Tag Archive | "emerging markets"

Alcoholic Drinks Continue to Make Gains in Emerging Markets


As in 2011, emerging markets will continue to drive alcoholic drinks volume growth in 2012, according to Euromonitor. All four emerging market regions – Asia Pacific, Latin America, Eastern Europe and the Middle East and Africa- will see volumes increase. In the case of Asia Pacific and the Middle East and Africa, gains will exceed 5%. Beer will be the key growth category but spirits and wine will also contribute.

“Equally important is the fact that growth in the emerging markets is increasingly being driven by consumers trading up to more premium products as these economies continue to prosper,” explains Jeremy Cunnington, senior alcoholic drinks analyst at Euromonitor. “In all the emerging market regions, with the exception of the Middle East and Africa, premium lager will outperform the standard and economy segments, albeit from smaller bases. Meanwhile, growth of premium international spirits categories such as blended Scotch and cognac will also be driven by emerging market regions.”

In contrast, all three developed market regions – Western Europe, North America and Australasia – will see volumes decline, primarily due to the maturity of beer in these regions. However, these regions do offer opportunities for growth elsewhere in the industry. Wine, spirits and cider are all expected to do well in North America, while in Western Europe cider/perry and certain spirits categories such as vodka and rum will continue to grow.

Jeremy Cunnington continues: “In addition, products that suit changing consumer preferences, such as drinking at home rather than in on-trade establishments, will continue to do well, as witnessed by the strong performance of RTDs. In particular, this includes products such as ready-made cocktails which allow consumers to recreate the on-trade experience very closely at home.”

Despite tough economic conditions in North America and Western Europe, there will also continue to be opportunities to achieve value growth, as witnessed by the rapid progression of premium ‘craft’  beers in the US and super-premium gin in Spain.

“Regardless of the recovery of mature markets, the importance of emerging markets will only continue to rise, not just in terms of rapid volume gains but increasingly in value terms too. As more consumers in emerging markets are able to trade up, their retail value prospects can only accelerate. This can be seen in blended Scotch, for instance, where volume sales in emerging markets will actually exceed corresponding sales in mature markets by 2014. The balance of power is well and truly shifting in the global alcoholic drinks industry,” he concludes.

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Plans to Export More UK Food and Drink Unveiled


The UK food and drink industry has welcomed a new plan, launched by Food and Farming Minister Jim Paice, which could help hundreds of companies secure sales in lucrative emerging markets. The Exports Action Plan, overseen by a Forum co-chaired by Jim Paice and FDF (Food and Drink Federation) deputy president and chief executive of Nestle UK Paul Grimwood, aims to cut through many of the barriers currently faced by potential exporters and help towards the drive for industry growth of 20% by 2020. Food and drink exports were valued at £10.8 billion in 2010 but are expected to reach almost £12 billion when official 2011 figures are released in March.

The plan identifies a number of actions to boost exports including removing trade barriers; encouraging and putting in place measures to help SMEs export; shifting the focus to emerging economies and highlighting exporting as the key route to growth.

Welcoming the launch of the plan, FDF director general Melanie Leech says: “Food and drink is one of the UK’s key growth sectors and our shared ambition with Government is to grow the sector by 20% by 2020 across both the domestic market and exports. The core of food and drink manufacturing is SMEs and it can be difficult for these companies to access the help and support that they need to take that first step to export. Therefore the opportunity to work in partnership with Defra and UKTI has been embraced by industry.”

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Unilever Continues to Expand in Emerging Markets


Unilever has unveiled expansion to production facilities in Indonesia that will help drive sustainable growth for the food and personal care group in the fast-growing developing and emerging markets. The company has invested about €90 million to build a new, state-of-the-art personal care factory and to expand existing ice cream and personal care factories to increase Unilever’s capacity for growth and service increasing demand for beauty products and ice cream in Indonesia and in other parts of Asia and Africa. These developments complement the additional capacity already being built in the Home Care and Foods categories in Indonesia this year and will better enable Unilever to deliver bigger and better innovation more quickly to consumers.

 

“These new facilities will help us to continue to grow in Indonesia, an important market in which we have strong category positions across our portfolio, as we do across South East Asia,” says Pier Luigi Sigismondi, Unilever’s chief supply chain officer. “These markets contribute significantly to the 54% that Unilever currently generates from emerging markets, a figure we expect to rise substantially over the next ten years. We are excited by the enormous possibilities these markets offer and more investments will undoubtedly follow.”

 

The current investment is part of a €550 million, three-year investment programme in Indonesia to enable Unilever to leverage its leading position in developing and emerging markets by enabling sustainable and profitable growth.

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Nestle Strengthens Leadership in Emerging Markets With New Factory


Nestle is strengthening its leadership in emerging markets by starting construction of a new $200 million factory in Indonesia. The new factory in Karawang, West Java, is due to begin production in early 2013.

