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Are sugar concerns the real reason Pepsico strips Tropicana and Naked?

In the West Governments have gone to war against sugar due to concerns about obesity and related life style diseases like diabetes. In the UK, according to the food standards agency, ‘the amount of sugar in food’ is currently the number one consumer concern, ahead of food waste, animal welfare and surprisingly (for me) the use of additives and pesticides.

Photo Omid Armin

But sugar is not the number one concern everywhere. In China, for example, sugar levels in food are not top of consumers’ minds. Instead production dates, shelf life and storage conditions, namely fundamental food quality issues, are much bigger issues.

At first glance, no surprise that last week Pepsico announced it was selling its Tropicana and Naked brands – in North America only. But note carefully, keeping a 39% stake.

Delve further, in North America last year sales of Tropicana actually grew as consumers shifted to in-home consumption, especially breakfast. And in Britain the brand grew too thanks to lower calorie and lower sugar offerings like Lean and Trop 50.

So why the divestment? I suspect the real reason is more to do with profitability. 

Commodity prices are rising; shipping bulky liquids long distances is expensive; and orange juice is a price sensitive category. Let’s not forget retailer brands are strong too. These facts were implicitly recognised in the deal’s low multiple (enterprise value $4.5bn, revenue $3bn). 

The new private equity owner, FAI, also has shown it can work well behemoths like Nestlé in ice cream.  

The divestment is one less distraction as PepsiCo searches for better returns in other categories. 

Personally I still see a lot of upside in fruit. Sugary sweets and cakes is one thing, but natural sugars in fruits, not to mention vitamins and fibre?

Is M&S food at the cutting edge of UK gourmet fare?

M&S food division is one of the brighter stars in the company’s portfolio; its legacy fashion businesses a victim of ageing demographics, a surge in on-line and the Covid pandemic which has seen shoppers shift away from the high street in droves.

At one time, M&S food were in the high street stores only, but that’s changed with a surge in stand alone food outlets (FoodHalls) plus more facilities in petrol retail.

The product portfolio has definitely expanded. The vast majority of it is fresh, salads and ready meals branded ‘dine in’. Recently M&S food has taken to selling 3rd party brands, a strategy it once refused to contemplate.

I visited an M&S FoodHall in Norwich last week about an hour before closure. (The shop shuts at 2100 which for people like me who’re used to living in Asia-Pacific is quite early.) It was pretty empty of shoppers, although well stocked.

I was looking for cheese.

Living in Japan, finding good quality cheese is a perpetual challenge. When you do find it, it’s in miniscule pack sizes and priced exorbitantly.

This was one half of the M&S FoodHall cheese display.

Honestly speaking, space wise it was much smaller than I’ve seen in Sainsbury or Waitrose, for example. The selection wasn’t bad but it didn’t really grab my attention. The varieties are hard to pick out on shelf and there didn’t seem to be any logic in how the shelf was ranged.

By contrast, M&S has put more effort into plant meats. I don’t know what M&S shoppers buy, but I would guess that the basket spend on cheese is much higher than plant meats.

Although M&S has some category signage there’s little other POS material to stimulate or educate the shopper. These days gourmet shoppers want to be tantalised with news and new fare.

I wonder if the M&S team have spent much time looking at retailers like City Super, Seijou Ishii or even Japanese in-store, gourmet brands like RF1? Their bright colours (M&S Foodhall is quite dark and somber), ambiance and above product selection are truly something to savour if you’re a foodie.

Join the queue for the latest Japanese udon in London!

These was the scene last week when Marugame Udon opened its doors in London.

Source: Twitter

Japanese people certainly know how to queue and so do Brits!

Marugame Udon is a j/v between Toridoll (the Japanese parent company) and Capdesia a UK entity.

There are relatively few Udon restaurants in the UK today, Sushi is far more popular. However, Marugame is not the first Udon-ya, that honour goes to Kineya Mugimaru which opened last year.

It’s not Marugame’s first venture overseas either, the company operates restaurants in Russia, the US, Philippines, Vietnam, Hong Kong, Indonesia and even Cambodia. London is the chain’s first port of call in Western Europe.

I particularly like Marugame Udon’s UK website, they clearly have made a big effort to educate consumers about Udon in simple, but mouthwatering terms.

I don’t think the site loses any Japanese authenticity either. That’s not easy when you have to write everything in English.

Marugame could become an interesting case study in how to grow ethnic food penetration.

Incidentally Toridoll’s share price is up over 50% year on year.

Apps like Yuka, Fooducate and ToxFox are the new-age sages of the grocery aisle

As anyone who’s done segmentation studies knows, not all shoppers or consumers are the same.

Marketeers love to cluster shoppers into groups based on demographics, lifestyle, shopping habits and of course spend. It’s a fundamental part of segmentation (and I have done a fair few of these studies!)

The rise of apps like Yuka, Fooducate and Toxfox signal the growth of a heavily involved, nutritionally aware and possibly cynical cluster: shoppers who doubt what’s written on labels; or more accurately what isn’t on the labels.

