category forum

Frances Allen: A great retail experience is the ease with which you can navigate around the store. It’s that feeling when you go into a store that you just never know what kind of treasures you’re going to find.

Costco is a wonderful example of that. You never know what’s going to be the big offer from Costco. It could be a TV that you’ve been looking at for ages for a ridiculously cheap price. Or it could be a pair of socks.

At Dunkin’ Donuts, we’re consistently bringing out different tastes. Right now we’ve got a Milky Way hot chocolate that we combine with a triple chocolate muffin and an M&M donut. It will be different next month and the month after that, so we’re constantly keeping it fresh.

James Damian: The experience is the thing that’s delivered after you’ve investigated who is it that you’re trying to serve. So, it always starts with the audience and knowing the audience, the brand promise and customer insights from the brand promise based on the criteria set for designing a great retail experience.

The experience could be different from store to store, but there are certain universal things that will be consistent. That’s where the brand promise work really comes in, in terms of, who you are and what you stand for as a company. Those things need to be transported consistently no matter where you are on the globe.

Paula Beadle: A great retail experience always consists of speaking to someone who is responsive and knowledgeable about the products and services. My favorite retail experiences are as much about how I feel as how I’m treated. I’m a visual person, so the environment has a huge impact on my propensity to spend money.

Whenever a retailer can provide an experience to customers that represent the brand through all the senses, I believe you form a stronger relationship. When customers can see, smell, feel, hear and taste the brand, it’s a homerun.

Michael Copeland: At the retail store level, the emotional part of the Cabela’s experience occurs when a customer first steps in through the front doors. Typically, they’re greeted by a two-story mountain rising up the center of the retail floor, covered with animals from all over North America, waterfalls, and ponds filled with live fish.

The store walls are lined with amazing trophies from all over the world as well as educational maps and classic outdoor memorabilia. Cabela’s is really like a museum as well as a retail store. It’s not uncommon to see people come into our stores with cameras—not coming to shop, but coming to visit.

In addition, Cabela’s product selection and pricing ensure that our customers are able to find the exact product they are looking for at the best price. Most importantly, our associates are probably the most critical part of our customer’s Cabela’s experience. There is a level of service that has existed ever since Dick Cabela started the company at his kitchen table back in 1961.

David Sommer: This will sound simple, but a great retail experience is about paying attention to the shopper, first and foremost. There is now a dizzying array of new in-store vehicles—whether it’s digital screens or projection media or interactive kiosks.

But the key thing about the retail experience is thinking about shoppers and their mission, making it convenient for the shopper, and thinking about whether they’re open to exciting, new things in the product categories they’re shopping. A great retail experience is about putting the shopper front and center.

Allen: It’s knowing who you are that is number one. So, we understand completely who Dunkin’ Donuts is and who finds Dunkin’ Donuts appealing. You’ve got to understand the products they want, that fit in with their needs, the service that’s appropriate for them and a value equation that they can feel good about.

It’s certainly not about demographics in our case. When you go to a Dunkin’, you see a construction worker standing behind a nurse standing behind a woman in a power suit. Dunkin’ Donuts has a unique appeal to people who have busy lives. They are working people with places to go.

What Dunkin’ customers want is quick quality. They want to come in and know what they’re going to get. They are not looking to sit around on sofas and chat and have meetings. They have worked a hard day’s wage and want a real down-to-earth quality product at a fair price. That crosses all demographics.

Damian: It’s always critical to understand who is on your customer platform and the first step would be segmentation. The next step would be how these segments relate to one another. So, demographics and psychographics have to be in play, but you also need to understand the differences between the audiences you’re trying to serve.

Our job at Best Buy is completely about getting to know those audiences. It’s about starting to develop relationships with them so that it’s not just a sales relationship, but also about serving their unmet needs. That’s what customer-centric behavior is really all about.

Beadle: Customer segmentation is absolutely critical to the marketing success of any industry today. The days of speaking to everyone isn’t an effective, efficient way of marketing any longer. You have to understand who your customer is, what’s important to them, and then deliver your message in a meaningful way.

Understanding your customer is critical to delivering the right products, services and relevant messages. Customer segmentation helps to understand and view customers as like-minded communities rather than trying to appeal to the masses.

Copeland: Customer segmentation has allowed Cabela’s to refine our product offering within our retail stores as we have in our catalog business. We started out with only a handful of catalogs annually, but we now send out smaller specialty catalogs, each tailored to specific segments of the outdoor marketing seasons.

For example, we work diligently to provide products, clothing and footwear that are cut and sized to fit the female form. As more and more women take up outdoor pursuits, we’re committed to providing them with the products they need to enjoy the outdoors.

Sommer: There is a ton of buzz right now around customer segmentation and how CPG brands have to align with key retailer segmentations. I do think it’s a very rich area for collaborative marketing between suppliers and retailers, but there’s a limiting factor in there, as well.

The limitation is that there are only a limited number of ways that most retailers can connect with targeted shopper segments. So, I would say customer segmentation is very important, but only to the extent there are channels available to communicate to those segments.

Allen: We can put as much TV advertising on the air as we like, but the impression that you get as you go into a store or past the store—that’s our brand. So, we’ve really got to focus on making sure that our stores stay up-to-date, that they’re clean and that they are well looked after, because that’s where the consumer interacts with our brand on a daily basis.

Our heavy consumers are interacting with our brand three or four times a week. We want to tell them about all the great new products that we have and we want to make sure we keep reinforcing the emotional connection between our values and their values. Our stores are living billboards for our brand and we work hard to make sure that they are a good reflection of our brand.

Damian: We have an expression inside Best Buy where we don’t think of ourselves as a consumer electronics company; we think of ourselves as a communications company because the things that we sell foster communications of all sorts.

