News

15 Apr, 2024
Adviser sought for Darrell Lea parent company’s sale
The Australian Business Review

Quadrant Private Equity is understood to have recently launched a beauty parade to pick an adviser to sell Darrell Lea owner The RiteBite Group, say sources.

It is understood that investment banks have received requests for a proposal in recent weeks.

The understanding is that the Sydney-based Quadrant had aspirations to sell the business this year.

However, some believe it now may be backing away from that plan as the cost of cocoa has gone through the roof which is likely to push up the cost of chocolate across the industry even further in 2025.

This may cause product costs to rise sharply, impacting earnings.

The private equity firm was believed to be thinking about a sale of RiteBite in 2021 but pulled back in an effort to focus on growing earnings.

Likely buyer candidates could be groups like Kohlberg Kravis Roberts, which owns Arnott’s Biscuits, Fererro Group, of Ferrero Rocher chocolates and Nutella, and the locally based Pacific Equity Partners.

Mondelez would be ruled out as a buyer because it owns chocolate giant Cadburys.

Quadrant bought Darrell Lea in 2018 for about $200m before creating the RiteBite Group the next year.

RiteBite owns other confectionery and snack brands such as New Zealand’s RJ’s and Life Savers, along with Well Naturally, The Bar Counter, Munchme, Systemax, Planet Food, CrispyFruits and Smooze.

The brand Darrell Lea is best known for its licorice, chocolate bullets, All Sorts and Rocklea Road sold widely now in supermarkets and has been run by former Allied Pinnacle boss James Ajaka since 2020.

Mr Ajaka told The Australian last week that the rising cocoa price had been the greatest challenge across the industry, increasing 220 per cent for the past two years.

The Wall Street Journal reported before Easter that cocoa futures topped $US10,000 a metric ton for the first time ever as major West African producers like Ghana and Ivory Coast reported lacklustre harvests due to bad weather and crop disease.

The industry as a whole has responded through price rises, ranging from 5 to 11 per cent in that two-year time frame.

Darrell Lea was a family business founded in 1927. Quadrant purchased it from the Quinn family and now has plans to expand further into the US market, which accounts for a fifth of its $500m of annual sales.

The business had collapsed in 2012 after earlier having hundreds of retail stores across Australia, and the Quinn family, founder of VIP Petfoods, bought it out of administration, reportedly for about $25m.

Reports are filtering through the private equity market of a number of beauty parades afoot to pick banks to sell businesses in funds from the second half of the year onwards.

The rising interest rate environment in the past 18 months has made asset sales hard because of the large debt costs, so funds have had few strong divestment opportunities for some time.

Quadrant also wants to offload its Affinity Education business this year and Amart furniture company, and an adviser is also potentially being sought for that company after Jefferies had been on the ticket.

Other sellers are Potentia and Crescent Capital, while global fund Kohlberg Kravis Roberts is believed to be holding back on divestments for now, until interest rates fall.

According to a report from MergerMarket, private equity and venture capital exits for 2023 totalled $US7.8bn across Australia and New Zealand.

This compared with $US20.7bn in 2021 and $US32.8bn in 2022 as managers made the most of highly liquid markets when interest rates were low.

15 Apr, 2024
Aldi tops customer satisfaction rankings for fourth year in a row
Inside Retail

Aldi bagged the Supermarket of the Year 2023 title from the Roy Morgan’s Customer Satisfaction Awards – for the seventh time and the fourth consecutive year.

The supermarket chain boasted an average 95.7 per cent customer satisfaction score.

“This the fourth consecutive year that we’ve received the award, and at a time when shoppers are continuously seeking better value, we have never been more aware of the need to continue to deliver on our promise to offer Aussies the highest quality products at the lowest possible prices,” Aldi Australia director Simon Padovani-Ginies said.

Aldi claims to have delivered $3.4 billion in savings to local consumers in 2023.

“Aldi’s business model is about saving people money. We aim to cut out unnecessary costs and pass these savings onto customers.”

15 Apr, 2024
Multinational giants urged to front supermarket inquiry for ‘playing hardball’
The Sydney Morning Herald

Global multinational food giants such as Nestle, Coca-Cola, Mars and PepsiCo are facing a push to front the Senate inquiry into supermarket prices, after being accused of playing hardball with Australian retailers and driving up prices at the checkout.

