Kroger merges with Albertsons to create $200bn US grocer 

14 October | Pan-Industry

Kroger and Albertsons have merged to create a US grocery giant with combined sales of more than US$200bn. 

Under a “definitive agreement” approved by both boards of directors, Kroger will acquire all of Albertsons’ shares for $34.10 each, implying a total enterprise value of $24.6bn, in line with earlier market expectations

Rodney McMullen, Kroger’s chairman and CEO, will hold the same positions at the combined company. 

“This merger advances our commitment to build a more equitable and sustainable food system by expanding our footprint into new geographies to serve more of America with fresh and affordable food and accelerates our position as a more compelling alternative to larger and non-union competitors,” McMullen said. 

“We believe this transaction will lead to faster and more profitable growth and generate greater returns for our shareholders.” 

Neil Saunders, a managing director of UK-headquartered research and analytics provider GlobalData, said the merger consolidates Kroger’s position as the second-largest US food retailer behind Walmart. 

The combined entity will control around 11.8% of the food and grocery market, still below Walmart’s 17.1%. 

“In a market where margins are under pressure, the additional scale is useful for Kroger as it improves economics through better buying power. This is critical at a time when inflation is acting as a drag on both the top and bottom lines,” US-based Saunders at Just Food’s parent company said. 

“Heightened competition from Walmart and the value chains – all of which are taking a more aggressive stance on price – and from new entrants like Amazon, necessitates a greater investment in prices and propositions. Both Kroger and Albertsons are capable of managing this alone, but the larger, merged business will have more financial firepower.” 

Albertsons and Kroger employ more than 710,000 staff and operate 4,996 stores between them. Combined, they also have 66 distribution centres, 52 manufacturing plants, 3,972 pharmacies and 2,015 fuel centres. 

Vivek Sankaran, the CEO of Albertsons, said: “Together with Kroger, our combined iconic banners will be able to provide customers with even more value and greater access to fresh food and essential pharmacy services. Given the similarities in the culture and values at Kroger and Albertsons Cos., I am confident that the combination will also have a positive impact on our associates and the communities we are proud to serve.” 

Saunders added: “From Albertsons’ point of view, Kroger’s superior expertise in private-label development, its advanced e-commerce operations and its customer insights programme are all major advantages that can help the group’s various banners. This is also a win for Ocado, the UK grocery and technology firm that partners with Kroger, as there is now scope to roll out Ocado’s automated warehousing kit further and faster.” 

The transaction remains subject to regulatory approval and will entail both Kroger and Albertsons cutting stores. 

14 October | Meat Substitutes

Beyond Meat cuts 200 jobs as revenue outlook lacerated again 

Beyond Meat has added to the fervour around slowing plant-based sales growth in the US by slashing its outlook by as much as US$95m and cutting hundreds of jobs. 

The California-based maker of the Beyond range of products has lowered its sales guidance for the second time in its fiscal year ahead of the third-quarter results on 9 November, the latest in a spate of negative announcements for the alternative-meat category. 

Nasdaq-listed Beyond Meat said it had eliminated 200 jobs, with president and CEO Ethan Brown citing “current economic conditions” for the lay-offs. 

Third-quarter sales are expected to be down 23% on last year at $82m. For fiscal 2022 as a whole, revenue will likely be 9-14% lower after Beyond Meat cut its forecasted sales to $400-425m. 

In August, when the company revealed a separate, unspecified number of job losses from its more than 1,000-strong global workforce, the outlook was $470-520m, a cut in itself from a previous estimate of $560-620m. 

Brown explained: “We believe our decision to reduce personnel and expenses throughout the company, including our leadership group, reflects an appropriate right-sizing of our organisation given current economic conditions. We remain confident in our ability to deliver on the long-term growth and impact expected from our global brand.” 

Earlier this month, Impossible Foods, confirmed “fewer than 50” staff had been let go as part of a restructuring exercise under new CEO Peter McGuinness. However, the Impossible Burger maker was more sanguine over its own growth prospects. 

In the wider US alternative-protein market, staff are also destined for the chopping block at Planterra Foods’ Denver factory as JBS, the Brazilian real meat major behind the plant-based business, said it was pulling the plug on the venture just two years after launch. 

Brown added: “While the company continues to review the drivers behind recent performance, the company believes it has been negatively impacted by ongoing softness in the plant-based meat category overall, especially in the refrigerated sub-segment, and by the impact of increased competition. 