We deliver experiences that enable people to connect with one another. We enable people to escape at the end of a long day or a long week through a great home-theater system or Mp3 player. So, that idea of content being available no matter where I am and Best Buy as the facilitator to enable these different experiences—that is our purpose.

Beadle: I’ve seen a lot of proposals for advertising and promotion opportunities within retail locations. Marketers need to consider carefully how this impacts the customer experience. I’d like to see more data behind the effectiveness of retail marketing.

Using your retail location to market the products within the environment—that’s more obvious. But advertising bank products within a grocery store doesn’t have a natural connection for me, although I recognize that the customer may be the same.

Copeland: To be successful, retailers need to do more than just sell products. Our stores and our website are places not only to purchase outdoor products and apparel, but also to learn about the outdoors and connect with others who share your outdoor passions.

Our website has outdoor agencies for all 50 states as well as product reviews, recipes, buyer’s guides, comparison charts, Cabela’s travel and chat rooms. We produce and distribute Cabela’s Outfitter Journal magazine and we have our own television show, which gives us another link to our customers.

Sommer: Retail as media has to add value for the shopper. I sit at the largest media buying company in the world—Group M—which buys one-third of the world’s ads, or around $54 billion in ads annually. The question I have when in-store media companies come to see me is, why would a shopper pay attention to it?

So, to the extent that targeted offers are served up to shoppers, and add value to the shopping experience, in-store media is wonderful. I do think it’s still a little bit of the Wild West out there, but it’s going to be a very exciting and high-growth area for the future.

Allen: Dunkin’ Donuts has a great new floor design that meets the needs of our consumers today. Our new design is very reminiscent of our heritage, which dates back more than 57 years, but is coupled with contemporary features that give Dunkin’ Donuts a new, more modernized appearance.

It’s a really wonderful look that captures everything that the modern consumer is looking for in a retail environment. But, also it captures that unique Dunkin’ Donuts personality. So, it’s still pink and orange. We love our pink and orange! It’s one of the things that make us so unique and different and it’s part of our heritage.

Damian: Retail is change. If retail formats don’t continue to change, those retailers will get stale because people get bored very quickly and we’re always looking for what’s next, what’s new. There are going to be some things that are familiar and comfortable but retail is always about the art of surprise as well.

Best Buy is designing stores now with female customers in mind. We’ve already got two stores on the market, called Studio D, that are designed with the female in mind (see page 16). We have built a very loyal following with men of all ages; they love us. But, we’ve also found out over the last few years that the unmet need of the female is far greater than that of the male because she is head of household in many cases.

Beadle: Retail formats will become more interactive. The expectations of customer service and what companies will deliver will step up a level. It’s going to evolve to where customers can be more a part of the process.

For example, if there are messages that someone is communicating within the store, the customer should be able to determine what those messages are and what they want to see.

Consumers will have more power and more input into how they are being communicated to. It will be more specific to individual consumers, more personal and more conversational.

Copeland: Successful retailers will need to continue to maximize their efficiencies both in brick-and-mortar channels as well as the direct businesses. Obviously, technology is going to play a huge part in allowing retailers to better analyze the volume of data related to every aspect of the business and react accordingly.

We’ll see a greater demand for the experience. Retail has been a hallmark of Cabela’s, and going forward just the experience in one of these brick-and-mortar stores is very
advantageous to us as a company. It certainly makes for lifelong customers once people visit our stores.

Sommer: It’s a fiercely competitive market out there—so, we use this term, “the battle for trips.” You’re going to see that battle across classes of trade, across formats, with retailers fighting for shoppers whether it’s the “paper towel” trip or the “consumer electronics” trip or the “grocery stock-up” trip.

In general, you’re also going to see formats get better at integrating “bricks and clicks,” as they say. So, with both their physical stores and their online stores, you’re going to see better targeting of offers, and better use of customer segmentation. You’re also going to see retailers come up with not just merchandising, but also innovative experiences.

Allen: Crate & Barrel is one of my favorite retailers because you never know what kind of incredible space-saving, time-saving gadgets those clever people are going to come up with next. I love surprises when I shop.

I also love to read, so Barnes & Noble and the quality experience there is something I really enjoy. And I love Dunkin’ Donuts! I love coffee. I love muffins. I love donuts. So, that’s just a pleasure every time.

Damian: I love retail and I love to shop. I love Neiman Marcus. I love the way in which they know me. I also love Tiffany and Company for the same reason. They service me for everything that I’ve ever purchased from them throughout my entire life. And they take care of me—they’ll take care of my watch if it needs cleaning, or change my battery for me. They are there for me.

William Sonoma is another great retailer. They care about presentation. They care about servicing people and greeting them. They are great shopkeepers. They are great merchants and they are trying to deliver a great experience that consistently brings you back, like the Four Seasons Hotel. I love them. The service is incredible. The environments are incredible.

Byerly’s is an incredible, service-oriented grocery store that delivers on their people, their environment, their operational model and their food, with all the quality and the service that goes with it. It’s all of those things, no matter what sector of retail you’re in. Bang & Olufsen. Love ’em!

Beadle: Nordstrom’s. Part of what I enjoy so much about Norstrom’s is that when I walk in, I hear the piano playing, the lights are dimmed, it smells fabulous and people are sampling different things. There’s lots of interaction and I like that. They have done a great job of understanding who their customer is and the experience they want to have.

I also like Home Depot. During my home renovation, I spent a lot of weekends at Home Depot. Most importantly, I could always get help. But the emotional connection happened on Saturdays, when my daughter would get an apron and tools to make a project. That was absolutely brilliant.

