2024-10-08 11:29

LONDON/BRUSSELS, Oct 8 (Reuters) - Companies that have paid to source agricultural produce that complies with the European Union's anti-deforestation law would lose out if the EU decides to delay implementing the legislation by a year, industry groups and traders said. Deforestation is the second largest source of the greenhouse gas emissions that cause climate change after the burning of fossil fuels, according to the European Commission. The EU had planned to ban the import of commodities from suppliers unable to prove their goods were not linked to deforestation. The EU Deforestation Regulation (EUDR) would have impacted imports of cocoa, coffee, cattle, soy, oil palm, timber, rubber and related products like chocolate and leather. It was scheduled to come into effect on Dec. 30, but last week the EU Commission proposed a 12-month delay, under pressure from industries and governments who said it would cause supply chain disruptions, exclude poor, small-scale farmers from the EU market, and drive up the cost of basic foodstuffs because many farmers and suppliers were not ready to comply. The EU's vegoil and oilmeal group Fediol said its members - which include trading giants such as Cargill and food processors like AAK (AAK.ST) , opens new tab - will suffer losses from a delay after paying premiums to secure raw materials that comply with the law. "It's a financial loss they are making by having been ready on time," Fediol director general Nathalie Lecocq told Reuters. Cocoa processors and chocolate makers face the same scenario with traders saying they had sold deforestation free beans to them at a premium of up to 6%, amounting up to 300 pounds a ton. The premium will now likely fall to zero as consumers won't be willing to pay more for cocoa that complies with a law that has been pushed back. That will leave the processors and chocolate-makers unable to pass on the cost and forced to absorb it. "There's real world implications to this. Whoever agreed to buy and pay that premium paid for nothing," said a Europe-based cocoa trader. Research published last month by Fefac, an EU animal feed industry body, estimated that EUDR compliant soybeans would cost 5-10% above regular beans. Fefac, EU farmers lobby Copa-Cogeca, and various other EUDR-impacted industries welcomed the delay proposal, having previously warned that implementing the rules on time would result in many small businesses suffering. The EUDR will require importers of commodities to prove their goods weren't grown on land deforested anywhere in the world, or face fines of up to 20% of their turnover. The law requires companies map and trace their supply chains down to the plot where their raw materials were grown. Critics said the measure is too complex as supply chains involve millions of farms and multiple intermediaries whose data is often difficult to obtain or verify. The Commission's delay proposal still needs to be approved by the European Parliament and member states. The majority of members asked Brussels in March to scale back and possibly suspend the law while parliament members who oppose the delay do not have a majority. The Commission said the vote would likely happen in November or December at the latest. (This story has been refiled to fix a link and add attribution to the European Commission, in paragraph 2) Sign up here. https://www.reuters.com/business/environment/eu-deforestation-law-delay-brings-losses-most-vigilant-2024-10-08/

2024-10-08 11:27

Oct 8 (Reuters) - PepsiCo (PEP.O) , opens new tab cut its forecast for annual sales growth on Tuesday as picky consumers in North America limit their spending on savory snacks and sodas, while opting for cheaper private-label brands. The packaged food giant now expects fiscal 2024 organic sales to grow in a low single-digit range. It had previously forecast a 4% rise. "The cumulative impacts of inflationary pressures and higher borrowing costs over the last few years have continued to impact consumer budgets and spending patterns," CEO Ramon Laguarta said. A rise in prices for food and other products is forcing American consumers to curtail their spending habits, opt for smaller packages and portions, and shop more at mass retailers than at convenience stores, which typically account for a bigger portion of PepsiCo's beverage sales. "The company has not been immune from overall category pressure facing most consumer staples companies," RBC Capital Markets analyst Nik Modi wrote in a note. PepsiCo also posted a surprise drop in third-quarter revenue, hurt in part by a fallout from the recall of Quaker Foods products owing to concerns around a salmonella contamination earlier this year. Its international markets of Latin America, South Asia and Europe, which had till now helped weakness in its North America PepsiCo business, are witnessing a slowdown in volumes. "Pockets of elevated geopolitical tension and macroeconomic pressure are also expected to persist in certain international markets," Laguarta said. Organic revenue in Quaker Foods North America segment slumped 13% during the quarter, following an 18% decline in the second quarter. However, price increases and measures to drive efficiencies across its operations helped drive a 111 basis point growth in margins. It also earned $2.31 per share on an adjusted basis, beating estimates of $2.29 per share, according to data compiled by LSEG. It maintained annual adjusted profit forecast. Net revenue fell 0.6% to $23.32 billion in the quarter ended Sept. 7 from $23.45 billion last year. Analysts estimated a 1.3% jump to $23.76 billion. Shares of the company fell about 1% in premarket trading. Sign up here. https://www.reuters.com/business/retail-consumer/pepsico-posts-surprise-drop-quarterly-revenue-cuts-sales-forecast-2024-10-08/

