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Australian retailers just had an outstanding year with sales in 2007 rising by 7.3% from the year before.

It was the second consecutive good year but it would take a very optimistic forecaster to predict a 'three-peat'. Many industry insiders are looking for a slowdown.

If a leaner year does lie ahead, retailers big and small will be back to the barricades in 2008, implementing their carefully planned downturn-defense strategies.

What's that you say? You don't have one? Then now is the time to be figuring out what that strategy is going to be.

But first things first. Why will retailers need such a strategy at all? Times are good. On a year-over-year basis, total retail sales in Australia have risen by more than seven percent in every month since June last year.

If you take out spending on food, entertainment and services, and just focus on discretionary merchandise such as clothing, home furnishings and consumer electronics, the results have been almost as good - a string of robust monthly sales gains. Christmas was beaut.

The problem is that the engines of consumer spending growth in Australia are being subjected to a twin assault from the global credit crunch and the Reserve Bank of Australia's monetary policy.

The US is already lumbering toward a recession and the shockwaves from its subprime crisis are reverberating through global credit markets.

In Australia, this means commercial banks are experiencing a higher wholesale cost of funds that will be passed on to borrowers.

Unfortunately, this is happening at a time when inflationary pressures are building from a tight job market, high energy prices (oil closed at $100 a barrel for the first time this past Tuesday) and other supply-side pressures.

Enter now the Reserve Bank of Australia, which has just raised interest rates in November and February and is likely to do so again at least twice more by mid-year.

The double-whammy for borrowers - one from the commercial lenders and the other from the RBA - will deal a significant blow to consumer spending power.

In the second half, it's a better than 50-50 chance that the cracks will really be showing in consumer spending

Before consumers get their marching orders though, the first casualty of the slowdown is likely to be the housing market.

Slower home sales will filter through to home values, which will drag on consumers both psychologically and also directly by reducing the opportunity to finance consumption through home equity withdrawal.

This is exactly what has already happened in the US and retailers have been clobbered as a result.

The first retailers to suffer in Australia, as in the US, will be home-related retailers such as hardware and home furnishings stores.

Upscale retailers such as designer clothing and gourmet food stores will also be among the first to take a hit as more well-heeled consumers start tightening their purse-strings.

We're not talking about the super-rich here because they aren't spending at your stores anyway. (They're heading out to Everest base camp or getting ready for their space shots.)

We're talking more about the upper middle class that has traded up during this decade's consumption boom and now will have to trade down as their asset-based wealth is eroded.

At the end of the day, there will be few retail beneficiaries of a consumer spending downturn.

Discounters will gain from the ''trading down'' effect but this will only partially offset the losses incurred as their normal target customers become more thrifty.

Mass market fashion apparel for teenagers will be hit last, since teenagers are the consumer group least psychologically tuned in to economic cycles.

So what's a small retailer to do? We already know what the chains will do: they will hit the discount button hard and often.

In this respect, many small independent retailers are at a distinct disadvantage because they cannot compress prices as much as the big guys without becoming unprofitable.

If a small retailer has a very well-differentiated product, a downturn shouldn't unduly worry him/her. There are countless examples of good retailers thriving during hard times. Sales might fall marginally but not catastrophically even in a recession environment.

*An ultra-conservative approach to inventory buildup to reduce the need for panic clearances

*A merchandising emphasis on smaller-ticket but higher-margin items (e.g. emphasising accessories over outfits if you are a fashion retailer).

*Greater emphasis on value-priced brands in any given product line. This is analogous to the larger chains stocking a higher percentage of private label or ''home brand'' items.

*Reduce fashion risk by rejigging the merchandise mix in favour of items that are tried and tested in the market rather than ahead of trend.

*Pump up the in-store service level and overall in-store experience: give your customers another reason to show up other than just the stuff you want them to buy.

Of course, there is always a chance that 2008 could turn out to be another peach for retailers, but that looks less likely with every passing day.

The RBA would say that it is important for the central bank to mop up excess demand pressures. In plainspeak, that means ensuring that consumers don't have too much money to spend

Mars is reviving its iconic 'Work, Rest & Play' slogan in a new TV ad to air in March in the UK.

The use of 'Work - Rest - Play', an update on the original 1959 slogan, heralds a return to the classic 'A Mars a Day…' jingle that featured in the brand's advertising from the 1960s to the 1990s.

Caroline Jary, Mars Bar brand manager said: "It's such a memorable strapline and an important part of the brand heritage - the updated version helps communicate the brand values as much today is it did in yesteryear."

Rumours of the slogan's return have persisted in recent months. Last September, the confectionery giant said it had "no plans" to revive the "work, rest and play" strapline.