Copeland: I’m a little bit biased. I worked for Lowes for 15 years, but as a customer I love spending time in their stores. I’m a big do-it-yourself person. I do a lot of my own work around my house. I love their locations.

I’m a huge fan of Best Buy. They are kind of like Cabela’s is for a lot of other customers. I could spend hours at Best Buy looking at all the new technology. They have some of the best service and service standards—not only in their industry but also in retail.

Sommer: Locally, I like Zachys, a wine retailer in Westchester, New York. It’s just a very personalized experience, and one that’s not pretentious. They make you feel comfortable asking questions about wines even though they stock incredibly expensive bottles. I think there’s a nice, disarming quality about that.

I also like Stew Leonard’s. I love shopping there with my son, who likes pushing the Chiquita Banana button and watching the animatronic characters dance. But beyond the folksy brand, there’s actually a lot of merchandising science behind the way he leads you down the path.

Stew Leonard’s has just the right assortment — you’re not staring at thousands of SKUs, just the right SKUs for a family. He has quality produce, dairy, bakery, fish and meat departments. It’s the kind of thing where you enjoy yourself and get high quality food, too. And the price points are sharp, which is something we all care about these days. n

FRANCES ALLEN, as brand marketing officer of Dunkin’ Donuts, develops and executes marketing strategies and initiatives, advertising campaigns and new product launches worldwide.

JAMES DAMIAN is senior vice president, experience development group, at Best Buy. He is, in his own words, “a right-brain ambassador for the value of design within the left-brain world of consumer electronics.”

PAULA BEADLE is vice president of national promotions and partnerships for Washington Mutual. Previously she was with Clear Channel Communications and the Minnesota Vikings.

MICHAEL COPELAND is vice president of retail operations for Cabela’s, a retailer of hunting, fishing, camping and related outdoor merchandise. Previously, Michael was with Lowe Home Improvement.

DAVID SOMMER is managing partner and director of GroupM Retail, part of WPP’s media investment management company, GroupM, which is dedicated to in-store and other retail communications channels.

In the UK, the Tiffin Food Company has launched a range of ready-to-eat curry meals that, the company said, are "identical" to dishes served in its award-winning restaurant.

These up-market ready meals have been made using recipes from the Tiffin restaurant in Leicestershire.

Three of the dishes - chicken jalfrezi, chicken bhuna and chicken tikka masala - have gone on sale in selected Asda stores.

"Customers of The Tiffin kept telling us that they loved our meals so much that they really wanted to take the Tiffin experience home with them and serve up our dishes whenever they fancied a curry," company founder Monica Parmar said.

One of the giants of the world's chocolate scene, has set its sights on the premium end of the market. The appetite for posh chocs is growing in the West, not least in the US, one of the company's target markets. But has Nestlé left it too late to be successful Stateside?

In chocolate, as in many food categories, it's no secret that premium is where it's at. Dark chocolate, artisan-style chocolate, organics, Fairtrade: the appetite for upmarket chocs is growing - and growing fast.

As you'd expect, the US is one market where premium chocolate is becoming all-the-more popular and confectioners, big and small, have been jostling to get a share of booming demand.

In the last six months, Starbucks and Hershey have joined forces with their "artisan-style" chocolates; Ghirardelli has launched "indulgent" filled bars, while Mars has introduced a range of "delicate" and "luscious" new products in a bid to tap into the double-digit growth seen in the US premium chocolate category.

If flowery words are not your thing, try some numbers: premium chocolate now accounts for around 17% of the US$16bn US chocolate market, according to industry analysts Packaged Facts. That's up from 12% in 2002. Packaged Facts estimates that premium chocolate sales will continue to expand, commanding 25% of the US market by 2011 - or $4.5bn in sales. Those figures should be enough to sweeten the appetite of any confectionery executive looking for the next wave of growth.

Nestlé, for one, has set its sights on upping its presence in US chocolate and at the premium end in particular. The Swiss food giant is cagey over its plans but tells just-food today (18 April) that it is currently working on a range of new products with Belgian chocolatier Pierre Marcolini - and some could be heading for the US.

"There is a clear market for premium and super-premium chocolates in industrialised countries," Nestlé says, highlighting - albeit rather cautiously - Europe, the US and Asia as three such markets. However, before Nestlé HQ gets too excited about the company's potential in the US, they should be aware that, despite the growth of premium chocolate Stateside, it will be tough to break into the market.

Fellow Swiss chocolate maker Lindt Sprüngli is the dominant force in premium chocolate in the US with its products, including its famous Lindor globes, seen as the quintessential European premium chocolate. Perhaps sensing fiercer competition ahead, Lindt has amassed a CHF750m (US$733m) war-chest to invest in its business, with some of the cash going towards boosting production in North America.

Nestlé also faces competition in the shape of Godiva Chocolatier. Godiva changed hands last December when US food group Campbell Soup Co sold the business to Turkish peer Ülker Group for $850m. Campbell may have decided that Godiva no longer fit its focus on soups and snacks but, in the eyes of US consumers, the brand is seen as perhaps 'the' artisan chocolate, thanks to its network of retail outlets.

It is clear, then, Nestlé will find it tricky to locate a clear niche in which to build a premium chocolate brand in the US. James Amoroso, a food industry consultant, insists he finds it "difficult" to think of a "unique brand positioning" in the US for a premium chocolate from Nestlé

Nestlé is the global number one in consumer chocolate but it does not have a premium brand. It is difficult for me to see what positioning Nestlé could come up with to create a gap in that market," Amoroso tells just-food. "It can't just suddenly come up with a new brand and then two years later expect people to recognise it as a luxury brand. You have got to go slowly or you will never get that."