 

It will produce Cerelac infant cereals, Milo chocolate malt drinks and, eventually, Dancow milk powder. The new Nestle factory will help satisfy Indonesian consumers’ increasing demand for nutritious, branded products at affordable prices.

 

“Our decision to invest $200 million in Karawang is consistent with the growth in demand and our confidence in the rapidly developing economy ofIndonesia,” explains Arshad Chaudhry, president director of Nestle Indonesia. “We are very optimistic about the growth opportunities inIndonesia. It has a large, progressive population and the economic environment is very conducive for growth.”

 

The Karawang factory, Nestle’s fourth factory in Indonesia, will also benefit the community by creating jobs for over 600 people.

 

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Emerging Markets Drive Sales and Profits at Diageo


Buoyed by strong growth in emerging markets, particularly by its Scotch whisky brands, Diageo has achieved 5% organic growth in both net sales to £9.94 billion and in operating profit before exceptionals to £2.88 billion for the year ended June 30th 2011.

 

Exceptional operating costs were £289 million for the year including a net charge of £111 million in respect of restructuring programmes. Group profit before taxation increased by 5.4% to £2.36 billion.

 

Three of Diageo’s four regions –North America, International and Asia Pacific – saw organic growth in net sales, operating profits and marketing spend. However, in Europe, net sales and operating profit fell by 3% and 7% respectively and marketing spend was down 4% on an organic basis.

 

“The very challenging trading environments of Spain and Greece are well understood and led to the overall decline in net sales for Europe this year. However, excluding these two markets, net sales in the region grew,” explains Andrew Morgan, president of Diageo Europe. “Strong performances from our Scotch and rum brands led to double digit organic net sales growth in Russia, Eastern Europe and Germany, while Great Britain, France, Benelux and Italywere resilient, with single digit growth. Throughout the year we focused our marketing spend on the biggest opportunities.”

 

Diageo is continuing to restructure its gloabl business to adapt to changing market requirements. In May, the company announced an operating review which is expected to reduce cost of goods and operating costs by approximately £80 million per annum by the end of fiscal 2013. The total cost of the changes which have been identified is expected to be £160 million, of which £77 million was taken as an exceptional charge this year.

 

Diageo also expanded its presence in faster growing markets during the year through a series of deals worth £1.6 billion, including taking a controlling stake in Serengeti Breweries inTanzania, an equity stake in Halico inVietnam, making additional investment in ShuiJingFang in China and the £1.3 billion acquisition of Mey Icki, the leading spirits company in Turkey.

 

“Our leading brands and superior routes to market have delivered volume growth, positive price/mix, gross margin expansion and strong cash flow. We have strengthened the business, investing more behind our brands and in our routes to market and we have deepened our leading brand and market positions in the fastest growing markets of the world,” comments Paul Walsh, chief executive of Diageo. “In addition we have implemented changes to drive further operational efficiencies. While Diageo is not immune from a fragile global economy, this is a strong platform. It is the basis of our medium term outlook for average organic top line growth of 6%, organic operating margin improvement, with the first 200 basis points achieved in the next three years, and double digit eps growth.”

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Unilever Focuses on Emerging Markets


Unilever expects to generate more than 70% of group turnover from emerging markets by 2020, up from a current level of 55%. In face of sluggish growth in developed markets, Unilever has been investing heavily to expand its presence in emerging markets in Asia, Africa and Latin America, withBrazil,India,ChinaandTurkeyamong the group’s fastest growing markets.

 

“Europe and theUSwill be, for the next ten years, low-growth territories, I’m afraid. So, soon we will have 75% of our turnover in emerging markets – 70-75% by the end of decade,” says Paul Polman, chief executive of Unilever. “This is also where the 2 billion more people will be born in the next 40 years, and obviously where most of the world growth is going to be.”

 

He adds: “We are growing by 10% or more now consistently in the emerging markets, and that’s a very healthy growth. We can continue to grow at a 4 to 6% range overall.”

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Unilever Reorganisation Designed to Drive Growth


Unilever has announced changes to its category and go-to-market structure to further support its growth plans, especially in its fast-developing businesses in the emerging markets. The new structure is designed to facilitate a more efficient rollout of increasingly bigger and more scalable innovations, and the optimisation of resources behind strategic priorities.

“Unilever now has over half its turnover in the emerging markets, where, over the last 10 years, growth has been close to double digits. We have an opportunity to better support this footprint of the business, to keep our strong momentum, with a more globally aligned country and category organisation,” explains Paul Polman, chief executive of Unilever.

As part of these changes Harish Manwani will be appointed as chief operating officer, with effect from 1 September, and will take responsibility for all markets, in order to drive speed-to-market behind further simplification and efficiency.

