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European Business News – Week ending May 6, 2011

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European Business News – Week ending May 6, 2011

May 09
09:01 2011

Cocoa and chocolate made food news headlines during the past week. Nestle announced the extension of its Aero chocolate bar into the biscuit sector in the UK and Ireland with the launch of Aero Biscuit. Of course, Nestle’s Kit Kat brand, which like Aero celebrated its 75th anniversary last year, owes much of its success to being able to bridge the chocolate bar and biscuit categories.

The move reflects the current trend for new product innovation within the food industry to centre on the extension of well established brands, especially during the present economic environment when consumers seem to find reassurance in the brands that they have ‘grown up’ with. The move into the biscuit category marks the fourth new product launch this year for the Aero brand.

 

Thorntons’ Dilemma

While the chocolate confectionery market has largely remained recession-proof as consumers continue to seek indulgent treats, Thorntons is an obvious exception. The UK confectionery manufacturer and retailer, which is currently celebrating its 100th anniversary, has been hit by fragile consumer confidence on the high street and by unprecedented weather conditions, which impacted on the important Christmas and Easter trading periods. As a result, Thorntons has warned that profit before tax and additional impairment charges for the year to June 25th 2011 will be in the £3.0 million to £4.5 million range and significantly below the £6.1 million achieved last year.

The confectionery group faces the dilemma of how to rebalance its business, by restructuring its retail business (own store and franchise) while increasing sales through other commercial channels, and maintaining the strength and integrity of the Thorntons brand, which has chiefly been developed through its retail presence on the high street.

Cocoa & Chocolate

Meanwhile, Cargill has strengthened its cocoa and chocolate business in Germany, the largest European chocolate market, following EC approval of its acquisition of Berlin-based KVB, an integrated chocolate company. The deal is significant step in Cargill’s cocoa and chocolate growth strategy in Europe.

While Cargill has been expanding its business on this side of the Atlantic, its Switzerland-based rival in the global coca and industrial chocolate market, Barry Callebaut, was sealing a significant supply deal in Cargill’s domestic market. Barry Callebaut has agreed to a long-term increase in the volume of products it supplies to Hershey, the leading manufacturer of chocolate and confectionary products in North America.

Sweetener For Tate & Lyle

Also on the food ingredients front, Tate & Lyle has extended its portfolio of ‘wellness’ ingredients by signing a five-year strategic partnership agreement with New Zealand-based BioVittoria for the exclusive global marketing and distribution rights for BioVittoria’s monk fruit. Claimed to be the only fruit-based calorie-free sweetening ingredient available, natural monk fruit extract facilitates the reduction of sugar and calories in food and beverage products.

The move is in line with the rising consumer demand for natural, health and wellness products and fits with Tate & Lyle’s strategy of developing its position as a global provider of speciality food ingredients and solutions. Tate & Lyle recently completed its retreat from sugar processing following the sale of its Vietnamese sugar business. This deal completed a two year disposal strategy that has entailed Tate & Lyle divesting its sugar factories around the world, including its European sugar operations, to focus on its speciality food ingredients activities, including the sweetener Sucralose, and its bulk products division, which manufactures products such as corn syrup.

Depressed European Spirits Improving

Diageo and Pernod Ricard, the two largest spirits groups in the world, have both reported challenging but improving trading conditions within Europe in their third quarter trading statements. Diageo registered a 3% organic sales decline in Europe during the first nine months of its financial year, as overall trading continues to be challenging although in the third quarter stronger price/mix in Great Britain and Russia offset weaker price/mix in Ireland and Greece and a deterioration of the on trade in Spain.

Pernod Ricard also found trading difficult in Western Europe, particularly in Spain, but achieved growth in Central and Eastern Europe, chiefly in Russia and Ukraine. On an organic basis, Pernod Ricard’s sales in Europe (excluding France which grew by 4%) were stable for the first nine months – a marked improvement on the 6% organic decline in the corresponding period of the previous year.

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