director Adam Penny as its head of corporate development, as reported online by The Australian yesterday. His appointment comes as Westpac reports its results today and as some suggest it could indicate that the bank is gearing up for asset sales.

Mr Penny has been head of financial institutions at BAML Australia.

US-based private equity firm TPG Capital is tipped to be on the brink of spending $1 billion on the acquisition of an Australian company and most are pointing to pet care business Greencross as the outfit for which the buyout fund is about to pay up.

It comes with talk in the market this week that TPG Capital had its eye on a $1bn Australian prize and that the deal was about to be done.

Greencross seems to be the logical target, given the buyout fund has been in the data room with other parties assessing a purchase of the listed operation for several weeks.

Its current market value is $546 million and the expectation is that TPG would be offering a premium of as much as 30 per cent for a successful pursuit.

Factoring in $268m of debt takes the price tag to almost $1bn.

Market analysts yesterday had much to say about the price TPG was paying for Greencross, should that in fact be its target.

The concern is that although the amount of money consumers are investing in pet care is increasing, the industry is ripe for online disruption. Supermarkets and discount department stores are expected to penetrate the sector further.

Australia has one of the highest rates of pet ownership in the world, according to IBISWorld, which says more than 60 per cent of Australian households has a pooch or puss.

Revenue in the industry has been growing at more than 7 per cent annually and is likely to grow about 3 per cent in the next few years.

Shares in Greencross were worth more than $10 in 2014, but closed yesterday at $4.54 as the sector globally comes under pressure due to the growing dominance of online retailer Amazon.

Working for Greencross is Macquarie Capital and Allier Capital. TPG has UBS.

The latest speculation suggests TPG has fended off competition from Permira and BGH, which have also been in the data room conducting due diligence. The thinking is that TPG has pre-empted the process with its bid.

Greencross was a market darling in early 2016 when TPG Capital made a bid to buy the business for $770m.

This was only two years after the merger of Petbarn owner Mammoth Pet Holdings, of which TPG held a major stake, with vet business Greencross.

At that time, BGH Capital founding partners Ben Gray and Simon Harle were running Australia’s operations for TPG Capital so they know the target well. Quadrant Private Equity was also a former Greencross owner.

Now TPG’s Australian operations are run by former Champ Private Equity director Joel Thickins.

The Carlyle Group in recent months and Kohlberg Kravis Roberts are both understood to have looked at the business in the past, but are not thought to be currently circling.

Greencross is Australasia’s leading specialist retailer of pet food, pet-related products and pet accessories. It has more than 230 stores under the Petbarn, City Farmers and Animates brands and operates Australia’s largest veterinary services business, which has more than 160 clinics.

In the 2018 financial year, it posted a 51 per cent fall in its net profit to $20.7m, despite reporting a 7 per cent revenue lift and as it was weighed down from its vet clinic division and impairment costs.

Elsewhere, stockbroking and financial advisory firm Wilsons has lured former head of investment strategy at UBS Asset Management Tracey McNaughton to lead macro strategy in its strategy group.

Coles’s decisions to launch its popular Little Shop promotion and to delay the phasing out of single-use plastic bags has helped end its arch-rival’s long run of sales outperformance, with Woolworths posting its slowest store sales growth in two years.

Woolworths chief executive Brad Banducci called out both activities when he unveiled the latest trading performance for the nation’s biggest supermarket chain, which showed that like-for-like sales growth at its Australian supermarkets had skidded to 1.8 per cent for the first quarter, down sharply from just over 3 per cent the previous quarter.

It was also well down on the strong comparable sales growth Woolworths had enjoyed since late 2016, although Mr Banducci held out some hope for investors when he revealed there had been a return to improved momentum in September and October.

But it was clear from the trading results that outgoing Coles boss John Durkan had inflicted a flesh wound on Woolworths when he chose to hold on to his plastic bags for eight weeks after Woolworths had stripped all of its stores in late June, while the Little Shop promotion lured shoppers away from Woolworths.

“While it was a more challenging quarter for sales, customer and brand metrics were strong across the group, especially in Australian food, reflecting the underlying health of our business,” Mr Banducci said. “Australian food had a challenging start to the quarter with sales affected by our customers’ and team’s adjustment to the removal of single-use plastic bags as well as the impact of a competitor continuity program (Little Shop).’’

While other retailers blamed flat wages growth, sliding property prices, rising mortgages and booming energy prices, Mr Banducci said the volatile weather conditions on the east coast had disrupted consumer demand.

“Some of the drought issues ­affected all of our businesses in some of the more regional areas — NSW and some parts of Queensland,’’ he said.

Total sales for its Australian supermarkets were up 1.9 per cent to $9.87 billion, while for its drinks business, led by Dan Murphy’s, comparative store sales rose 1.7 per cent. Its New Zealand supermarkets booked a 4 per cent lift in sales and the loss-making Big W recorded a 2.2 per cent gain in same-store sales.

Big W had a big win with its online sales as the popularity of click and collect helped drive sales growth by 177 per cent for the quarter. The hotels business saw like-for-like sales up by 1.2 per cent. Its online operations, now housed within its tech arm ­WooliesX, posted online sales growth of 26 per cent.

However, it was the performance of its supermarkets that most investors were keeping an eye on and, despite the slower growth rates and the now domination of Coles with its higher sales growth of 5.1 per cent for the first quarter, shares in Woolworths rose 27c to $28.70 as the result was broadly in line with expectations.

The gap between Woolworths and Coles’s strong sales growth is now 3.3 per cent and comes as Wesfarmers prepares the $20bn demerger of Coles next month. Coles’s growth should help sell the demerger to investors, as new Coles boss Steven Cain spruiks the performance of the supermarket business.

Coles surprised the market with a 5.1 per cent sales jump for the first quarter. It marked the biggest underperformance for Woolworths against Coles in nine quarters. In the fourth quarter of 2016, Coles reported 2.9 per cent sales growth and Woolworths had -1.1 per cent, for a gap of 4 per cent.

But Mr Banducci attempted to assure analysts and the investment community.

“We certainly have seen a bounce back in our market share as we return to a more normal trading environment,’’ he said.