“Inflation is believed to be an underlying factor exerting pressure on the category as consumers trade down into cheaper forms of protein, including animal meat.” 

Beyond Meat has been plagued by losses on its bottom line and the company grabbed further attention in September when COO Douglas Ramsey was suspended following a fracas at a US football game. He has since left the business. Meanwhile, chief supply chain officer Bernie Adcock has quit to pursue other opportunities. 

7 October | Dairy

Arla Foods to pay farmers more for milk under sustainability incentive 

A sustainability initiative has been launched by international dairy cooperative Arla Foods to encourage farmers to lower their carbon footprint. 

From 2023, the price farmers receive for their milk will be impacted by their sustainability credentials. 

Arla’s 8,900 European members will be judged on a points system, gaining credits for things like fertiliser use, biodiversity work, renewable electricity and the green credentials of their feed. 

The Cravendale owner has a Scope 3 target of aiming to reduce greenhouse gas emissions at farm level by 30% by 2030. 

CEO Peder Tuborgh told a press conference: “From next year, the milk price that individual farmers will receive will depend on their activities related to their environmental sustainability profile. It is not only fat, protein and quality. 

“These parameters have been part of our milk price model for many years and have served us very well. Now, we are adding the sustainability component to it. To my knowledge, no other company in the world is doing that in the way that we’re suggesting.” 

Based on the cooperative’s current milk volumes, it estimates the incentive will cost up to EUR500m (US$489m) annually. In the first full year, at least $264m is expected to be distributed through the monthly milk price. 

Each point gained will give the farmer EUR0.03 per kilo of milk. Activities with “bigger improvement potential for climate and nature” will lead to the most points. 

Farmers will also be rewarded for green initiatives they have already implemented, so many will start the programme with points in the bank. 

Arla calculates that, for its average farmer, with an average annual milk production of 1.2m kg, approximately $25,400 of the milk price will be earned via sustainability activities. 

The Denmark-headquartered group predicts the scheme, developed in collaboration with farm owners, should not cost the farmer – and admitted it would be difficult to get them on board if the incentive offered did not cover the cost of meeting the climate targets. 

29 September | Pan Industry 

US food agency lays out HFSS limits for ‘healthy’ label appraisals 

The US food agency has proposed packaged-food products would need to adhere to limits on fat, sugar and sodium to carry ‘healthy’ labels. 

On the heels of a new White House strategy plan on nutrition, health and food security, the Food and Drug Administration (FDA) said it proposes updating the healthy criteria to “better account for how all the nutrients in various food groups contribute and may work synergistically to create healthy dietary patterns and improve health”. 

With improving the well-being of Americans and cutting diseases related to consumption of unhealthy foods at the heart of the government strategy, the FDA said more foods would be “eligible” to be classed as healthy if they are consistent with the country’s national dietary guidelines. 

Products would need to contain a “meaningful amount” of at least one group or sub-segment featured in the Dietary Guidelines for Americans compiled by the United States Department of Agriculture (USDA). They include fruit and vegetables, grains, low or non-fat dairy, “lean” meats and poultry, seafood and unsaturated vegetable oils. Consumers are encouraged to lower their intake of red and processed meats, sugar-sweetened food and drinks, and refined grains. 

Under the proposals, products would also need to “adhere to specific limits” for saturated fat, sodium and added sugars based on the Daily Value (DV) recommended percentage consumption levels. For example, 10% is the DV for sodium, equating to 230 milligrams per serving, the FDA said. 

The Dietary Guidelines 2020-25 set out recommendations to pursue a healthy diet from an early age, encouraging consumers to seek out “nutrient-dense” foods and beverages, and limit foods high in fat, sodium and sugar (HFSS), and also to limit consumption of alcoholic drinks. 

President Biden outlined the strategy, with a plan develop a front-of-pack labelling system. 

The key goal is to reduce sodium and salt consumption with longer-term voluntary targets for the food manufacturing industry. The White House said it will work with the FDA to devise a front-of-pack (FOP) scheme that will “empower” consumers to make healthy choices, especially for lesser-informed shoppers. 

“FOP labelling systems – such as star ratings or traffic-light schemes – can promote equitable access to nutrition information and healthier choices and could also prompt industry to reformulate foods to be healthier,” the US government said. 

“[The] FDA will conduct research and propose developing a standardised FOP labelling system for food packages to help consumers, particularly those with lower nutrition literacy, quickly and easily identify foods that are part of a healthy eating pattern.” 