The new strapline is not exactly the same as the original but Mars will be hoping it will prove as popular with UK consumers.

According to the Daily Mail, McDonald’s Happy Meals could soon be banned in Liverpool in the UK over concerns of its contribution to child obesity. Members of Liverpool City Council's Childhood Obesity Scrutiny Group are planning a bye-law that forbids the sale of fast-foot accompanied by toys and will put it to a Select Committee at the end of the month.

Tesco is to launch a range of budget own-brand PC software, in a move that will pitch the grocery giant against the likes of Microsoft and Symantec.

Tesco said it would offer six packages, including office software, security systems and a photo editing tool.

Britain's biggest retailer said each title would cost less than £20, challenging what it described as the current "high" price of PC software.

In August, the firm announced it was launching a new home shopping service for a range of 8,000 items including sofas, bikes, golf clubs and cameras - taking the supermarket into direct competition with retailers such as Argos.

Analysts expect Tesco to announce half-year profits later this week of more than £1bn.

Tesco said its own-brand software range, which will also include a CD/DVD burning tool, would be available in 100 of its stores from later in October.

The supermarket group said it had developed the range of titles with UK software distributor Formjet.

Formjet's products include Ability Office, a software package which includes word processing, spreadsheet and photo editing applications, the basic version of which retails at £20.99.

"When it comes to software there is little choice and prices are high," said Tesco buyer Daniel Cook.

"Our new range of software changes this, bringing choice and value to the market that has offered little of either for too long."

However, the software market has become increasingly competitive recently, with online companies like Google challenging Microsoft's dominance of the industry by offering free downloads of software.

UK's computer software market is currently worth about £8.5bn, according to Tesco.

The software and home shopping services are the latest in a growing list of non-food products offered by Tesco, which also includes finance and insurance packages and phone and broadband services.

Tesco's successful move into retail areas not previously associated with supermarkets has helped the firm hold on to its position as Britain's dominant retailer.

The latest data published last month by market retail analysts TNS Worldpanel showed that Tesco had a 31.4% share of the UK grocery market, followed by Asda with a 16.4% and Sainsbury's with 15.9%.

As reported by the UK marketing press, Tesco is offering unknown food brands the opportunity to gain instore listings through a Dragons’ Den reality television show called “Breaking in to Tesco”. The peak time series, beginning on 3 March, will follow the people behind the new brands as they go through a genuine pitch process to Tesco's buyers. Although the retailer said it did not commission the show, it is an attempt to help improve perceptions of the store and its attitude toward suppliers.

Bottled Water is the latest sector to come under fire from Green lobbyists after supermarkets, GM crops and airlines. The companies behind bottled water are being portrayed as dirty polluters ruining the fair planet from whence they source their oh-so-pure product.

Time for the industry to get its act together fast. The issue has been bubbling away for a while – plastic packaging plus unsustainable “food miles” are an obvious target, in some ways it’s amazing that Volvic, Evian, Vittel and their rivals were not taken to task sooner. But being criticised by the environment minster, Thames Water and on Panorama should make them sit up and take notice. The relevant trade bodies have not yet put forward a strong argument that can counter both the logic and emotion of the environmental message.

The bottled water market has been a lucrative one for several years but the boom time may be coming to an end. Britvic’s acquisition of Ballygowan last year may look like the, ahem, high water mark for the sector.

Interestingly, Coca-Cola is probably as aggrieved as the water brands as the company missed the big opportunity half a decade ago when it fumbled with Dasani. Now is hardly the right time to get back into the market, so all those rumours about Coca-Cola launching or buying a water brand may remain exactly that. Unless anyone can leak something (sorry).

The nation's largest retailer,Woolworth's has booked a 28.1% increase in first half profit as it continues to steal market share from rival Coles and says there are significant growth opportunities across all its businesses.

Woolworths today confirmed that it expects net profit for fiscal
2008 to grow between 19% and 23% above the $1.29 billion profit achieved in fiscal 2007.

The company also announced that it would partner investment bank HSBC to launch a general-purpose branded credit card late this year.

Woolworths booked a $891.3 million net profit for the 27 weeks ended to December 30, up from $695.6 million in the previous corresponding period.
''This is clearly a strong result and one that reflects the momentum for sustained profitable growth that exists in our business,'' chief executive Michael Luscombe said.

Woolworths expects its full-year sales to grow between eight and
10%, and earnings before interest and tax (EBIT) to grow faster than sales.

In the first half, Woolworths increased sales by 8.6% to $24 billion, while EBIT rose by 20% to $1.37 billion.