Photo RetailDetailEU

Yuka was launched in 2017 and now has around 10m users. The App’s raison d’être is to score a product’s health. Food analyses are based on nutritional quality, presence of additives and whether they are organic.

Fooducate hails from Silicon Valley and has been around since 2009, whilst Tox Fox was pioneered by German NPO Friends of the Earth.

Whilst it would be misleading to claim these apps are mainstream, they clearly resonate with an educated, nutritionally aware and probably high spending demographic. Watch this space!

I have sat in many focus group studies round the world and just because many struggle to elucidate concepts like ‘protein’ or an ingredient label, it doesn’t mean they don’t care.

The Powerful and the Dammed; a tell-tale newspaper editor reveals all

I’m a fussy and impatient reader. Either the book fascinates and I read it voraciously or it fails to enthral and it’s quickly dropped.

This wasn’t the case with Lionel Barber’s tome, ‘The Powerful and The Dammed’.

For 15 years Barber was editor of the Financial Times (retired Jan 2020) and by his account turned the paper into a digital powerhouse with a global audience. (Though curiously for a business journalist there are only a few figures floated to support these allegations).

The Powerful and the Dammed

The book is written like a journal, episodes are chronological with short pithy sentences typically starting with Barber’s own reflection in italics, followed by a succinct account of an incident. The book dives straight into issues; all padding has been mercilessly deleted.

Want an insider’s perspective of Lehman, Brexit or meeting Obama or Putin? Fascinated how an old media brand turned digital? Barber tells all.

If one takes Barber at his word, he’s a pivotal influencer and ear for leading politicians, bankers, flamboyant business tycoons and oligarchs. Even Prince Andrew seeks his counsel.

I think Barber overstates his influence. My take is this due to the FT’s Rolodex network rather than Barber’s own insights.

If you wonder how the super powerful business folk swing, smooch and boogie then this ones a must-read.

(As an aside Barber tells a fascinating tale of how the Nikkei swooped at the last minute to buy the FT when German media group Axel Springer had been the pundit’s favourite. For those (including me) who think Japanese corporates can be slow to move, this is a wake-up)

Tesla fast charges up the UK electric car market

As readers of this blog may know, I am spending 3 months in the UK this ‘summer.’ It was difficult to visit last year due to the coronavirus pandemic and I was last here 18 months ago.

One of the more obvious changes I’ve noticed is the presence of electric cars on the roads, especially Tesla.

Photo Jordan Brierley

In 2020 UK electric car sales were around 110,000 units and looking at various sources I estimate Tesla has around 14% share. According to the stats they were not the leader, that accolade has gone to VW with around 20%.

However, on the road, I have hardly seen any electric VWs, either the ID3 or the newer ID4. I cannot say the same for Tesla. I am staying in rural Norfolk, hardly the electric capital of the world, yet have seen many in these parts too. On the motorways I have seen many more.

Tesla’s UK models are coming from California currently, however there are some signs it may shift source to its new China plant. Some models in France have been shipped from China.

There is much press coverage of Tesla’s new German plant, where planning delays and objections are pushing back delivery schedules. Certainly the UK Government, and the energetic mayor of Teesside, who has reached out to Musk directly, are hoping to persuade Tesla to build in the UK.

Self-health and Covid boost vitamin market, but careful the regulators are ready to pounce

Ten years ago wellness and preventative health were niche but today in the US over 83% of households use vitamins, minerals or supplements (VMS). Many other developed markets are close behind. Down under most Aussies pop VMS in some shape or form.

Globally VMS is worth over $140b; and it grew strongly last year as consumers sought to boost their immunity. GSK’s Centrum, one of the leading brands soared 16%.

Photo Julia Zolotova

However, VMS is a confusing market. For a start there is no clear definition of what it includes, or excludes. There are pills, powders, drinks, food products with nutraceutical claims, not to mention cosmetics with functional ingredients.

Online is now one of the category’s biggest channels. Since VMS are generally not classed as drugs it’s not difficult for new comers to conceive a concept, find a third party OEM, fire up a fancy website and start selling.

There are some consumers, perhaps not the majority but certainly a significant cohort, who actively avoid brands sold by big-Pharma.

No surprise the top 10 brands globally account for less than 20% of the market.

In America, VMS are classed as food products by the FDA regulator, meaning brands don’t have to prove they’re safe before being sold, unlike drugs.

Compounding matters further, some VMS brands, especially those sailing close to the wind, use ‘borrowed’ science to validate claims, communicated through word-of-mouth and social media.

A recent report in the WSJ suggested that the FDA is taking a closer look at VMS, especially as surveys have shown a significant number of products contain undeclared ingredients.

It’s an industry that has become too big for the regulators to ignore. 

This is also a watch out for Nestle, Unilever and other big companies who are aggressively pushing into this space, largely through M&A. They’re usually amongst the first to come under the microscope.