2024-10-08 11:26

WARSAW, Oct 8 (Reuters) - Polish oil and gas company Orlen's (PKN.WA) , opens new tab flagship petrochemicals project may see further losses due to problems in the planning and construction process, the firm said on Tuesday. The initial cost of the project was started under the former management and estimated at 8.3 billion zlotys ($2.11 billion), but has now soared to 25 billion zlotys, while its scale and efficiency estimates have been reduced. Orlen pledged to decide on the future of the project, which already saw investment writedowns, before the end of this year. "Verification of the planning and construction process of the Olefins (III) complex indicates a number of errors and abuses that may result in the identification of further losses," Orlen said in a statement on Tuesday. Orlen said it has carried out over 50 audits of projects implemented by the former management, a similar amount of audits is in progress, while prosecutors are carrying several probes related to the actions of the former management. "In the case of two of them, the actions or omissions of the previous Orlen management board resulted in losses of over 5 billion zlotys", Orlen said. Key probes include the abuse of powers that led to losses of about 1.6 billion zloty by Orlen Trading Switzerland (OTS) in prepayments for mostly Venezuelan oil. An unjustified use of "mandatory reserves" to keep fuel prices low ahead of the October election, which cost the refiner over 3.5 billion zloty, the company said. Members of the former management board spent 43 million zloty without business justification, while the expenses of the former chief executive included costs of prosthetic and aesthetic medicine services, Orlen said. "There is a reasonable suspicion that they were not covered by the agreed management package and should not be paid for using a company credit card." ($1 = 3.9301 zlotys) Sign up here. https://www.reuters.com/business/energy/polands-orlen-says-olefins-project-may-incur-more-losses-2024-10-08/