Woolworths will invest in key growth initiatives such as the national launch of its `Everyday Rewards' program, which will replace paper petrol dockets with a card-based system.

It is speeding up the refurbishment of its supermarkets and Big W general merchandise stores, and plans to have around 200 stores conforming to a new format by the end of fiscal 2008 at a capital cost of $1.8 billion.

It also increased capital expenditure to $1.8 billion from $1.3 billion previously.

Mr Luscombe also said Woolworths would most likely undertake a share buyback in the second half of 2008.

''Each of our businesses is performing well,'' Mr Luscombe said. ''We are confident that these initiatives will all contribute to driving future growth.''

Woolworths shares have lost about 15% of their market value since January 1, but today investors jumped into the stock, pushing it up 4.21%, or $1.22, to a two-month high of $30.23.

CommSec analyst Grant Saligari said the result was very strong, but sustaining the current level of growth depended on consumer spending, which was likely to ease though 2008 as recent interest rate rises take effect.

''We wouldn't expect the fairly frenetic level of spending we saw in 2007 ... that will have an effect on growth across all of the divisions,'' Mr Saligari said.

CommSec is forecasting a full-year net profit of $1.59 billion for Woolworths.

Another analyst said Woolworths' full year guidance appeared conservative, even after taking in the impact of an increase in capital expenditure and investment programs in the second half of the year.

''Regardless, it seems a bit conservative,'' he said. ''Without a doubt they will be at the top end of their guidance, if not above.''

Mr Luscombe said today Woolworths planned to continue to deliver double-digit profit growth.

''We could have had a significantly higher profit result but we have chosen to invest in the future,'' he said.

''We have chosen to invest in new store formats and new stores and in price.''

Asked if he had seen any significant improvement in the business of rival Coles, and if that had affected Woolworths, Mr Luscombe said: ''No.''

Mr Luscombe said Woolworths was taking market share from Coles.

Coles's parent, Wesfarmers, said last week that its supermarkets, liquor, fuel and convenience businesses increased revenue by 7% in the one month since being taken over in November. Wesfarmers said the performance was below acceptable benchmarks.

In the first half, Woolworths' growth engine of food and liquor increased EBIT by 19.3% to $998.7 million.

Revenue for its Australia supermarkets rose 7.8% to $18.17 billion, with EBIT up 18.6% to $1.04 billion.

Woolworths declared an interim dividend of 44 cents, up from 35 cents in the first half of fiscal 2007.

Austalia's job market has performed magnificently again over the past 12 months with more than 280,000 net new jobs being created, of which 188,000 were full-time.

The unemployment rate has sunk to 4.1%, a depth it hasn't plumbed since ABBA won the Eurovision song contest. The workforce participation rate is also at an historic high.

It's been an outstanding run but there is a dark side to it that's really making our retail industry squirm.

What it means is that new employees being hired and the ones still pounding the pavement looking for a job are the least skilled, the longest out of work, and the most difficult to train.

Moreover, retention of skilled employees is increasingly difficult because a tight labour market means greater competition for the limited pool of skilled workers.

Nowhere is evidence of the skills shortage more abundant than in retailing.

The problem is not simply manifested through indifferent service in the aisle and at the register. The top level of management is stretched perilously thin as well.

Think about it. You have Myer, an ailing department store company being run by ex-supermarket guys after its previous head, Dawn Robertson, a US import, couldn't turn the place around.

(Postscript: Robertson moved from Melbourne to San Francisco to try to turn around the Old Navy division of the apparel retailer Gap. That went pear-shaped as well and
she was recently replaced.)

If the Myer example isn't enough, you only have to look at Coles being taken over by Wesfarmers, which itself has no supermarket management experience and was forced to head-hunt all the way to Scotland to get its new supermarket MD, Ian McLeod.

The risks of the skills situation in the retail industry becoming ever more acute over time are increasing as the population ages, as baby boomers retire and as competition for the limited pool of skills intensifies.

Professions with a poor image in terms of career path, compensation and personal/professional development will be increasingly disadvantaged, and unfortunately retail is one such profession with its name up there in lights.

According to recent research by the Australian Centre for Retail Studies (ACRS) at Monash University, retail is not viewed favourably by young people or the broader public as a career alternative.

It's often really just a school holiday job or a temporary stop-gap until something better comes along.

This is partly because retailers don't show employees an opening onto an exciting career beyond the shop floor. Instead, the only door that beckons is the exit.

Another reason for leaving a retail job, according to the ACRS research, is ''poor treatment by the employer'' (read: feeling undervalued, overworked, stressed out and unrewarded).

So employees come and go and many retail managers don't get the hint. Instead of coming up with a strategy for solving the longer-term problem they go about it piecemeal- taking care of one vacancy at a time.

