Bakkavör has defied rising raw material costs to post a 9% increase in first-quarter profits despite a hit to sales.

The prepared foods and fresh produce company posted an adjusted EBITDA of £23m in the three months to 31 March, up £1.9m on the same period last year.

But sales were down 1% in the period to £413.9m, which the company attributed to the closure of its Exotic Farm Produce last June and English Village Salads facilities in February this year.

The company continued to see raw material inflation with the price of key ingredients, such as meat and fish, rising by more than 5% year-on-year, it reported.

Bakkavör upped its promotional spend over the period, it said, supporting volumes but at a cost to margins.

It will soon be launching “a complete new ethnic food range with one of our customers”, it said, as well as adding four new lines under its New York Soup Co, sold in Tesco.

“Despite the challenging economic environment we have continued to strengthen relationships with our key customers and have maintained leading positions in our chosen categories,” said chief executive Agust Gudmundsson.

Source: The Grocer

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Trigon Agri revealed plans to list its dairy business, newly expanded through the purchase of Estonia's top dairy farm, maintaining the strong pace of corporate activity in agribusiness absent in many other sectors.

The Black Sea farm operator, which in February revealed ambitions to become the top dairy producer in "Europe, including Russia", said on Tuesday that it was maintaining a focus on "expansion of dairy operations through new acquisitions".

The latest purchase, which closed in April, of the Vaatsa farm in Estonia, lifted the group's dairy herd to 3,800 milking cows, on 9,640 hectares of land.

The division's access to capital markets may be enhanced through a separate listing, Trigon added, extending a theme muted earlier in the year of attracting external investment into the dairy division.

In February, the group said that it was "in early stage discussions with external investors about them making co-investments into Trigon Dairy Farming", which legally is a separate company to Trigon Agri, if wholly owned by the group.

Flotations and acquisitions

The plans for a separate listing follow a similar proposal by JBS, the world's top meat group, to float its Vigor Alimentos dairy division, whose prospects for expansion are seen by some analysts as currently limited by the debt burden carried by the parent company.

Louis Dreyfus Commodities, the crop trading giant, on Monday said its 65%-owned LDC-SEV sugar and ethanol business, based in Brazil, was preparing for a potential listing.

Indeed, with Louis Dreyfus also revealing a $7bn warchest, and in the midst of purchasing US sugar refiner Imperial Sugar, while Glencore has bought Canada's Viterra and Japan's Marubeni is considering a purchase of US grain trader Gavilon, the agribusiness sector appears rife with corporate activity.

This contrasts with a slow start to deals elsewhere, with global mergers and acquisitions announced in the first quarter tumbling 35% to $390bn, according to Mergermarket.

'Very favourable financial terms'

Trigon Agri, which is also in the process of purchasing 30,000 hectares of land in southern Russia, said that its own acquisitions had to meet "stringent criteria" of returning at least 20% on equity, on an average basis.

"Some part of our business are already showing substantially higher return on equity," Joakim Helenius, the Trigon Agri chairman, said.

The Estonian dairy purchase "was carried out on very favourable financial terms, and makes the investment case for our milk production subsidiary substantially more attractive", Mr Helenius said.

"The acquisition… takes us much closer to our declared goal of attracting outside third party investors to our milk production operations."

Finance costs

The comments came as Trigon unveiled an after-tax loss of E3.81m for the January-to-March quarter.

While revenues soared 34% to E10.3m, and the group broke into the black at the level of earnings before interest, tax, depreciation and amortisation (ebitda), the group reported "significantly" higher finance costs, up five times to E2.36m, following a SEK350m bond issue last year.

Trigon shares closed 2.1% higher at SEK7.45 in Stockholm.

Source: Agrimoney

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Strong Russian demand for fresh potatoes and continued growth in global demand for fries meant that the trade in potatoes and potato products rose by more than 11% in 2011 to €8.3 billion (£6.8 billion). That is one of the key findings in the World Potato Markets 2012 Potato Market and Trade Review

“The 2012 Potato Market and Trade Review contains essential information for all potato growers, packers, processors and retailers who need a better understanding of the current potato market,” says Guy Faulkner, Editor-in-Chief of World Potato Markets.

“There are sections on current and expected production in Europe and North America, plus in-depth analysis of expanding potato and potato product markets across the world. Anyone can buy the review via the World Potato Markets website at www.worldpotatomarkets.com.”

A better harvest across Europe in 2011 has reduced the volume and value of ware (fresh) potato trade this year, but the demand for fries continues to grow, particularly in China and other parts of Asia. A smaller harvest is predicted in 2012 which could strengthen prices. The Chinese fry import market is currently growing at more than 40% a year.

