News

30 Oct, 2023
Aldi still gaining as food price inflation to ease, says survey
Coles boss Leah Weckert is seeking to get the rate of theft under control.  Arsineh Houspian

Food price inflation is set to ease, discount chain Aldi is still winning share from the majors and supplier margins are coming under pressure, according to the latest industry survey by Jarden and the Australian Food & Grocery Council.

Other key findings from the survey, which canvassed 57 supermarket suppliers in early October, are that market volumes are lifting and so are the number of promotions in store.

Jarden head of research Ben Gilbert estimates Aldi sales are up mid-high teens year-on-year, gaining back lost share during COVID-19.

“Aldi is benefiting from a more value-focused shopper, larger branded offer, increased cross-shopping, rising own-brand [sales] and easing supply chain issues,” he said in a note to clients.

The majority of surveyed suppliers have increased prices over the past year (up 8.3 per cent on average); however, about half are not planning to hike prices further in 2023. But in 2024, 74 per cent expect to make more price increases, but the rate of increases will slow.

“We expect dry [grocery] inflation to moderate from 6-8 per cent today, to 3-4 per cent in 2024,” Mr Gilbert said.

It is getting harder to push through price rises, with more suppliers citing Coles as the most difficult over Woolworths.

Mr Gilbert said retailers are looking for ways to expand gross margins to help manage continuing cost pressures via price hikes, more efficient promotions, and selling higher-margin own-branded products.

Coles flagged at its full-year results that theft across its 850 stores was a major problem. The Jarden survey found one-quarter of suppliers believe Coles may have “overplayed the theft issue” and its impact.

Loyalty schemes were another contentious issue, with the majority of those surveyed saying such schemes do not provide tangible benefits.

Mr Gilbert believes Coles’ underperformance is unwarranted if it can get theft under control, while Metcash’s IGA network could regain momentum heading into its first-half result in December given its value offers and more competitive pricing.

Both Coles and Woolworths will report their first quarter sales later in October when Mr Gilbert expects them to both gain in top-line sales growth as more consumers shift to eating at home.

30 Oct, 2023
Canned fruit giant SPC asks Goulburn Valley locals to tip in $20 million
SOURCE:
The Age
Financial Review

Fruit and vegetable processor SPC is asking Goulburn Valley residents to tip in $100,000 or more of their money to become a shareholder once again in the business that has been based in the Victorian region for over 100 years.

SPC, which stands for Shepparton Preserving Company, was founded in 1917 by Goulburn Valley farmers as a co-operative and is the company behind Ardmona tomatoes, canned fruits, baked beans and more. Its value suffered after being acquired by Coca-Cola Amatil in 2005, and SPC was sold to a private equity group called the Shepparton Partners Collective in mid-2019 for $40 million, a fraction of the $490 million that Coca-Cola paid for it.

In 2014, the Victorian government chipped in $22 million to keep the fruit processor operating, saving up to 2700 jobs, after the federal government refused any assistance.

Chairman Hussein Rifai said SPC was moving from “starting to walk” to “running marathons” after engineering a successful turnaround in the years since Coca-Cola’s ownership, and it was now inviting locals to be part of that growth journey. 
 

“We want to get the families of the Goulburn Valley to come back and invest in SPC because the natural alignment of their interests and SPC’s interests,” Rifai said. “We believe that will also bring more employment into the valley.”

SPC is a major employer in the region, with about 470 permanent staff and as many as 1000 during peak seasonal periods. The business is hoping a $20 million capital raise exclusive to Goulburn Valley residents will boost the local economy and attract young people back to the region.

The company will host information sessions in Shepparton and Melbourne to take locals and their business advisers through SPC’s growth plans and financial figures in greater detail. Only wholesale investors are permitted to take part, meaning there is a minimum investment of $100,000.

Shares are being offered at $1.17, a discount to the last traded price of $1.30. SPC delisted from the ASX in 2005.

The funds raised will go towards expanding product offerings and funding potential acquisition opportunities. Outside fruits and vegetables, SPC’s portfolio encompasses ready-meal food brands, The Kuisine Company and frozen quesadilla brand Street Eats, a category that has grown 25 per cent in the past year.