26 September | Corporate 

Unilever CEO Alan Jope to step down 

Alan Jope, Unilever’s CEO, plans to depart the FMCG giant at the end of next year. 

The Scot, who has spent more than three decades at the Hellmann’s and Knorr owner, has been chief executive since 2019. 

“As I approach my fifth year as CEO, and after more than 35 years in Unilever, I believe now is the right time for the Board to begin the formal search for my successor,” Jope said. “Growth remains our top priority and, in the quarters ahead, I will remain fully focused on [the] disciplined execution of our strategy and leveraging the full benefits of our new organisation.” 

Jope, who joined Unilever in 1985 as a graduate marketing trainee, succeeded Paul Polman at the helm of Unilever. He sought to continue Polman’s strategy of pursuing growth and Unilever’s environmental and social “purpose”. Early on in Jope’s tenure, he suggested brands that were not able to find “a higher-order role” could be sold

Not all investors had been wholly comfortable with the emphasis Polman had placed on sustainability and those concerns continued into Jope’s reign, spilling out into the open in January 2022 when investment firm Fundsmith Equity publicly criticised Unilever for focusing too much on sustainability rather than the core elements of the business. 

Tensions over ESG emerged internally in 2021 when Unilever’s socially-conscious ice-cream subsidiary Ben & Jerry’s announced it would no longer sell its products in territories occupied by Israel but claimed by Palestine. The decision sparked anger in Israel, with Jope scrambling to underline Unilever’s “commitment” to operating in the country. 

Nevertheless, the row rumbles on, with the founders of Ben & Jerry’s accusing Unilever of breaching the terms of its takeover in 2000 by selling the ice-cream business’ operation in Israel. 

Unilever and Jope also attracted investor ire over the company’s move to buy GlaxoSmithKline’s consumer healthcare business (since spun off as a separate company called Haleon) at the turn of this year. GSK said it had turned down three offers for the unit – the last of which, it said, was worth GBP50bn (then US$68.24bn). 

14 OCTOBER | Corporate 

Danone set for EUR1bn hit with Russia dairy, plant-based exit 

Danone will shed its dairy and plant-based business in Russia in a move set to cost the company EUR1bn (US$0.97bn). 

The Paris-based food giant said its essential dairy and plant-based (EDP) business in Russia made up around 5% of its net sales in the first nine months of this year. 

The move will “ensure long-term local business continuity, for its employees, consumers and partners,” it said in a statement. 

Danone has more than a dozen factories in Russia, where it sells products under brands including Activia yogurt, Nutrilon infant formula and Prostokvashino milk. EDP forms the majority (90%) of its Russia activities, the rest being what Danone calls specialised nutrition. 

The Alpro and Activia brands owner intends to continue operating its specialised nutrition business in Russia, which includes baby formula. 

In March, Danone halted its investment in Russia in response to the invasion of Ukraine but maintained its manufacturing and distribution of products “to still meet the essential food needs of the local population”. 

Danone now says operating in Russia had become increasingly difficult and the move was necessary to ensure the long-term sustainability of the EDP business. 

The company would not confirm further details of its exit or whether the business would be taken over by local management, calling it a “transfer (of) effective control”. 

In brief

Ferrero plant at heart of Kinder recall regains full operational approval 

Ferrero has regained the full production licence for its Arlon plant in Belgium at the heart of the Kinder salmonella outbreak and recall earlier this year. 

Saputo chief alludes to further dairy plant closures under optimisation drive 

Saputo alluded to more potential factory closures as part of the Canadian dairy giant’s four-year “optimisation” strategy. 

Thai Union makes “first real step” into US plant-based seafood 

Seafood giant Thai Union Group has made its first concreted foray into the plant-based seafood market in the US. 

TreeHouse Foods sells bulk of meal prep unit to Investindustrial for $950m 

US private-label major TreeHouse Foods has sold what it describes as a “significant portion” of its meal preparation business to European investment group Investindustrial for US$950m. 

UK’s Science in Sport seeks cash buffer as strategic sale option launched 

Science in Sport has flagged a potential sale under a strategic review as the UK nutrition business seeks a cash buffer against further operating shocks. 

21 September | Baby Food

US infant-formula crisis: internal review highlights FDA failings 

The US Food and Drug Administration (FDA) made mistakes in the way it responded to the infant-formula crisis that left supermarket shelves depleted of stock earlier this year, an internal review has concluded. 