“Over the past few years we have seen a significant step-up in our innovation success rate and our speed to roll them out across markets. The new structure will further accelerate this,” adds Paul Polman.

Paul Polman, chief executive of Unilever.

The Category organisation will be broadened to four categories reporting directly to Paul Polman.

Dave Lewis, currently president , Americas, will be appointed as president, Personal Care consisting of Skin, Deodorants, Oral and Hair.

Kevin Havelock, currently executive vice president Ice Cream, will be appointed as president of the newly established Refreshment category which includes ice cream and beverages.

Antoine de Saint Affrique, currently executive vice president Skin, will be appointed as president, Food which includes savoury, spreads and dressings.

In the Home Care category, Randy Quinn, currently executive vice president Laundry, and Sean Gogarty, senior vice president Household Care, will report directly to Paul Polman.

The new structures will be put in place during the third quarter and will be fully operational before year-end.

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Record Year For Heinz But Factory Closures Planned in Europe


HJ Heinz has achieved record sales and net income of $10.7b and $990m respectively in its 2011 financial year, while completing key acquisitions in Brazil and China to accelerate its dynamic growth in emerging markets. The US-based food group increased sales by 2% and net income by 14.4%.

Emerging markets, which generated more than 16% of Heinz’s total sales in 2011, delivered 14.4% organic sales growth (12% reported). The company’s strong growth in emerging markets reflected record sales of: Heinz baby food in China, Complan and Glucon-D nutritional beverages in India, ABC soy and chili sauces in Indonesia, and Heinz Ketchup and baby food in Russia.

William. Johnson, chairman, president and chief executive of Heinz.

The company’s top 15 brands generated 3.8% organic sales growth (2.9% reported). Heinz global ketchup sales registered 3.8% organic growth (1.9% reported).

“Heinz delivered record sales, net income and cash flow in Fiscal 2011, fueled by accelerating growth in key emerging markets like China, India, Indonesia and Russia and value-enhancing innovation in our core portfolio of iconic brands,” says William. Johnson, chairman, president and chief executive of Heinz. “Through excellent execution of our long-term plan, Heinz enhanced its position as one of the best-performing global food companies while driving shareholder value and continued dividend growth.”

To support continued future growth, Heinz will invest approximately $160m on initiatives to increase its manufacturing efficiency and accelerate productivity on a global scale. The plan includes exiting five factories, including two in Europe, two in the US, and one in the Pacific, leaving Heinz with 76 factories globally.

In addition, Heinz will establish a European supply chain hub in The Netherlands to consolidate and centrally lead procurement, manufacturing, logistics and inventory control. Overall, Heinz will streamline its global workforce by approximately 800 to 1,000 positions.

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Heineken Looks to Expand in Brazil


Heineken is reported to be considering making an offer to acquire Primo Schincariol Industria de Cervejas Refrigerantes, the second largest brewer in Brazil behind Anheuser-Busch InBev. Primo Schincariol Industria de Cervejas Refrigerantes is estimated to be worth in the region of £2b.

Such an acquisition move would be in line with Heineken’s strategy of developing its presence in fast growing emerging beer markets of the world to help balance its exposure to sluggish mature regions such as Western Europe and the US.

Heineken is already present in Brazil, the world’s third largest beer market by volume, through its partnership with Cervejarias Kaiser.

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European Region Still in Decline at Diageo


Greater focus on its priority brands and increased investment in emerging markets has allowed Diageo to deliver 7% organic net sales growth in its third quarter, and to increase sales by 5% on an organic basis and volume by 2% in the nine months ended March 31st 2011, compared to the comparable period last year. However, while its regional markets of North America (3%), Asia Pacific (9%) and International (!4%) all registered organic net sales growth, Europe declined by 3%.

On a reported basis net sales grew by 3% in the quarter ended 31 March 2011 and by 2% in the nine months ended 31 March 2011, against the comparable prior period in each case.

Paul Walsh, chief executive of Diageo.

‘Trading in the third quarter was in line with our expectations that the second half would be stronger than the first,” comments Paul Walsh, chief executive of Diageo. “In North America consumer trends are improving, albeit modestly, and Diageo’s scotch, vodka and tequila brands performed strongly in the quarter. Better mix and lower discounts offset volume decline to drive top line growth. Overall trading in Europe continues to be challenging although in the 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. Further improvement in price/mix in both International and Asia Pacific in the quarter were driven by the continuing strength of our scotch brands especially around Chinese new year, improving trends for our beer brands in Africa, especially in Nigeria, and stronger growth in South Africa and Australia.”

He adds: ‘This overall improving trend is the result of our focus on our priority brands and our strengths in market. We remain confident that our up weighted marketing investment together with the increased investment we have made in emerging markets in the year will continue to deliver improving performance.’