“Harvest problems in Russia in 2010 increased the demand for imported potatoes across the country,” says Faulkner.

“This resulted in a 15% increase in the value of ware exports during the year to €2.2 billion (£1.83 billion), but that was still dwarfed by fry exports which grew by nearly 10% to €4.05 billion (£3.3 billion). Exports of chips (crisps) and dehydrated products were also up 9% to €1.5 billion (£1.23 billion).”

During 2011 7.914 million tonnes of ware potatoes were exported by the 43 main exporting countries. Fry exports were at 5.602 million tonnes in the year, but that equates to 10.644 million tonnes of potatoes, a third more than the ware figure.

Belgium and the Netherlands are the world’s largest exporters of fries at nearly 1.4 million tonnes each. They are followed by Canada at nearly 900,000 tonnes and the USA at 832,000 tonnes.

Lower prices after the 2011 harvest and weather problems are expected to result a drop in European potato production this year, while North American plantings and production is expected to continue a recent pattern of growth.

UK production is expected to drop in 2012, but still approach 6 million tonnes. The UK saw export growth in 2011, but much of that trade has dried up this year. The country imports nearly 375,000 tonnes more fries than it exports and that figure has increased by nearly a third in the last year.

The World Potato Markets 2012 Potato Market and Trade Review is available now for £175+VAT, €210 or US$280. World Potato Markets is a weekly global potato price, production and trade information service aimed at potato packers, traders, processors and retailers. See www.worldpotatomarkets.com

For more information contact:

Cedric Porter, Managing Editor, World Potato Markets

0044 1892 543444

cedric@supplyintelligence.co.uk

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Ongoing rainfall is threatening to curtail the asparagus season and disrupt the new potato and vining pea campaigns.

An annual asparagus festival in the Vale of Evesham scheduled for last weekend had to be cancelled due to a lack of asparagus. Cooler air temperatures and rain cooling soil temperatures has meant that asparagus crowns are not producing their spears yet.

According to the British Asparagus campaign, run on behalf of growers by Pam Lloyd PR, it could be another 10 days before peak volumes are reached and cutting will have to stop on 21 June as usual in order to give ferns enough time to recover and produce next season.

A spokeswoman for the campaign said: “The long-term forecast for May is also not good, but this does have the side benefit of spreading the asparagus supply more evenly throughout the season, which should provide more availability for the Jubilee weekend than we might normally expect for that time of year.” Harvesting is running at one day in four rather than every day.

In Lincolnshire and the eastern counties, concern is growing for the vining pea crop. Salvador Potter of the Processors and Growers Research Organisation said: “Early varieties went in quite early, but we have been on hold now for three weeks with the mid-season varieties. The consequence is at harvest time the factories will be stood still for a couple of weeks and then we will get a concertina effect.”

Meanwhile, David Nelson, field director at Branston, said its growers in the South West are feeling the effects of the rain: “Some of the early planted potatoes are waterlogged and there is a bit of erosion due to the rain.” He added that four weeks without any plantings means that there is still some 40 per cent of the potato crop to go into the ground.

“That later crop then won’t have much of the growing season left to reach its full yield potential.”

Fears that there will be an overlap of supply and a clash on the marketplace with Jersey Royals are unfounded, however, according to a spokesman for the Jersey Royal Company. “It is turning into a pretty normal season for Jersey Royals,” he said. “The start was late, but there won’t be any great splurge of product all at the same time. Now is the key time and the multiples have kicked off promotions.”

Source: Freshinfo

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Fyffes has announced it is increasing its target profit range for 2012. The Irish multi-national made the statement after delivering a strong performance in the early months of this year. The group is increasing its target earnings before interest, taxes and amortization (EBITA) range for the full year 2012 to €25million-€30m, from €22m-€27m previously, and compared to €23.2m in 2011. This would equate to an adjusted earnings per share of between 6.80 and 8.30 cent, compared to 6.05 cent in 2011. Fyffes said that as in previous years, this result will be significantly weighted towards the first half.

The announcement was made ahead of Fyffes’ agm last week and the company said the produce industry as a whole has experienced further cost inflation during the period, including higher bunker fuel costs, and less favourable exchange rates. Fyffes continues to pursue necessary increases in selling prices in all markets. In a statement the company said: “The group’s performance to date in 2012 and its positive outlook for the full year reflects the impact of further operational efficiencies, a continued focus on costs and returns on the group’s significant investment in the business in recent years. Fyffes remains focused on growing the group both organically and through further strategic acquisitions and alliances.”

Source: Freshinfo

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Redfox works with a number of leading commentators to give our readership an understanding as to topical subject of the day. This week David Beecham - Global Perishable Supply Chain Consultant.