Nestlé, Amoroso claims, should have snapped up Godiva. "I don't know why Nestlé didn't go for Godiva," he says. "It could have paid more than the Turks paid and it could have justified paying that because of its global distribution network. Nestlé has a century of competence in premium-quality chocolate - the company makes it for the Swiss mainly - and it has got the marketing muscle and the patience required. It was a no-brainer."

Still, Godiva has been and gone. How can Nestlé hope to break into the upper reaches of the US chocolate market? One strategy could be with dark chocolate, perhaps with a premium brand for the mass market - in a similar vein to products like Dove from Mars - or with a product for the more super-premium end of the market.

"The key driver in chocolate full-stop is dark chocolate and Nestlé can play the dark chocolate card well," Amoroso says. "However you can't really make the leap up to super-premium unless you have a brand, or you have a unique positioning. Otherwise you become a me-too product, which no-one will buy."

It seems, then, that Nestlé will have its work cut out breaking into one of the more lucrative parts of the US confectionery industry. There promises to be no let-up in competition. Aside from the new products from Mars and Hershey and the planned investment from Lindt, UK giant Cadbury has signalled that it will launch its organic chocolate Green & Black's nationwide in the US this year

Nestlé today gave no timetable for the rollout of any of its new products. "We prefer to surprise our competitors," the company says.

However, the company will have to act quickly or, to its own surprise, it could find its dreams of success in US chocolate have soured before they have even begun.

Burger King has announced plans to offer the world’s most expensive cheeseburger at selected upmarket locations in central London. The limited edition burger will be priced at GBP85 (AUS$200) and is likely to feature Japanese Kobe beef with foie gras. The offering is part of a wider strategy to boost Burger King’s premium image against rival McDonald’s.

Snack maker Frito-Lay has unveiled what it claims is the largest solar thermal system in the US at its Modesto plant in Central Valley, California.

The five-acre solar concentrator field includes 54,000 square feet of concave mirrors designed to absorb sunlight.

The Pepsi-Co owned unit said the solar energy captured by the 192 solar collectors generates steam that helps heat the cooking oil used in making its SunChips snack.

The switch to solar power will significantly reduce the plant's use of natural gas, the company said.

Half of the system is in operation and the rest is expected to be online by July.

The project is a public-private partnership and the California Energy Commission provided US$700,000 towards construction of the solar field.

"The plant will harness the power of Central Valley sunshine to reduce its natural gas use, air pollution and greenhouse gas emissions -- all while helping us meet our renewable energy goals," California Governor Arnold Schwarzenegger said at the dedication ceremony

Almost a quarter of the new food and drink products launched this year have claimed to be "additive- and preservative-free".

The analysts said 24% of the products launched this year claim to contain no additives or preservatives.

"Manufacturers are tapping into the nation's growing desire for a more natural lifestyle, as consumers take a greater interest in what really goes into their food".

"The assumption is that it is better for you to avoid additives and preservatives, as many Brits are concerned about the effect they may have on their health."

"Additive- and preservative-free" had become the number one health claim in the UK food and drinks market, overtaking "low fat" for the first time.

The possible link between additives in food and unwanted health effects has again entered the spotlight in the UK in recent weeks. Earlier this month, the UK's Southampton University published a study that claimed to show a link between certain artificial food additives and colourings and hyperactivity in children.

Last week, Mars stepped up its efforts to remove artificial colours from its confectionery products. The Starburst brand will be free from all artificial colours by the end of year. The company said it would also take steps to remove certain artificial colours from its Skittles brand by the end of the year

Restrictions on foreign supermarket chains will be relaxed in a move the Federal Government hopes will drive down food prices.

The Government wants to make it easier for overseas companies like Aldi and Wal-Mart to set up shop in Australia.

Under the changes, the companies will be given five years to develop vacant commercial land, rather than the current 12 months.

Assistant Treasurer Chris Bowen says the old rules stifled competition, especially in the grocery sector.

"Generally more competition is the way to put downward pressure on prices," he said.

"This isn't a silver bullet, it isn't a panacea, it's one of several steps the Government's taking.

"All in all, we hope that they do put downward pressure on prices across the board.

"We believe that competition is the way to put competition on prices, and there are artificial barriers to entry for companies who have to develop their land within 12 months, which is not really a realistic requirement of them," he added.

"So this is really levelling the playing field and giving those companies a chance to compete.

"Consumers will be the winners out of that competition."

Executive Director of the Retail Traders Association, Richard Evans, says any move to increase competition and provide new shopping experiences is welcome generally, but may contain hidden dangers for consumers.

But he is warning consumers not to expect a substantial fall in grocery prices.

"We have to understand that there's other influences as opposed to competition in this particular field," he said.

"There's a lot of demand upon groceries at the moment and there's a bit of a shortage going round. So we have to understand when there's high demand and less supply, the prices are going to go up."

The organisation representing Australia's small grocers says consumers will benefit from the proposed changes.

National Association of Retail Grocers of Australia chief Ken Henrick says his members do not fear more international competition.

"Woolworths and Coles have 80 per cent of the market between them, and that is the most concentrated grocery industry in the world," he said.

"So, obviously, if Aldi and Franklins and others are able to come in and develop new stores and provide more extensive competition, that's a good thing in principle."

Local supermarkets operator Franklins has generated its first annual operating profit, after higher retail sales and asset sales boosted its earnings.

Franklins, which is owned by Pick n Pay of South Africa, generated a fiscal 2008 operating profit of $2.3 million (Australian US dollars), against a loss of $8.8 million in the previous year.

The result included a $7.9 million profit on the sale of two stores and followed a rise in sales to $820.8 million, from $807.2 million.