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Pernod Ricard On Track to Meet Financial Targets


Following a solid third quarter, Pernod Ricard has confirmed its targets for the full 2010/11 and 2011/12 financial years. Over the first nine months of the 2010/11 financial year (to 31st March 2011) consolidated sales (excluding tax and duties) increased by 11% to Eur5.90b, compared to the same period in the previous year, and organic growth was 7%, in line with the first half of the financial year. During the nine months period, sales grew by 16% in emerging markets and by 2% in mature markets.

Sales in Europe (excluding France) for the first nine months, were stable on an organic basis at Eur1.63b, but declined 3% on a reported basis following the disposal of certain assets in Spain and Scandinavia. This stability was a marked improvement compared to the 6% organic decline during the same period of the previous year. The situation remained difficult overall in Western Europe (in particular in Spain), but growth was confirmed in Central and Eastern Europe, more specifically due to Russia and Ukraine. In France, organic growth remained sound at 4%, bringing sales to Eur549m.

Pierre Pringuet, chief executive of Pernod Ricard.

The improving business trend in Pernod Ricard’s overall global business, noted in the first half, was confirmed in the third quarter of 2010/11. In addition to strong growth in emerging markets and a recovery in mature markets, portfolio premiumisation was confirmed by 11% organic growth from the group’s top 14 brands in the first nine months, with a significant price/mix effect of 4%. The period also saw a 9% increase in premium brands, which represented 71% of sales in the first nine months compared to 69% in the prior year.

“The third quarter 2010/11 confirmed the improved business trends since the start of the financial year and strengthens our confidence in our ability to meet our targets – organic growth in profit from recurring operations of close to 7% for the full 2010/11 financial year and Net Debt/EBITDA ratio close to 4 at the 30 June 2012 year-end,” says Pierre Pringuet, chief executive of Pernod Ricard.

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Heineken Expands in Africa With Two Acquisitions


In line with its strategy of increasing exposure to emerging markets, Heineken is acquiring two breweries in Ethiopia, after being named the preferred bidder by the Ethiopian Government following a public auction. Heineken is paying $85m and $78m respectively for the Bedele and Harar breweries.

The two breweries have a combined market share of 18% with brands such as Bedele, Harar, Hakim Stout and Harar Sofi (malt). Ethiopia is Africa’s second most populated country with 85 million people and its beer market (3m hectolitres in 2010) has grown by approximately 20% per year over the past five years, compared to a GDP growth of 8%.

Beer and non-alcoholic malt consumption in Ethiopia was approximately 4 litres per capita in 2010, which is well below the global average of 27 litres and below beer consumption in neighbouring countries, such as Tanzania (7 litres), Uganda (9 litres) and Kenya (10 litres). In addition to a fast growing population and a developing beer market, the country’s political stability and improving economy, make Ethiopia a promising, long-term growth market for Heineken in Africa.

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Fifth Consecutive Quarter of Growth at Unilever


Food, personal care and home care group Unilever has delivered its fifth consecutive quarter of growth as its transformation strategy continues. Turnover in the first quarter increased by 7% to Eur10.9b as underlying sales rose by of 4.3% with all categories growing, driven by emerging markets up 9.9%. Underlying volume growth was 2.5% and pricing was up 1.8%.

Reflecting another good performance in the emerging markets, revenue in ice cream and beverages during the quarter was Eur1.94b with underlying sales growth of 4.7%. The Magnum brand is continuing to grow rapidly, fuelled by the launches in the US and Indonesia. Cornetto is also doing well, particularly in Asia with a strong performance in China.

Paul Polman, chief executive of Unilever.

Tea grew on the back of a strong performance in South Asia, good share gains in the UK and the early success of the Lipton pyramid Green and White teas in Western Europe and Russia. AdeS soy drinks continue to deliver rapid growth in Latin America supported by new flavours, packaging and communication.

Underlying sales in savoury, dressings and spreads rose by 2.1% to Eur3.38b as all the sub-categories delivered sales growth on the back of strong innovations and increasing price. Savoury growth was driven by Knorr jelly bouillon and Knorr baking bags, successfully launched in Brazil and growing well in Europe. The mild winter held back sales of soups in Europe whilst PF Chang’s restaurant quality frozen meals are doing well in the US.

Dressings grew through the successful campaign to inspire new uses of mayonnaise. Rising commodity costs, especially in spreads, required higher pricing which led to negative volumes in the quarter. However, Unilever has a strong programme of innovation, for example the launch of Flora Cuisine liquid margarine in the UK, with more to come as the quality and taste of the group’s products are improved.