The canned fruit company also has aspirations to push into beverages and plans to relaunch Helping Humans, its sparkling water product announced last year that failed to resonate strongly with customers.

“It wasn’t really launched properly. We didn’t really target the right clients, the right pricing point and everything else. Obviously, as much as everybody tries to do everything right, every now and then some things don’t work out and you learn from it.” 

SPC also hopes to expand around the globe and is eyeing joint venture or acquisition opportunities around Spain, Portugal and the Asia-Pacific region. 

SPC booked an $11.8 million loss in the 2021 financial year but swung to a profit of $24 million in 2022. Rifai said the figures of the most recent financial year had been heavily impacted by La Nina floods, which damaged 18,000 tonnes of tomatoes.

The business has made new executive appointments recently, appointing South African-born consumer goods executive Neil Brimacombe as chief executive. Earlier this month, former Asahi CEO Rob Iervasi joined the board of directors, which Rifai said would greatly assist with SPC’s mergers and acquisition goals and push into the beverages sector.

Regarding the capital raise, Rifai said there might be apprehension among Goulburn Valley locals who may have had a negative experience with SPC under the Coca-Cola ownership, but he said the business was prepared to “put our money where our mouth is”. 

“My children’s money is in there, just like you. I’ve got more to lose than anyone else,” said the chairman, who is a shareholder through his investment firm Perma Funds Management, which owns 58 per cent of SPC.

“Get your ownership back. Be part of the success of this business because the success of the business means success of the valley. It has meant that for 100 years, and it will continue to be that.”

3 Oct, 2023
Kellogg board approves company’s split into two listed entities
Inside FMCG

Kellogg’s board of directors has approved the FMCG giant’s split into two independent, publicly traded entities: Kellanova and WK Kellog Co. 

From October 2, Kellogg Company will be renamed Kellanova and will continue to trade on the New York Stock Exchange under the ticker symbol “K”, while WK Kellogg Co will trade under the ticker symbol “KLG”.

Kellog chairman and CEO Steve Cahillane said the decision was made after more than a year of comprehensive planning and execution.

“We are more confident that the separation will produce two stronger companies and create substantial value for shareowners,” said Cahillane.

Kellanova will focus on an expanding portfolio geared towards snacks and emerging markets, led by various brands.

It is projected to generate net sales of an estimated US$13.4 to $13.6 billion and an adjusted-basis EBITDA (earnings before interest and tax, depreciation, and amortisation expenses) of $2.25 to $2.3 billion next year.

“We are looking forward to a new era as Kellanova, marked by a more growth-oriented portfolio, a renewed vision and strategy, and an energised organisation grounded by a winning culture and our founder’s values,” continued Cahillane, who will serve as chairman and CEO of Kellanova.  

“These elements build on what has already been a track record of strong and consistent financial performance for the Kellanova portfolio.”

Meanwhile, WK Kellogg Co will continue to build on the foundation of its “iconic” cereal brands and will focus on integrating its commercial strategy and execution while modernising its supply chain. 

Gary Pilnick will serve as its chairman and CEO following the separation.

The business is expected to earn an estimated $2.7 billion in net sales and adjusted-basis EBITDA of approximately $225 to $265 million in 2024. 

Pilnick explained that as a standalone company, it will immediately benefit from the advantages of increased focus and end-to-end integration while modernising its supply chain.

“WK Kellogg Co has a 117-year legacy of innovation and the soul of a start-up, with an organisation incredibly energised by our future,” he concluded. “We’re on a profitable journey to take this great business to the next level.”

Kellogg Shareowners of record will receive one share of KLG for every four shares of K owned. 

3 Oct, 2023
Guzman y Gomez reveals $759 million revenue, 30-store plan
Inside Retail

Guzyman y Gomez founder Steven Marks has revealed a revenue of $759 million in the 2023 financial year, a lift of 32 per cent on the previous year.

Underlying earnings rocketed 56 per cent to $32 million in what Marks described as “a phenomenal year”.

GYG reported the median weekly average unit volumes for a drive-thru restaurant was $106,000. A strip restaurant had AUV of $80,000, up 16 per cent on the previous corresponding period.

