The past year has seen no shortage of drama – both inside and outside the food and drinks industry. At the same time as we look ahead to what will star in 2018, FoodBev has rounded up five of the biggest themes in this year’s industry news to provide a clear snapshot of how the landscape changed for businesses.
From food safety scandals and sugar taxes to executive chop-and-change, we’re sure you’ll agree it’s been a busy 12 months.
Long-running M&A sagas get settled
Several high-profile and long-running takeover sagas were settled this year, as food and beverage companies continued to consolidate their position in a competitive market. Most recently, Unilever sold its spreads business this month after waiting since April for a viable suitor. The brands – including Flora, Stork and Blue Band – went for a total price of €6.83 billion, the third largest sale of the year at the time of writing. The buyer, though, was US private equity firm KKR, putting a dampener on speculation that the business might be an attractive bet for rival food companies such as ADM or even Kraft Heinz, who prompted the sell-off in the first place.
The sale couldn’t be much different to another piece of M&A in the condiments space: Reckitt Benckiser’s divestiture of its food business, which consists of brands like French’s mustard and Frank’s RedHot sauce. RB Food was sold to McCormick for $4.2 billion in July, less than a week after reports in the media suggested that Unilever and Hormel Foods were the most likely suitor for the condiment brands.
Other drawn-out M&A sagas that were eventually settled this year include Saputo’s acquisition of struggling Australian dairy business Murray Goulburn, Refresco’s will-they-won’t-they private equity takeover, plus the sale of Brazilian dairy company Vigor – which eventually went to Grupo Lala.
Brazil weathers carne fraca affair
When plants owned by Brazilian meat giants BRF and JBS were targeted in a food corruption probe in March, fears for the state of the Brazilian meat industry were high. After all, the country is a major exporter to markets like the US and the European Union, which bought $1.8 billion’s worth of meat from Brazil in 2016. The two companies, as well as the smaller Grupo Peccin, were accused of paying health officials to overlook contaminated or potentially rotten shipments of meat.
But, despite Brazilian meat exports being banned by more than 30 countries at one point, the country was showing signs that the worst had already passed by April. JBS’ owners, J&F Investimentos, paid a record $3.2 billion fine and admitted to spending $184 million to bribe nearly 1,900 officials, while BRF continued to shrug off the incident in August, reporting revenue higher than the first quarter and a 13.7% increase in pre-tax earnings.
The long-term prospects of Brazilian meat and poultry exports remains to be seen, but the country has been gifted a platform from which to rebuild and recover. The other major food scare this year was the fipronil scandal, where eggs were contaminated with chemical insecticide, traced back to two companies in Belgium and the Netherlands.
Sugar tax confirmed
Just as the UK’s political future was sealed earlier in the year with a confirmed timescale for its exit from the European Union, the country’s proposed sugar tax – highly controversial within the industry – was also set on an unavoidable course. Chancellor Philip Hammond confirmed the levy would go ahead in his spring budget, with the same two tax bands proposed in 2016 when the plan was first announced: one for sugar content above 5g per 100ml and a higher band for sugar content above 8g per 100ml.
But the UK government has also had to repeatedly downgrade its forecast of how much the tax will generate – first by £145 million and then by another £105 million – raising questions over its efficacy and the methods used to model new fiscal measures. The government now only expects the tax to bring in £275 million a year, much less than the £520 million initially stated, and the soda lobby is jumping on events of the past year to further its case that the tax won’t work.
Major change in the boardroom
There was some major movement at executive level this year, as some of the world’s largest food companies changed tack and – in some cases – CEO. Unilever has reportedly kicked off the search for a replacement for Paul Polman, Dutch dairy cooperative FrieslandCampina appointed Hein Schumacher as successor to Roelof Joosten, and PepsiCo made Ramon Laguarta president in a move spectators claimed was preparation for Indra Nooyi’s retirement.
But the biggest shake-up of the year was the departure of Irene Rosenfeld after 11 years as CEO of Mondelēz International and its predecessor, Kraft Foods. Rosenfeld, who oversaw only one major acquisition since Mondelēz was formed, had been under pressure from investors to step aside for months – if not years. Before the announcement in August, rumours suggested that Mondelēz had started looking for a successor more than three months earlier. She was replaced by McCain Foods’ Dirk van de Put in November but will continue as chairman until March 2018, before retiring, leaving Indra Nooyi as the only female CEO at any of the world’s 25 largest food and drink companies.
Rise of the meal kits
Meal kits was a major winner in 2017, as the category finally found life after threatening to emerge into the mainstream for several years. The concept is particularly strong in the US, having first found prominence in northern Europe. The middle of the year was dominated by big players investing in meal kit start-ups, with Unilever the lead investor in a $9.2 million funding round for Sun Basket, Campbell’s pumping $10 million into meal kit upstart Chef’d, Nestlé taking a minority stake in prepared meal provider Freshly, and Albertson’s weighing in on the action with the acquisition of meal kit start-up Plated as it aims to bring more customers to its stores.
Indeed, meal kits that consumers can buy in store and prepare at home are proving increasingly popular in mainstream grocery retail. There is massive opportunity for meal kit companies in the US right now, not least because of Blue Apron’s misjudged IPO earlier in the year, described by Bloomberg as the ‘bust of the decade’.
Amazon has even got involved, trialling a range of meal kits to existing users of AmazonFresh – its grocery delivery service. The technology giant has threatened to significantly disrupt the retail environment this year with a $13.7 billion move for organic specialist Whole Foods and reports that it would open brick-and-mortar convenience stores that utilise innovative new technology to keep payment and waiting times to a minimum. Amazon’s buzz prompted Target to buy US online same-day delivery platform Shipt for $550 million, as it steps up its challenge to Amazon and also Walmart. There’s no doubt that Amazon is at the start of its growth trajectory, and there could be many more developments to watch out for in 2018.
© FoodBev Media Ltd 2019