NBR Food Industry Week

NBR Food Industry Week Privately circulated to decision-makers of the fast-moving consumer goods industry

Monday Update Starbucks is phasing out the use of a natural colouring derived from crushed beetles in its Strawberry Frappuccinos and smoothies, as well as a few sweet treats, after a storm kicked up by the vegan community in the US. Ground up cochineal beetles is a common, government-approved food colouring found in many products, from yogurt to snack cakes. Starbucks began using it in January in an effort to move away from artificial ingredients. Last month, blogger Daelyn Fortney launched a campaign against the switch to cochineal extract, advocating the use of red beet, black carrots or purple sweet potatoes instead. Faced with an unexpected public-relations problem, Starbucks began searching for an alternative colouring. Last week, the company’s US president, Cliff Burrows, said that “after a thorough, yet fastidious, evaluation, I am pleased to report that we are reformulating the affected products to assure the highest quality possible,” using a tomato-based extract called lycopene. Burrows acknowledged Starbucks “fell short” of customer expectations and said the company intended to be “fully transitioned” to the new products across the US near the end of June. Fortney’s campaign, which gained more than 6000 signatures, “originally began as a story to inform vegans that the Starbucks Strawberry Frappucino was no longer safe to consume, but ended up being an issue that bothered many people,” she said.

April 23 2012 / ISSUE 827

Salt study focused on fast food Nevil Gibson A Canadian-based research project on salt levels in highprofile fast-food outlets in six countries may not reflect wider industry reduction moves. The study, published in the Canadian Medical Association Journal, included New Zealand and was also done in the US, Canada, Australia, the UK and France, it measured sodium levels in Burger King (Hungry Jack’s in Australia), Domino’s, KFC, McDonald’s, Pizza Hut and Subway. The data were collected from 2124 individual offerings on websites in April 2010. It found average levels in New Zealand were above those in the UK and France (the lowest) but below those of the US, Australia and Canada. The study also measured and compared serving sizes, finding that serving sizes varied considerably among countries. This was a key reason for some of the differences seen in the sodium content per serve. Food & Grocery Council chief executive Katherine Rich, who doesn’t directly represent the fast-food industry, said food companies were continuing to make “great strides” in reducing the amount of salt. “Although many companies started reducing salt in foods a decade ago, this work continues to gain major momentum,” she said. “Great progress has been made, for example, by the bread and breakfast cereal industry, while work is beginning on processed meats. “Bread reformulation has taken place quickly, and I’m informed that manufacturers have been able to reduce the salt content of many leading breads by 15%, resulting in about 150 tonnes of salt being removed from the bread

supply each year.” Cereal makers have been reformulating their products over a long period but in one year alone a total of more than 7.5 tonnes were removed from many popular brands. “And as the companies are continually reformulating, they are achieving reductions of between 5% and 25% at one time, as determined by consumer acceptance. “However, reducing salt in some foods has to be gradual to give time for peoples’ taste buds to adjust. Because humans’ taste preference for salt is learned, a gradual reduction allows our taste buds to adapt so changes are not noticeable.” Rich warned that regulating salt in foods was “simplistic and unrealistic.” “No country in the world has regulated the reduction of salt in foods. Lowering salt content can be a technological challenge, and companies spend a lot of time and money investigating ways of doing it. Salt is an integral part of the manufacturing process and is involved in the end taste, texture, and flavour of food.” She said the Heart Foundation’s HeartSAFE programme was a collaboration of food manufacturers, food industry associations, and health and regulatory agencies. To page 2

Woolworths aims to topple Coles Tjeerd Jegen, Woolworths’ newly installed supermarkets boss in Australia, is determined to reclaim the title of best-performing retailer. Jegen quit as chief executive of Tesco Malaysia to join Woolworths in October last year, He is charged with turning the tables on Coles, which for more than two years has outstripped its rival on sales growth in existing stores. Woolworths’ food and liquor division reported sales growth of just 1.1% in the second quarter of this financial year, excluding the benefit of new store openings – its slowest quarterly sales growth from comparable stores in 13 years. The result was less than one-third the 3.7% increase reported by Coles, and the10th consecutive quarter in which Woolworths’ comparable-store

sales growth has lagged behind. “It’s a very big concern – the universal measure of strength in retail is comparable sales growth, and it’s not good that we’ve had such a big gap between us and Coles,” Jegen told The Australian. Woolworths supermarkets are still much larger and growing faster in absolute terms than Coles, reporting food and liquor sales of $A19.6 billion in the first half of the financial year, up $A799 million from a year earlier, compared with Coles’ $A13.4 billion, up $A619 million. Analysts expected Woolworths’ third-quarter sales numbers would include comparable-store sales growth of between zero and 0.75%, compared with an expected 3% at Coles, which will report along with Wesfarmers’ other retail businesses this week.