Clearly something has to be done, but in a world where our population is ageing and competition for a limited skills supply is growing, how does a retailer get there?

The ACRS report, entitled ''Attracting and Retaining a Cross-Generational Workforce'' has a number of useful suggestions. It emphasises the need for retail businesses to broaden employment policies to encompass multiple generations.

On top of that you need to manage the diversity properly because if it is introduced without special management strategies it will only create tensions and conflicts that crush productivity.

Such strategies should include an appreciation of the viewpoints of the different generations, which will differ based on worldview and values.

In a word: empathise. ACRS also recommends a more consensus-based approach to decision-making within the business so that all views are heard.

Retail managers will also need to adapt human resource policies to the new situation because a one-size-fits-all approach won't cut it when you're dealing with people who have different motivations to work, different career trajectories ahead and behind, and different perspectives on work-life balance.

Another smart idea is to develop tailored training programs. And, of course, make sure that the career path is clearly articulated.

The attention to intergenerational employment policies as a way of expanding the pool of job candidates and retaining skilled workers is timely because the skills shortage in Australia's retail industry is bad and getting worse.

Our education system doesn't help. Retailing is routinely ignored by our tertiary institutions, consigned to the same status as basket-weaving and culinary arts.

There is nothing wrong with getting a supermarket executive from Scotland or a department store CEO from New York.

However, when this reflects a chronic and ongoing failure by Australian retailers to attract and retain good employees at the beginning of their careers, then the industry is clearly in a spot of bother.

Source: SMH

Goodman Fielder, Australia's largest baker, may consider bidding for Dairy Farmers, becoming the second company in two weeks to express potential interest in the maker of milk, yogurts and cheese.

``Clearly Dairy Farmers is of strategic value to us,'' Chief Executive Officer Peter Margin said today on a conference call. ``We might take a look.'' Goodman hasn't yet approached Dairy Farmers, he said.

Dairy Farmers said this month it was reviewing options for a trade sale, merger or listing of the Sydney-based cooperative amid ``very significant interest'' from domestic and overseas companies.

Kirin Holdings Co., Japan's biggest beverage maker, said February 18 it may bid for Dairy Farmers.

Acquiring Dairy Farmers would give the purchaser control of Australia's third-largest milk processor and add brands including Coon cheese and Ski yogurt. Goodman Fielder currently gets about 12% of earnings before interest and tax from its own dairy unit, according to Bloomberg calculations.

Dairy ``is a highly relative category for consumers today and tomorrow,'' Margin said. ``We are not going to overpay for any assets.''

Goodman Fielder, based in Sydney, is New Zealand's second- largest milk processor, with brands including Activate yogurt, Bouton d'or cheese and Meadow Fresh milk.

The company's fresh dairy unit had earnings before interest and tax of $20.6 million in the six months ended Dec. 31, Goodman said today in a statement to the Australian Stock Exchange. Total earnings were $166.1 million.

Other potential buyers of Dairy Farmers may include Fonterra Cooperative Group and Coca-Cola Amatil Ltd., the Australian Financial Review said on December 19.

Dairy Farmers, owned by its 2,000 farmer suppliers, has been closing unprofitable units and cutting staff before the potential share sale or merger. The cooperative is being advised by Goldman Sachs JBWere.

Trans-Tasman brewer Lion Nathan today revised its guidance for net profit before significant items for its 2008 financial year as it reported solid trading in the first quarter.

Lion Nathan also said that its integration of Tasmanian beer-maker J. Boag and Son Pty Ltd (Boag's) - which Lion Nathan acquired for $325 million in November - was on track and that Boag's would be earnings-per-share (EPS) accretive in the 2009 full year.

"Following a solid first quarter, and with the impact of commodities and Boag's now clarified, Lion Nathan today revised its guidance for NPAT (pre-significant items) to $265-$275 million for the 2008 financial year, including Boag's,'' the company said.

Lion Nathan said today that the acquisition of Boag's would have a negative impact of $13 million on net profit for 2008 due to integration and interest costs.

In November last year, Lion Nathan forecast a net operating profit in a range of $270 million to $280 million for fiscal 2008, and then a "significant step-up'' in earnings from fiscal 2009.

But that guidance for 2008 specifically excluded the impact of Boag's on group earnings.

The acquisition of Boag's was completed on January 2, 2008.

Lion Nathan said the sales of Boag's portfolio on the mainland had started on January 14, 2008.

"The overall Boag's integration process is running ahead of schedule,'' Lion Nathan said.

"Long-term funding has been arranged, and Boag's will meet Lion Nathan's acquisition criteria by being EPS accretive in full year 2009, its first full year of ownership.''

