South Africa declares national state of disaster as power outages hit food makers‘ profits

South Africa has declared a national state of disaster following years of power outages that have prompted a spate of profit warnings from food manufacturers. 

South African President Cyril Ramaphosa set out plans to “dramatically reduce” so-called load shedding – the regular imposition of blackouts to save energy – during a state of the nation address.

It follows an open letter sent from the Consumer Goods Council of South Africa (CGCSA) calling for government action to support the food and beverage industry. 

“We are in the grip of a profound energy crisis, the seeds of which were planted many years ago,” Ramaphosa said. 

“The state of disaster will enable us to provide practical measures that we need to take to support businesses in the food production, storage and retail supply chain, including for the rollout of generators, solar panels and uninterrupted power supply.” 

The CGCSA letter was signed by food and beverage companies including Coca Cola, Tiger Brands, Mars, Massmart and Bidfood. 

It called for the removal of red tape, a suspension of the fuel duty levy, incentives to install local renewable energy sources and for essential food production to be exempt from load shedding. 

RCL Foods has issued a profit warning, citing “unprecedented levels of load shedding”, which the company said had further “impacted production and service levels”. 

In January, poultry processor Astral Foods issued a similar warning, blaming power disruptions for exacerbating already high energy and feed costs. 

Ramaphosa’s proposals include a bounce-back loan scheme to help small businesses invest in solar equipment and investment in power infrastructure. He outlined deals to source energy from private companies as well as neighbouring countries. 

He also set out plans to exempt “critical infrastructure”, including hospitals and water treatment plants from load shedding – both of which have been impacted by outages. 

CGCSA CEO Zinhle Tyikwe told a local radio station: “We are hoping that some serious considerations will be made for our members…who feed this country.”

Nestlé, Danone among four companies under Turkey pricing probe 

Nestlé and Danone are among four companies under investigation in Turkey for allegedly violating competition laws on sharing pricing information. 

Swiss food giant Nestlé, meanwhile, is also being investigated in a separate case under the accusation the company set prices and imposed unspecified restrictions for “distributors”, according to notices posted on the website of Rekabet Kurumu, Turkey’s competition authority. 

In the first instance, Rekabet Kurumu presented the company names as Danone Tikveşli Food and Beverage Industry, Eti Gıda, Horizon Fast Consumption and Nestle Türkiye Gıda Sanayi. 

A preliminary investigation was concluded in December into whether the four companies violated Article 4 of competition laws in the “exchange of information sensitive to competition”, Rekabet Kurumu noted. 

It added the regulator’s board had “found the findings serious and sufficient” to launch a follow-up investigation into the said firms. 

In the separate notice pertaining to Nestlé in Turkey, Rekabet Kurumu has launched an investigation following another preliminary probe on allegations the company again violated Article 4 “determining the resale price of its distributors and imposing region and customer restrictions on its distributors”. 

The competition board came to the same conclusion, that the findings were “serious and sufficient” enough to merit further investigation. 

Neither of the notices detailed the products central to the accusations. 

Just Food approached all four companies for comment, including Turkey’s Yildiz Holding, the owner of Horizon Fast Consumption, otherwise trading as Horizon Hızlı Tüketim. 

Only Nestlé responded. The company said: “We are co-operating fully with the authorities as part of their investigation. Nestlé is committed to operating in full compliance with all applicable regulations and legal requirements wherever we operate.” 

Nestlé supplies baby and pet food, confectionery, breakfast cereal, and coffee and beverages in Turkey, according to its local website. Danone, meanwhile, distributes dairy products and water. 

Horizon’s website refers to 40 different product categories, such as baby food and personal-care items supplied into Turkey, including the Ülker brand of food and beverages. 

Eti Gida’s offering in the country features chocolate and cakes, adult and baby snacks, and breakfast cereals and bars.

“No decision” made on Princes, owner Mitsubishi insists 

Mitsubishi Corp. has yet to decide on the future of its UK food-and-beverage subsidiary Princes. 

According to financial-markets news publication Debtwire, the Japanese conglomerate has appointed M&A advisers at Houlihan Lokey to oversee a sale process. 

Approached by Just Food, a spokesperson for Mitsubishi said “no decision” had been made on Princes. Asked if Mitsubishi had hired bankers to oversee a potential sale, the spokesperson declined to comment. Referring to Mitsubishi as a whole, he added: “We are always looking to seek opportunities to grow the company.” 

Mitsubishi acquired Liverpool-based Princes in 1989. At that time, Princes focused on the import and distribution of shelf-stable food. The company’s product range now also includes edible oils and beverages. 

In the year to 31 March 2022, Princes generated revenue of GBP1.44bn (US$1.76bn), down 8% on the previous 12 months, according to a filing with the UK’s Companies House made last week. Princes said it was lapping “an exceptional increase” in revenue booked the year earlier when Covid-19 boosted demand. 

Operating profit stood at GBP37.4m, versus GBP47.5m the year before. Profit for the year attributable to the owners of the company halved, falling from GBP34.8m to GBP17.2m. Princes pointed to lower sales volumes, higher tax expenses and a boost to the previous year’s profits from an asset sale. 