Pick n Pay chairman Raymond Ackerman said the outcome reflected an upturn in sales driven newly refurbished supermarkets and a wider range of fresh produce offerings in the Australian stores.

"Our significant investment to refurbish approximately 30 Franklins stores is delivering strong results, producing average sales growth of more than 15 per cent in the stores already completed," he said in a statement.

The three year store refurbishment program, announced a year ago, has so far completed five stores, with 10 more due to be updated in calendar 2008.

Looking ahead, Franklins said the retail environment will continue to be tough as consumer cut back on discretionary spending.

But it expects to ride out the tough times and benefit from increased spending on food and everyday items.

"The effects of the drought in Australia, the diversion of grain based crops to biofuel production and the increased global demand for commodities continue to put upward pressure on food pricing," it said.

"While Franklins anticipates that this will necessarily involve further food inflation the group's policy is to absorb these increases as much as possible."

Franklins in Australia is valued at up to $350 million and has long been singled out as potential takeover target, although the company has said it is not for sale.

SUPPORT for new taxes on junk food, tobacco and alcohol to finance healthy living policies has come from Michael Luscombe, the chief executive of Woolworths, Australia's biggest food retailer.

Mr Luscombe also supports the call for a simpler "traffic light" system for red, green and amber food labels, which the food industry has opposed.

The summit also sought a ban on the marketing of food to children, which will renew pressure on the Government to end food and drink advertising during children's viewing hours.

Mr Luscombe acknowledged the suggested new taxes and labels would be opposed by the manufacturers.

But he told the Herald that if the balanced view was that these would finance better preventive health measures, he would support them. "I am, here as an Australian. How else can you come to any other conclusion?" As a participant "you need to put your other half at the door", he said.

Mr Luscombe who joined the discussion on healthy lifestyle issues, hailed the decision to hold the summit and said the talks produced more achievable ideas than he had expected.

The proposed taxes would finance a national preventive health agency, which the summit suggested should be independent, and commission research and design and deliver public health campaigns.

The summit organisers also highlighted as one of the top ideas that by 2020 every sedentary job had to include 30 minutes physical activity a day, or every office building had to re-open stairwells to encourage employees to walk more.

Mr Rudd yesterday signalled his Government would increase spending on preventive health measures but not at the cost of reducing its spending on hospitals and doctors.

FRESH from completing a $5 billion debt refinancing linked to its Coles Group acquisition, Wesfarmers has reported solid quarterly sales but warned of softer trading conditions in some of its retail businesses due to a weakening economy.

The Perth conglomerate yesterday announced it had refinanced $5 billion of short-term debt and working capital, partly through a $2.5 billion underwritten equity raising. It also unveiled retail sales figures from January 1 through to April 13, which allowed it to include last year's Easter holiday for comparison purposes.

The Coles supermarket and liquor division reported store-on-store sales growth of 3.2 per cent, up from the 0.2 per cent growth rate in the fourth quarter last year. "We think we've arrested the market-share decline in the business," Wesfarmers's chief executive, Richard Goyder, told media. "We're stopping the fall."

But Goldman Sachs JBWere said the improving sales figures benefited from rising inflation and a low base, and added Coles was still losing market share.

The sales figures were in line with the forecasts of the Citigroup analyst Craig Woolford. "Food and liquor has shown a stabilisation of sales performance," he said. The non-food retailing businesses had performed well despite tougher industry conditions, he said.

Wesfarmers reported sales growth in all retail divisions, including a 11 per cent store-on-store increase at Bunnings. But the company said its Bunnings, Officeworks, Target and Kmart chains had experienced "tight" trading conditions due to competition and the weaker economic climate - and conditions at all except for Target were expected to be tougher in future quarters.

Mr Goyder and other top executives are expected to provide further details during an investor briefing in Sydney today which will discuss other divisions such as insurance and resources.

Mr Woolford said documentation with Wesfarmers's $2.5 billion rights issue announced yesterday suggested Coles's profit margins were likely to fall by 0.9 per cent in the half-year ended June 30. Coles already has significantly lower margins than its major rival, Woolworths.

But Cannae Capital Partners' managing director, Hugh Giddy, said Wesfarmers faced a difficult task in improving margins, since Coles did not have a "dreadful" profit margin compared with other global retailers.

"Coles is quite profitable already," he said. "What may happen is not that Coles makes more money, but Woolworths makes less. But Woolworths has a reasonable lead."

Wesfarmers acquired Coles Group for $19 billion last year and has been under pressure to refinance $4 billion in short-term debt set to expire in October.

The company yesterday confirmed it had refinanced $800 million of the debt with Australian banks with an interest rate about 1 per cent above the swap rate. That was much better than the 11 per cent-plus rate Wesfarmers is paying on a recent $710 million US bond issue.

Wesfarmers also refinanced its $1 billion working capital facility at about 1 per cent above the swap rate. The $1.8 billion in new debt facilities announced yesterday expire in one to three years. After the refinancing and equity raising, Wesfarmers' gearing ratio will fall to 48 per cent from 70 per cent. Wesfarmers shares remained in a trading halt yesterday while it conducted the institutional component of its one-for-eight rights issue at $29 a share, compared with its last trading price of $36.97.

A consortium of biotechnology scientists and food experts, with a state of the art processing company in Melbourne, is aiming to carve a niche for Australia in the $75 billion a year world chocolate market.

The scientists have set up Horizon Science, the wholly owned subsidiary of which, Cocoa Australia, is running a trial plantation of 1200 cacao trees on a 20-hectare plantation in Mossman, in far north Queensland. The trees, now four years old, have begun to yield.