The Australian Retailers Association chief executive Paul Zahra called on large multinational suppliers to appear at the inquiry, arguing these businesses often had parent companies several times larger than Coles or Woolworths and would set prices on household brands that often left local retailers no option but to accept price increases.

“Multinationals play hardball, and it comes down to power. It’s not specific to food … in a multinational pricing negotiation, the retailer has very little to no movement on price,” he said.

Zahra urged the Senate inquiry to examine the transparency of the supply chain on pricing, as well as ethical sourcing and conduct.

“It’s got to go beyond the retailer input. You’ve got to include the full supply chain from the very beginning of the product being sourced, right through to its transportation, to then being sold in store,” Zahra said.

Globally headquartered companies such as Unilever, Procter & Gamble, Mondelez International or Kraft Heinz are not obliged to publicly reveal their Australian profit or revenue.

However, IBISWorld data estimates Nestle’s Australian net profit at $2.6 billion with a 5 per cent profit margin; PepsiCo’s profits at $2 billion with a 2.4 per cent margin; Mars Wrigley at $1.8 billion with an 8.3 per cent profit margin; and Unilever at $1.1 billion with a 3.5 per cent profit margin.

Overseas, Kraft Heinz’ net margin is 8.9 per cent, PepsiCo’s is 10.3 per cent and Unilever’s is 13.8 per cent.

In Woolworths’ submission to Dr Craig Emerson’s review of the food and grocery code of conduct, the supermarket stated large multinational suppliers sell “must-have brands” that accounted for more than 60 per cent of all sales in 2023.

The biggest 100 suppliers accounted for more than 80 per cent of all price increases.

In categories such as pet needs, two major suppliers represent more than 50 per cent of sales; in snacks, the top three suppliers account for 62 per cent of sales in that category.

“Large suppliers are often robust cost price negotiators and may, in some cases, withhold the supply of products as part of the negotiation,” Woolworths said in its submission.

“In many cases, we are obliged to accept these cost price increases or face an inability to supply our customers with well-known brands.”

The inquiry’s terms of references includes a mandate to examine “the role of multinational food companies in price inflation”.

No multinational companies have been called to face the inquiry so far.

Western Australian Labor senator Glenn Sterle said the inquiry committee had called “a diverse range of witnesses” to provide evidence but did not say whether this included multinational companies.

“The committee is continuing to consider further public hearings,” he told this masthead.

Tasmanian senator Tammy Tyrrell said it was the go-to for the major supermarkets to blame multinational companies. “There’s always someone bigger and badder to pass the buck too, right?” she said.

“It’s on the major supermarkets to sit before the Senate inquiry and explain to Australians why their grocery bill is going up, but the items in their trolley are going down.”

Other Senate select committee members have been contacted for comment.

Australian Food and Grocery Council chief executive Tanya Barden, who represents food manufacturers that supply to supermarkets, objected to Woolworths’ characterisation of multinationals withholding supply.

“Product is still available for sale, the retailer is just choosing not to buy it at a new price,” Barden said. “They’re not withholding supply, they’re wanting to sell it … the supply’s available for sale, it’s just the retailer’s not wanting to purchase it at that price.”

Multinationals often make lower margins in Australia than they do overseas, Barden added.

“It’s important that they are able to operate profitable businesses in Australia, otherwise manufacturing risks moving offshore.”

In 2019, Australian shoppers were unable to purchase Nestle-owned Uncle Tobys oats after Woolworths refused to pass through a 6 per cent price rise.

Customers were also unable to purchase pet food brands such as Whiskas and Pedigree from Woolworths and Coles following a similar situation with Mars Petcare.

In January, French supermarket Carrefour pulled PepsiCo products such as Lay’s chips and soft drink 7Up from shelves due to “unacceptable price increases”.

Inquiry hearings will resume on Monday when former ACCC chair Allan Fels, unions, the competition watchdog, Treasury and the Department of Agriculture are due to appear.

Coles and Woolworths chief executives Leah Weckert and Brad Banducci will appear on Tuesday.

 
15 Apr, 2024
Why re-establishing Australia’s wine sales in China won’t be easy
Inside FMCG

China’s Ministry of Commerce has finally ended its tariffs on Australian wine, which had been imposed for more than three years at rates as high as 218.4 per cent.