Releasing a first quarter trading update today, Lion Nathan said strong revenue growth was driven by a continuing shift to premium beers and higher equity brands, and brand innovation.

This had helped offset cost pressures caused by the drought in Australia, a global commodities boom and rising oil prices.

"Our business has continued to perform strongly in the first quarter of 2008, reflecting good momentum in all our business segments,'' Lion Nathan chief executive Rob Murray said.

Lion Nathan said that in Australia, revenue in the first quarter grew by about six per cent, led by growth in "power'' brands and a positive mix shift led by Tooheys Extra Dry, Hahn Super Dry and XXXX Gold.

Beer volumes for the quarter fell by just over one per cent, in line with the decline in market volumes.

Tap volumes were impacted in states where smoking bans were introduced last year, while wet summer weather dampened demand in some parts of the country.

However, Lion Nathan's biggest selling brand, XXXX Gold, increased its value and volume share of the total Australian market and the mid-strength beer segment.

Lion Nathan said the business in New Zealand had performed well, with total beer volumes rising 1.7 per cent.

This was driven by growth in volumes of premium beers such as Steinlager Pure and Corona.

Volumes of packed beer grew, but tap volumes were lower, reflecting a market-wide trend.

In the wine business, Lion Nathan said Petaluma's Bridgewater Mill, Croser and Stonier brands performed well, and the Argyle brand returned to growth.

Sales growth in the United Kingdom continued to exceed 20 per cent, and US sales were boosted by Argyle's performance.

"In the short term, growth expectations for Australian and New Zealand wine exports to the US will be subdued while the company reviews its US route to market following the sale of current distributor Beran Wine Estates to Constellation Brands,'' Lion Nathan said.

Lion Nathan said fiscal 2008 continued to bring cost challenges, and the company re-affirmed annual input cost increases of 4.5 per cent, excluding volume or mix impacts.

The previously advised barley cost increase of $10 million for the year was confirmed.

Lion Nathan said capital expenditure for the year, including spending on the new Auckland brewery, was expected to be in the range of $250 million to $300 million.

Lion Nathan shares were 14 cents higher at $9.37 at 1.34pm today.

The head of supermarkets giant Woolworths Ltd has told the Australian business community to quit "navel gazing" on the issue of climate change and join the fight to lower greenhouse gas emissions.

"You can do a lot of talking and do a lot of navel gazing if you want to," chief executive Michael Luscombe told delegates at the Environment Business Australia Forum in Sydney on Wednesday.

"You might not get it all right, but you will learn a hell of a lot along the way."

Mr Luscombe was taking part in a panel discussion with business leaders at the forum to highlight ways companies can address global warming.

The panel, which included executives from energy retailer Elgas, greenhouse solutions business Energetics, Investa Property Group and think tank Environment Business Australia (EBA), agreed that cutting greenhouse gas output would reduce waste and save money.

Mr Luscombe said Woolworths' "green journey" began about 18 months ago and it recently employed a sustainability expert and set up an independent advisory board to make sure the retailing giant hits its targets.

Mr Luscombe said goals include as zero landfill impact, lower water usage, more efficient transport and minimising its overall carbon dioxide (CO2) footprint.

"In 2006, our carbon footprint was 3.7 million tonnes of CO2 equivalent ... and a big part chunk of that was around refrigeration, air conditioning and lighting," he said.

"We have set ourselves a challenge to hold our carbon footprint at the 2006 limit.

He said Australia's biggest retailer would eventually like to recycle everything coming out of its 800 stores.

All new Woolworths outlets conform to strict new environmental standards while older stores are being upgraded at a cost of $200,000 per store.

Mr Luscombe said evidence of greenhouse gas leakage from supermarket fridges and high energy consumption had sparked the changes.

Woolworths is shifting to cascade cooling systems, which replace some of the more harmful gases with carbon dioxide, better fans and roll-down screens to keep in cool air.

Mr Luscombe said by June this year, all of its stores will carry the new equipment.

Energetics founder Jon Jutsen said the effectiveness of increasing energy efficiency to cut emissions had been grossly underestimated.

"We need targets for energy efficiency," he said, adding that a 20 per cent energy efficiency target by 2020 would be ideal.

Mr Jutsen said changes must be made quickly and at the time of capital replacement.

The business panel also agreed there are enormous financial opportunities in the green space.

"The business opportunities far outweighs the negative side," EBA chief executive Fiona Wain said.

"Australia can truly show others that an energy intensive economy can be energy efficient."

While a survey of 303 top executives found 80 per cent believe the business community needs to take more action on climate change, sceptics remain.

