Diageo’s positive forecast could be marred by second COVID-19 wave

Following the news that spirits manufacturer Diageo’s US business has outperformed expectations at the start of its fiscal year 2021; Carmen Bryan, Consumer Analyst at GlobalData, a data and analytics company, offers her view.

“Diageo is a model example of agile marketing, proven by how the company reinvented its business model to align with new consumer trends when its 2020 H2 sales plummeted. These expansions have given the company a resilient start to the new fiscal year, however, if the experiences of much of Europe are anything to go by, the new forecasts could be in jeopardy as the threat of a second wave looms over the US, said Bryan.”

According to GlobalData’s latest COVID-19 recovery tracker, published September 23, nearly one in four US consumers are feeling anxious or stressed. Combine this with the 63 per cent of millennials who noted that their purchasing choices are always or often influenced by changes in the world such as social or economic movements – 21 percentile points higher than the country’s average (42 per cent) – and it has been noted that US consumer sentiment is sensitive to change, making for a volatile market going forwards, according to Bryan. Foodservice premises must build trust and reassure patrons that they are maintaining safe practices, which in turn will greatly benefit spirits suppliers such as Diageo.

“While the public continues to receive mixed messages from the government and news outlets on best COVID-19 safety practices, it is critical that brands such as Diageo stay connected with consumers and monitor ongoing trends,” said Bryan. “Should pubs and bars close again, spirits manufacturers must realign with online channels, which proved a strong safeguard against falling sales in the past few months. Moreover, GlobalData’s survey found that 35 per cent of US consumers are buying more alcoholic drinks online since the start of the outbreak. Diageo and similar brands should continue to focus their efforts in part on home consumption, offering ‘bar experiences’ such as RTD cocktails through accessible channels such as apps and delivery platforms.”

Bosworth Wines celebrates 25 years of organic vineyards

Converting to organics in 1995 was a radical and pioneering move that changed viticulture in the Vale forever.

Organic wine sales in Australia have soared in recent years, making it hard to imagine that back in 1995 organic wine was rarely heard of. This year, 2020, marks 25 years since Bosworth Wines began converting their McLaren Vale vineyards to become certified organic, the first growers in the region to do so. That decision sparked a movement that now sees McLaren Vale boasting the highest number of certified organic vineyards of any wine region in Australia.

From those early days in the mid-1990’s Bosworth Wines now produce more than twenty wines from their certified organic, family-owned estates under two labels – Battle of Bosworth and the Spring Seed Wine Co. They also export to over 10 countries, including the USA, Korea, Russia, Sweden and Japan.

As there was no existing methodology for modern McLaren Vale vineyards wanting to convert to organic, viticulturist Joch Bosworth (who is also the co-founder and co-owner of Bosworth Wines together with his partner Louise Hemsley-Smith), had to largely invent his own. This included pioneering the use of the local yellow soursob under the vines for weed control, and the modification of a rotary hoe to cultivate only the soil under the vines in order to remove weeds.

Twenty-five years later, many of McLaren Vale’s organic growers use Joch’s cleverly adapted rotary hoe technique in their own vineyards. And the humble soursob has proudly become the Bosworth Wines logo.

Born and raised in McLaren Vale, Bosworth’s decision to convert to organic was made when he returned home after a stint working as a viticulturist in the USA and Victoria. “I realised that McLaren Vale’s Mediterranean climate was well suited to organic viticulture”, said Joch. “Personally, I’d never been too keen on using chemicals, so I took what I knew and made a start, devising the process as I went using some ideas and advice from a few old growers in the district.”

Bosworth’s vision and commitment to organic viticulture has underpinned the success of the Bosworth Wines business, capitalising on the rising consumer interest in organics over the last two decades. Some reports indicate demand for organic wine in Australia is growing at more than 50 per year as consumers become more conscious of their purchasing decisions and aware of issues like sustainability.

Organic wine – which is wine produced from grapes grown without the use of synthetic or artificial chemicals, pesticides, herbicides or fungicides – must also be subject to restricted levels of sulphur dioxide that can be added to the wine, as well as the chemical fining agents used.

Despite the surge in demand, the area is still considered a niche market, with organic wine making up only 1.3 per cent of all still wine consumption in Australia.

Europe’s drinks industry drops by 18.8 per cent in deal activity in Q2

Europe’s drinks industry saw a drop of 18.8 per cent in overall deal activity during Q2 2020, when compared to the four-quarter average, according to GlobalData’s deals database.