The measures have had a catastrophic impact on Australia’s wine exports.

In 2019, Australia sold $1.24 billion worth of wine to China, surpassing France to capture a market share close to 40 per cent. But by last year, this had collapsed to less than $1 million.

Dreams to diversify to new markets in the interim mostly fizzled. Last year, US imports of Australian wine actually fell by about 20 per cent, the UK held flat, and sales to India remain trivial. A stubborn wine glut has plagued Australian producers as a result.

The removal of tariffs has stirred industry hopes for some relief. But while we’ve been away, things have changed in the Chinese wine market, and challenges lie ahead.

Since we’ve been gone

The departure of Australian wine from the Chinese market created a gap that was quickly filled by other suppliers.

France has since regained first place with a market share of 49 per cent, followed by Chile at 17 per cent.

But the size of China’s imported wine market has also more than halved over this period, falling from $3.3 billion in 2019 to $1.5 billion last year.

On re-entry, Australian wine producers are set to face stiff competition in a significantly smaller market.

A couple of factors may be on our side. One will be a return to the preferential tariff rate that was negotiated for Australian wine under the China–Australia Free Trade Agreement.

This tariff had been reduced to zero for Australian wine, in contrast to a generic tariff of 14 per cent applicable to many other foreign suppliers.

Secondly, the fact that China’s market for imported wine has shrunk doesn’t mean it will stay that way forever. Back between 2014 and 2019, wine imports to China grew by $1.25 billion, and Australian producers met nearly 70 per cent of this increase.

The hope for Australian growers is that brand loyalty among Chinese consumers and savvy marketing will be enough to restore Australia’s share of a once again growing pie.

Major Australian producers like Treasury Wine Estates have maintained sizeable staff headcounts in China, expecting the Chinese market to return to prominence in their business.

Lessons for Australia – could it happen again?

Crushing tariffs on Australian wine may be gone for now, but that doesn’t mean our producers are safe forever. Given China’s track record of using retaliatory anti-dumping measures, it would be wise for Australian exporters to stay alert, particularly if Australia’s own anti-dumping action continues to target China.

However, two key factors could encourage Beijing to maintain this decision longer term.

1. A need to maintain credibility

China has a vested interest in maintaining credibility at the World Trade Organization (WTO), because it uses the organisation to settle its own disputes.

In March, Canberra committed to implementing an adverse decision in a case brought by China involving wind towers, stainless steel sinks and railway wheels.

Conversely, Australia used the WTO to challenge Chinese tariffs on barley and wine. Although both cases took almost three years, they imposed pressure on China and arguably accelerated the removal of these tariffs.

In contrast, Beijing has ignored decisions against it in cases brought by the US. This does not risk Beijing’s reputation in the same way, because Washington has repeatedly done the same in cases brought by China and other WTO members.

To maintain the WTO’s effectiveness, Australia and China have a shared interest in restoring its appellate mechanism, the Appellate Body. The US has blocked the appointment of new judges to this body since 2019, paralysing its ability to uphold, modify or reverse findings of WTO panels.

2. It was always diplomacy in the first place, hardly protectionism

Some commentators have suggested that protecting Chinese producers was an important consideration behind Beijing’s decision to first impose the tariffs, and that the country’s local industry lobby groups were well-placed to campaign to keep them in place.

Yet, despite more than three years of tariffs on imported Australian wine, the proportion of domestic production in China’s total wine supply still fell – from 61 per cent in 2020 to 55 per cent in 2022.

The risk of a return to tariffs for protectionist purposes shouldn’t be overstated, as the most plausible explanation of the disruption in 2020 was always Australia’s sharply deteriorating political relationship with China.

It was not surprising that the removal of the tariffs coincided with both sides now agreeing, in the words of Chinese Foreign Minister Wang Yi when in Canberra recently, to “manage and rise above” their differences.

Australia’s relationship with China may be warming, but further development will require sustained commitments by both sides to cooperate in areas of common interest and manage disagreements constructively based on mutual respect and engagement.

It’s hard to imagine the removal of duties will see the Chinese market soon delivering the same fortunes to Australian winemakers it did prior to 2020. But it will provide some much-needed relief.

It also offers broader lessons for Australia and is another data point confirming a positive trajectory in the overall bilateral relationship.