With the UK importing circa £6bn of fresh produce each year , Inbound logistics , the art of getting product from suppliers around the globe to your door, is worth around £1.2 bn annually. Despite this hugely significant cost the focus many companies put on this isn’t always a high priority.

In many companies that have experienced major growth the logistics element has often continued to be looked after in the same way that it originally was when its impact was relatively insignificant compared to the main focus of developing the core business objective. This often leads to a fragmented function where visibility of the logistics is poor and the ability to understand , leverage and control is extremely difficult. It is difficult to understand the practise of having this responsibility within trading or procurement as it is unlikely that the core skills in these functions are likely to stretch to an in depth understanding of international air, sea and road freight. This often results in taking an easy option which is buying product on a Carriage , Insurance and Freight (CIF) basis which devolves the responsibility. An even more baffling practise is buying Free On Board (FOB) but then leaving the exporter to arrange the freight and forward the charges as these will inevitably include a kickback. Very often where a logistics function exists their responsibility is limited to outbound  freight and maybe the back end of the inbound , transport from air or sea port. This function frequently sits under a different reporting line.

With constant pressures on margins , reaching downstream and developing an understanding of the complete logistics process can deliver major benefit, from packaging to freight costs . Leveraging the critical mass can produce shipping cost savings. Reducing shipping costs will reduce duties ( where applicable) as duty is payable on product cost, insurance and freight. In many cases the freight costs quoted to the importer on a CIF basis will include a hidden rebate back to the exporter , therefore duty is being paid on this rebate.

When importing by air the importance of having the Air Waybill filled in correctly can potentially mean significant savings in handling costs at the airport, up to 50%. Because there is often no input from the importer then the exporters freight forwarder may not even be aware of the extra costs being created as these have no impact on them or the exporter. Furthermore when importing via places like Amsterdam or Paris and the final leg being trucked to the UK , having the Air Waybill completed in a certain way can almost eliminate airline handling costs.

Air routeings can also have a big impact on costings. Understanding product durability and temperature management options can often result in alternative more cost effective routes. Utilising secondary airports can also reduce costs.

Relinquishing control of the CIF by ocean often means the ability to impact on  UK  handling costs are significantly reduced. Having control or input widens the scope for direct input into some of the UK logistics costs.

With a better focus and understanding of this very important segment a slice of that £1.2bn pie could be there for the taking!

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THE boss of Darlington Farmers Auction Mart has died after suffering serious head injuries in an incident involving a bolt gun at the cattle market yesterday (Monday, May 14).

Stephen Aitken, 45, from Ingleby Barwick, who was managing director and chief auctioneer at the market, died at the James Cook University Hospital, Middlesbrough, yesterday evening.

Durham Police said they recovered a bolt gun from the scene at Darlington Cattle Market but said they were not looking for anyone else in connection with the incident.

The incident happened just before yesterday’s sale. The mart was subsequently closed for the remainder of the day.

Investigations are continuing and a post mortem will be carried out in the next few days.

Source: Farmers Guardian

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A potato firm director from Cambridgeshire has been found guilty of paying bribes to a buyer at supermarket giant Sainsbury's.

Andrew Behagg, 60, from food supplier Greenvale, authorised payments in return for contracts worth millions.

Thousands of pounds of cash was handed to buyer John Maylam, who splashed out on lavish meals and stays at top London hotels, Croydon Crown Court heard.

Behagg, of Chatteris, was convicted of one charge of corruption.

Judge Nicholas Ainley warned him: "For any case of this magnitude a sentence of imprisonment is almost inevitably passed, and a significant one at that."

Behagg is expected to be sentenced on 22 June at the same court alongside Maylam, 44, of Bearstead in Maidstone, Kent, and Greenvale's account manager David Baxter, 50, of Hinstock, Market Drayton, Shropshire, who have both admitted corruption.

Employee's suspicions

The prosecution's case was that Sainsbury's was overcharged by a total of £3.8m by Greenvale.

The extra money went into an account, then some of it was channelled to the buyer.

Maylam would incur expenses of £20,000 a month, spending the cash on expensive restaurants and exclusive hotels including Claridge's and The Dorchester, the court heard.

The crime was uncovered when a Greenvale employee grew suspicious when he was asked to withdraw £5,000 bundles of £50 notes from a small local bank.

Jurors heard Simon Forster, a group financial accountant, found payments were being entered into their financial system as "entertaining" expenses and then written off as "raw materials" or storage costs for potatoes at fictitious firms in Spain and the UK.

Mr Forster said when he raised the payments with Behagg he was told they were "rebates" and part of a "scheme".

'Abuse'

Behagg told the court Greenvale had a two-year contract, worth £40m, to supply 45% of Sainsbury's UK potatoes at the time of the alleged corruption.