2 NBR Food Industry Week Comment / Analysis

Nestlé wins round in coffee-pod war Nestlé scored a victory in the coffee wars as the European Patent Office upheld a patent that protects the Nespresso coffee system from compatible capsules made by other companies. Three rival producers of single-serve coffee pods that are compatible with the Nespresso system had demanded the patent be removed. But the patent, which protects the interface between the coffee capsule and the machine, was upheld by the EPO’s panel of experts. The three Nestlé rivals – Sara Lee, Ethical Coffee and Vergagno (of Italy) – now can challenge the decision at the EPO’s court of appeal, whose decision is final. Nestlé’s Nespresso business has been fighting legal battles against a string of rivals, including Swiss discounter Denner, that have launched their own versions of capsule coffee that are compatible with Nestlé’s machines. Nespresso has grown into a business with sales of more than three billion Swiss francs in 2011 and profit margins among the highest in the company. Nestlé chief executive Paul Bulcke said the patent would “continue to provide adequate protection to our intellectual property.” It is too early to say whether the decision means the rivals must remove their capsules from shop shelves. Nespresso chief executive Richard Girardot said it wasn’t against competition, with the brand facing competition from 50 other companies in the coffee capsule business. But Nespresso would continue to defend its intellectual property where necessary.

Premium blend

Meanwhile, a new premium Nescafé uses a blend of soluble and finely ground micro-granulated coffee designed to meet specific tastes in indi-

vidual countries. It was first launched to Japanese consumers as a luxury coffee called Nescafé Koumibaisen last year. In the United Kingdom, it was launched as Nescafé Azera, it has been launched in Brazil as Nescafé Duo Grão. and as Nescafé Molienda in Mexico. Different tastes – Nescafé asked researchers at the Nestlé Product Technology Centre in Orbe, Switzerland, to help them understand how to match its coffee to consumers’ taste preferences and habits. The researchers found out that consumers in Mexico do not like bitter coffee, but prefer a smoother taste. The Japanese like their coffee stronger and rich in aroma, while the British like a well-balanced coffee taste. Brazilians prefer their coffee with a smooth but aromatic taste. Tailoring the product – “From Brazil to Japan, we discovered that consumers have really diverse tastes,” explained Michael Briner, of the Beverage Strategic Business Unit at Nestlé. “Lifestyle, consumption and daily patterns all made a difference so we used our coffee expertise and know-how to tailor the product to each country,” he added. Determine different aromas – Nescafé selected a blend of Arabica and Robusta coffee beans to achieve specific tastes, choosing beans that provided a smoother or more bitter taste. The beans are either lightly or deeply roasted to determine the different aromas. The roasted beans are then ground down to micro-granules and blended together with soluble coffee to provide a unique and specifically crafted cup of coffee.

From page 1

Salt study focused on fast food It aimed to support the work already done by manufacturers and encourage further salt reduction in popular pre-prepared foods. Companies that had reduced salt included Goodman Fielder and George Weston Foods with bread; Kellogg, Hubbard and Sanitarium with breakfast cereals; Bluebird with many of its snack ranges; Nestlé across a wide number of foods; Mars with its sauces; as well as Heinz Wattie’s, Arnotts and Unilever. However, she admitted more could be done to overcome the health dangers of salt over-consumption. “We need a concerted effort to bring the nation’s salt intake down,” she said. “Action is already under way in some parts of the food supply – such as cafés, bakeries, restaurants and fast-food outlets – but more is needed.” One of the 10 researchers in the study, Associate Professor Cliona Ni Mhurchu, of the University of Auckland’s Clinical Trials Research Unit, said it showed the high risk to the population’s health and gave an urgent message about the need for change.

“If the UK and France have similar products with much lower salt levels, this shows that New Zealand could be – and should be – heading in the same direction,” she said. “In the UK there is a long-standing programme where agreements between government and industry on salt targets have driven down the salt levels of processed food. “The study demonstrates there is still clear room for improvement in the UK and even more so in New Zealand. The research refutes the standard industry protest, since it shows there is no technical reason why salt content of our food can’t be reduced.” A diet high in sodium leads to higher blood pressure, and to a greater risk of heart disease and stroke. Fast foods such as pizza and burgers are a leading source of excess dietary sodium. New Zealanders have an average salt intake of nine grams a day, compared with the recommended maximum of 5-6 grams a day. One third of the food that is bought is from restaurants and fast food outlets.