2024-10-08 11:26

Circle K, 7-Eleven are the two top U.S. convenience store chains by store count Combined, they may be able to leverage size to cut prices on tobacco, nicotine products Threats to tobacco revenues like deep discount cigarettes, vapes remain U.S. cigarette sales in long-term decline amid shift to vapes or other alternatives NEW YORK/LONDON, Oct 8 (Reuters) - A Couche-Tard (ATD.TO) , opens new tab takeover of 7-Eleven owner Seven & i (3382.T) , opens new tab would position the combined convenience store chain to dominate U.S. cigarette sales and try to push tobacco companies for better prices and promotions - including on fast-growing nicotine pouches like ZYN. Canada's Alimentation Couche-Tard remains keen on a buyout after Japan's Seven & i rejected its acquisition proposal as too low, and it remains unclear if the deal will go ahead. Seven & I has since moved to speed up an overhaul of its business demanded by some investors. It is set to announce quarterly results on October 10. If the two players were to combine, the new U.S. chain's size may offer greater bargaining power with cigarette manufacturers like Altria (MO.N) , opens new tab and British American Tobacco (BATS.L) , opens new tab. But it would still face a major threat from illegal flavored vapes and deep-discount smokes like Cheyenne that are widely sold at independent smoke shops and bodegas. The market for U.S. cigarette smokers is declining after decades of warnings about health risks. But it approached nearly $60 billion in sales in the year ended in early September, according to market research firm Circana, and it is crucial to convenience, or c-store, sales. In addition to health worries, U.S. consumers have moved away from name-brand cigarettes sold in major c-stores like 7-Eleven because of price hikes. The net price for a pack of Marlboros is up nearly 30% to $9.27 from 2019, according to manufacturer Altria. Taxes on heavily-regulated smokes can add further hefty costs per pack. The potential $38.5 billion deal would more than double Couche-Tard's U.S. store footprint - through its Circle K shops - to almost 20,000, adding 12,601 7-Elevens, according to 2023 numbers from the National Association of Convenience Stores, a trade group. The shops are usually attached to gas stations. Circle K and 7-Eleven are the two top c-store chains by store count, meaning they likely already each capture the largest shares of U.S. tobacco sales, said Don Burke, senior vice president at Management Science Associates, a market research firm. Most convenience stores are independently owned. Cigarettes made up 21.5% of total c-store sales in 2023, and other tobacco products like ZYN pouches and JUUL vapes were about 8%, according to Convenience Store News' 2024 industry report. A combined chain would be able to leverage its unrivalled size to try to cut prices on packs of cigarettes and popular, more-profitable nicotine pouches like ZYN, c-store and tobacco consultants told Reuters. "There will be sharper negotiations between the retailer and manufacturer," said Don Stuart, managing partner at Cadent Consulting Group, which has worked with tobacco companies. "(A combined chain) will get more attention from manufacturers, and they will invest there." Burke agreed tobacco companies, which rely on c-stores for sales, would seek partnerships with a combined retailer, but cautioned any pricing benefits would likely be incremental. Matt Domingo, senior director of external relations at BAT's U.S. subsidiary Reynolds American, which makes Newport cigarettes, said it offers its largest retail customers the same programs as smaller distributors - companies that sell tobacco and nicotine products to a variety of retailers. Altria declined to comment. Seven & i and Couche-Tard either did not respond or declined to comment. DECLINING MARKET C-stores have long dominated tobacco sales, accounting for around 70% of purchases, according to market research firm Euromonitor International. Recently, some rivals including Ahold' s(AD.AS) , opens new tab Stop & Shop and Walmart (WMT.N) , opens new tab have removed cigarettes from shelves nationally or in some states. Sales of cigarettes have been falling for years as smokers switch to vapes, pouches or cheaper brands. That has left manufacturers and retailers competing for the remaining chunks of the market, Burke said. C-store partnerships with tobacco companies can limit them from competing with independent stores on deep-discount cigarettes. In return for financial incentives, convenience stores agree to prioritize shelf space for certain brands or ensure they are among the cheapest in the shop, Burke said. Smokers priced out of Marlboro or Camel smokes may then find a broader range of discount brands in stores without such agreements. Tobacco companies paid retailers like 7-Eleven and Circle K $247.2 million for promotions including displays and merchandising in 2022, up 5% from the prior year, according to the U.S. Federal Trade Commission's cigarette report. The companies spent the most on funding discounts on cigarettes at retailers, about $5.74 billion in 2022, according to the report. Large c-store retailers have also largely missed out on the sky-rocketing sales of flavored vapes, like Elf Bar, made by Chinese company Heaven Gifts. The vast majority of such vapes cannot be legally sold in the United States and are too risky for retailers like 7-Eleven and Circle K to carry. But they are easy to find at independent bodegas and smoke shops. BEYOND MARLBORO Canada's Couche-Tard has taken steps to stem tobacco revenue declines, including adjusting prices and offering loyalty programs to customers, executives told investors on conference calls this year. Nicotine pouches, which users insert under the lip to get a buzz, have soared in popularity, driven by Philip Morris International's (PM.N) , opens new tab brand ZYN. That has helped boost Couche-Tard's nicotine profits. "We're making more from nicotine than we ever have in the past," executives said. New nicotine products are likely to be a key competitive front in the future, especially as smoking rates decline, Stuart said: "I think we'll see a big push in the less harmful alternatives category ... more items, more space, better merchandising beyond just the Marlboros of the world." A combined Circle K and 7-Eleven would have a big advantage in terms of their ability to advertise tobacco and nicotine products around the cash register - one of the few remaining places where tobacco companies can spend on marketing, he continued. But large c-stores may find they aren't able to maintain dominance in pouches, either. Online retailers like Haypp Group are looking to take a growing share of the U.S. pouch market by offering cheaper prices for bulk purchases, while manufacturers like Altria have warned of a growing black market. Sign up here. https://www.reuters.com/business/retail-consumer/dominating-us-cigarette-sales-combined-7-eleven-circle-k-would-face-risk-vapes-2024-10-08/