A total of 26 deals worth $50.47m were announced for the region during Q2 2020, against the last four-quarter average of 32 deals.

Of all the deal types, venture financing saw most activity in Q2 2020 with 17, representing a 65.4 per cent share for the region.

In second place was M&A with nine deals, representing a 34.6% share of the overall deal activity for the quarter.

In terms of value of deals, venture financing was the leading category in Europe’s drinks industry with $41.36m, followed by M&A deals totalled $9.11m.

Europe drinks industry deals in Q2 2020: Top deals
The top five drinks deals accounted for 67.6% of the overall value during Q2 2020.

The combined value of the top five drinks deals stood at $34.11m, against the overall value of $50.47m recorded for the quarter.

The top five drinks industry deals of Q2 2020 tracked by GlobalData were:

  • Felix Capital Partners, Five Seasons Ventures, Fonterra Ventures and New Ground Ventures’ $15.99m venture financing of YFood Labs
  • The $9.11m acquisition of Rude Health Foods by PepsiCo
  • Crowdberry and Slovak Investment Holding’s $6.62m venture financing of GymBeam
  • The $1.26m venture financing of Sullivans Brewing by Enterprise Ireland
  • Bpifrance and Generis Capital Partners’ venture financing of MyBrazil Factory for $1.13m.

Global drinks industry M&A deals total $706.92m in Q2 2020

Total drinks industry M&A deals in Q2 2020 worth $706.92m were announced globally, according to GlobalData’s deals database.

The value marked a decrease of 86.9 per cent over the previous quarter and a drop of 85.8 per cent when compared with the last four-quarter average, which stood at $4.99bn.

Comparing deals value in different regions of the globe, North America held the top position, with total announced deals in the period worth $385.07m. At the country level, the US topped the list in terms of deal value at $385m.

In terms of volumes, North America emerged as the top region for drinks industry M&A deals globally, followed by Asia-Pacific and then Europe.

The top country in terms of M&A deals activity in Q2 2020 was the US with 12 deals, followed by the UK with four and China with four.

In 2020, as of the end of Q2 2020, drinks M&A deals worth $6.09bn were announced globally, marking an increase of 123.5% year on year.

Drinks industry M&A deals in Q2 2020: Top deals
The top five drinks industry M&A deals accounted for 100 per cent of the overall value during Q2 2020.

The combined value of the top five drinks M&A deals stood at $706.85m, against the overall value of $706.92m recorded for the month.

The top five drinks industry deals of Q2 2020 tracked by GlobalData were:

  • Shanghai Yuyuan Tourist Mart’s $265.91m acquisition of Jinhui Liquor
  • The $255m asset transaction with Constellation Brands by SazeracInc
  • E. & J. Gallo Winery’s $130m asset transaction with Constellation Brands
  • The $46.82m acquisition of Tianjin Heavenly Palace Winery by Tianjin Food Group
  • PepsiCo’s acquisition of Rude Health Foods for $9.11

Why removing bottlenecks can be the difference between a food and beverage business surviving and thriving

Competition in the food and beverage sector in Asia Pacific is intense, which puts pressure on producers and distributors to become more efficient if they want to stay both competitive and profitable. In a sector of high-volume and low-value perishable goods, having accurate insights into costs, margins, inventory, production and the supply chain can be the difference between surviving and thriving.

Consumers are more demanding too, calling not only for greater variety but for more information on the product they are consuming, where it was produced and where its ingredients are sourced from.

Manufacturers in the food and beverage sector are faced with the challenge of providing a wide range of goods that are safe to consume and are compliant with mounting regulations. With short ingredient expiry dates, tight timelines and the need to be price competitive, even quite minor bottlenecks can have a significant impact on profitability. Therefore, it is essential that bottlenecks are quickly identified and removed to ensure the long-term viability of the business.

When the solution becomes a bigger problem
For many companies in an effort to reduce bottlenecks and become leaner, their instinct is to minimise, minimise, minimise, reducing cleaning and changeover time. However, in the rush to eliminate extra steps, food and beverage producers can sometimes cause new bottlenecks to occur. These can severely reduce throughput, impact product quality, cause delays and annoy customers, resulting in orders being cancelled.

Typical bottlenecks in a food and beverage plant could involve a fault in critical machinery requiring urgent maintenance or a key worker getting sick or going on holiday. These long-term bottlenecks are unpredictable, and their impact can vary from fairly minor to major delays. Australian manufacturers must deal with long-term bottlenecks regularly and should strive to eliminate them.