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NBR Food Industry Week 3

King Salmon lands Japanese deals NZ King Salmon has aligned with two of Japan’s largest retail centralised buying organisations (CBOs), giving the company access to 80 supermarket chains comprising 2500 stores. The company already has 3% of the Japanese market and exports some 800 tonnes of fresh salmon there each year. It now aims to triple that market share within 36 months. Most of the fresh salmon in Japan is sold through some 55,000 supermarkets in around 550 chains servicing a population of around 130 million. Japan country manager Rob Morris says the new arrangements will provide benefits in marketing efficiency and new product development. “The CBOs are helping us with sales support, marketing promotions and enabling us to exhibit at their own trade shows as well as introducing us to the decision makers of their chains,” he says. “Importantly, they are also helping with product development where necessary. Simply because of the way things are done in Japan we have identified most of our likely growth

will be in retail. “Seafood is more an everyday staple for Japanese consumers so products such as fresh salmon tend to be purchased daily by households for consumption at home.” Morris says NZ King Salmon is selling into eight new chains and negotiating with a further 40 and working with the CBOs on trade fairs and joint sales promotions. “We have recently employed two highly experienced Japanese managers for retail and food service who have strong and important connections with decision makers. Who you know is very important in the Japanese market and it is so big it’s vital to develop firm alliances and connections.”

Brits to protest against fat tax Hundreds of British bakers are expected to march on Downing Street this week in protest against the so-called “pasty tax” that will add 20% to the cost of hot foods, including Cornish pasties. High Street bakery chain Greggs and the National Association of Master Bakers have organised the event on April 26 to protest against the proposed value-added tax (VAT). Hundreds are expected to take part in the march, which will start at Pudding Lane and finish at Downing Street with the delivery of a petition against the plans, a spokeswoman for

Short bites

Dairy prices slump International milk prices fell in Fonterra’s latest global auction, reversing a rise at the previous sale. The Global Dairy Trade weighted index, which covers a range of 30 products and contract periods on offer, fell 9.9%, with an average selling price of $US2983 per tonne. The index resumed its falling trend seen for much of the year, after prices rose for the first time in two months at the last auction. Prices fell for all dairy products on offer, with the largest fall seen in cheddar, which fell 12.1%, while rennet casein and milk powder fell 11.9% and 11.0%, respectively. The index has fallen nearly30% since hitting a near four-year peak in March last year as global commodity prices have retreated. Full details: www.globaldairytrade.info

Indonesian plant Fonterra said it would invest around $20 million in a new plant in Indonesia to keep up with growing demand there for its Anlene, Anmum, and Anchor Boneeto branded milk products. The move will enable Fonterra to package its milk products in-house. Fonterra said it was in talks with prospective partners in Indonesia, the company’s 10th largest market, and is considering structural options and locations for the new plant, which it expected would be operating within 18 months.

Odours close store

Greggs chief executive Ken McMeikan

Greggs said. Chancellor George Osborne announced the tax in last month’s UK budget, saying it would bring bakeries and supermarkets selling hot food in line with fast-food outlets, which already pay VAT. But the government has since faced concerted opposition to the measure, with a group of Cornish MPs announcing they were looking to build a pact with Labour MPs and others from across the country to oppose the measure. Greggs chief executive Ken McMeikan, said: “If the chancellor does not reconsider his proposals, there could be huge repercussions for the entire bakery industry.”

The Katikati Countdown supermarket was closed temporarily last week after odours from new flooring caused people to become ill. Progressive Enterprises communications manager Luke Schepen said the closure was a precaution. “We had to wait for tests and assessments to be carried out. The actual issue itself is the laying down of the new floor, so there was reports of odours and illness and the sorts. We needed to do some testing in terms of the actual store environment.” The store reopened 24 hours later.

4 NBR Food Industry Week Produce report NZ vegetables

Pick of the week is cabbage. It is here in great volume, tasting as awesome as it ever was. In recent years, it has actually been found to be very good for you. Other top veggie buys are white button mushrooms, pumpkin, spinach, cauliflower, and carrots. Spinach is a wonderfully versatile vegetable, popular worldwide, with nearly every cuisine featuring it somewhere in its repertoire. The Italians are particularly partial to spinach and have hundreds of dishes using it. The words a la florentine mean the dish contains spinach. Also to look out for is late season New Zealand capsicums. The journeys Christopher Columbus and the conquistadors made were partly to find spices but instead he found maize, potatoes and tomatoes. He found the native Indians flavoured their food with ground peppers, and since they was hot, like pepper, he called them peppers, too.