“We have delivered a good performance which demonstrates that the transformation of Unilever is progressing well; this against a backdrop of rising commodity costs, weak consumer confidence and very competitive markets. All categories are growing, driven by a particularly strong performance in the emerging markets. We have continued to deliver volume growth, albeit at a lower rate than in recent quarters reflecting the pricing action taken and the sluggishness of the developed markets. Innovation continues to be the key driver of growth,” comments Paul Polman, chief executive of Unilever. “We continue to focus on the long term development of the business and our priorities remain: profitable volume growth ahead of our markets, steady and sustainable underlying operating margin improvement and strong cash flow.”

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Tesco to Outpace Global Rivals


With a compound annual growth rate (CAGR) of 7.5% between 2010 and 2015, Tesco is set to be the fastest growing retailer of the global grocery top four, according to the latest forecasts from international food and grocery analysts IGD. Driven by sharing best practice in areas like loyalty and services across its markets, and particularly by activity in Asia, Tesco will grow sales to Eur106.07b by 2015 (compared with Eur73.78b in 2010).

The world’s largest retailer in 2015 will remain Walmart, with a CAGR of 4.7% taking global sales to Eur401.75b. It will pass half a trillion US dollars in 2014.

Carrefour’s new hypermarket format, Carrefour Planet, and strong growth in emerging markets, will support its position at number two in the global rankings. Metro will rely on its international operations which are predicted to grow faster than its domestic ones.

By 2015 the top four global grocery retailers will account for Eur717.21b of turnover, of which 43% will be derived from their international operations.

“Global retailers that want to achieve the highest growth rates are those that are building a presence in emerging markets. Rapid urbanisation and a growing middle class will create big opportunities in countries like Brazil, China, Russia and India,” points out Joanne Denney-Finch, chief executive of IGD. “With retailer investment plans heavily focused on these emerging markets, food and drink manufacturers will need to keep pace if they want to be part of the growth. Each market is different and nobody should take their eye off the mature and domestic markets which still provide the bulk of sales for the international players.”

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Diageo to Acquire Turkey’s Leading Spirits Company For £1.3 Billion


Diageo has reached agreement to acquire Mey Icki, the leading spirits company in Turkey, for an enterprise value of £1.3b from investment firm TPG Capital and Actera. The transaction is expected to complete in the second half of calendar 2011, subject to regulatory clearances.

Paul Walsh, chief executive of Diageo.

Mey Icki is the leading spirits producer and distributor in Turkey. In the financial year ended 31st December 2010 the company had net sales of £300m and EBIT of £120m. It is the clear market leader in Raki, the biggest spirits category in Turkey, and has a leading position in vodka. In addition the company has an extensive nationwide sales and distribution network.

Turkey is a substantial fast growing economy with a growing and increasingly affluent middle class and consumer spending is forecast to be twice the rate of GDP growth. The acquisition of the leading spirits company in this very attractive emerging market will allow Diageo to accelerate the growth of its complementary international spirits brands with increased access through Mey Icki’s strong distribution network and customer relationships in Turkey. Mey Icki will be consolidated as part of Diageo Europe and will continue to operate under the current management team.

“This investment represents the continuation of our strategy to increase Diageo’s presence in those emerging markets, such as China and Vietnam, which have a rapidly growing middle class,” says Paul Walsh, chief executive of Diageo.

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Solid Sales Growth and Bumper Profit at Nestle


Reporting growth across all regions and categories, Nestle achieved a 6.2% organic growth in 2010 group sales to SFr109.7b (Eur84.9b) with real internal growth of 4.6% and tripled net profits to SFr34.2b, reflecting the disposal of its Alcon shareholding. However, excluding the exceptional net profit of SFr24.5b from the Alcon disposal, 2010 group net profit was actually down 6.7% to SFr9.7b from SFr10.4b in 2009.

The continuing operations achieved organic sales growth of 6.0% and real internal growth of 4.4%. Food and Beverages achieved good growth with market share gains in all categories and regions. Organic growth in emerging markets stood at 11.5%, underlining the increasingly important role they will play in Nestle’s future development. Organic growth for Food and Beverages was 5.7% in the Americas, 3.7% in Europe and 10.2% in Asia, Oceania and Africa.

Nestle improved its group EBIT margin from continuing operations by 30bps to 13.4%, while increasing the investment behind its brands with marketing expenses up by 100bps, and consumer facing marketing spend up 13.2% in constant currencies. The improvement in EBIT margin was driven by sales growth and business mix, as well as by the achievement of operating efficiencies of over SFr1.5b through the Nestle Continuous Excellence programme.

Paul Bulcke, chief executive of Nestle.

During 2010, Nestle concluded acquisitions worth more than SFr5b, including Kraft’s frozen pizza business, Vitaflo (clinical nutrition products) and Waggin’ Train (dog snacks). Nestle invested SFr4.6b in its operations across the world with strong emphasis on emerging markets such as India, Indonesia, the Philippines, the Equatorial African Region and Poland.