Franchisees achieved a median return on investment of 47 per cent.

Fast growing store network

Marks said: “FY24 will bring us the opportunity to innovate across all parts of our menu, drive more sales through our digital channels and sustainably grow comps across our network.”

The GYG app and website accounted for 17 per cent of Australian network sales in June 2023. The figure is a 12 per cent rise on the contribution in June 2022.

The Mexican fast food chain now boasts 200 restaurants globally with the recent launch of the Cairns outlet.

The chain was listed by GapMaps as one of the fastest-growing QSR brands by store numbers this year

Another 30 outlets, including drive-throughs, are in the plans for the Australian market. There 23 GYG restaurants in the US, Singapore and Japan.

In the new US market GYG reported $6 million in network sales. In Singapore and Japan, network sales rose 35 per cent to $50 million.

Steven Marks signals ASX listing

Marks earlier this year announced he would step back from his CEO role and the business continues its search for his replacement.

At the time he referenced his dream of an IPO. “Whenever that happens, I want to ensure I have a world class and experienced team in place to lead GYG well into the future.”

This week he has hinted at a possible listing on the Australian Stock Exchange in late financial year 2024 or 2025.

Marks told the Sydney Morning Herald that GYG was prepping for a stock listing, the timing dependent on the board and investors.

This story was originally published on Franchise Executives.

3 Oct, 2023
Bondi Sands expands presence on US shores with Walmart launch
Inside FMCG

Australian tanning brand Bondi Sands is expanding its presence in the US market with a nationwide launch in Walmart. This partnership represents the eighth major US retailer to list the brand’s product range within the past six years. 

Walmart will make eight of Bondi Sand’s bestsellers available – in-store and online – including the Self Tanning Foam, Self Tanning Foam 1-Hour Express, Everyday Gradual Tanning Milk, and Self Tan Eraser. 

Through this expansion, the company said it aims to make salon-quality, affordable, vegan, and cruelty-free tanning products accessible to a broader audience.

“We are thrilled to cultivate a new relationship with Walmart and introduce our self-tanning range to a new category of shoppers,” said Blair James, co-founder of Bondi Sands.

“Propelling our global presence with Walmart is an unmatched growth opportunity for us, and we’re excited to offer the beauty consumer what they’re looking for – salon quality tanning products at an affordable price.”

Established in 2012, Bondi Sands offers a range of self-tanning and suncare products. 

3 Oct, 2023
‘Appetite for growth’: Zambrero is taking Aussie burritos to Ireland and the UK
The Sydney Morning Herald

The head office of Zambrero is situated in the buzzy precinct of Circular Quay, overlooking Sydney’s Harbour Bridge.

But Matthew Kenny, chief executive of Australia’s largest Mexican food chain, has his sights set further afield: on Ireland, Britain and the United States, as he oversees the franchise’s international expansion.

“Truly becoming a global brand is probably the thing that I’m excited about most,” Kenny said in his first major interview as CEO. “Even in uncertain times, what many would describe as difficult economic conditions, we still have an appetite for growth.”

Zambrero was founded in 2005 by serial entrepreneur and philanthropist Dr Sam Prince as a medical student with $16,000 in savings. He went on to start other businesses including not-for-profit One Disease (which successfully eliminated crusted scabies in the Northern Territory); Next Practice (to create a new model of GP medical centres); Shine+ (a natural energy drink); and other hospitality ventures Mejico and INDU.

Kenny, a former banking and finance lawyer, joined the business in 2018 as general counsel and chief operating officer across Prince’s entire group but found he was spending most of his time on Zambrero. He stepped into the chief executive role in 2020, at the beginning of the pandemic.

Although Kenny is at the helm, founder Prince remains very involved in the business; the Mexican food chain’s overall strategic vision and direction is set by Prince and then executed by Kenny. New Zambrero products don’t get sign-off without the approval of Prince, whose philanthropic focus remains at the core of the business: for every burrito or bowl Zambrero sells, it donates a meal. In early August, the chain celebrated a key milestone of 70 million donated meals.