Describing the size of Greenvale, Behagg said it handles 10% of the UK potato crop, amounting to 600,000 tonnes a year.

Following the verdict, Produce Investments, the owners of Greenvale, said it had introduced new procedures to "make sure that such abuse can never happen again".

"Our relationship with Sainsbury's is now on a footing as before and we continue to be one of the largest suppliers of potatoes to shoppers all over the country."

Source: BBC News

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Supermarkets will no longer be able to “scrap arrangements with suppliers at the drop of a hat” when the Grocery Code Adjudicator comes into being, business minister Norman Lamb has warned.

Speaking today as the Adjudicator bill was published in the House of Lords, Lamb said he amended the draft legislation to permit trade associations to files complaints to the new watchdog on behalf of individual companies.

“The large supermarkets have a lot of buyer power – and with power come responsibilities,” Lamb said.

“Supermarkets will still be able to secure the best deals and to pass the benefits on to consumers, but they should also treat farmers and suppliers fairly and lawfully. This means paying them on time or not being able to scrap arrangements with farmers and suppliers at the drop of a hat.

“By preventing retailers from transferring excessive risk to their suppliers we will support investment and innovation in the supply chain. In the long-term, that’s in the best interests of everyone, especially the consumer.”

Melanie Leech of the Food & Drink Federation added: “The Competition Commission findings were clear that unless the abuse of market power is addressed then businesses especially small and medium sized manufacturers will be less inclined to innovate and invest.”

Source: The Grocer

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Hi - hope you enjoyed the short week (if you were not working through it) and hopefully we will see the weather pick up as we race towards the "huge" summer of 2012.

We have a clever piece of software in our business that allows us to see who is on our site in real time and what you are all looking at. When our newsfeed went out last Friday, the number of hits we were gaining for the CORRUPT JS BUYER article was huge. It was the highest hit rate yet for any news story we have run. The number of people who also emailed the article on to contacts was unprecedented as well. You can get a feel of the opinion of our readership on the COMMENT SECTION. Why were so many contacts of Redfox reading the article? Well the salacious details of the case are frankly staggering. For a supermarket buyer who was probably on £60-70ishk as an annual salary, to allegedly spend £250,000 at the Monaco Grand Prix, £200,000 on a short stay at Claridges, have a host of flash cars, a pair of handmade Purdy shotguns, a new conservatory  etc etc....and all allegedly of course..you can see why the redtops and broadsheets ran with it.

The best quote we had from a client goes as follows; "He had a great business model...till he got caught..." I’m not sure if that is hugely funny or just very black humour. The psychology of the case in itself is so intriguing. If the case for the prosecution is proved, did the “buyer” think he was just going to get away with it? Did he think he was entitled to these riches? Was he deferring himself to some sort of god status as a supermarket buyer? And how rife is this practice today? You tell me...but we don't need this form of negative publicity in any shape or form. Unfortunately there are two more fraud cases that we are aware of that are due to hit the courts for the fresh sector before years end, so the end is not in sight.

Post the “potato” case being revealed, the retailer in question has apparently run internal audits and has put in full controls combing new checks and balances to stop a “rogue” individual profiteering to such an extent again. You have to feel sympathy for the supplier in question as it appears to be a small number of unscrupulous individuals within their business who aided and abetted the retail buyer for their own personal gains. With the level of damaging PR that will be rolling out re the retailer in the coming weeks, you hope that they won’t look to “throw out the trash” and delist the supplier as some form of knee jerk reaction in an attempt to gain positive PR from the situation. Even more so as the supplier went through the business immediately to remove the “cancer” of such corrupt employees. Let’s see…

Having asked around as to what level of corruption could be present, there are allegedly a few cases of individuals asking for…or being offered the likes of new cars to give/gain business, but nothing to the extent of what is going through the courts currently. So hopefully this is not the tip of the iceberg and is just a very unusual and one off case by a very small minority of hugely unscrupulous and greedy people. The instigation of the BRIBERY & CORRUPTION ACT may help as it does appear to have bite to it.

What are your views? Have you seen or are you aware of corruption/bribery in the sector? Use the comment section below to voice your comments either named or an anonymous basis as we would be keen to hear your views.

As an aside, we look forward to seeing you at the Re:Fresh EVENT on the 17^th in London. We are on Stand 1 and have a Jeroboam of Champagne to give away to one lucky delegate! 

Do you agree or have any comments on what Max’s blogs? If so use the comment section below….

Max MacGillivray is the founder and MD of Redfox. You can view his profile on LINKED IN and if you are looking for any assistance for Recruitment and Training for your business please contact Max and the Redfox team on +44 (0)1284 715055 or email hello@redfoxexecutive.com

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