15 Apr, 2024
Woolworths partners with Tesco on $190m start-up investment fund
Financial Review

Woolworths is launching a $US125 million ($190 million) venture capital fund with four overseas retailers, including the UK chain Tesco, despite other companies pulling back from investing in start-ups.

The fund will be called W23 Global and run out of the same Sydney office as Woolworths’ domestic venture capital fund W23, which launched in 2019 and has invested in companies including meal-kit seller Marley Spoon and telehealth start-up Eucalyptus.

Tesco, Woolworths, the Canadian retail conglomerate Empire Company, South Africa’s Shoprite Group and the European-headquartered Ahold Delhaize all have equal investments in W23.

The fund will be deployed over five years and each investment will be approved by a committee comprised of the chief executives of the five retailers. Its mandate is to invest in strategically useful companies for its supermarket backers, including in supply chains and sustainability.

Technology giant Salesforce cut its Australian venture capital fund early last year and the big four banks have had mixed success with their corporate venture capital funds.

W23 Global’s pitch is that its portfolio companies will gain access to a group of big potential customers and advisers without being beholden to one supermarket chain.

W23 Australia boss Ingrid Maes will also run the new fund as chief executive and chief investment officer, though it will legally be based in the United Kingdom.

“With five of the world’s leading grocery CEOs sitting on our investment committee and access to our broader ecosystem, our founders can test and develop their ideas quickly based on an accelerated understanding of retailers’ needs,” Ms Maes said.

W23’s spokesman declined to make her available for interview or specify the returns that the fund is targeting.

Corporate venture funds have a patchy reputation in Australian venture capital circles. Large companies that launch venture funds may eventually come into competition with the start-ups they back, or resent their decisions to work with competitors. And though corporate funds are designed to back riskier ventures than their corporate parents, sometimes public company bosses are wary of taking on the same risks as independent venture capitalists.

In an announcement on W23 Global’s launch, the fund emphasised that companies it invests in will be free to do business with any customers. And Ms Maes said W23 Global would act like other venture funds.

“We’ll be there when founders need us, but get out of the way when they don’t,” she said.

W23 Global’s founding marks a bright spot for the Australian venture capital industry, where some smaller funds have struggled to raise and larger funds are returning to the market to seek more cash.

Those dynamics were caused by the pandemic-era bubble where venture funds invested at inflated prices, denting their returns.

The chief executive of South Africa’s ShopRite, Pieter Engelbrecht, said his 3543-store chain faced trading circumstances unlike anything the other W23 backers had to deal with.

“In a country with one of the highest levels of inequality in the world … we at the Shoprite Group have to find more affordable solutions for our
customers to sustain their livelihoods, every day,” Mr Engelbrecht said. “This is the driving force behind our need to innovate faster than most retailers and is why we entered this venture with our esteemed global counterparts.”

15 Apr, 2024
Supermarket prices under pressure in new grocery code
The Sydney Morning Herald

Shoppers will pay less and farmers will be paid more under the Albanese government’s pledge to make controversial reforms to address the nation’s cost-of-living crisis, which may force major supermarkets to reveal the markup they charge on fresh food and what they pay farmers.

An interim review of the grocery code of conduct released on Monday said compulsory regulations should be imposed on supermarkets to govern how they deal with suppliers, backed by heavy fines and new rules to address claims of price gouging and market manipulation.

Treasurer Jim Chalmers said the government agreed in principle with the recommendations and the current voluntary code of conduct would “absolutely” be beefed up to drive down prices for shoppers.

“The whole point of this interim report is: how do we make the code tougher, how do we make it compulsory, better dispute resolution processes and bigger penalties for people who do the wrong thing,” Chalmers said.

The government would also announce “very substantial changes” to laws governing company mergers to streamline the regime, which Chalmers said would make the economy more productive.

Price gouging claims were first levelled late last year when plummeting livestock markets delivered cheaper cuts of red meat to supermarket shelves.

Cattle prices fell 66 per cent across the east coast in the 12 months to October, and lamb prices were down 38 per cent in the same timeframe, but lamb cutlets sold in major supermarkets for about $43 a kilogram, and rump steak $28 a kilogram.