Princes has two food factories and three beverage production sites in the UK. The company also has a tomato-processing facility in Italy and a tuna-processing site in Mauritius. During the year to the end of March, the company employed, on average, 6,977 full-time staff. 

Among Princes’ assets are shares in Edible Oils, a UK-based supplier of bottled edible oils. Princes co-owns the business through a venture with agri-food group ADM. Edible Oils has three production facilities. 

Asked to comment on the Debtwire report, a spokesperson for Princes said: “Princes does not respond to market speculation suffice to say that in the normal course of business, we routinely seek to identify growth and investment strategies. No decisions have been taken.” 

Houlihan Lokey declined to comment.

Perfetti Van Melle buys gum assets from Mondelez International

Perfetti Van Melle has struck a deal to buy a clutch of gum assets from fellow confectionery major Mondelez International.

The privately-owned group, home to brands including Mentos, Chupa Chups and Daygum, is to pay US$1.35bn for Mondelez’s “developed-market” gum businesses in the US, Canada and Europe. The deal excludes assets in France. “

The parties have entered into exclusive arrangements for the sale of the business in France,” the statement read.

Seven months ago, Mondelez announced plans to sell its gum assets in developed markets and its cough sweets brand Halls as part of efforts to focus on chocolate, biscuits and baked snacks.

At the time, the US snacks giant said it would continue to operate its gum businesses in emerging markets and those assets will remain in its portfolio.

“Perfetti Van Melle will be an excellent home for the management team and employees of Mondelez’s gum business in North America and Europe,” Egidio Perfetti, the chairman of Perfetti Van Melle, said. “We have long admired the product and brand portfolio of the gum business and look forward to combining them with the Perfetti Van Melle brand family.”

Dirk Van de Put, Mondelez’s chairman and CEO, described Perfetti van Melle as a “values-led, family-owned company whose portfolio is a strategic fit and where our brands and people can thrive”.

Under the terms of the deal, Perfetti Van Melle will acquire Mondelez factories in the US and Poland. The company will buy eight gum brands across the US, Canada and Europe, including Trident and Dentyne.

Three European candy brands – Cachou Lajaunie, Negro, and La Vosgienne – will also change hands.

The price paid for the assets is equivalent to 15 times what Mondelez estimates will be the EBITDA it generates from them this year.

In the statement, the companies said they expect to complete the transaction in the fourth quarter of next year.

Kellogg to keep plant-based business in strategic U-turn 

US food giant Kellogg has decided to retain its plant-based business, U-turning on plans to spin it off, citing the category’s “long-term growth prospects”. 

The plant-based arm represents 2% of the company’s net sales and was due to be siphoned off into an independent arm called Plant Co. as part of an overhaul of the entire company. 

In June last year, Kellogg announced it was separating itself into three independent companies in a major restructuring plan. 

The decision to keep the plant-based assets comes as the market in the US has started to slow, with sales down following the pandemic boom. 

Kellogg said: “The company continues to work towards its previously announced spin-off of its North America cereal business by year-end. After exploring strategic options, the company has decided to retain its plant-based business, which represents 2% of net sales and offers strong long-term growth prospects.” 

In June, Kellogg said it would spin off its North America cereal and plant-based businesses. The two entities collectively represented approximately of 20% Kellogg’s net sales in 2021. 

At the time, Kellogg even suggested it was considering selling its plant-based business further down the line. 

Remaining operations were to focus on the Pringles maker’s global snacking assets, as well as on its international cereal and noodles operations and its North America frozen-breakfast assets. 

Announcing the plant-based U-turn, Kellogg “continues to work towards its previously announced spin-off of its North America cereal business by year-end”. 

Abbott Laboratories faces SEC, FTC investigations over infant formula shortage

US infant-formula manufacturer Abbott Laboratories is facing investigations by the Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC), documents show.

The company at the heart of last year’s infant-formula crisis faces “various claims, legal proceedings, and investigations”, with 399 pending lawsuits in federal and state courts involving the manufacturer, it said in an SEC filing.

In November, the Department of Justice launched a criminal investigation into Abbott and in December it received a subpoena requesting further information on its business.

The probes follow a US-wide infant formula shortage last year after a reported salmonella outbreak in Michigan prompted the closure of an Abbott factory and a mass product recall.

Abbott said it does not expect the legal proceedings to impact the company financially. It said: “Abbott is involved in various claims, legal proceedings, and investigations… While it is not feasible to predict the outcome of such pending claims, proceedings, and investigations with certainty, management is of the opinion that their ultimate resolution should not have a material adverse effect on Abbott’s financial position, cash flows, or results of operations.”

In January, the company received a civil investigative demand from the FTC, which was investigating the bidding process for infant formula contracts.

The SEC filing adds: “In addition, multiple civil lawsuits have been filed against Abbott regarding Abbott’s manufacturing of certain powder infant formula products.”

Meanwhile, The Food and Drug Administration (FDA) began an overhaul earlier this month into its structure and food-safety procedures following criticism over its handling of the infant-nutrition crisis.