Systemic bottlenecks that are causing persistent production delays, such as specialised equipment with consistently long queues, need to be dealt with. Some producers will experience significant downtime due to breakdowns and other than regular planned maintenance schedules to keep machinery operational, factories must have contingency plans in case of a worst-case scenario.

With lean manufacturing, it is all about finding the constraint, which is the piece of equipment on the production line with the lowest net output. No matter how fast the other machines can run, the entire line will never be able to run faster than this machine. That is why we call it a constraint, because it constrains the output of the line and this issue needs to be resolved as it will significantly impact profitability.

How bottlenecks impact profitabilityThe main way bottlenecks impact profitability is by compounding the effect of downtime along the production line. Downtime costs manufacturers a huge amount of money. By one estimate, companies in the food and beverage industry experience as much as 500 hours of downtime every year.

Fortunately, it is easy to calculate exactly how much this compounding effect is costing producers. They should determine the difference between what they are producing and what they could be producing if the bottleneck did not have to stop every time another machine on the production line went down.

ERP software provides manufacturers with a structured view of how their processes, systems, data and people are designed, so they can identify ways to be leaner and remove these types of bottlenecks. This can be critical especially when dealing with increased complexity and growth, therefore manufacturers need a way to review, revise and revamp operations right down to the individual process level.

Supply chain visibility & traceability
With the rise of global food and beverage product recalls, more regulations than ever before have been implemented to protect the end consumer and here food safety is covered by the Australia New Zealand Food Standards Code. This aims to lower the incidence of foodborne illness by strengthening food safety and traceability throughout the food supply chain.

When a food product is found to be deficient or contaminated, the first vital step is to trace and account for every suspect item throughout the value chain. This requires an ERP solution with traceability capabilities which must be able to track several units of a stock item from the same lot or batch number. Once these have all been found, manufacturers can then implement product recalls or quarantine suspect goods.

Most food products are made up of a wide range of ingredients that come from different providers, often located around the world. Additionally, most food and beverage finished products and ingredients have a limited shelf life and can quickly perish.

The food and beverage sector supply chain is incredibly complex and presents many challenges. Complete visibility of location and status of shipments is therefore essential for freshness and just-in-time-arrival of ingredients needed for the processing schedule. An advanced supply chain system that allows producers to make real-time adjustments can be a clear advantage and will help manufacturers to avoid supply chain bottlenecks and surplus stock.

Surplus stock management
When sales teams do not have clear visibility of surplus and expiring stock, companies tend to end up with a combination of fire sales and price erosion. Customer service takes a hit as well due to a lack of understanding of available stock. With an ERP system that provides forward visibility of any excess and expiring inventory, sales can put the right plans in place to maximise sales and minimise waste and heavy discounting.

The agility to make changes
To minimise the stress associated with eliminating either production, people or supply chain bottlenecks, food and beverage manufacturers need strong ERP project management with careful planning to steer the change management process. For most businesses in this sector, irrespective of size or structure, change is not easy, but this can be done more effectively if they have a structured view of their entire business. This will enable them to see the logic of how processes, systems, data and organisational hierarchies are designed and can easily make changes.

Global drinks industry deals total $1.15bn in Q2 2020

Total drinks industry deals for Q2 2020 worth $1.15bn were announced globally, according to GlobalData’s deals database.

The value marked a decrease of 79.7 per cent over the previous quarter and a drop of 78.9% when compared with the last four-quarter average of $5.47bn.

In terms of number of deals, the sector saw a drop of 26 per cent over the last four-quarter average with 97 deals against the average of 131 deals.

In value terms, North America led the activity with deals worth $619.29m.

Drinks industry deals in Q2 2020 top deals:
The top five drinks deals accounted for 70.3 per cent of the overall value during Q2 2020. The combined value of the top five drinks deals stood at $810.91m, against the overall value of $1.15bn recorded for the month.

The top five drinks industry deals of Q2 2020 tracked by GlobalData were:

  • Shanghai Yuyuan Tourist Mart’s $265.91m acquisition of Jinhui Liquor
  • The $255m asset transaction with Constellation Brands by SazeracInc
  • E. & J. Gallo Winery’s $130m asset transaction with Constellation Brands
  • The $100m venture financing of Nayuki by Shenzhen Capital Group
  • Engaged Capital and Oaktree Capital Management’s private equity deal with SunOpta for $60m.