NZ fruit

Pick of the week is Jazz apples. Developed in New Zealand and now grown around the world, Jazz are a naturally bred cross between Royal Gala and Braeburn. They combine the juicy sweetness and colour of the Royal Gala and the tangy tartness and crunch of the Braeburn. The result is the crunchiest, densest apple in the world. Other top fruit buys are new season DDC pears and late season Beryls peaches. DDC stands for Doyenne du Comice, which when fully ripe and soft would have to be the juiciest pear on the planet. The late peaches cost around $6-$8/kg. Also to look out for is new season kiwifruit, both green and gold. The gold are just a little less tart than the green early on. Imported produce The main tropical treat is pineapple. It’s also hard not to mention grapes again, with the green and red seedless in full supply. Along with the Island coconut, there are also drinking nuts from the Philippines. A whole tray of fresh dates costs only $3.99. They contain more natural sugar than any other fruit and deliver a substantial amount of dietary fibre and potassium. Supplied by Turners & Growers, New Zealand’s leading distributor and marketer of fresh produce.

Fresh on the shelves GODS GO CRAZY Hutt Valley cheesemaker Zany Zeus has opened its first store, a short distance from its milk and cheese factory in Randwick Rd in Moera. For the past 12 years, owner Michael Matsis and sister Meropi have specialised in boutique cheeses, including halloumi and feta, which are distributed to hundreds of cafés, restaurants and supermarkets throughout the country. It is the first time the entire Zany Zeus cheese range will be available to purchase in store. These include cultured products such as crème fraiche, mascarpone, cream cheese and sour cream. The company will also launch a new range of smoked cheeses – brinza, ricotta and paneer as well as the country’s first smoked yoghurt. The latest addition to its range is a premium ice-cream made with fresh organic milk and cream. This is available in 14 flavours, including cookies and cream, pistachio and almond brittle, feijoa and chocolate rough. Soy ice-cream and snow freeze are also available. Matsis launched the business in 2000 with his mother, Lefki Matsis, after several years researching and experimenting with the art of cheese-making.

COFFEE GOES GREEN Nescafé Greenblend instant coffee delivers 70% more antioxidant polyphenols than green tea, the company claims. Greenblend will also be the only instant coffee on the markets boastings a blend of green and roasted coffee beans, while not compromising the taste. Research published in the British Journal of Nutrition says although a cup of green tea contains similar levels of antioxidant polyphenols, the body absorbs 70% more antioxidants from Nescafé Greenblend than from green tea. “Discerning coffee drinkers will notice that the delivery of 70% more antioxidants to your body than green tea doesn’t compromise the taste and aroma of Nescafé Greenblend,” says Nestlé nutritionist Susan Kevork. HOT HARVEST Just in time for winter, Old Mout Cider has created a hot new take on cider and an alternative to mulled wine, Hot Berry Cider. This intense black cherrycoloured drink has a vibrant smell of boysenberries, cherries and cranberries, with a touch of fizz. Sales and marketing director Scottie Chapman says being the first to introduce a hot cider variant in the market is an example of the company’s commitment to provide innovation and creativity to cider lovers, all-year-round. “We pioneered the fruit cider category in New Zealand, and as New Zealand’s largest independent and dedicated cidery, we’re always looking at ways to craft new and appealing ciders for those of us who appreciate exceptional quality and taste,” he says. Hot Berry Cider is at its juicy best when gently heated (don’t boil) on the stove or in a microwave. To spice things up, add a few winter spices such as cinnamon, cloves and star anise, and garnish with fresh orange slices. Hot Berry Cider (8% ABV) will be available at selected supermarkets and liquor retail outlets nationwide from the end of May with RRP $15.99 for the 1.25L PET bottle.

Monks revive old brew The cider-making monks of Ampleforth abbey in Yorkshire are to brew a beer from an ancient recipe that has not been tried for two centuries. Chuffed by the success of their apple orchard, which has grown to more than 2000 trees and 70 varieties of apple, the Benedictine community hopes to have £36 packs of 12 bottles of beer available by the end of June. Known traditionally as “la bière Anglaise,” the

brew is thought to date back to medieval times before the order was suppressed in England under Queen Elizabeth I. The beer assumed its French name via the loyalty of exiled monks, who brewed it in France while their French colleagues made related experiments that led in due course to the 19th century’s Benedictine liqueur.