Some 70 per cent wanted more information on the issue, with just two per cent expressing strong confidence about the greenhouse gas data already available, the survey by PricewaterhouseCoopers showed.

Mr Luscombe is dubious about a federal government proposal to ban plastic shopping bags, which often end up as landfill.

"All retailers need to participate in working on finding a biodegradable solution."

Mr Luscombe, who has swapped his six litre V8 car for a cleaner two litre turbo-diesel, said educating the community and business about climate change was important.

Meanwhile, Elgas general manager Ian Maloney called on the federal government to provide more clarity on the structure of forthcoming carbon trading markets.

Federal Climate Change Minister Penny Wong this week said the government would reveal its model for an emissions trading scheme by the end of the year, and plans to have it in place by 2010.

The Rudd Labor government has reassured industry groups that they won't bear the brunt of any push to reduce greenhouse gases

FOSTER'S Group has reported another disappointing result from its wine business, placing further pressure on the beverages group to justify its $3.2 billion takeover of Southcorp three years ago.

After warning that Foster's faced "tough and sudden headwinds" in its US wine business, the company's chief executive, Trevor O'Hoy, conceded its heavy investment in becoming the world's second-largest wine maker had still failed to pay off. All he has asked for is more time.

"We have underperformed both in returns and category, but I am absolutely committed to getting there," Mr O'Hoy said.

In response to speculation he could soon be pushed out, Mr O'Hoy said: "The rumours of my death are a little premature, but I am not going to give any guidance on that date at this stage."

Nor would he provide any guidance on when he believed the company's wine business would turn the corner. "We are absolutely committed, focused and confident that we will deliver on our promises," he said.

Mr O'Hoy would only say the group was on track to report a 10 per cent increase in pre-abnormal full-year net profits on a "constant currency" basis. Given the recent rise in the Australian dollar, some expect this could lead to a flat full-year result for the group.

The group's shares fell by 9c to $5.77 yesterday after Foster's reported a 28 per cent drop in first-half net profits to $398.5 million, a result skewed by $190 million in asset sales the year earlier. Before one-off items, the group's net profits rose by 6 per cent to $393.5 million.

Removing the solid contribution by the group's Australian beer and spirits business, wine accounted for only one-third of Foster's profits. This is despite the company having the bulk of its assets tied up in wine production.

The US wine business was the worst performer, reporting a 33 per cent slump in profitability. Foster's blamed the slowdown in the US "consumer environment" in the December quarter and the fall in the value of Australian wine exports to the US.

Mr O'Hoy attempted to highlight the positive sides of the business, including the company's 1.25c increase in its interim dividend to 12c, payable on April 2.

He said some of his doubters had ignored what had been achieved in the company, such as a 25 per cent reduction in stock-keeping units to lessen the complexity of its brands, and a reduction in staff from 12,000 to 8000. If the Australian dollar were at the same level when Foster's bought Southcorp, he argued, the group would be close to achieving its cost of capital on the business.

He also noted how the company's "truly great beer business" was performing well, but he conceded market criticisms that he has been too focused on raising profits margins, while failing to generate revenue growth. "In wine returns and revenue growth we have unperformed. We've underperformed our targets but can I say the category in that market is as robust and spinning off as much growth as it ever has," he said.

Goldman Sachs JBWere described the result as "compositionally disappointing".

Kellogg's has today (13 February) launched a bid to become a major snacks player in the UK.

The move to include the appointment of Jean-Yves Heud as general manager, who believes Kellogg needs to boost its presence in the convenience channel.

"Snacks is an impulse category and we need to be in the right location when a consumer is looking to buy. The convenience channel has a critical part to play in this," Heud said.

A 15-strong sales force has been established including 12 retail development representatives and three regional managers. The team will focus on supporting smaller retailers as well as non-traditional convenience outlets such as sandwich shops.

The team will focus on the core range of SKUs that Kellogg launched to convenience retailers including Budgens, Nisa and Bookers last year

Supermarket giant Tesco has become the first UK retailer to unveil annual profits of more than £2bn.

The UK's biggest supermarket chain posted underlying pre-tax profits of £2.03bn ($3.83bn), up 20.5% on 2004.

Tesco's chief executive Sir Terry Leahy cited the group's overseas expansion and moves into non-food areas like CDs and clothes for boosting growth.

Tesco's overall turnover increased 12.4% to £37.1bn, with sales in the UK making up £29.5bn of that figure.

The group's market share has continued to grow in the UK despite fierce competition.

"These results again demonstrate the broad appeal of the Tesco brand," said Sir Terry.