All Hands available in cans

All Hands Brewing House  has canned four of its award-winning brews, and will be available across 24 Dan Murphy’s stores in Sydney.

All Hands and Signature Hospitality Group CEO, James Sinclair, explains that the move has been an  exciting one for the brand.

“We had been toying with the idea of canning and selling our brews via retail for a while, but the current coronavirus pandemic gave us the nudge we needed. We’re starting locally with the tremendous support of Dan Murphy’s in Sydney, but there is potential to grow if this is successful in the future. We’re lucky to have an incredible and award-winning Head Brewer at All Hands, Sam Clayman, who has worked tirelessly to bring this idea to life in such a short amount of time,” said Sinclair.

A guide for returning people to work safely

With COVID-19 restrictions easing in some states in Australia, a workforce that has spent a lot of the past couple of months at home, is now starting to return to work. Here are some practical steps to take into consideration, especially if you are in the food and beverage processing and manufacturing sector.

  • Manage employee expectations. To ensure a successful transition back to the office, employees need to feel their employer has done everything to maximise their safety at work. Before you re-open, organise a full disinfection coronavirus precautionary clean, which includes a precautionary cleaning of all personal spaces in addition to shared touchpoints, such as door handles, remotes, kitchen taps, microwaves, fridges, and coffee machines.
  • Plan your space using the four-square metre rule. The existing seating or working plan of your workplace may no longer be viable for the distancing rule of four-square metres per person. To determine how many staff you can have on the premises at once, calculate the area of the workspace in square metres and divide it by four. To allow for objects, such as desks and boardrooms, divide the space by eight. For example, if your office is 160 square metres, you could only have up to 40 people in the room, to allow each person to have four square metres of space.
  • Initiate a rotational working system. Once you have calculated how many employees you can have on site, create a roster system that includes all relevant employees. For example, if you employ 100 people, divide that by five working days, and you’ll find yourself with a 20 person ‘team’ that can come into the office on a set day per week. However, don’t forget the four-square metre rule, which can be achieved by re-configuring furniture to increase physically distancing or getting staff to ‘own’ a different desk to what they are used to. Lisa says: “Whether your employees are rostered on weekly, fortnightly, on a ‘team’ basis, or an every-other-day basis, once you have your roster in place, I strongly recommend that each person uses the same desk or workspace each time they are at work. Hot-desking and shared workspaces present too much of a risk.”
  • Appoint an on-site COVID-19 champion. Select an appropriate person in your organisation to be the ‘champion’ of keeping employees’ hygiene levels on tracks. Someone with Workplace Health and Safety knowledge, such as a human resources team member, would be ideal. They would become the go-to person for other employees to ask questions about how they can navigate the ‘new normal’ working environment. For instance, the champion would check in with each team member to gauge what’s working, what’s not, and if they require any additional information or support. They would also manage the upgraded cleaning schedule for your office or workspace and ensure team members remember to wipe down and clean their equipment after use. Lisa says: “Choosing a champion that keeps everyone aware of best safety principles – from good respiratory hygiene to encouraging people to stay home if they show any flu-like symptoms  – will reassure staff that their health and safety is the priority. It also has the benefit of making them feel like their organisation is ‘there’ for them, and that they have the emotional comradery they need in our new style of working environment.”
  • Create a plan for ongoing sanitisation. Consider equipping each employee with their own bottle of hand sanitiser, hospital-grade anti-viral disinfectant, and cleaning cloth when they return to the workplace. Having individual sanitary equipment will also alleviate any worry that multiple people are handling the disinfectant.
  • Assess and determine how to use shared meeting spaces. Up until the outbreak of COVID-19, open-plan offices with shared desks and ‘pod’ meeting areas were becoming the preferred way of working for many organisations. However, for the foreseeable future, these more casual meeting spaces with soft furnishings – surfaces that need to be steam-cleaned, often at a considerable expense – should be avoided, as a virus has the potential to last on these surfaces for up to 24 hours. If you can, choose a more traditional meeting room with hard surfaces. Although the virus can live on glass, plastic, and stainless steel for up to 72 hours, these surfaces are much easier to clean and disinfect.
  • Incorporate company vehicles into your cleaning schedule. If you have company vehicles, forklifts, or trucks, these now also need to be included in your cleaning schedule – especially if multiple people use the vehicles. A minimum of one precautionary COVID-19 clean a week will ensure all surfaces within the vehicle’s interior are fully cleaned, and all external touchpoints are also cleaned, such as door handles and side-view mirrors.
  • Consider a cleaning concierge service. Most organisations – especially larger ones – have high-risk shared touchpoints used by site visitors and staff. These are best managed by a fully trained day-cleaning team who are uniformed and equipped to sanitise and disinfect touchpoints all-day long – whether they be kitchens, bathrooms, or meeting rooms. Though some might regard it as extreme, having an on-demand cleaning service will restore stakeholder confidence in your organisation’s hygiene standards day-in and day-out.
  • Hire a commercial cleaning specialist. Some cleaning companies have had to adapt quickly to the new COVID-19 risk environment, while others, especially professional commercial cleaning services, have been cleaning to a hospital standard for many years. Lisa says that organisations, especially those who have committed to additional safety standards, such as ISO 45001, should seek cleaners whose services are ISO certified. She says: “Even before the outbreak of COVID-19, Cleancorp – which is one of the few Australian cleaning companies to have achieved three ISO Certifications – was using vacuum pumps with HVAC power-operated scrubbers, and chemical foggers, to keep workplaces free from virus