Other highlights of the year included the creation of Nestle Health Science and the Nestle Institute of Health Sciences to pioneer a new industry between food and pharma, and the opening of a R&D Centre for biscuits in Chile. Nestle also completed its SFr25b three-year share buy-back programme and launched a new SFr10b programme.

“In 2010, we delivered another year of strong top and bottom line growth, outperforming the market. We increased investment in our brands, our operations and our people. We continued to drive efficiency and effectiveness in both developed and emerging markets while at the same time accelerating innovation, serving well over a billion consumers a day across the world,” comments Paul Bulcke, chief executive of Nestle.

He continues: “We are starting 2011 with continued momentum, well placed to face uncertainties ahead, including volatile raw material prices. We are therefore confident of achieving the Nestle Model in 2011 – organic growth between 5% and 6% and an EBIT margin improvement in constant currencies.”

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Europe Remains Weak Spot For Diageo


Despite a 3% decline in Europe, Diageo achieved organic net sales growth of 4% to £5.32b for the six months ended December 31st 2010 and 2% organic operating profit growth (before exceptional items) to £1.73b. Diageo reported a 12% rise in operating profit to £1.72b for the period and profit before tax was £1.61b, against £1.39b in the first half of 2010.

According to Diageo, the overall economic and consumer environment in Europe continues to be weak. In Greece and Spain, the financial crisis has led to a further decline in consumer confidence and to trade destocking. In Ireland, the ongoing contraction of the on-trade has led to a decline in Diageo’s predominantly beer business. In Great Britain, net sales growth was driven by the growth of wine which reduced margins as did the very competitive pricing environment on spirits. In contrast, the consumer recovery in Russia and a bounce-back in Eastern Europe, aided by some wholesaler restocking, led to strong double digit growth in these emerging markets.

Paul Walsh, chief executive of Diageo.

Europe accounts for almost a third of group profit. The key markets of Spain, Great Britain and Ireland generate about half of the region’s sales for Diageo.

“Momentum is building in our business. Our top line performance was stronger and price/mix improved. We have increased marketing spend significantly, up 10%, but in a very focused way. 35% of the increase was behind strategic brands in US spirits to build the brand equity as we move away from promotional support and over 60% of the increase was on our brands in the faster growing emerging markets,” comments Paul Walsh, chief executive of Diageo. “Despite the economic weakness in much of Europe, our first half performance gives me increased confidence that we will improve on the organic operating profit growth we delivered in fiscal 2010.” Diageo’s organic operating profit growth was 2% in 2010.

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PepsiCo Continues to Invest Heavily in Emerging Markets


Having recently unveiled plans to invest $140m to build its tenth plant in Russia as part of a $1b investment programme in the country, PepsiCo has announced that it will construct a $73m beverage facility in Vietnam. The move marks the first phase of a $250m investment programme in Vietnam. The new plant in the northern Bac Ninh province will become the global soft drinks and snacks giant’s biggest production site in Vietnam.

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Diageo Strengthens Brewing Business


Diageo has strengthened its beer business in emerging markets after its East African Breweries subsidiary acquired a 51% stake in rival Tanzanian brewer Serengeti Breweries for $60.4m (£38.1m). The deal strengthens East African’s distribution in Kenya and Uganda.

Meanwhile, speculation has heightened that Diageo is considering a move to purchase the 66% of Moet Hennessy, the drinks business of French luxury goods group LVMH, that it does not already own. Incorporating the Hennessy cognac and Moet & Chandon and Don Perignon champagne brands, Moet Hennessy would cost Diageo in the region of £10.8b.

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Nestle to Invest in R&D Centre in India


Nestle is investing SFr50m (Eur38m) to establish its first R&D Centre in India. The facility will be built in Manesar, close to Nestle India’s headquarters in Gurgaon, and will be operational in 2012.

The investment will help to further strengthen Nestle’s R&D capabilities in emerging markets. Nestle has a strategic focus and leadership in emerging markets where the company expects sales to reach 45% of the group’s total by 2020.

The new centre will focus on popularly positioned products (PPPs), especially for India but also worldwide. PPPs meet the specific needs of consumers with lower income levels by offering them high-quality, nutritionally enhanced products at affordable prices.

Nestle has had a presence in India since 1912 and today operates seven factories located across the country. Nestle India has benefited from Nestle’s global R&D network, with innovative PPPs such as Maggi noodles, Masala ae magic spice seasoning and Chotu Munch chocolate confectionery.

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Molson Coors Expands in China


In line with its strategy of increasing its exposure to emerging beer markets, Molson Coors Brewing Company has completed its $40m acquisition of 51% controlling interest in a joint venture with the Hebei Si’hai Beer Company, a regional Chinese brewer.