Tesco said it was expecting a "more normal year" in the UK in 2005, on the back of rising business costs and an "unclear" consumer outlook.

Shares in Tesco, which have risen by about 25% in the last 12 months, were down 0.25p, or 1%, at 318.5 pence at the close of trade on Tuesday.

"There's a note of caution that everyone would have expected, both in the top line and on the cost front, there clearly are cost pressures on all the retailers at the moment," James Collins at ABN AMRO told Reuters.

While Tesco has maintained rapid growth in sales and profits in recent years, its success has led to critics arguing the firm is having an adverse impact on other businesses and is squeezing prices paid to farmers.

UK supermarkets were recently cleared by the Office of Fair Trading in a review of the implementation of its supplier code of conduct.

But Tesco's results prompted environmental campaign group Friends of the Earth to say its "unchecked" growth is putting smaller shops and UK farmers out of business.

"The government must introduce stronger protection for suppliers and call a moratorium on any further takeovers," it said.

The Forum of Private Business, which represents 25,000 small firms, said smaller retailers and suppliers were paying a "heavy price" for Tesco's success.

Interviewed on BBC Radio 4's Today programme Sir Terry described Tesco's deals with suppliers as "tough but fair".

Tesco now accounts for almost one pound in three spent in the UK's supermarkets but Sir Terry said data showed about 90% of customers have a choice of three retailers.

"They are exercising that choice," he added. "We've only grown profits by growing our sales and that's by making our stores more attractive for customers."

Tesco operates more than 2,300 stores in 13 countries including Japan, Poland, Turkey, Hungary, and a joint venture in China.

Non-food sales rose 17% to £6bn, with the group highlighting a 28% increase in sales of its clothing range.

Profit at its online operation grew 51.8% to £36m, on the back of sales of £719m.

Tesco said sales at its international operations in Asia and central and eastern Europe were up 13.1%.

It added that it intended to create 25,000 jobs worldwide this year, including about 11,000 in the UK.

Tesco's underlying profits figure excluded profits on disposal of assets, integration costs and goodwill amortisation. Including these, Tesco's pre-tax profit rose 24.5% to £1.96bn.

Unilever is set to embark on a further stage of corporate restructuring as it looks to step up its growth in developing markets.

The consumer goods giant has decided to manage its businesses in Central and Eastern Europe alongside its operations in Asia and Africa.

Unilever saw sales climb 11% in Asia and Africa last year, while Russia was one of the key factors behind the company's rising sales in Europe.

As part of the changes, Unilever will manage its businesses in Western Europe as a stand-alone unit.

The moves mean changes at the top of Unilever's executive team. Harish Manwani, currently president of Unilever's business in Asia and Africa, will lead the new expanded division, including Central and Eastern Europe.

Doug Baillie, CEO of Hindustan Unilever, will move to head up the Western European unit.

Kees van der Graaf, who heads Unilever's present European operations, will stand down from the role in May.

The two roles of president of Unilever's home and personal care brands and president of its food business will be merged, with Vindi Banga, currently president of Unilever's foods operations, taking the enlarged role.

Chief executive Patrick Cescau said: "These measures build naturally on the changes of recent years and give us an organisational structure even better placed to advance our growth agenda

Economic growth and rising disposable incomes in Brazil are fostering growth across a number of premium food categories. As consumers become more sophisticated in their consumer choices, Euromonitor International notes, sales of impulse and indulgence foods are growing, along with products offering health benefits.

Economic growth in Brazil is boosting demand for impulse and indulgence products, according to research by Euromonitor International, as rising disposable incomes allow consumers to spend more on non-essential food products.

Strong GDP growth has increased purchasing power particularly among middle-class urban consumers, but it has also impacted on overall food expenditure. Increased consumer buying power has also meant that health and wellness are playing a more important in role in consumer decisions.

In particular, more affluent consumers are willing to pay a premium for products offering indulgence as well as a health benefit. Benefiting from this trend has been the emerging fruit snacks category. Fruit snacks sales increased by 11% in volume terms in 2007 against 7% for overall sweet and savoury snacks. Fruit snacks sales take place almost exclusively in supermarkets, hypermarkets and specialist health food stores in more affluent neighbourhoods. These premium snacks are proving very popular among better-off consumers, willing to pay a premium for a snack offering both indulgence and health benefits.

Health awareness has also bolstered growth in snack bars, with retail sales reaching R$270m (US$161m) in 2007, up 11% on 2006. Energy bars, mostly targeted at athletes and sports enthusiasts, grew by over 20% in retail value in 2007, according to Euromonitor estimates. Nestlé Brasil remains the market leader in this segment through well-known brands such as Protein Plus and PowerBar. The Pan American Games, held in Brazil last summer, played a key role in boosting sales, while Nestlé invested heavily in the promotion and advertising of its product range during the games, increasing consumer awareness of energy bars in general.