The secret to Korean beauty is known only to Cosmax

For those who live in Asia-Pacific, it’ll be no surprise to learn that Korea is the world’s second largest beauty exporter. Sales exceeded $6.1b in 2020, larger than Japan or the US. The country has industry leader France (exports $8.9b) in its sights.

Korea’s beauty industry is helped by its proximity to China which last year posted sales increases of 22%, one of the few markets to grow in the pandemic.

Photo Greg Kantrar

French beauty suffered as the sales of perfumes dropped by 16% and Eau de toilette by even more. The collapse of global travel hit hard, especially as the French beauty business relied heavily on the International duty free channel.

Cosmax, a Korean original design manufacturer, now makes a third of all cosmetics bought by Chinese shoppers and sells over 100 million lip products in the country. 

Cosmax started its original brand manufacturing business in China in 2015 and now has two subsidiaries there.

China isn’t its only focus, it has a plant in Indonesia where it received Halal certification and has even ventured into French beauty’s closet receiving a vegan certification.

The business works with over 600 beauty companies including 15 of the top 20. Last year its sales exceeded $1.1b.

What Foxconn is to technology, Cosmax is to beauty.

Despite sales dropping 30% in the pandemic, Eataly presses ahead with international expansion

How does one describe Eataly? For some it’s a foodie’s haven, for others an emporium of restaurants, shopping and culinary classes. A less favourable and cynical comment I heard was ‘Disneyland for pasta.’ 

Founded in 2006 in Moniticello d’Alba, the business has over 40 stores in over 18 countries. Its most successful market by far has been North America. Here the Madison, NY store turns over $85m a year, and Chicago $50m. Pre-covid annual sales exceeded Euro700m.

Photo Massimo Virgilio

There are different ownership structures globally. In Asia-Pacific for example the business is run by Japanese trading house Mitsui and restaurant chain Kichiri, together they own over 96% of the (Asia-Pacific) franchise. (A concession I think the Italian head office now regrets). As an aside I suspect the business underperforms in Japan, the stores are small, and neither Mitsui nor Kichiri are at the cutting edge of retail.

Growth is built on authenticity and provenance; Eataly has it in droves.

“We have done well on the topics of quality, originality, freshness, digestibility, history & traditions. It is now time to add sustainability to these topics.”

CEO NICOLA FARINETTI, 2020

However Covid significantly curtailed foot traffic, especially to restaurants which account for 50% of revenue. Global sales dropped, a store in Italy was shut, and according to the Italian press, shareholders were tapped for refinancing plus a new loan agreement worth Euro100m.

Despite these set backs, not to mention a few management upheavals, in May, Eataly opened its first London store. It’s in Broadgate next to Liverpool street station. It’s a great location, right in the City of London. This store covers 2 floors and features cocktail bars, a cafe, pasta restaurants, a pizzeria, an ice cream parlour plus a wine shop with more than 2,000 Italian labels.

Eataly London dessert

Eataly’s bet is that workers are going back to the office. 

Given the drop in physical foot flow you’d imagine Eataly had dialled up its EC business. This seems to be patchy, just last October it signed an agreement with Mercato for same-day delivery in downtown New York City, Boston, Chicago and Los Angeles.

Across the pond in London, although the physical emporium is open, the online store is yet to take clicks.

Malaysian palm oil exports soar; still early days for biotech alternatives

Malaysia’s palm oil industry is on a roll. It’s the country’s third biggest export worth $9.8b in 2020, up 18% year on year. Significantly ‘processed’ palm oil, which is more valuable than ‘crude’ accounts for over 70% of exports.

palm oil plantation SE Asia

India is Malaysia’s largest export market, followed by China. 

Palm oil is widely used in the cosmetic and food industry for example cooking oil and spreads. Palm oil has several USPs, it’s resistant to oxidisation extending shelf life; it’s also stable at high temperatures giving fried products a crispy texture. And its odourless and colourless.

It’s no surprise that the industry attracts close Government supervision. The Malaysian Palm Oil Board oversees research, regulation and promotion. The MPOB also sets an export tax levy – currently 8% – on crude palm oil.

However, the palm oil industry is not free of controversy. The biggest issue is deforestation and climate change.

In neighbouring Indonesia at least 81% of forested land cleared to produce palm oil is said to be illegal, according to Watchdog Forest trends. Surveys have shown that deforestation has increased across SE Asia during the pandemic.

palm oil deforestation impact

Global stocks of palm oil are tight currently, and a shortage of migrant workers in Malaysia’s plantations linked to Covid-19, has pushed up global prices.

Given concerns, at least in the West, about sustainability, not to mention the scale of palm oil industry – $61b – one would expect to see more alternatives to palm oil emerging. 

There are a few but none close to commercialisation.

C16Bio sciences is one startup researching single cell alternatives based around algae or yeast. However, the company is at early stage funding (series A, $24m) with just 20 employees. Lanzatech is another. 

Perhaps if MPOB is wise, it will take a close interest in such biotechs?

In the meantime palm oil futures are up nearly 100% on the same period last year.

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