The report pointed to “systemic vulnerabilities” at the FDA as it investigated reports of Cronobacter bacteria-contaminated product at Abbott Laboratories’ infant-formula plant in Sturgis, Michigan. The closure of the plant in February – which lasted for several months – led to a shortage of supply and forced President Joe Biden to introduce emergency measures to bring in infant formula from abroad. 

Report author Steven Solomon, a director at the Center for Veterinary Medicine, stressed he had only looked at “aspects of the response that are within the agency’s purview”. He did not consider other factors said to have contributed to the crisis, including the number of infant-formula manufacturers in the US, needed improvements in the ingredient supply chain and better control of product distribution. 

But the report, based on dozens of interviews with 61 FDA employees, found delays, lack of procedures and limits on the FDA’s authority shaped its response. 

The regulator has acknowledged its reaction to the crisis was slowed by delays in processing a whistleblower complaint and test samples from the nation’s largest infant-formula factory. 

A company whistleblower had tried to warn the FDA of problems at the Abbott plant in September 2021 but inspectors did not investigate the complaints until February after four infants became sick, with two dying, the agency previously told Congress. 

However, Solomon said one key finding from its interviews is there is no single action to explain the events that occurred. 

“Rather the report identifies a confluence of systemic vulnerabilities that demonstrate the need to focus on continued modernisation and investment in the expertise and tools needed to better anticipate and address future public health challenges in this area,” he reported. 

Solomon added: “This incident demonstrated the need for an integrated, multi-disciplinary approach that included scientific, clinical, nutritional, analytical and inspectional expertise, legal processes, supply chain and policy considerations and resources to support this multi-disciplinary work. 

“The report also identifies several areas in which the FDA lacks specific authorities and resources. Simply put, if the FDA is expected to do more, it needs more.” 

Responding to the report, FDA commissioner Robert Califf said he agreed with Solomon’s findings and recommendations. However, he added “years of consolidation in the infant-formula industry and concerning food safety processes and general procedures at some of the facilities producing these products have resulted in a fragile supply chain that is susceptible to production disruptions when quality issues are identified”. 

2 September | Meat

2 Sisters Food Group says “massive” CO2 price hike a “national security issue” 

2 Sisters Food Group has warned of the consequences for consumers as the UK’s largest poultry supplier faces a “massive” hike in CO2 prices. 

Owner Ranjit Singh Boparan has called on the government to act with some “urgency”, describing a pending CO2 shortage as a “national security issue”. 

Boparan conveyed “dismay and concern for consumers at [a] massive UK CO2 supplier ‘surcharge’ hike up to 20 times current levels”, which he says will cost 2 Sisters an extra GBP1m (US$1.1m) a week. 

His cries come in the wake of an announcement from US-headquartered CF Industries Holdings, the UK’s largest supplier of CO2, that it planned to temporarily close its remaining ammonia manufacturing facility in Billingham, Durham, in north-east England. Its subsidiary, CF Fertilisers UK, cited elevated global prices of natural gas and carbon for its decision. 

Boparan, who was also vocal last year over a similar episode, said: “This is a price shock just like we’ve seen with energy and all companies and households are feeling the pain right now. What is very sad is that it’s the UK shopper who will ultimately pay the price and CO2 suppliers are, in effect, holding consumers hostage.” 

Ammonia is the first step in producing fertiliser, where CO2 is captured in the process. In food manufacturing, the gas is used to cull animals our poultry, in chilling and packaging foods, and in refrigeration systems. 

Boparan, who also owns turkey supplier Bernard Matthews, added: “This is a very serious situation we are facing. Once again, UK food security is under threat and the shopper ultimately loses – we simply have no choice other than to pay to keep supply. C02 suppliers are saying these increases happen immediately. They say it’s a take it or leave it situation.” 

In brief

Ter Beke names Puratos’ Piet Sanders CEO

Ter Beke, the Belgium-based pâte and ready-meals supplier, has hired Puratos director Piet Sanders as its new CEO.

Fonterra puts forward new capital structure proposals

Fonterra is considering adjusting the minimum shareholding requirement for the dairy cooperative’s farmer-owners in its shareholders’ fund.

Nestlé confirms cell-based meat initiative

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Yoplait brand Petits Filous to make plant-based debut

Yogurt business Yoplait has taken its UK brand Petits Filous into the plant-based arena for the first time.

Smithfield Foods to pay multi-millions to settle pork price-fixing claims

US meat giant Smithfield Foods has agreed to pay $83m to settle litigation that accused it, and other food businesses, of fixing prices in the American pork market.