NBR Food Industry Week 5

All groups fall in Food Price Index For the first time since October 2009, all five sub- main contributor to the monthly fall in the grogroups in the Food Price Index fell in March. cery category, while crackers (up 15% over 12 The monthly drop of 1.0% compared with months), nuts (12%) and potato crisps (up 5.8%) a rise of 0.6% in February and no movement in were the main contributors on an annual basis. January. On an annual basis, the index rose 0.2% Among beverages, the main upFood coffee pricewas index from March 2011 (see tables). ward contributorMonthly duringchange the month but was 1.3% % Apples (down 24%), chicken pieces (down lower than its peak in May 2011. 3 4.0%), chocolate biscuits (down 7.8%) and bacon In dairy products, cheddar cheese was back (down 6.5%) were the main contributors to the at February 20102 levels and 18% lower than the monthly drop. peak in September1 2008; butter was down 11% on Prices were higher for strawberries (up 24%), a year earlier and 16% below the June 2011 peak; 0 potato crisps (up 4.5%), avocados (up 35%) and and fresh milk was 1.7% lower than its peak in ham (up 6.9%). February 2012. -1 In the category with the largest fall, vegetables -2 were down 6.2% and fruit down 2.0%. Pumpkins M A M J J A S O N D J F M 2011 2012 were down 26% for their second monthly drop Source Statistics New Zealand and were down 54% from their peak in January. They were just 3.3% higher than 12 months ago. Grapes were down 20% and potatoes 5.8%. On an annual basis, fruit and vegetables are now at their lowest level since May 2010. The main annual falls were for tomatoes (down 31%), potatoes (down 15%) and lettuce (down 37%). Food price index Food price index change Annual change Discounting was the major Monthly % % 8 contributor to the fall in the 3 meat and fish category, with 6 lamb chops down 7.8% and 2 sausages down 5.0%. 1 4 Over the year, porterhouse 0 and sirloin steak was 7.2% 2 cheaper, lamb chops were -1 down 12% and whole frozen -2 0 chicken were down 9.2%. M A M J J A S O N D J F M M A M J J A S ON D J F M 2011 2012 2012 2011 Discounting of chocolate Source Statistics New Zealand Source Statistics New Zealand biscuits (down 7.8%) was the

A2 weighs options A2 Corporation is undertaking a Food strategic review price index Meanwhile, A2 has change of the business as major players inAnnual signed a supply deal with %the dairy sector 8 start to take notice of the NZAX-listed alternative Canterbury-based Synlait milk company. Milk to manufacture A2 6 A2 has been approached by would-be partners brand nutritional powders, and wants to review its options to speed up growth which it hopes to sell on and maximise shareholder value, it4 says. the international market, That’s seen its board appoint Sydney-based particularly targeting in2 Greenhill Caliburn as principal adviser, with sup- fant formula for the Chiport from New Zealand’s Clavell Capital. The re- nese market. 0 view is expected to take several months. the comJ F month, M A M J J A S O N DLast M 2012 2011 we lay the “We are conscious of ensuring that pany raised $5.2 million Source Statistics New Zealand appropriate platform for growth in new markets in a share placement at and the next strategic steps we take are important 37c apiece. Its shares have to ensure we optimise shareholder value,” chairman surged more than 110% this year, valuing the comCliff Cook says. pany at more than $300 million. “This, coupled with recent approaches from inA2 expects to launch its product in UK markets dustry participants, makes this the appropriate time in September this year and has formed a partnership to undertake a full review of our strategic options.” with Robert Wiseman Dairies to do so.

Short bites

GPG sale mooted Guinness Peat Group and listed investment vehicle CVC are exploring the sale of Green’s Foods, the Australian owner of grocery brands including Poppin microwave popcorn and Lowan oats, unconfirmed Australian reports say. The move is part of a selldown of GPG shareholdings, which have previously included the sale of a majority stake in Turners & Growers to German firm BayWa.

Spike down under Boundary Road Brewery has appointed American craft brewer Brian “Spike” Buckowski to the position of The Resident. Buckowski is brewmaster and co-founder at award-winning Terrapin Beer Company in Athens, Georgia. He will travel down under in May to complete the task of creating a new craft beer range of three bespoke brews. They will be called The Resident and will be released for sale from July 2012.