Increased purchasing power and changes in lifestyles have driven up sales of extruded snacks, which saw volume growth of nearly 13% in 2007. Meanwhile, popcorn is becoming a popular snack for at-home consumption among middle-class consumers. Popcorn sales grew by 15% in value terms last year, driven by the strong demand for microwave formats.

In contrast to growing demand for all other impulse food products, sugar confectionery sales declined by almost 1% in value in 2007. Low profitability and more shelf space in retail channels for value-added snacks, such as chocolate tablets and sugar-free gum, contributed to the weak performance of products such as mints, boiled sweets and chews. Furthermore, research shows that low margins and maturing consumer demand is discouraging manufacturers from investing in NPD in this area, resulting in a lack of product differentiation, further depressing consumer interest and demand.

However, economic growth is driving demand for chocolate products, with retail volume sales growing by 10% during 2007. Boxed assortments, mainly purchased as gifts, are particularly popular, accounting for 31% of chocolate retail value sales in 2007. Brazilian manufacturers often include miniature versions of popular assortments, such as Sonho de Valsa (Kraft Foods) and Serenata de Amor (Garoto), in their ranges.

Furthermore, in spite of increasing health concerns, sugared products posted the strongest performance within gum, growing by 14% in value terms during 2007. Functional gum sales were hit by new legislation introduced by ANVISA (Brazilian National Health Authority) in 2006 which establishes strict criteria for advertising functional properties, including those related to oral care.

In the bubble gum sector, collectables of all types, including stickers, tattoos and licensed characters, have played a key role in maintaining Brazilian children's interest. This category still accounts for an important share of overall gum sales, claiming 33% of total retail value sales in 2007.

Impulse ice cream is another category that has benefited from rising consumer expenditure on indulgence products. Retail value sales of these products increased by 11% in 2007, according to Euromonitor estimates, with low-calorie ice cream representing around 8% of sales and showing double-digit growth on the previous year. Research shows that the latest Brazilian legislation on trans-fat labelling has prompted a number of manufacturers, including Nestlé, to reformulate their products.

One of the key features highlighted by Euromonitor International in 2007 was the entry of private-label brands into the low-calorie ice cream segment. Retail chain Pão de Açucar's Taeq brand, for instance, is a low-calorie premium ice cream and sorbet priced on a par with Nestlé desserts.

One impulse category which has been hit by increasing health concerns is the biscuits market. Research shows retail value growth of just 2% in this segment in 2007 which Euromonitor attributes to competition from other food products perceived to be healthier, such as snack bars.

Brazilian parents, for instance, are increasingly opting to buy healthy snacks such as granola/muesli bars or single-portion cakes for their children to eat during school breaks. In São Paulo and Rio de Janeiro, consumers are increasingly replacing biscuits with alternative healthy baked goods such as packaged/industrial bread. Biscuit manufacturers have reacted by stepping up investment in the development of 'healthy ranges'. For example, last year Kraft launched Trakinas TrakMix, which includes trans-fat-free plain biscuits enriched with fibre and vitamins, targeted at more health-conscious consumers.

With sustained economic growth forecast to continue over the next few years, the trend towards more expensive health-focused products is expected to expand across Brazil, with products such as snack bars, dark chocolate and functional gum the main beneficiaries. Euromonitor International expects producers of functional gum to adapt their offerings and product claims to meet new legislative standards in the medium term, fostering future sales growth.

Sugar confectionery, in contrast, will see a continued, if not accelerating, sales decline. Euromonitor International believes manufacturers in this segment will need to step up investment in innovation in order to maintain consumer interest and demand, particularly among more sophisticated and increasingly health-conscious consumer groups.

UK retailer Sainsbury’s has appointed Luke Jensen to the newly-created role of director of strategy for the next phase of the company's turnaround programe.

Jensen, a partner and head of retail and consumer practice at consultants OC&C will join Sainsbury's in April and report to chief executive Justin King.

King said: "I'm delighted to welcome Luke to the company. He brings a wealth of consumer and retail experience which will be invaluable as we progress to the next stage of our growth plans."

Previously, Jensen was responsible for advising the boards of UK international retail and FMCG companies and private equity groups. He also co-founded and led M8 Group, an Internet retail company comprising petplanet.co.uk and greenfingers.com.

"We set out our initial plans three years ago and those will come to an end at the finish of our financial year in April," a spokesperson for Sainsbury told just-food. "Luke will join when the new plans come into practice in April and he will be very much focused on those