Farmers argue that a more transparent market would deliver fairer returns and predictable prices to enable them to invest in efficiency measures and drive down wholesale costs. Supermarkets would also be held to account if retail prices rise steeply above wholesale costs.

“If the senior management of a supermarket chain establishes an incentive system for their buyers and category managers that rewards maximising margins and penalises low margins, the buyers and category managers will squeeze suppliers as hard as possible,” the interim report stated. It was led by Craig Emerson, a former competition minister in the Rudd and Gillard governments.

Opposition Leader Peter Dutton said the interim recommendations supported by the government would not reduce prices at the checkout. “They are not going to be the solution consumers are looking for,” he said.

“I think this is a Mickey Mouse review that’s been conducted by a Labor mate with an outcome predetermined by the treasurer.”

Farmers told the inquiry that supermarkets have in some instances set unrealistic standards for the quality of produce and can reject shipments from suppliers who seek higher prices.

National Farmers Federation chief executive Tony Mahar said the government must deliver on its promise and prevent supermarkets squeezing farmers with unsustainable prices.

“We are going to hold them 100 per cent accountable to this process. What we don’t want is for it to be just a show of support, but then nothing materialises,” Mahar said.

“Senior management have got to be accountable for the pressure they put on their buyers. That behaviour should be transparent and if it’s detrimental to suppliers, then there should be ramifications.”

Coles stopped short of endorsing the recommendations, saying only they are committed to the objectives of “delivering value to our customers while maintaining strong, collaborative relationships with our valued suppliers”.

Woolworths said it supported a mandatory code “for all large retailers and wholesalers of groceries to engender public trust and to level the playing field for retailers and wholesalers alike”.

In Woolworths’ submission to Emerson’s review, the dominant grocery giant said major multinational suppliers were raising the prices of well-known brands, but would not give examples.

IGA operator Metcash said it did not object to the code “in its current form” becoming mandatory and was considering the report’s implications on the broader business. Aldi, which is a voluntary signatory to the code, said it supported the code becoming mandatory.

The Australian Competition and Consumer Commission said large fines as well as arbitration between suppliers and supermarkets were needed.

“The interim report highlights and recommends several changes that the ACCC sees as important, such as meaningful penalties and a more independent dispute resolution process,” a spokesperson said.

Consumer advocacy organisation CHOICE said Emerson’s interim report was recognition that voluntary codes were ineffective.

“Unfortunately, big businesses need strong incentives to comply with the law,” said CHOICE director of campaigns Rosie Thomas, who also called for stronger merger laws.

“This highlights why it’s important we have those merger laws right first, to stop supermarkets and other businesses growing bigger and more powerful in ways that harm consumers.”

15 Apr, 2024
Supermarket review recommends huge fines, mandatory code for Woolies and Coles
SOURCE:
The Age
The Age

Australia’s major supermarkets could face fines that run into the billions of dollars if they fail to comply with a revamped and mandatory code of conduct designed to protect farmers and families.

An interim review of the Food and Grocery Code of Conduct, to be released on Monday, has the country’s big four supermarket retailers and wholesalers – Woolworths, Coles, Aldi and Metcash, which supplies IGA – squarely in its sights with a series of recommendations designed to deliver cheaper prices for consumers and fairer prices at the farm gate.\

The review is being led by Craig Emerson, who was competition and small business minister in the Rudd and Gillard governments. He was tasked with undertaking the review by the Albanese government in January amid growing outcry that supermarkets were failing to pass savings on even as the prices paid by the big retailers for meat, fruit and vegetables were falling.

The federal government is under intense pressure to address cost-of-living concerns in the May budget. The interim review is being released as the Greens push new laws – which the Nationals and a handful of Liberals have backed – that would allow the Australian Competition and Consumer Commission (ACCC) and the courts to force corporations such as Woolworths and Coles to sell assets if they grow too big.

The big four signed on to the voluntary code of conduct when it was established in 2015, but in his interim report, Emerson found a heavy imbalance in market power between the major supermarkets and their smaller suppliers, who fear retribution if they complain under the current code.

To remedy this, Emerson has recommended the code be made mandatory and major breaches of the code should be met with fines which would be the greater of $10 million, 10 per cent of a company’s turnover or three times the benefit gained from the breach of the code. Penalties for minor breaches of the code would be set at up to $187,800.