2024-10-08 11:18

PARIS, Oct 8 (Reuters) - France cut its projection for this year's wine crop on Tuesday following the rainiest September in 25 years, with 2024 now forecast to be among the worst recent vintages in such prized winemaking regions as Champagne, Burgundy and Beaujolais. The forecast of 37.5 million hectolitres is now in line with the poor 2021 vintage marked by frost damage. It is 22% below last year's crop and 15% below the five year average, the farm ministry said. It was revised down from an already weak forecast of 39.3 million released the previous month, which had taken account of poor weather earlier this year. A hectolitre, or 100 litres, is equivalent to 133 standard wine bottles. "This drop is due to unfavourable weather conditions which impacted all wine-growing areas," the ministry said in a monthly report. All types of wine are affected, it said, but particularly those from Burgundy, Beaujolais and Champagne. The Champagne crop would be down 33% from last year and 14% below the five-year average, while Burgundy and Beaujolais would be down 35%. Like other crops, including cereals, grapes have suffered from heavy rainfall in France over the past year. The ministry said many vines had flowered in cool and humid weather, causing millerandage and coulure, conditions in which grapes are small, or young grapes and flowers drop off the vine. "Added to this were losses due to frost, mildew and hail." As a result of the September rainfall, the harvest was brought forward in some regions to limit health risks and additional losses. In July, Champagne producers had called for a 12% cut in the number of grapes to be harvested this year after sales of the wine fell more than 15% in the first half of the year. Sign up here. https://www.reuters.com/markets/commodities/france-cuts-wine-output-estimate-after-soggy-weather-2024-10-08/

2024-10-08 10:58

TSX ends down 0.1% at 24,072.51 Energy falls 2.3%; oil settles 4.6% lower Materials sector loses 1% Technology rises 1.1% Oct 8 (Reuters) - Canada's main stock index edged lower for a second straight day on Tuesday as a drop in oil prices and fading optimism around China's efforts to boost its economy weighed on energy and metal mining shares. The Toronto Stock Exchange's S&P/TSX composite index (.GSPTSE) , opens new tab ended down 30.2 points, or 0.1%, at 24,072.51, extending its pullback from a record closing high on Friday. China, one of the world's major consumers of oil and base metals, expressed confidence on achieving its full-year growth target. But it refrained from introducing stronger fiscal steps, disappointing investors who had banked on more support from policymakers to get the economy back on track. "Today we saw a selloff in everything that was banking on a better Chinese economy," says Colin Cieszynski, chief market strategist at SIA Wealth Management. The energy sector was down 2.3% as the price of oil settled 4.6% lower at $73.57 a barrel on easing fears of supply disruptions from the conflict between Israel and Iran. The materials sector, which includes fertilizer companies and metal mining shares, lost 1% as gold and copper prices fell. Technology helped limit the market's decline, rising 1.1%, while industrials ended up 0.6%. Among the stocks posting the biggest declines was infrastructure technologies company Mattr Corp (MATR.TO) , opens new tab. Its shares dropped 10.5%. In contrast, South Bow Corp (SOBO.TO) , opens new tab, TC Energy's (TRP.TO) , opens new tab recent liquids pipeline spin-off, climbed 6.3%. Sign up here. https://www.reuters.com/markets/tsx-futures-fall-oil-prices-decline-china-stimulus-optimism-fades-2024-10-08/