Crafar sale approved Shanghai Pengxin’s controversial bid to buy 16 central North Island dairy farms was approved by Land Information Minister Maurice Williamson and Associate Finance Minister Jonathan Coleman. The ministers approved the Overseas Investment Office’s new recommendation to let holding company Milk New Zealand buy the Crafar family farms, after a High Court judgment sent it back to the bureaucrats in February. Williamson said the OIO sought advice from Crown Law and independent advice from David Goddard QC in making its recommendation.

Branded lamb first Silver Fern Farms’ branded New Zealand lamb range is being expanded in the UK, where it is sold in Tesco supermarkets. SFF says it is the first time branded lamb has been available in the fresh chilled lamb section of a major grocery chain in the UK. It is also he first deal of its kind for the company and for the red meat sector as a whole, The range of branded retail prepacks was launched in October 2011 into a category traditionally dominated by supermarket brands.

6 NBR Food Industry Week CORPORATE ROUND-UP

Things go better at Coke COCA-COLA

TESCO

HEINEKEN

SABMILLER

Expansion of its reach worldwide and turning to a variety of smaller drink sizes helped boost profits and keep rising commodity costs in check. Although volume growth came from all regions, increases were far greater in emerging markets. In the region encompassing Russia, India, the Middle East and Africa, for example, volume grew 9%, compared with a 2% increase in North America. Global volume for bottled water grew 15% in the quarter, while volume for energy drinks rose 25%. That surpassed the volume gains in the company’s namesake Coca-Cola, which increased 4%. Even the slight bump in volume in North America was driven largely by the company’s Powerade sports drinks, Dasani bottled water and zero-calorie Vitaminwater. Despite the competition and market saturation at home, CEO Muhtar Kent said: “We believe North America is a growth market for our business.” Total revenue was $US11.14 billion for the three months ended March 30, up 6% from $US10.52 billion a year ago. Earnings were $US2.05 billion, up 8% from $US1.9 billion a year earlier. The 2012 growth outlook was confirmed after first-quarter net profit rose 15.9% to €175 million due to rising volumes in all regions except western Europe. The figure included a €20 million revaluation gain on a stake in a Haitian brewer. Excluding the gain, profit was almost flat due to a rise in fixed and input costs. Revenue at €3.83 billion, up 6.4%, also surpassed analysts’ expectations. Heineken is banking on continued growth from markets in Asia, Africa and Latin America to offset sluggish growth in mature markets. It will continue to make investments in Africa, Latin America and Asia in an effort to capitalise on growing populations and rising incomes. The company still expects input costs to rise 6% a hectoliter, primarily reflecting higher prices for malted barley. It aims to mitigate this impact by implementing planned revenue growth initiatives and efficiency programmes.

It will spend £1 billion revamping its ailing UK operations and cut back its domestic expansion plans to regain market share from its rivals after reporting a slight rise in full-year net profit. Chief executive Philip Clarke said the majority of future growth would be online and in smaller stores on the high street, rather than large-scale hypermarkets. “We will reduce new space opening by 38% this year in the UK.” he said. Tesco shares have fallen more than 17% since its first profit warning in January, as analysts and shareholders have questioned the priorities after a period of aggressive international expansion that has seen the company open stores in China and embark on a so-far loss-making Fresh & Easy venture in the US. Same-store sales excluding petrol were up 1.9% in Asia and 12% in the US over the year to February 25. Revenue in the UK, excluding petrol and valueadded tax, was down 0.9%, while trading profit in the home market fell 1% to £2.5 billion. Full-year net profit of was £2.81 billion, up 5.6% from £2.66 billion a year earlier and matching consensus expectations. Overall sales, excluding VAT, were up 6.8% at £64.54 billion. Emerging markets are continuing to drive growth in beer volumes, despite weakness in mature economies. It benefited from strong performances in Africa, Asia-Pacific and Latin America, where rising incomes and populations of drinking age are fueling consumption. Developing economies account for about three-quarters of the company’s earnings, helping it outperform its rivals in recent years. Demand in Europe and North America remained weak as tax increases, spending cuts, below-inflation pay rises and rising unemployment squeeze consumer spending. Volumes for the newly acquired Foster’s Australian business dipped 4% in the most recent quarter, even as the rate of decline slowed compared with the previous three months, Fourth-quarter group revenue excluding acquisitions and disposals on a constant currency basis rose 10%, while group revenue per hectoliter increased 5%. In the full year, the increases were 7% and 4%, respectively.