On top of its 220-odd Australian restaurants, it has 20 in Ireland, seven in Britain and one in the US, with plans to eventually launch in mainland Europe. The British and Irish market will remain a key priority this financial year.

Towards the end of last year, Skip Capital (co-founded by Atlassian’s Scott Farquhar and his wife, Kim Jackson, an asset manager) and London-based Metric Capital Partners invested $250 million into the business, in a deal that valued Zambrero at roughly a billion dollars. Prince retains a majority shareholding of more than 70 per cent.

Homegrown

Closer to home, its aspirations are no less ambitious: Zambrero has plans to open about one restaurant a week, with a goal of reaching 400 in Australia. To court customers, it is eyeing real estate in Australia’s biggest cities in populous areas such as Sydney’s northern beaches.

But it faces a fierce rival in Guzman y Gomez, which not only has a strong brand and loyal customer base but is not shy about its own ambitions to expand rapidly, float on the ASX soon and conquer the US market. Meanwhile, smaller competitor Mad Mex, which has about 70 stores, has recently installed a new chief executive with a “ruthless focus on operational efficiency”.

Kenny claims they’re not paying too much attention to their competitors. “We’re really focused on ourselves,” he said. Part of the solution, the chief executive believes, is simply to build out. “Presence is important,” Kenny added, pointing out that the overall popularity of Mexican food has increased in the past two decades.

“The reason [Sydney and Melbourne] are so important to us and such big growth opportunities is because as soon as we put restaurants there to make it available to customers, it’s our job to attract those customers into becoming frequent users.

“Yes, people are loyal to certain brands, and it’s our job to try to attract them from those brands.”

Zambrero will also be fighting other food outlets and restaurants for hospitality workers. Kenny highlighted staffing as the Mexican food chain’s biggest challenge, not just in Australia but around the world, but said there were signs that the worker shortage was beginning to ease as Australia received the largest influx of migrants in history.

“We’re currently opening a restaurant a week across the world, which is quite frantic when you think about it. Ensuring that we have enough staff and the right staff to maintain that growth is the most important thing,” he said.

”I think everyone’s experienced challenges. Now we’re starting to see that soften. But still, I think it’s important to ensure that we continue to strive to be an employer of choice.”

Despite cost of living pressures on household budgets, which at Guzman y Gomez has led to a decline in order values as customers flock to cheaper offerings, Kenny said the business had not seen a significant drop in sales, which he described as “steady”. He declined to provide sales or revenue figures.

“People talk about fast food and [quick-service restaurants] as being kind of counter-cyclical in a downturn market ... recession-resistant. My view is that whilst that might have been happening in the past, we don’t know if that’s actually going to proceed to the future. So to me, I am cautiously optimistic about our business,” Kenny said.

“Customers are more picky with their choices. They have less tolerance for poor product or service. For us, if we ensure we deliver a great product all the time, that experience will hopefully lead us in good stead to take advantage of the market going forward.”

3 Oct, 2023
New Krispy Kreme ANZ CEO Nicola Steele started with chain at 19
Inside Retail

Krispy Kreme ANZ has appointed Nicola Steele, who has been with the company since she was 19, as its new CEO, effective immediately.

Steele has worked with Krispy Kreme since 2006, rising through the ranks from crew member to store manager and area manager. She left university in 2011 and returned to Krispy Kreme as a state manager before progressing to senior leadership positions including national operations manager and head of retail & development, where she was instrumental in the brand’s expansion into Western Australia and New Zealand. 

Steele increased Krispy Kreme’s ANZ retail footprint over the next eight years before being appointed to COO in March last year.

“My focus is to broaden the horizons of career pathways for our employees,” she said. 

“I want to be able to offer all team members development and career opportunities that were afforded to me.” 

With the new role, Steele is in charge of the brand’s expansion, including concentrating on regional growth, establishing convenience partnerships, as well as investing in e-commerce and digital platforms.

3 Oct, 2023
Unilever hires consultants to sell ‘non-core’ beauty portfolio
Inside FMCG

Unilever has hired Morgan Stanley and Evercore to sell a portfolio of non-core beauty and personal care brands as the company struggles with the impact of inflation.

