Business podcast: March 24th
John Collins talks to Colm Keena about the conclusions of the Moriarty Tribunal, hears about Kooky Dough from founders Sophie Morris and Graham Clarke, and interviews angel investors Nelson Gray and Sean Baker.
Current Account »
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Business podcast: February 3rd
John Collins talks to Dan O’Brien about economic predictions for 2011, Suzanne Lynch about Greencore’s stalled merger, Dr Diarmuid O’Brien of Nanoweek and Oren Michels from US software firm Mashery.
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Sugar exit leaves Greencore with a bitter aftertaste
The former Greencore sugar factory at Carlow
Greencore’s decision to get of sugar production at the earliest available opportuity to concentrate on its international chilled foods business is increasingly looking questionable.
Last November an EU auditors report found that the decision to close the last sugar plant at Mallow was based on outdated data and that the closure actually cost more than keeping Mallow open. As a result an Oireachtas committee is looking into the closure but Greencore boss Patrick Coveney told the Committee on Agriculture, Fisheries and Food Greencore had no plans to get back into sugar. (more…)
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A glass and a half full of it
Bournville was christened “Mournville” yesterday as the board of Cadbury capitulated to a hostile takeover from Kraft – the US food conglomerate disparagingly dubbed a “plastic cheese company” by Felicity Loudon, great-great-grandaughter of the original Mr Cadbury, John.
“I just don’t understand it,” Loudon despaired on the radio yesterday, before making a half-hearted appeal for Britain’s political parties to intervene. Loudon knows that little such help will be forthcoming, as Guardian journalist Fiona Walsh discusses in her London Briefing in today’s Irish Times. So what if Gordon Brown says he is “determined that levels of UK investment in Cadbury are maintained and jobs secured”. Cadbury’s British workers, having seen what Kraft did to Terry’s (of chocolate orange fame) in its home town of York (clue: it’s no longer there), expect job losses and are understandably livid about what’s happened.
The deal, which unites the much-loved Cadbury brand, responsible for milking many an Irish cow, and Green & Black’s (which sold out to Cadbury a few years back) with such duty-free heavy hitters as Toblerone and Milka, has prompted much cod-alarm about what might happen to the goods themselves. Could low-sellers but resonant classics such as the Curly Wurly be axed by Kraft’s accountants, none of whom would have ever had the joy of receiving a Cadbury’s Selection Box at Christmas? Would Cadbury’s Dairy Milk now taste the same way it does in America ? (Not good.) Was this the fate of the Cadbury’s Creme Egg?
That’s all a distraction, however, from the real tragedy of the Kraft-Cadbury takeover: that it’s another victory for the global, expansionary market logic that gives big paydays to a small executive cohort while in the long-term stripping value away from both companies and depriving workers of their jobs.
The headlines in the British press may be negative today, and the BBC’s Robert Peston was on top form last night, juxtaposing the payouts for Kraft executives with a rather ecstatic shot from a Flake ad. But over the last couple of months, the financial press there has rather dispiritingly treated Cadbury’s succumbing as an inevitablity. From the very moment that Kraft’s chief executive Irene Rosenfeld first said she fancied it, “resistance was futile”, the “clock was ticking for Cadbury”, how could it expect to “remain independent” (as if Cadbury was some minnow). Meanwhile, it seemed, despite Cadbury’s protestations, all they were doing was haggling over the price.
In the end, it was Cadbury’s institutional shareholders that had the final say on whether Kraft would get the goods. Such is the nature of the stock market. Critics of the Cadbury deal, such as economist and Birmingham Post blogger David Bailey, point out that without rules in place to prevent such corporate takeovers, we will continue to see a further concentration in wealth in the global economy, while manufacturing bases such as Bournville and its many equivalents see their prosperity melt away.
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Corporate memory at Cadbury is short and selective
As Fiona Walsh wrote in her London Briefing column last week, after an eight week phoney war the battle between Kraft and Cadbury over the American conglomerate’s £10 billion (€ billion) hostile takeover bid for the British chocolate maker, now becomes a formal three month battle of wits.