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NBR Food Industry Week 7

Biting into controversy

International News

US: Nestlé closes in on Pfizer deal Pfizer is close to selling its infant-nutrition business to Nestlé for at least $US9 billion, the Wall Street Journal reported, quoting unnamed sources. If it succeeds, it would be one of the largest deals so far this year. Other bidders were France’s Groupe Danone and Mead Johnson Nutrition, which had explored a joint bid for the business. Pfizer is also going ahead with an IPO for its animal health products business, though a sale of that division can’t be ruled out either, the Journal said.

US: McDonald’s taps Asia head as COO McDonald’s appointed Tim Fenton as its new chief operating officer. He will succeed Don Thompson, who will become chief executive when Jim Skinner, 67, retires after 41 years with the company. Fenton, 54, is president of the Asia, Pacific, Middle East and Africa division and will assume his role on July 1. He has been with McDonald’s almost as long as Skinner. The promotion of the 39-year veteran can be seen as a nod to the company’s stronger focus on emerging markets for restaurant expansion and growth. Sweden’s culture minister, Lena Adelsohn Liljeroth, caused a media storm last week when she cut a piece of cake that was part of an art installation highlighting the issue of female genital mutilation. The exhibit at the Moderna Museet in Stockholm featured a cake of a naked black woman’s torso with artist Makode Aj Linde’s blackened face and head sticking up next to the cake’s stomach and arms. The minister was asked to cut the cake by taking a chunk from the most intimate part of the anatomy. The cake’s “insides” were a gruesome red. A video shows Linde screaming loudly every time a visitor hacks off another slice. Linde posted photos of the “genital mutilation cake” on his Facebook page. But the images provoked a furious response, with Sweden’s African-Swedish Association describing it as “a racist spectacle.” The association demanded Adelsohn Liljeroth’s resignation, saying the cake was just “a racist caricature of a black woman.” It said her decision to take part in a dubious event with cannibalistic overtones showed her “incompetence and lack of judgment. “Her participation, as she laughs, drinks and eats cake, merely adds to the insult against people who suffer from racist taunts and against women affected by circumcision,” the statement went on. Adelsohn Liljeroth, however, said she sympathised with the association’s criticisms but denied she had done anything wrong. She conceded the cake installation was provocative and rather bizarre but said she had been invited to speak about artistic freedom and the right to offend. She added: “They wanted me to cut the cake.” Ultimately, the artist was to blame for any confusion, she said, arguing that the situation had been misinterpreted. “[The association] claims that it challenges a romanticised and exoticised view from the west about something that is really about violence and racism,” she said. “Art needs to be provocative.”

Holland: Unilever ends factory-farmed chicken Unilever says it will phase out the use of factory-farmed chicken in its products. In Dutch, factoryfarmed chickens are commonly known as plofkip – blown-up chicken – because they grow so large and so fast that they are ready for slaughter in just 42 days. Unilever has told animal rights organisation Wakker Dier the phase out will start in the first quarter of next year, beginning with its chicken hot dogs and later following with its soups and other food products. The industrially farmed chicken will be replaced with chicken that qualifies for at least one star in the Dutch “better life” meat production rankings. One-star chickens are not bred as quickly and have access to a covered outdoor area.

UK: Internet outrage at Milk Tray changes Websites and social networking forums have been inundated with concerns about the poor taste of Cadbury’s Milk Tray chocolates and claims that old favourites have been reformulated or dropped completely. The Daily Mail reports there is particular outrage about the orange truffle, a replacement for the traditional orange cream. Consumers say that the modern crescent-shaped version is a poor imitation of its rich, creamy predecessor with only a hint of orange flavour. The hazelnut whirl has also been the subject of vigorous debate, with many claiming it has been reformulated and its distinctive hard-edged grooves replaced with softer whirls. Meanwhile, eagleeyed shoppers have also noticed the absence of coffee creams and mocha-flavoured chocolates, and bemoaned the loss of the paper menu from boxes. Instead, they point out that there are now four different caramel chocolates and three separate hazel-nut sweets in a standard 7.05oz (200g) box.

Germany: Obesity surge sparks crematorium fires As the number of obese Germans rises, the funeral industry is scrambling to make adjustments in how larger bodies with more fat can be safely incinerated. A number of crematoriums have suffered severe damage when burning fat overwhelmed their emergency measures. The funeral industry has adapted with plus-size coffins and crematorium furnaces outfitted with larger doors. But one problem remains: Due to their high fat content, obese bodies often burn so hot that they overtax crematorium facilities. In several cases, chimneys have become so hot that they have glowed redhot or melted, causing a fire. Germany has159 crematoriums and 15% of Germans are considered obese.