If a fine of 10 per cent was imposed on one of the major supermarkets, it would probably be one of the largest fines in corporate history.

Coles reported turnover of just over $40 billion in the most recent financial year, so a fine of 10 per cent of its turnover would be about $4 billion. Woolworths reported sales of $48 billion.

Metcash reported $9.6 billion in food sales in the financial year to June. Aldi reported about $12 billion.

Emerson said the interim report offered the government a practical, low-cost solution and that the idea of imposing a fine equivalent to 10 per cent of turnover had been modelled on the franchising code of conduct.

“I hope this is well received,” he said. “I have sought to achieve the best of both worlds – a tough penalty regime for systemic bad behaviour but mediation and arbitration which, if agreed by the supermarkets under the constitution, would do most of the work to resolve complaints.”

In the report, Emerson says critics of the voluntary code point to the small number of disputes filed under the code as evidence of its failure.

“They nominate the fear of retribution by supermarkets as the dominant reason for so few disputes being raised by suppliers,” Emerson wrote.

That retribution could lead to unfavourable terms and conditions being imposed on suppliers, relocation of products to less popular locations in stores and even delisting of a supplier’s products.

Treasurer Jim Chalmers said the review was an important part of the government’s competition reform agenda, which included an ACCC inquiry into supermarket prices, a boost in funding for supermarket price monitoring by Choice and a comprehensive review of competition policy settings.

“We want a fair go for families and a fair go for farmers,” Chalmers said.

“This work is all about making our supermarkets as competitive as they can be so Australians get the best prices possible.”

Under Emerson’s proposed law changes, the ACCC would help enforce the code but, rather than leaving the enforcement process to potentially years-long court cases, an independent arbitration system would be used so suppliers that brought a complaint would not go bankrupt while waiting for their case to be heard.

The ACCC would continue to be able to issue public warning notices, seek injunctions, initiate court proceedings and accept court-enforceable undertakings.

Compensation for suppliers affected by breaches of the code by one of the major supermarket chains would be capped at $5 million. Emerson also advocated for an anonymous complaints process to be established.

Eight recommendations, including the penalties making it mandatory, and changes to the code to ensure supermarket suppliers don’t fear retribution will not change between now and the final report being handed over on June 30 but three recommendations, including how to implement low-cost dispute resolution, are still to be finalised.

8 Apr, 2024
Aldi launches its first streetwear range
Inside FMCG

Aldi Australia will debut its first streetwear collection in mid-April, aiming to offer effortlessly elegant and casual pieces for less. 

The Aldimania collection includes 23 products priced under $20, including trendy slides, bucket hats and beanies, fleece sweatshirts and pristine white trainers. 

“We have been offering our shoppers high-quality, affordable loungewear for years, but this is the first time we’ve brought our own brand of leisurewear to the middle aisles,” said Aldi Australia’s buying director for Aldimania, Belinda Grice. 

“Designed to celebrate and champion our shoppers, this new range is made specifically with Aldi budgets in mind, without compromising on quality or comfort.”

According to Grice, the collection is made from ethically sourced or repurposed materials and was designed to be mix-and-matchable.

In addition to celebrating the launch of the new collection, Aldi Australia will be giving away five sets to its stylish customers through the Aldi Australia Facebook page beginning April 3.

8 Apr, 2024
Australian wine back on the menu after China ends crippling tariffs
The Australian Business Review

Australian wine will retake its place among Chinese supermarkets, restaurant wine lists and banquet tables after Beijing announced the end of crippling tariffs that should see China return to being the Australian wine industry’s biggest export market.

Late on Thursday afternoon, just before the Easter break, China’s Ministry of Commerce announced the end of the politically-motivated tariffs that had all but wiped out what was once a $1.2bn export trade for Australia.

“The Ministry of Commerce ruled that in view of the changes in the relevant wine market conditions in China, it is no longer necessary to impose anti-dumping duties and countervailing duties on imported relevant wines originating in Australia,” the Ministry of Commerce said in a statement.

The Beijing ministry said the tariffs would be lifted on March 29, Good Friday.

Anthony Albanese welcomed Beijing’s decision, which he said came “at a critical time for the Australian wine industry”.