The joint venture, Molson Coors Si’hai Brewing Company, will provide Molson Coors with a platform to further expand its distribution channels throughout China and give the company greater control over brewing, increased cost efficiency, and more flexibility on packaging and brand innovation in order to grow in the market.

Since entering the Chinese market in 2003 with Coors Light, Molson Coors has enjoyed a rapidly growing business with its leading international brand, which is now available in more than 40 cities across China. The new joint venture will provide opportunities to further expand the sales and distribution of Coors Light and regional Si’hai beers.

Molson Coors is a leading global which operates in Canada through Molson Coors Canada; in the US through MillerCoors; and in the UK and Ireland through Molson Coors UK.

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Nestle Continues Expansion in Central and Eastern Europe With New Service Centre in Ukraine


Nestle is creating a new service centre in Ukraine to facilitate its continued expansion in the emerging markets of Central and Eastern Europe.

The world’s biggest food group will invest SFr25m (Eur19m ) over three years to establish the Shared Service Centre in the Ukrainian city of L’viv. The new facility will support more than 20 countries in the region such as Russia, Poland, Romania, Hungary and Bulgaria.

L’viv was chosen for its location due to its local transport infrastructure, employee talent potential, real estate and office space availability. In addition, the city is also home to Nestle’s Svitoch confectionery factory.

The L’viv centre is set to become the third internal Shared Service Centre worldwide led by Nestle Business Services (NBS) – an international unit under the Nestle umbrella that performs a standardised and cost-effective way of running financial and HR services.

The centre will reflect the model of two other internal NBS Shared Service Centres that support the Latin American region and the Asia, Oceania, Middle East and South Africa region – with a centre based in Ribeirao Preto in Brazil since 2006, and a centre in the Philippine capital, Manila, since 2008.

At the Brazil centre, around 400 employees support 21 Latin American countries in financial services and employee services focusing exclusively on accounting activities, HR administration and payroll. While in the Philippines, a workforce of around 550 employees support countries from Australia to Vietnam in the same categories.

Bringing together financial and human resources transactional activities as a single entity, the L’viv centre will be the first of its kind to make its mark in Central and Eastern Europe.

NBS aims to form partnerships with some of the 12 universities in the L’viv region to develop specific curriculums including foreign languages and international finance, to align with the Shared Services industry. As part of this goal, Nestlé has already commenced talks with Ivan Vakachuk, Rector of L’viv National University.

Mainly focused on business, law and management, the university partnerships will follow similar learning initiatives already implemented by Nestle in Malaysia. Since 2006, the Malaysian programme has focused on the development of local Nestle executives into first line managers. This has upgraded workforce competencies in order to meet the needs of the company and challenges of the global market.

Nestle in Ukraine

Established in 1994 with its head office in Kiev, Nestle has built up a strong presence in Ukraine over the past 16 years and currently employs 4,500 people there. Acquiring confectionery brand Svitoch in 1998 and culinary brand Torchyn in 2003, Nestle Ukraine also offers internationally recognised brands such as Nescafe, Nesquik, Nuts, Kit Kat and Lion.

In January 2010, Nestle acquired Ukrainian brand Mivina, a market leader in instant noodles, instant mashed potato and dehydrated seasonings. The acquisition enables Nestle to complement its culinary portfolio in Ukraine and boost its presence in one of the fastest growing segments of the Ukrainian food market.

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Emerging Markets Drive Heinz


Emerging markets such as China, India, Indonesia, Latin America and Russia are expected to deliver at least 20% of Heinz’s total sales by 2013, more than double their contribution of just five years ago, according to William Johnson, chief executive of the US-based global food group.

“Emerging markets are key to unlocking future growth because their economies are growing at a significantly higher rate than developed markets; the middle-class in emerging markets will eventually outnumber the combined populations of the US and Europe; and per capita consumption of packaged foods in emerging markets has significant upside,” he explains.

Record Sales and Profit

Heinz achieved record sales of $10.5b, up almost 5%, and record gross profit of $3.8b in its 2010 financial year, despite having to navigate “the most difficult economic environment in decades.” William Johnson adds: “Our record sales were driven by solid results in our Top 15 brands and most importantly, by accelerating double-digit growth in emerging markets, our most powerful growth engine.”

With emerging markets generating organic sales growth of almost 22% in the first quarter of the 2011 fiscal year, Heinz is on track to deliver its financial targets for the full year, even though the consumer and economic environment remains challenging.

Indeed, William Johnson says the global economy is in the worst state he has seen during his 35 years in the consumer goods industry. “The near-term economic outlook for the US and Europe remains pretty dreary, marked by high unemployment and low consumer confidence.” He adds “Many consumers have gone into what I like to term as economic hibernation, eating at home more often, eating out less, reducing spending and worrying more about the future.”

Heinz is not spending much time looking for M & A opportunities in the US and Western Europe but instead is focusing almost entirely on the emerging regions of the world.