Singapore: ‘Hug me’ Coke tests students Coca-Cola has created an attention-grabbing publicity stunt in Singapore – a vending machine that gives out free cans of Coke in return for hugs. The whacky idea is part of the company’s Open Happiness campaign designed to target young people in a gesturebased marketing stunt being tested out in Singapore. Instead of paying money, students at the National University of Singapore have to squeeze the sides of the drinks machine to receive a free can of Coke. Public displays of affection are uncommon and have long been discouraged in Singapore but are on the rise among young people. Advertising agency Ogilvy & Mather says the stunt is intended to position the brand as a non-threatening ally to demonstrating youth.

8 NBR Food Industry Week

Domino’s shows difference by staying the same The US operation of Domino’s Pizza has a different strategy in emerging markets and it means doing it the same as at home. Its competitors, such as KFC’s Pizza Hut, have completely reinvented themselves for China, India and other emerging markets. But Domino’s is going strong with traditional pizza delivery, just as it has always done. So far, the formula has worked. It has flourished in India, where it has about 440 locations. Same-store sales have increased 21% compounded annually over the past five years. This compares with same-store sales rising 6.8% in the international division as a whole in 2011. Domino’s says it has the potential to have at least 1000 locations in India. Domino’s is increasingly focused on growing in other emerging markets such as China, Malaysia and Turkey. But the competition there is greater and pizza isn’t exactly a popular meal among locals in those places. In Malaysia, Domino’s is targeting 100 stores by the end of this year, from around 70, and Turkey is becoming a bigger focus with more than 200 stores. When Pizza Hut ventured into China, parent company Yum Brands opted to introduce Pizza Hut Casual Dining, a chain that resembles more of a Cheesecake Factory in terms of menu and motif, with a vast selection of American fare, including ribs, spaghetti and steak, as well as café latte. Domino’s isn’t interested in table service, even if that is what locals are used to. “We go in there with a tried and true business model of delivery and carryout pizza that we deploy around the world,” international president Richard Allison told the Wall Street Journal. “In the emerging markets, we’ve got more tables than you would find in the US but we have no plans to lean toward a casual dining model where a server comes out and takes an order.” But some are questioning whether the model will continue to work. In China, McDonald’s, Pizza Hut and KFC are offering delivery service, moving into Domino’s turf. Pizza Hut Home Service in China has roughly 135 stores that deliver. Domino’s has no more than two dozen stores there. Domino’s has blamed its struggles in China in part on the fact that cheese and bread aren’t traditional staples of the Chinese diet and also on some of its own “self-inflicted wounds.” “We brought in a new partner in China about a year and a half ago,

and have been working with them on redoing the brand’s products, pricing and image,” Allison says. “We are now well on our way of re-launching in that market, and we see substantial opportunity.” Russia and Brazil are two other emerging markets that Domino’s concedes it has some work to do to improve its brand awareness and capitalise on the potential. Domino’s uses “master franchisees” in emerging markets, which means they collect a smaller percentage of sales as a royalty fee, in return for the franchisees’ local expertise and ability to provide both the capital and the employees to build the business. “Pizza is a product that lends itself to innovation,” Allison says. “India has a lot of vegetarian pizzas; Malaysia has a pizza with prawns on it. With the help of our franchisees, we’re able to adopt it to the local tastes.”

n Domino’s Pizza Enterprises, an ASX-listed company, holds the exclusive master franchise rights for the Domino’s brand and network in Australia, New Zealand, France, Belgium, the Netherlands and the principality of Monaco. Domino’s Pizza Enterprises now extend across five countries, with more than 845 stores employing approximately 21,000 people and making more than 60 million pizzas a year. Sales for the half-year to January 31 were up 10% to $A401.1 million.

OddSpot A new advertising campaign that urges consumers to “fuck the diet” has enraged German-language purists – and, surprisingly, not with its profanity. Cosmopolitan Germans have long flaunted their worldliness by littering their speech with Anglicisms, whether striking a deal over “ein BusinessLunch” or discussing the threat of “ein Cyberkrieg.” Unilever’s Du darfst (literally: you may, or you’re allowed) low-fat fast products advise German women – in their native tongue – that the range is for “those

who don’t want to hold back, those who want to eat until they are full.” Accompanying images of beautiful women with excellent teeth slurping low-fat spaghetti bolognaise, the voiceover says, “You can’t be bothered to count calories? Then don’t! With Du darfst, you can enjoy yourself without worrying – Du darfst means above all that you don’t have to do anything. Just help yourself: fuck the diet!” See for yourself at www. du-darfst.de.