Nearly three-quarters of the world's cocoa production comes from West Africa, which has the right climate for cacao trees. But similar temperatures, rainfall and soil types exist in northern Queensland and, according to Janice Falzon, chief executive of Farm by Nature, the Melbourne-based chocolate-making company associated with Horizon Science, bean
production here is better than in West Africa.

Horizon Science was founded by Dr David Kannar and Dr Barry Kitchen, two scientists well known in the Australian biotechnology and food industries. Dr Kitchen spent 21 years working with chocolate for Cadbury.

They were joined in the Horizon Science venture by Ross Dobinson, a Melbourne businessman specialising in technology start-up companies.

Their aim with Horizon Science is to conduct research and develop new food ingredients in the sugar, chocolate and dairy industries.

Test production of chocolate has begun in a small milling plant on the Mossman site but soon all of the cocoa bean production will go to Farm by Nature, which has invested millions of dollars on a state of the art chocolate production and packaging plant in Scoresby.

Production began in Scoresby in December using cocoa products from larger companies such as Cadbury, and already lavishly packaged bars of wine-infused chocolate, under the Cocoa Farm label, have been exported to Britain and Germany and sold through wineries and wine shops around Australia. About half the production has been exported.

"We're aiming very much at the prestige end of the market," says Ms Falzon. Cocoa Farm's production so far has centred on wine-infused chocolate bars and coated muscat berries, using a patented process that Ms Falzon says is unique - "a world first that was difficult to perfect.

Cocoa Farm also has chocolate flavoured with lime and chilli, the latter a growing taste among aficionados of a food not only high in the antioxidants beloved of the health-food set, but also said to contain an enzyme that fosters love in the human mind. Since the time of the conquistadores, it has been known as an aphrodisiac.

Chocolate is said to have originated in the Amazon more than 4000 years ago and cacao trees were first farmed by the Mayans on the Yucatan Peninsula 1500 years ago.

The Aztecs accorded it mystical properties and believed that the seeds of the cacao tree were brought to them by the god Quetzalcoatl riding to earth on a beam of light from the morning star.

The Mayans and Aztecs used the bitter paste of ground cacao seeds to make a thick, cold, unsweetened spicy drink called xocoatl, from which the English word chocolate comes.

Spanish buccaneer Hernando Cortez, who brought the beans to Spain in 1528, disliked the bitterness and added sugar, vanilla, nutmeg, cloves and cinnamon. Spanish nobility embraced sweet chocolate and its aphrodisiac reputation.

High-quality chocolate is growing in importance as a healthy food, Ms Falzon says. It contains more antioxidants than green tea or blueberries, although the downside is that it also carries more calories.

Independent supermarket group FoodWorks has appointed its first chief operating officer as it consolidates its status as a major national grocer.

Former Blockbuster Australia chief executive Rick Wight has been appointed to the new position.

FoodWorks is Australia's second largest independent supermarket group behind Metcash Ltd's IGA supermarket chain.

It has more than 700 associated supermarkets and stores - with 400 of them operating under the FoodWorks brand - and $1.35 billion of annual turnover.

The independent retailer was created in 2004 from the merger of the FoodWorks Supermarket Group Ltd and Australian United Retailer in response to rapid industry consolidation and increased competition

US food giant Campbell Arnott's is to close its southern Sydney biscuit and chocolate factory, resulting in the loss of 150 jobs.

Morrison's has secured an out-of-court settlement from the Office of Fair Trading after the competition watchdog admitted it made false accusations against the retailer in last year's dairy price-fixing inquiry.

In an embarrassing apology issued this morning, the OFT said it would pay Morrisons some GBP100,000 to settle a defamation case brought by the supermarket chain.

The OFT said it had been wrong to claim that Morrisons had colluded to push up the price of butter and cheese in 2002 and 2003.

It also apologised for claiming that the retailer had already been warned about anti-competitive behaviour, which it now said was not true.

Morrisons, however, is still facing an investigation over the supply of liquid milk products in 2002. The OFT said it was still considering evidence from Morrisons and had an "open mind" about the case.

The OFT launched its inquiry into dairy price-fixing last September and then claimed that UK dairy producers and retailers had cost consumers some GBP270m over a two-year period.

In December, three retailers - Sainsbury, Asda &Safeway - and three producers - Dairy Crest, Robert Wiseman Dairies and The Cheese Company - admitted fixing the price of milk, butter and cheese in return for lower fines.

Danish dairy giant Arla Foods, meanwhile, admitted its role in return for immunity from fines.

In February, cheese maker Lactalis McLelland also admitted that subsidiary A McLelland and Son had fixed cheese prices.

Sections of the dairy industry, however, hit out at the fines, arguing that prices were increased to secure supplies from farmers.

Wal*Mart has announced a "dramatic" increase in the number of US consumers buying "green" products.

Research carried out by the US retailer claimed that consumers were buying 66% more "green" products than last year.

Wal-Mart claims the growth seen in its "Live Better Index" shows concern for the environment has a growing presence in shopping baskets.

"The fact that product adoption has increased dramatically in one year shows that the decisions our customers make in the aisles, coupled with Wal- Mart's commitment to providing more eco-friendly choices at the best value, is helping consumers and the planet live better together," said Stephen Quinn, chief marketing officer at Wal- Mart.

The index said US consumers were buying more organic milk, with organic sales accounting for 1.58% of all milk sales at Wal-Mart, compared to 1.15% last year.

