News

Coca-Cola HBC (Hellenic Bottling Company) has purchased Finlandia Vodka from liquor giant Brown-Forman for $342 million (US$220 million), subject to adjustments related to inventory and other working capital items.

The beverage giant says the acquisition will bolster Coca-Cola HBC’s premium spirits credentials and drive mixability opportunities with premium and super premium non-alcoholic ready-to-drink (NARTD) products, capturing more consumers and strengthening partnerships in strategically important channels such as HoReCa (hotel-restaurant-catering)

Brown-Forman said the sale of Finlandia vodka is another step to its long-term strategic plan to premise its portfolio through brand innovation, acquisition, and divestiture. 

Established in 1970, Finlandia is one of the leading vodka brands in Central Eastern Europe with annual volumes of 2.7 million cases worldwide, of which more than 60 per cent is generated within Coca-Cola HBC’s geographic footprint. 

Anora Group bottles Finlandia in Finland based on a long-term production services agreement and is sold in pure and flavoured versions. 

“We are pleased to pass on the ownership torch of Finlandia to Coca-Cola HBC, who has proven to be a strong and reliable partner to our brands for more than 17 years,” said Lawson Whiting, CEO of Brown-Forman.

“I am confident that Coca-Cola HBC’s growth ambitions and capabilities in premium spirits, its critical mass and execution excellence, and its leading sales and distribution credentials in the markets where it operates will accelerate Finlandia’s growth trajectory.”

Brown-Forman’s roster of brands includes Jack Daniel’s Tennessee Whiskey, RTDs and other Jack Daniel’s-branded products, Woodford Reserve, Old Forester, Coopers’ Craft, The GlenDronach, Benriach, Glenglassaugh, Slane, Herradura, Fords Gin, and Diplomatico Rum.

The company has approximately 5600 employees globally, and its brands are sold in more than 170 countries.

Supermarket operator Woolworths Group saw total sales increase year-on-year during the first quarter – but some operations suffered declines.

Woolworths booked sales of $17.22 billion in the 14 weeks to October 1, 2023, up 5.3 per cent. The Australian food segment rose 6.4 per cent to $13.08 billion, while the New Zealand food segment jumped 5.8 per cent to $1.91 billion.

“Importantly for our customers, inflation in our food businesses continued to moderate over the quarter driven mainly by deflation in fruit and vegetables and meat as lower input costs in these categories have led to lower retail prices,” said Brad Banducci, CEO at Woolworths.

The Australian B2B business segment inched up 1.5 per cent to $1.13 billion. However, sales of Big W fell 5.5 per cent to $1.13 billion.

Woolworths’ other business operations posted a sales slump of $22 million.

“Looking ahead, we have strong plans in place for the key Christmas and holiday trading period and while sales trends in October to date have remained broadly in line with the trend lines in Q1, the trading environment remains uncertain and value for money remains a key focus for our customers across all our businesses,” said Banducci.

Coles chief executive Leah Weckert has shrugged off the marked slowdown in comparative store sales growth in the first quarter of the new financial year, saying shoppers are snapping up cheaper fresh produce and Christmas treats like mince pies heading into the key holiday period.

Ms Weckert told The Australian Financial Review Coles has a strong plan for the holidays when she expects more consumers to eat at home to celebrate. She also flagged that Coles had a strong result with its Magical Builders Harry Potter collectables program a year ago, boosting sales.

“We think it’s a strong [first quarter] result, given what we were cycling last year, and we feel it’s setting us up well going into Christmas,” she said.

“At the moment, it’s all about lots of fresh produce because the prices are so great … with the level of deflation than we had 12 months ago, and that is the area where volumes are up the most.”

Coles posted a 3.6 per cent rise in first-quarter sales to $10.25 billion, underpinned by its supermarket business, with customers eating at home and looking for special offers amid pressure on household budgets.

Supermarkets’ revenue gained 4.7 per cent to $9.2 billion for the 13 weeks to September 24. Excluding tobacco sales – which continued to decline in line with industry trends – sales increased by 5.9 per cent.

Comparable sales grew by 4.6 per cent in the first quarter – a marked slowdown from 6.8 per cent in the fourth quarter of 2023. Rival supermarket group Woolworths on Wednesday reported comparative sales growth of 5.5 per cent down from 6.4 per cent in the June quarter of 2023.

Ms Weckert said that there were improvements in waste and markdowns in the first quarter. New technology such as smart gates and more security to help stem theft in stores is expected to be rolled out in more than 250 of the most affected sites by the end of this year.

Lower price inflation

The retailer in August flagged growing theft as a significant problem at the nation’s second-largest grocery chain.

“The early results from where the technologies are being rolled out are in line with our expectations,” she said. “From our perspective, this is a short-term problem.”

Ms Weckert said she expects the stock loss benefits to come through in the second half, and is looking to introduce other cost and margin optimisation initiatives.

Coles’ prices increased 3.1 per cent in the three months to the end of September, compared with a 5.8 per cent increase in the last quarter of the previous financial year. The lower inflation was due to falling prices of fresh foods, meat, seafood and baked goods.

Shoppers flocked to Coles own-brand products, and a fourth consecutive quarter of growth, with sales reaching $3.2 billion – a 9.4 per cent increase. Customers also continued to shift to healthier options, with sales from Coles own-brand health and lifestyle products growing by almost 30 per cent.

Supermarket online sales grew by 25 per cent in the first quarter, with penetration increasing to 9.1 per cent. Ms Weckert said Coles has made it easier for customers to search for specials online, adding new features in the app such “filter by lowest unit price”, which is popular with shoppers.

Coles’ liquor revenue increased just 1.8 per cent to $851 million in the quarter, helped by new store openings and online sales, which rose 32.2 per cent.

