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European Business News – Week ending October 29, 2010

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European Business News – Week ending October 29, 2010

November 01
13:04 2010

Russia has been in the news lately with PepsiCo announcing plans to build a $140m factory, its tenth plant in the country, as part of a $1b investment programme. The US-based soft drinks and snacks behemoth has already invested $3b in developing its Russian business over the previous decade and sees the region as providing one of its most exciting growth opportunities.

Danone is also targeting Russia. The French food giant has now received regulatory approval for the merger of its fresh dairy products operations in Russia with those of Unimilk, Russia’s second largest manufacturer of dairy products and baby food. To facilitate the Unimilk deal, Danone has sold its 18.4% stake in Wimm Bill Dann Foods, the market leader in Russian dairy and baby food, for $470m. Danone has held the stake since Wimm Bill Dann’s IPO in 2002, which provided the platform for the Russian group to expand its geographical footprint by acquiring successful businesses in Russia and the CIS, while investing heavily in modernising its production facilities.

International Expansion

Two other French groups, Florette and Bonduelle, are continuing their international expansion. Florette is commencing fresh salads production in the Spanish island of Gran Canaria, while Bonduelle has opened its first factory in Brazil to cater for the growing canned vegetables market there.

Having disposed of its dairy business to Lacatlis of France for Eur630m to concentrate on developing its core rice and other food activities, Ebro Foods is closing in on a major acquisition in Australia. Spain’s largest food group is negotiating a Eur420m takeover of SunRice which would give it leading positions in the branded rice foods markets in Australia, New Zealand, the Pacific Islands, Hong Kong, Singapore, Papua New Guinea, the Middle East and California/Hawaii in the US.

Tough Times for Premier Foods

Close on the heels of agreeing to pay out £167m over the next four years to restructure and de-risk its interest rate swap portfolio as part of its strategy to place the group on a more stable financial footing, Premier Foods has reported a slowdown in trading in its third quarter with sales of its branded products slipping by 0.5%, despite volume growth of 4.5%, and total group sales down 4.2% owing to a reduction in non-branded sales.

The sharp rise in wheat prices has forced the UK’s largest domestic food processor to increase the price of Hovis, Britain’s second largest bread brand after Warburtons. However, Tesco, the country’s largest grocery retailer, has subsequently de-listed 12 Hovis products following the rise in price.

Since its £1.2b acquisition of RHM in February 2007 shortly after its £480m purchase of Campbell Soup’s British and Irish operations, Premier Foods has struggled with its billion-pound debt mountain. It is currently trying to sell its meat-free business, based on the Quorn brand, to reduce debt, but speculation is mounting that it will also have to dispose of Hovis, as pressure mounts on chief executive Robert Schofield.


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