Following the move into the formal takeover period Cadbury chairman Roger Carr wasted no time in dismissing the Kraft bid as derisory and labelling its American suitor as a “low growth conglomerate”. There is of course a slight undertone of snobbery here. On its corporate website 185-year old Cadbury trumpets its Quaker roots, its commitment to fair-trade and the wholesome milk that goes into its flagship chocolate product. Clearly the approaches from the maker of Capri Sun, Handi Snacks and Kraft Easy Mac Cups (don’t ask) are unwanted.
Watching one of those Saturday night top 50 shows on Channel 4 I was reminded just how short the corporate memory at Cadbury must be. Anyone remember Cadbury’s Smash from the 70s?
Cadbury and Kraft may have more in common than one side wants to admit. This is going to be a long and interesting battle.
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Chunky sandwiches, even chunkier rents
Where has it all gone wrong for O’Brien’s Irish Sandwich Bars? Was it the unfashionably carb-heavy trademark thick-cut bread? Was it simply that competing franchises were newer, smarter and tastier? After O’Brien’s was placed in examinership by the High Court yesterday, its founder Brody Sweeney was in no doubt that the collapse of the property boom was the fly in the ointment – or the cockroach in the sandwich, as it were. It may have been chunky bread stacked behind its deli counters, but those were even chunkier rents that its franchisees were seeing drain away into the bellies of over-nourished landlords.
“We have had to close a number of stores as some landlords remain intransigent and refuse to reduce rents and some of our franchisees have been struggling to pay their rents for the same reason…” Sweeney is quoted as saying in today’s Irish Times report. You can also read Barry O’Halloran’s analysis and background to the High Court move here.
Of course, it’s not over yet for O’Brien’s: under an examinership, it will be temporarily protected from its creditors while it works on a rescue plan.
If only these same intransigent landlords with their cursed upward-only rent reviews would adopt the same relaxed approach to negotiation that Sweeney claims to have done when he expanded the O’Brien’s franchise overseas. In Making Bread: The Real Way to Start Up and Stay Up in Business, his (perhaps unfortunately titled in retrospect) “how I made it” book, Sweeney describes how in 1997 he was settling into a master franchise deal for 11 countries in Asia with a Singapore-based gentleman by the name of Hugh Hoyes-Cock:
“Just as we were about to sign the agreement, Hugh said to me: ‘What about Laos and Cambodia?’ ‘Go on then,’ I said, ‘you can have them’ – and thus I ‘gave away’ two sovereign countries for nothing!”
These days, we might count ourselves ridiculously lucky to get a free biscuit with our comfort coffees. If that does happen, be aware that the franchisee may merely be de-stocking itself of all O’Brien’s-branded produce as part of a grand plan to start over with a new name on the shopfront – and presumably cheaper lunches for these deflationary times.
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How many Grand Slams will it take to save the drinks industry?
The hysteric commentator on ITV’s Dancing on Ice final wasn’t afraid to embrace a few stereotypes last night when he posited that a victory in the Bolero for Co Kildare’s Donal McIntyre, self-styled hard man of undercover television reporting, would give Irish viewers another reason to tip alcohol down their throats – “not that they need a reason”.
If only, the drinks industry must be thinking. After a “cold bath” in 2008, it would appear that not even a weekend of rugby-related armchair debauchery was enough to lift the spirits of Drinks Industry Group of Ireland (DIGI) chairman Kieran Tobin this morning as he made the case for a freeze on alcohol excise duty in the emergency budget. “I’m afraid the old reliables no longer really live up their billing,” he sighed, entirely dispirited.
Last year was the worst performing year for the drinks industry in Ireland in 25 years, according to a report compiled for DIGI by DCU economist Anthony Foley. Sober sisters, cross-border shoppers and staying-in-is-the-new-going-out merchants all contributed to a 6 per cent decline in the volume of alcohol consumption last year, compared to an increase of 2.5 per cent in 2007. The decline accelerated in the second half of the year, suggesting that our flatlining personal finances were to blame for our lack of drunken cheer. “It is an unmitigated miserable set of figures,” said Foley. “2009 is shaping up to be a disastrous year.”