“This outcome affirms the calm and consistent approach taken by the Albanese Labor government and follows the success of the similar approach taken to remove duties on Australian barley,” the Prime Minister said, in a joint statement with Foreign Minister Penny Wong, Trade Minister Don Farrell and Agriculture Minister Murray Watt.

Although Australian winemakers remain cautious about re-entering the Chinese market, with many caught out by the imposition of the whopping tariffs almost four years ago that destroyed their business in the Asian giant, there will be celebrations in the $45bn wine sector as a once billion-dollar market is back open for business.

Ending the tariffs has been a top priority for the Albanese government, which agreed to halt a WTO case against China’s impost in an attempt to quicken the return of Australia’s trade. That face-saving arrangement for China was made to create an off-ramp for the nearly 200 per cent tariffs that were imposed by Beijing in November 2020 as one of the centrepieces of its sweeping trade coercion campaign against the Morrison government.

Mr Albanese said Australia would end those WTO proceedings now that Beijing had agreed to lift the duties.

The boss of Accolade Wines, Robert Foye, who oversees one of Australia’s biggest winemakers and which owns brands such as Hardys, St Hallett and Petaluma, said the news was positive for his business and for the whole Australian wine industry.

“While we do not anticipate a snapback to 2020 levels, we do see a sizeable opportunity for our business in China and we are excited about the long-term potential this market brings,” Mr Foye said.

“I was in China last week meeting with our key customers and distributors including at the Food & Drinks Fair in Chengdu and I can say there is genuine excitement about bringing Accolade’s portfolio of exceptional Australian wines back to the Chinese consumer.

“We know that Australian wine has a well-deserved reputation for quality in China, and that includes a number of our leading brands such as Hardys and Grant Burge, and we look forward to building on this now that the tariffs have been lifted.”

The tariffs decimated Australia’s wine trade to China, leaving the market open to competitors from France, Chile, Italy and Spain, and forcing many Australian winemakers to suddenly diversify from their largest export market.

It also left many Australian winemakers with excess stock, with many seeking alternative markets in South Korea, Taiwan and Japan. Some of the high-end trade continued through Hong Kong where the Chinese tariffs did not apply, facilitating a thriving black market trade into the mainland.

While the removal of tariffs is expected to make China again the top market for Australian wine exporters, many are not expecting the pre-Covid era “gold rush” to return.

China’s wine consumption has been in structural decline since before the pandemic, as consumer confidence has slumped. Also Xi Jinping has overseen a crackdown on banquet culture and many foreign luxury goods have been replaced by local alternatives. Last year, China imported only $1.6bn of wine – down more than 60 per cent from its peak of $4.28bn in 2018.

Experts say Australian producers will struggle to recapture even half of their peak of $1.2bn. But even a third of that pre-tariff level – worth about $400m – would once again make China the biggest customer for Australia’s wine industry, overtaking the US and the UK, our current two biggest markets.

That level would also likely see Australia overtake France again and become China’s biggest supplier of wine.

Chinese wine importers say the popularity of Australian wine remains among local drinkers. “It will take two or three years, but Australian wine will get back on top,” one Beijing wine wholesaler told The Australian.

8 Apr, 2024
MCoBeauty enters the US market with Kroger partnership
Inside FMCG

Australian vegan and cruelty-free beauty brand MCoBeauty has entered the US market by launching in more than 1800 Kroger stores.

According to MCoBeauty, the partnership with Kroger provides an opportunity for the company to reach a diverse audience and make a lasting impact in the competitive beauty market. 

The Kroger Co Family of Stores – including Kroger, Fred Meyer, Ralphs, Dillons, and Smith’s – will offer MCoBeauty’s extensive range of products, which will also be sold online at MCoBeauty.com.

Shelley Sullivan, CEO and founder of MCoBeauty, said the company was thrilled to get into the US market and offer American consumers access to its innovative and affordable beauty solutions. 

“Our mission has always been to make high-quality beauty products accessible to all, and we’re excited to introduce our range to a new audience,” said Shelley Sullivan, CEO and founder of MCoBeauty.

 “Supermarkets provide a very loyal and growing customer base for the brand, and I am confident that we will see the same success with the largest supermarket chain in the US, The Kroger Co.”

In addition to makeup essentials, MCoBeauty offers premium-quality, Korean-made skincare, on-trend hair accessories, and seasonal trend launches.

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