NSW government provides relief to indie brewers

NSW Deputy Premier and Minister for Regional NSW, John Barilaro, announced welcome support NSW independent brewers by providing financial assistance to the Independent Brewers Association (IBA) to implement a range of measures that aim to pave the way for recovery.

Barilaro revealed $135,000 would contribute to the cost of memberships for the 120 independent breweries in NSW for a year and $60,000 would go to a partnership associated with the IBA’s annual conference, BrewCon being held in November. These contributions ensure the industry body can continue to provide valuable assistance and resources for members during their recovery from the Coronavirus crisis.

The Independent Brewers Association represents over 600 small and medium business in every state and territory across Australia with a majority of members located in regional areas. We directly employ over 3,000 people and support the employment of more than 25,000 in related industries of agriculture, logistics, hospitality, manufacturing and services.

“Our region depends on tourism, so we’ve been struggling to hang on, especially after the fires and then Coronavirus. This support will allow us to keep staff onboard and focus on getting new beers ready for our local community and the next tourist season.” explains Jacob Newman from Eden Brewery.

The support follows on from the NSW Independent Brewers Action Plan launched by the Deputy Premier late last year which contained a broad range of initiatives to support growth in the sector. This new funding recognises that the industry has been devastated by the Coronavirus pandemic and that NSW breweries will struggle to recover without assistance.

“We’d like to thank Deputy Premier John Barilaro for being a champion of the independent brewing industry, his support has been essential in delivering policy and regulatory changes that will have long-term benefits for every NSW brewery. This strong partnership with the NSW Government is crucial for the health of our industry and it is the first step toward recovery for NSW breweries and their employees”, said Peter Philip, IBA Chair and founder of Wayward Brewing Company.

“Our industry has been doing it tough, especially small breweries based in regional areas that rely so heavily on tourism and taprooms for survival. A large percentage have lost nearly all their revenue since the pandemic started. This support will go a long way to alleviating some of the immediate pressures being faced these small, family owned and operated businesses.” explains Philip.

Furthermore, the NSW Government is lending its voice and asking the Federal Government to provide tailored responses for our industry, including modifying the small brewer excise refund scheme and developing a national strategy for the independent beer industry.

Good Pair Days offers compostable/ biodegradeable packaging

As the movement for sustainability continues unabated, more wine producers are moving towards farming and wine-making that is both good for the earth and marketable.

To support this industry growth and further the journey towards sustainability, Good Pair Days has taken the opportunity to redesign its packaging, removing all plastic.

Good Pair Days went on journey to come up with an innovative way to package wine, ending with the sugarcane plant, which is the world’s largest crop by production quantity, with over 2 billion tonnes produced annually.

After all the sucrose is extracted from the plant, producers are left with waste. Good Pair Days now repurposes that waste to give customer’s wines a protective bed to lie in when shipped to them each month.

Its new inserts offer protection to the wine. However, a  new insert alone wasn’t enough. Good Pair Days took the time to redesign their cartons, integrating a handle into the packaging structure to remove the use of plastics. This little change means a lot. All packaging can now be either recycled (in the case of its cardboard cartons) or composted (like its new inserts.)

No matter what customers do with Good Pair Days boxes, once they are done with them, they go back into the earth.