Ms Weckert said shoppers were buying cheaper beer, over craft brands. In wine, the growth in sparkling, prosecco and rose was offset by lower champagne sales. The ready-to-drink category also grew strongly.

Coles shares ended Thursday slightly higher at $14.98. The stock is down nearly 20 per cent in the past six months.

Penn joins board

JPMorgan analyst Bryan Raymond said in a note before the sales results that it was too early for capital investment in cameras and gates to be making an impact on stock loss.

“We would not expect a meaningful underlying shift in shoplifting trends in recent months given cost-of-living pressures are persisting,” he wrote.

MST Marquee analyst Craig Woolford said in a note that comparable sales growth in Coles supermarkets slowed more markedly than for Woolworths and its liquor business had a weak quarter.

“We expect small downgrades to earnings given the weaker trends are likely to continue into [the second quarter] and beyond as industry-wide inflation eases back,” he said.

Former Telstra boss Andy Penn will join Coles board as a non-executive director and be chairman of the audit and risk committee, effective December 1.

Coles chairman James Graham said Mr Penn would bring significant Australian corporate and customer-facing experience to the board.

“As a past chief executive of both Telstra and AXA Asia Pacific, Andy has a strong background in large corporations where the application of technology has assisted the repositioning and strengthening of businesses in competitive markets,” Mr Graham said.

Quick service restaurant Guzman Y Gomez (GYG) has appointed Hilton Brett as co-CEO, effective immediately, as the company plans to launch an initial public offering and further expand in the US.

Brett will be working alongside the restaurant’s founder and CEO Steven Marks, who announced in May that he would be stepping back from day-to-day operations to focus on culture and growth.

Prior to the new appointment, Brett served as a non-executive director on the board of GYG for over five years and worked as an operating partner at TDM Growth Partners – GYG’s biggest shareholder.

He is also a non-executive director at Somnomed Australia and Pacific Smiles Group, and from 2006 to 2018, he held the position of co-CEO at Accent Group.

Marks will keep the food, marketing, and US operations as his responsibility, while Brett will lead the finance, information technology, human resources, legal, real estate, and investor relations departments. Each of them will have a line of sight into all divisions. 

“Hilton has been on the board of GYG for the last five years so his knowledge of GYG’s business model and our company culture didn’t need to be taught or learned. When he joined us in a full-time capacity as acting CFO four months ago, he immediately knew what needed to be done and got to work,” said Marks.

“GYG is a unique business with an opportunity to become the biggest and best restaurant company in the world. The most important thing for me was finding a co-CEO who would bring in the skills we needed for the next chapter of growth for GYG.”

Brett will be leaving TDM in line with his new appointment.

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.

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.”

Endeavour’s largest shareholder, billionaire Bruce Mathieson, has taken an extraordinary swipe at the hotels and liquor retailing group, describing attempts to prevent the election of an experienced businessman he supports “a cynical attempt to ... entrench the insiders club on the ... board”.

In an increasingly acrimonious dispute, Mr Mathieson wrote to the Endeavour board complaining about the “material value destruction”, adding that the brand positioning for Dan Murphy’s and BWS, two retail chains owned by the company, was “strategically lost”.

Mr Mathieson, whose son Bruce Mathieson jnr is on the Endeavour board, is backing the election of former Myer chairman Bill Wavish at the company’s annual meeting this year. However, Endeavour chairman Peter Hearl declined to back his election because there was not “sufficient time” to conduct “customary processes it undertakes in selecting and appointing directors, including the associated probity assessments”.

Mr Mathieson, in his letter, said it was “preposterous” not to allow shareholders to vote for Mr Wavish if he had not obtained necessary approvals by the time of the AGM. “There is no realistic prospect that anyone could obtain all necessary regulatory approvals in such a short time frame,” he wrote. “This tactic could only be a cynical attempt to further entrench the insiders club on the Endeavour board.”

Other directors including Rod van Onselen, Anne Brennan and Bruce Mathieson jnr had been elected subject to obtaining all necessary approvals, Mr Mathieson wrote in his letter to Mr Hearl. “I am very concerned about the current and future strategic and operational priorities of the business, and current leadership’s ability to reverse these trends,” he added.

Mr Wavish, a former Woolworths executive, is also being supported by Roger Corbett, the long-time chief executive of the supermarket giant which once owned Endeavour. Mr Corbett, who resigned in 2006, said Dan Murphy’s had “lost the mojo”. “My expertise is really in the Dan Murphy and BWS chains, and I’ve got to say that I think they’re just a disgrace,” he said.

Others, however, are backing Endeavour. Tony Leon, who ran Dan Murphy’s until its sale to Woolworths in 1998, said Endeavour’s chief executive, Steve Donohue, was “the best fellow to operate this business”.

“He knows it better than anyone else. I understand what Mr Corbett said, but it’s not fair because it is still an amazing business,” he said. “They can go and get a new guy, but you think they’d run it better? I don’t want to be rude to my friends at Coles and Metcash, but BWS and Dan Murphy’s do very well.”

Close involvement

In a notice of meeting released on Wednesday, Mr Hearl wrote that Mr Wavish had been “invited to participate in the formal director search process under way and to be considered with other prospective candidates. At the time, he declined to participate in this process. The offer remains open to Mr Wavish to join the process.”

Mr Wavish was closely involved in Woolworths’ liquor and hotels businesses during his time with the company. He has touted his experience leading the re-organisation of part of the businesses into BWS, and the acquisition of large numbers of liquor licences.

After acquiring Dan Murphy’s, Woolworths entered into a partnership with the Mathieson family, creating Australian Leisure and Hospitality, a precursor to Endeavour. The company was listed on the ASX at $6.60 per share. They have fallen 25 per cent in 12 months, closing at $5.27.

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. 

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.

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.