Public health officials may celebrate at the thought that our spending hangovers may reduce the frequency of our real hangovers, but it looks like it could be a very small party. For Tobin, whose day job is communications and corporate affairs director for Irish Distillers Pernod Ricard, the prospect of further excise duty hikes in the forthcoming cluster bomb budget is not pleasant.
Already, employment in the Irish drinks industry has retreated from 100,000 to 90,000. With on-trade volumes peaking in 2001, some 1,500-1,600 pubs have called time over the past six years. Meanwhile, Cork’s historic Beamish brewery has closed its doors, cider maker C&C has axed jobs at its Clonmel plant and Diageo has postponed its investment in a new Guinness factory. Another 9,000-10,000 jobs will be lost across all sectors of the drinks industry this year, Tobin predicts.
Taxing the life out of alcohol, like any other tax on expenditure, will be subject to the law of diminishing returns, he argues. DIGI’s protestations may prove futile, however. The Government is scouring for simple and quick ways to raise revenue, meaning even measures that are (economically) counter-productive in the long term must be on the menu. The odds that the old reliables will be hit are sadly lower than the odds of TV commentators updating their patter of cliches about the Irish.
McIntyre lost, incidentally, to Ray “Ain’t That a Kick in the Head” Quinn, not that he seemed to mind. We may now be drinking an average of less than 10 litres of pure alcohol a year for the first time since the 1990s, but the only ice we care about is the ice that comes in our vodka mixers.
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So long probiotic yoghurts, bring on the cheeseburgers
It’s the big unanswered, indeed unasked, question of our times: how is this recession affecting our gastrointestinal tracts? Dairy group Glanbia said today that sales of its “higher end” probiotic drinks in Ireland are falling. Consumers are no longer willing to pay for pricey “good” bacteria in a bid to beat that bloated feeling, it would seem; nor are they so keen on building up their natural defences…. or at least, if they are, they plump for cheaper, Lactobacillus-free “basic” yoghurts, slurp a good old warm bowl of soup or simply let their stomachs fend for themselves.
Asked whether consumers would return to the joys of L.casei Immunitass (sorry no, that’s the Danone one) when their pockets are once again thickly lined, Glanbia group managing director John Moloney was not exactly brimming with optimism. Consumers would weigh up the (perceived) health benefit versus the price point. “I think in the current climate you will have a core of users who will discontinue. They can’t justify it, because they don’t really believe the message,” he said.
But for every probiotic sceptic at large there are countless more cash-deficient consumers downgrading to McDonalds, Burger King et al, to which Glanbia happily provides buckets lots of cheese. Approximately, 120,000-130,000 tonnes, to be precise, or 60 per cent of the output from its US cheese plant in Idaho is converted into processed cheddar slices, which to its quickservice clients are just perfect for sandwiching between the two beef patties of a double cheeseburger. Mmmm…. Meanwhile, Glanbia’s cheese joint venture in the UK makes mountains of mozzarella for those who prefer their low-budget treats to come in 12-inch form.
Ah, fast food: it won’t exactly aid our digestive systems in the same manner that some probiotics claim, but at least the ads won’t be so smug.
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A martyr for the Beamish – but let’s try not be bitter
Barry O’Halloran
A few years ago, when I worked for another newspaper, there was a rumour one day that a member of the Rolling Stones – possibly Ron Wood – was drinking in a pub on Cork’s northside (which gives away which paper employed me). A colleague was sent off to investigate, on his way out, he remarked drily that Wood must be “a martyr for the Beamish”.
It’s unlikely that Wood – or any other Rolling Stone – had heard of Beamish & Crawford, whose main market was, and probably still is, in Cork. In the tail end of a three-way deal done very far from there, it is about to be absorbed by Heineken Ireland, which brews its local rival, Murphy’s Stout, with the loss of 120 jobs. A decision that most would say was inevitable.
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