Consumers, however, are buying less organic baby food and formula, with organics accounting for 4.12% of sales, down from 4.31% in 2007

In the UK, the Office of Fair Trading is now investigating a number of large consumer goods companies into alleged price fixing between the country’s largest grocery chains and their suppliers. Procter & Gamble has confirmed that it was visited last week by the OFT which also visited the headquarters of Asda, Morrisons, Sainsbury and Tesco to request data about prices of groceries, health and beauty products and detergents. Mars and Unilever said they had received letters on Friday from the OFT to arrange a visit to their offices. Grocery retailers yesterday said the OFT had not taken e-mails or computers from offices, but had requested paperwork and taken some buyers’ notebooks. Tesco yesterday stated “We are confident that we always act in the interest of consumers. Over the last 10 years we have saved the average family almost GBP5,000 (USD10,093) as a result of our investment in price.” This week the Competition Commission will publish the findings of its latest investigation into the grocery sector. The regulator is expected to demand the establishment of a “supply ombudsman” to oversee retailers’ relationships with their suppliers.

Mars, backed by billionaire Warren Buffett, agreed to buy Wm. Wrigley Jr. Co. for $US23 billion to create the world's biggest candy maker.

Wrigley surged 23% in New York trading today after the companies said Mars would pay $US80 for each of the gum maker's shares, with Buffett's Berkshire Hathaway providing part of the financing. Mars is offering 28% more than Chicago-based Wrigley's closing price on April 25.

The combined company will have $US27 billion in annual sales and 14% of the world's candy market. Buffett will get more than 10% of Mars's Wrigley unit. Mars, the maker of M&Ms and Snickers, will add its Starburst and Skittles candies to 117-year-old Wrigley's Lifesavers and Altoids brands.

''It's a great price,'' said Thomas Burnett, director of research at New York-based Wall Street Access. ''Nobody is going to pay more than that. Who is going to go up against Mars and Buffett?'' He doesn't own shares of Wrigley or Berkshire.

Mars and Wrigley together will control almost 28% of the US candy market, eclipsing Hershey's 24% share of consumer purchases, according to Euromonitor International in Chicago, citing 2006 sales. It will also become the largest candy maker in the world, surpassing Cadbury Schweppes' 10.1% share.

The purchase will be financed with $US11 billion from Mars, $US4.4 billion from Berkshire and $US5.7 billion from Goldman Sachs. Berkshire will also buy a $US2.1 billion stake in the Wrigley division once the purchase is completed.

Candy Brands

''There's really nothing that can go wrong with something like the Wrigley and Mars brands,'' Buffett, 77, Berkshire's billionaire chief executive officer, said today in an interview on the CNBC television network. ''People are eating more and more of their products every day.''

Wrigley, which started trading on the New York Stock Exchange in 1923, jumped $US14.52 to $US76.97 at 2.43pm. The shares had gained 6.7% this year before today. McLean, Virginia-based Mars is the eighth-largest private company in the US, Forbes magazine said in November.

''Buffett gives it a lot of credibility so there's not a financing issue here, which is so important these days,'' Burnett said.

Hershey rose as much as 7.3% in New York trading, while Cadbury climbed 2.8% in London as analysts including Eric Katzman from Deutsche Bank Securities suggested other mergers may occur. US confectionary companies are exploring combinations as competition intensifies and milk and sugar prices rise.

Chocolate and Gum

Mars ''is primarily a chocolate company and we are primarily a chewing gum company,'' Bill Wrigley, Wrigley's chairman, said today on a conference call. Combining is ''about being able to invest for the long term and grow our business. We are very pleased with our competitive stance.''

Mars ''intends for us to run as a separate, stand-alone entity with a high degree of autonomy,'' said Wrigley, who plans to remain executive chairman and said other executives including CEO William Perez will stay in place. No employee cuts are planned, Wrigley said. It had about 16,400 employees at the end of 2007.

William Wrigley Jr. began selling soap in Chicago in 1891 and eventually turned to chewing gum, an item he was giving away for free with each sale, according to Wrigley's corporate Web site. He introduced Juicy Fruit and Wrigley's Spearmint in 1893, two brands the company still sells today.

In 2006, Wrigley named former Nike chief Perez president and CEO, the first person outside the Wrigley family to head the company.

Sales Growth

Sales at Wrigley may rise 9% this year, the slowest pace since 2000, according to the average estimate of nine analysts surveyed by Bloomberg. Competition from London-based Cadbury's Trident and Dentyne gums in the US has eroded its market share.

Cadbury, the maker of Dairy Milk chocolate, bought Pfizer's Adams candy unit for $US4.2 billion in 2003 to become the world's second-largest maker of chewing gum.

The purchase price values Wrigley at 32 times estimated 2008 profit, compared with about 18 times earnings for the Standard & Poor's 500 Packaged Foods Index, according to Bloomberg data.

''This valuation looks extremely rich,'' Alexia Howard, an analyst with Sanford C. Bernstein in New York, said in a research note today. Wrigley hasn't traded at such a multiple since 1998, she said.

Hershey Trust

The trust that controls Hershey discussed ways to merge the chocolate company with Cadbury in a way that wouldn't decrease the trust's ownership, the Wall Street Journal reported last year. Cadbury will split off its US drinks unit May 7 and begin trading as two separate companies: Cadbury in London and Dr Pepper Snapple Group in the US.

A combination of Hershey and Cadbury probably won't happen, given the pressure that Cadbury faces from its shareholders to improve performance, Howard said.

''The idea that Cadbury's board would approve a sizeable deal and pay a significant control premium to acquire a weak performer in a slow-growing, developed market is extremely unlikely,'' she wrote.

Hershey Trust spokesman Tim Reeves declined to comment.

Mars, founded in 1911 by Frank C. Mars, is still family owned. The company gets about 45% of revenue from chocolates and other snacks. Its biggest division is pet food, which sells Whiskas cat food and Pedigree for dogs, and accounts for 46% of sales, according to the company's Web site.

