Commodity Conversations Weekly Press Summary

Cargill reported a 20% drop in net earnings in the quarter ending November 30 at USD 741 million in part because of the US-China trade tensions, which also affected its freight transport business. The firm’s starches and sweeteners segment struggled too amid the low ethanol price in the US and the high cost of raw materials in Europe. Looking forward, however, Cargill launched in Europe a brand of artisan chocolate called Veliche Gourmet which is entirely sourced from Rainforest Alliance Certified farms. Chocolate makers will be able to buy the products directly from Cargill’s new e-commerce platform.

Cargill is not the only trading house to struggle with the sugar segment: Olam announced this week it was closing its sugar trading desk. This comes only months after Bunge sold its sugar trading unit to Wilmar and Louis Dreyfus’ Biosev unit in Brazil sold some of its mills and has been looking at selling some more.

In the US, McCain had to recall an estimated 99 million pounds of frozen vegetables in Oct-Nov last year, a record high recall. The company found that all the ingredients that went through its Colton, California, plant since January 2016 were at risk of being contaminated by Salmonella and Listeria monocytogenes. The New Food Economy pointed out that unlike other food recalls in 2018, this one received very little media coverage because it concerned ingredients – a small part in a bigger food system

Meanwhile, Amazon is planning to build more Whole Foods stores in US suburbs in a bid to boost its online pickup services as it aims to expand the reach of its two-hour grocery delivery offered to Prime Now subscribers. This would help boost online sales too, as the stores could also be used as distribution centres.  

Going forward, the line between supermarkets and restaurants should become increasingly blurred. A professor at NY University said this was already happening, with supermarkets offering food courts, salad kiosks and cafes. The assumption is that people still want to get involved in the production of the food they consume, notably in the choice of ingredients. That is – if they can afford to. As one expert put it “If you have the time and financial means, you will keep cooking” but with income inequality poised to grow, the number of food deserts and swamps should continue to increase too.

A study in the UK showed that although the majority of consumers are aware that palm oil causes deforestation and greenhouse gas emissions, most of them do not know about the Roundtable on Sustainable Palm Oil (RSPO) certification. The study also found that labels, even the widely recognised ones like Fairtrade, were not enough to push consumers to change habits. The study concluded that the government needed to make food companies take on the responsibility of sourcing sustainably.  

One country where the government is taking a significant step in trying to change consumer habits is Canada. The new Canada Food Guide, which is due for release early this year, will encourage the consumption of plant-based proteins, which has the dairy and meat industry up in arms.

We covered earlier news on the boycott against Danone products in Morocco which started in April last year and cost the group millions in lost revenues. While the boycott was reportedly against high prices, an investigation carried out by the French government suggests Danone was the victim of a troll operation organised by a local company that specialises in digital influence. According to a source, Danone was a “diversion” in a local affair. Another study carried out by a communication agency found that the boycott campaign was mainly political and aimed at the agriculture minister.

Regardless, Danone lost its number one ranking in the milk business to a local competitor as a result. The group has had to make drastic changes to gain consumer trust again, such as clearly communicating the price it pays for milk. Danone also launched a new milk pack which it sells at cost – i.e. with not profit margins. An expert on company communication argued, “The link between a brand and its buyers is very easy to break, much more difficult and time-consuming to rebuild.”

Nestle is facing a similar predicament in India where it is trying to re-establish consumer trust in its Maggi noodle, three years after the government banned the sale of the highly popular instant noodles. The company was cleared less than 6 months later, taking back most of its lost market share, but the Supreme Court has just revived a class action lawsuit for unfair trade practices, false labelling and misleading advertisements. To avoid losing consumer trust again, it launched an ad campaign across all media.

This summary was produced by ECRUU

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