The portfolio includes Q-Tips, Impulse, Caress, TIGI, Timotei, Monsavon, St Ives, Zwitsal, Ponds, Brut, Moussel, Alberto Balsam and Matey.

Two years ago, Unilever hired Credit Suisse to divest Elida Beauty portfolio but later scrapped its plan as other companies cherry-picked brands from the portfolio and did not satisfy the multinational FMCG company’s expectations.

Now the plan has been revived under the leadership of new CEO Hein Schumacher, who focuses on streamlining the business due to inflation, Reuters said in an exclusive report.

The report noted that Elida Beauty booked revenue of about $760 million in FY22, according to sources of the newswire.

Morgan Stanley and Evercore have already reached out to potential buyers to measure interest for the portfolio, which could be a multibillion-dollar deal, the sources said.

3 Oct, 2023
‘A lot of trends start here’: Nespresso wants to win the cost of living war in Australia
The Sydney Morning Herald

Nespresso’s famous pods, first developed in 1988, are manufactured in Switzerland and then shipped to 81 countries around the world. But when it comes to brewing fresh ideas and new technology, the maestros of capsule coffee often take their cues from Down Under.

“We bring innovation from the market to the head office because they realise and recognise that a lot of trends start here in Australia,” says Nespresso Oceania managing director Stefan Vermeulen.

He points to a framed visual of the Creatista machine, which along with the Vertuo machine was conceived in Australia, a top 10 revenue-driving market for Nespresso. “This is one of our best-selling machines across the world.”

Vermeulen has recently relocated to Sydney to step into his new role as head of the company’s Australia and New Zealand markets. A Belgian national, the managing director started with Nestle-owned brand in 2011 as an account manager and then climbed the ranks to do a 4.5 year stint as the head of Nespresso Professional Australia, the corporate office, food service and hospitality arm of the business, before leading NZ operations for 3.5 years.

As regional managing director, Vermeulen will focus on defending Nespresso’s position as the market incumbent and protecting its brand as a high-quality premium coffee capsule, particularly as economic pressures, such as mounting interest rates and higher grocery prices, bite into household budgets.

“I think, moving forward, portioned coffee is really the system that’s going to prevail,” he says.

“In an environment of cost of living [pressures], to provide a solution that brings a … no-barista-required experience in your home, this is not only in terms of quality the best way to do it but also a sustainable way to do it because of its precision consumption design.”

But competition in the coffee space is fierce: Vermeulen is conscious there is no shortage of ways to consume coffee at home, something that 67 per cent of Australians do. Instant, ground, roasted whole beans, filter coffee, cold brew, and ready-to-drink coffees such as Dare all vie for consumer dollars that are increasingly being carefully counted and driving customers towards more affordable private-label brands.

3 Oct, 2023
Australia seeks separate dialogue on China wine dispute
Inside FMCG

Australia wants a separate dialogue with China on their dispute over wine, the agriculture minister said on Sunday, rejecting Beijing’s proposal to link wine with other trade issues as the two nations slowly seek to improve battered relations.

China’s removal of tariffs last month on Australian barley has raised hopes for an easing of wine tariffs, in place since 2021, which have hammered the country’s wine exports.

Bilateral relations sank in 2020 when Australia called for an inquiry into Covid-19 origins, triggering reprisals by Beijing, including a raft of trade restrictions that hurt Australia’s export-reliant economy.

China on Thursday proposed a “packaged solution” that would tie the wine dispute to those about duties on Australian imports of Chinese railway wheels, wind towers and stainless steel sinks, state news agency Xinhua reported.

But Agriculture Minister Murray Watt said on Sunday, “We see them as entirely separate matters.” The government wants the wine dispute “resolved in the same way the barley dispute was resolved – through dialogue”, he told the Australian Broadcasting Corp.

“We will continue our WTO (World Trade Organization) case when it comes to wine and we will continue to defend the case when it comes to steel,” Watt said, referring to disputes ongoing at the global trade body.

China was Australia’s top wine export market before Covid, peaking at $770 million for the 12 months to January 2020 when the pandemic hit. In the year to June, they had plunged to $5.2 million.

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