Berkshire Hathaway

Berkshire Hathaway, based in Omaha, Nebraska, has about $US40 billion to spend on acquisitions. Buffett has built Berkshire over four decades from a failing textile maker into a $US195 billion holding company with businesses ranging from candy making to insurance.

Berkshire has stakes in companies including Coca-Cola and Buffett ranks as the world's richest person, according to Forbes magazine. It also owns See's Candies, an 87-year-old confectioner in San Francisco.

Additional financing as well as advice is coming from JPMorgan Chase, Mars said. Simpson Thacher & Bartlett is acting as its legal counsel.

Goldman Sachs and William Blair provided Wrigley with financial advice. Skadden, Arps, Slate, Meagher & Flom, served as legal adviser.

Bill Wrigley predicted the confectionery industry would sit up and take notice after his company's deal with Mars. Now, the spotlight has once again switched to Cadbury and Hershey. But will the two chocolate giants finally get together after years of flirtation? Dean Best reports.

Once the shock of yesterday's (28 April) mega-deal between Mars and Wrigley faded, there was only one question on the minds of most industry watchers: is it now a question of when - and not if - Cadbury and Hershey get together?

Mars' takeover of gum giant Wrigley is set to create a new number one in confectionery. According to data from Euromonitor, the enlarged company would account for 14.4% of worldwide confectionery sales, leapfrogging Cadbury, with 10.1%. Hershey, meanwhile, will have a 5.5% share of the market.

Cadbury has spent the last 12 months attempting to sell, and then spin off, its drinks operations in the Americas in a bid to create a pure confectionery player. Cadbury's management, led by CEO Todd Stitzer, has been busy convincing investors that the company's growth prospects are far rosier if it can focus on chocolate, candy and chewing gum.

Indeed, some industry watchers believe Mars' move for Wrigley vindicates Stitzer's investment in gum and, in particular, Cadbury's acquisition of US gum maker Adams in 2003.

"Cadbury will have to think long and hard now - but the company should take a minute to pat itself on the back," Investec analyst Martin Deboo tells just-food. "Who would have thought in 2003 that Cadbury would have driven Wrigley into the arms of a suitor? Of course, however, Cadbury has now created a problem for itself."

That problem is competing against the larger distribution muscle of a combined Mars and Wrigley. The two companies will have even greater clout in North America and the move will create a more powerful firm in the emerging markets of the East, where Wrigley's gum brands are growing in popularity.

For some, the most obvious solution to the problem is for Cadbury and Hershey to merge. Such a move has been touted around the food industry for years but has - so far - failed to get off the ground. A deal between the two foundered in 2002 after the Hershey Trust - which owns a 30% equity stake in the company but 80% of the voting rights - refused to give up control of the US confectioner.

The two sides met last autumn but again the discussions came to nothing. Around that time, Trust chairman Leroy Zimmerman signalled that Hershey's owners might be beginning to look outward, saying that the company would look to grow through investment at home and abroad - but there was still no sign that the owners were willing to cede control.

However, Hershey is struggling. The company is too dependent on the US, where it has wilted in the face of tough competition from the likes of Mars and upmarket Swiss chocolate maker Lindt & Sprungli. Hershey has also been too slow to expand overseas and, although it has fledgling operations in China and India, it has been left behind by rivals Nestle and Cadbury.

James Amoroso, a food industry consultant, says the "commercial and industrial logic" for a merger between Cadbury and Hershey is "undeniable".

He says: "Cadbury could use some extra help in the US, while Hershey desperately needs to get out of the US. With Mars and Wrigley getting together, the Hershey Trust may now think: 'Oh, bloody hell'. A merger with Cadbury did make sense; now the Trust may be compelled to do it. It depends on how stubborn the Trust is."

Deboo agrees that Cadbury and Hershey share the problem of an "impending Mars/Wrigley behemoth" but he questions whether the two sides will actually go through with a merger.

"It's right to assume that Mars/Wrigley would be a more formidable competitor but [a merger] is not necessarily a certainty," Deboo says. "It's only a bet that the Hershey bar could be pushed through the Cadbury system worldwide, while it's not clear that Americans would eat Cadbury Dairy Milk either. We have to keep things in proportion."

The analyst community, however, is rife with rumours of the next big move in confectionery. If Cadbury stands on the sidelines or is again rebuffed by Hershey, some see Kraft Foods as a possible acquirer of the UK confectioner. Amoroso, however, believes that as unlikely.

"Kraft is busy and has got more than enough to deal with," Amoroso says. "Nestlé is busy with its own chocolate strategy. Mars has picked its moment. It realised that the opportunity for companies to put up hostile competitive responses is limited."

For most industry watchers, the most likely response remains a merger between Cadbury and Hershey. History, however, tells us that there will be a few tricky obstacles to cross before any deal is signed - not least the obstinacy of the Hershey Trust.

According to reports in the Sunday newspapers, Tesco is to launch a loft insulation service in the UK next month. Andy Brocklehurst, Tesco's green living category director, claims the company will undercut competitors by offering to lag a loft for a flat fee of GBP199 (USD401.70), compared with an industry average of GBP450 (USD908.4). It will also insulate a cavity wall for GBP175 (USD353.27) compared to an average bill of GBP300 (USD605.60). According to Mr Brocklehurst, “Insulation is one of the biggest things customers can do to save energy. The elements of funding that are available tend to be difficult to navigate. The real thing we're trying to offer is to simplify the process. More and more people are insulating their homes because they realise that by minimising heat loss they will ultimately save money on their heating bills." Tesco will try out the service in the south-west of England in May and offer it nationwide in September