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European Business News – Week ending April 8, 2011

 Breaking News
  • Nestlé Inaugurates New Nescafé Dolce Gusto Production in Vietnam Nestlé has inaugurated a new Nescafé Dolce Gusto capsule production line in Dong Nai Province, Vietnam. The site will process an expected 2,500 tons of coffee per year (equivalent to 130 million capsules), using high quality coffee beans from Vietnam. This volume is expected to increase in the coming years. The investment reflects Nestlé’s clear focus on high-growth, [...]...
  • Pink Lemonade Yogurt? Arla Brings Indulgence to New Markets Arla Foods is to expand its successful Finnish brand, Ihana, into new markets with the premium yogurt range being launched in Denmark and the UK. Meaning ‘wonderful’ in Finnish, Ihana was launched through an extensive brand launch in 2016 in Finland with an iconic new design. Indulgence is one of the few areas in growth within [...]...
  • Process Components Announces Kemutec Expansion into Netherlands Process Components has announced the expansion of subsidiary company Kemutec in Europe, with the long-established manufacturing brand opening a new office in the Netherlands. The move forms a key part of its global strategy to extend its global territories, significantly grow its revenues and create new jobs. Kemutec has more than three decades’ worth of heritage in [...]...
  • Packaging Automation Supports the Reduction in Plastic Packaging Waste With the launch of the UK Plastics Pact to address the impact plastic waste is having on the environment, retailers and manufacturers are more conscious of single use and non-recyclable plastics and want to cater for the green consumer. The industry is turning to various kinds of eco-friendly packaging with the aim of reducing plastic [...]...
  • Glanbia Cheese Joint Venture to Build New €130 Million Mozzarella Cheese Facility Glanbia Cheese, the joint venture business between Glanbia plc and Leprino Foods, plans to build a new, world-class mozzarella cheese manufacturing facility in Portlaoise, County Laois, Ireland. A site for the new facility has been identified at the recently established Togher National Industrial Estate in Portlaoise. A total of €130 million will be invested in [...]...

European Business News – Week ending April 8, 2011

April 11
08:01 2011

The biggest news story of the week was Diamond Foods’ $2.35 billion (Eur1.6b) takeover of Pringles to triple in scale and become the second largest savoury snacks manufacturer in the world, behind PepsiCo. The move means that Diamond Foods has completed deals worth $3 billion since last year and has been transformed from being a US-based business into a global player with revenues of $2.4 billion. Pringles is available in more than 140 countries and has production operations in the US, Europe and Asia. Last year, Diamond Foods acquired the Kettle Foods businesses in both the US and the UK from private equity group Lion Capital for $615 million in cash.

Diamond Foods is also now one of the top five players within the Eur12 billion savoury snacks market in Western Europe, and the Pringles deal accelerates industry consolidation with the top ten manufacturers, headed by PepsiCo, controlling more than two-thirds of the market. Further concentration of ownership is expected as United Biscuits, the British and international biscuits and snacks manufacturer, is up for auction and is likely to be broken up when it is eventually sold off by private equity firms Blackstone Group and PAI Partners.

The Pringles acquisition also provides Diamond Foods with access to key growth markets around the world, including Asia, Latin America and Central Europe. International sales will account for approximately 49% of the enlarged group’s turnover.

Massive Growth in Private Label

The severity of the current economic recession is likely to have long-term consequences for food manufacturers. In the past, consumers have turned to private/own label products during times of austerity, only to return to branded products when the economic climate improved. However, recovery this time will be different.

Rabobank predicts that private/own label food products will double their global market share from a current level of 25% to 50% by 2025 because of greater consolidation by retailers, increased consumer acceptance of private label after recession and further expansion by the hard discount sector. A-brands will continue to be important for retailers in establishing price levels for different categories and in providing consumers with choice and familiarity. Smaller secondary brand (B-brand) producers will be squeezed from both sides and will have to strategically reposition to survive.

B-brands suppliers will either have to invest in quality and target the premium market, or specialise in private label, according to Rabobank. Consolidation among private label specialists is consequently inevitable as they strive to achieve the necessary economies of scale to compete effectively.

Chocolate and Scotch Whisky

The economic gloom is obviously driving some consumers to indulgence and comfort eating and drinking. According to Barry Callebaut, the global chocolate market grew by 3.6% in the last six months to the end of February. Scotch whisky export sales remained buoyant throughout 2010 with global shipments rising by 10% to reach £3.45 billion, reflecting continued premiumisation across the industry, as sales value increased despite a marginal decrease in volume. Eight of the top ten markets grew in value, with a strong performance in the US (+19%), which remained Scotch’s largest export market by value. The ‘BRIC’ markets continued to develop, with exports growing to Brazil (+12%), China (+24%), India (+46%) and Russia (+61%).

The Scotch whisky industry has been investing heavily for growth in recent years. Distillers, including the major players such as Diageo, John Dewar (Bacardi), Glenmorangie and Edrington, have spent in the region of £600 million during the past two years in extending production capacity – including distilling, bottling and warehousing.

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