Heinz expects to deliver another year of strong results on a constant currency basis, with sales growth of 3 to 4%, operating income growth of 7 to 10%, and earnings per share growth of 7 to 10%. Heinz also projects operating free cash flow of more than $1b for the second consecutive year.

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Nestle Investing SFr150m in Emerging African Markets


In line with its strategy of expanding in emerging regions of the world, Nestle will invest SFr150m (Eur110m) in the Equatorial African Region (EAR) over the next three years by building new factories in Angola, the Democratic Republic of Congo (DRC) and Mozambique, while also expanding existing factories. The world’s largest food group will also increase its distribution capacity in the region by opening 13 new distribution facilities and more than double its work force by creating 750 new jobs by 2012.

“Nestle is committed to unlock the business opportunities and to promote growth in Equatorial Africa. With 400 million people and an emerging middle-class with rising purchasing power, this region has major potential for Nestle,” explains Paul Bulcke, chief executive of Nestle. “By opening new factories in the region, we are closer to our consumers and can better adapt our products to their taste and nutritional needs.”

This new investment reaffirms Nestle’s commitment to the EAR which includes a SFr40m investment in the Democratic Republic of Congo (DRC). The Swiss group will build a new factory in the Congolese capital Kinshasa, which is earmarked to produce culinary and coffee well-known brands including Maggi and Nescafé 3-in-1. Other products offered under the dairy, beverages and some coffee categories will be tailored to respond to local market needs. Currently operating a distribution centre in Kinshasa since September 2009, Nestle will expand the total number of employees to 300 by 2012.

Paul Bulcke, chief executive of Nestle.

Nestle has also committed an investment of SFr30m to build a new factory and distribution centre in Beira, Mozambique. The factory, which will support the increasing demand in Mozambique and neighbouring countries for Nestle products including culinary, coffee and other beverages, will create over 260 new jobs within three years.

In Angola, Nestle will invest SFr25m in a new factory which is expected to bring the total number of employees to 145 by 2012. Currently, Nestlé sources products for the Angolan market from other markets such as Portugal and Brazil. Angola is important for Nestle, as an emerging market with a strong economy and a growing purchasing power.

While in Kenya, Nestle is investing SFr30m in the expansion of its Nairobi factory including a new production line to support its newly-launched food service division, Nestle Professional. The factory will supply Kenya, Uganda, Tanzania, Rwanda, Burundi, Eastern Democratic Republic of Congo, Malawi and Zambia.

In addition, in Zimbabwe, Nestle is investing in the expansion and upgrade of its Harare factory at a cost of SFr25m. This is expected to boost its production capacity and help supply other regional markets such as Zambia and Mozambique.

Nestle EAR was set up in 2008 and oversees the Nestle operations in 20 countries including Kenya, Angola, Burundi, Comoros, Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Madagascar, Mauritius, Mozambique, Malawi, Republic of Congo, Rwanda, Seychelles, Somalia, Tanzania, Uganda, Zambia, and Zimbabwe.

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Heinz Continues Drive into Emerging Markets With Expansion in China


HJ Heinz is acquiring Foodstar, a leading manufacturer of soy sauces and fermented bean curd in China, from Transpac Industrial Holdings, a private equity firm. The acquisition will increase Heinz’s annual sales in China to about $300m and enable the group to enter the nation’s fast-growing $2b retail soy sauce market.

The purchase price consists of a cash payment at closing of $165m and an earn-out potentially payable in 2014 based on the performance of the business. The completion of the proposed acquisition is subject to regulatory approval in China.

Foodstar’s Master Weijixian light premium soy sauce is the leading brand of Weijixian soy sauce in the southern region of China. Foodstar’s Guanghe fermented bean curd, a popular flavor enhancer that is used in cooking, also holds a strong regional market position. Based in Guangzhou, Foodstar has four manufacturing sites and 2,500 employees in China. A new manufacturing facility is being constructed in Shanghai.

“The acquisition of Foodstar gives Heinz a strong growth platform in China’s huge, rapidly growing soy sauce market. Foodstar’s leading brands have strong equity with Chinese consumers and they are a natural fit with our core global capabilities in sauces and condiments,” says William Johnson, chairman, president and chief executive of Heinz. “The acquisition is another important step in our strategy to accelerate growth in dynamic emerging markets like China, where Heinz is already well positioned with our growing infant nutrition business and Long Fong, a leading brand of frozen dim sum.”

Heinz has been in China, the world’s most populous nation, since the 1980’s, when the US-based food giant opened a factory in Guangzhou to produce Heinz infant cereal. Including China, emerging markets generated approximately 30% of Heinz’s reported sales growth and 15% of the company’s total sales in fiscal 2010. Heinz expects emerging markets to generate as much as 25% of sales by 2016.

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