Media

Americans bemoan our closed purses

Eli Greenblat
November 28, 2011 – 12:00AM
The Age
AUSTRALIA’S downbeat consumer is starting to infiltrate the boardroom discussions of some of the largest companies in the United States, with global food leader Campbell Soup the latest to bemoan the reluctance of Aussie shoppers to spend money, saying they were increasingly reflecting a “recessionary mindset”.
The nation’s despondent consumer confidence is starting to earn itself an international reputation and has become a widening talking point for US chief executives and the North American analyst community as they present their quarterly earnings figures.
Campbell Soup has warned investors the consumer environment had weakened in Australia over the first quarter, arresting growth at its Arnott’s Biscuits division which makes some of the most popular brands bought in Australian supermarkets as well as affecting soup sales and other food categories.

“A more cautious Australian consumer and the volume impact of higher prices at retail drove a profit decline for total global baking and snacking [division],” said Denise Morrison, chief executive and president of the $US10.2 billion New Jersey based Campbell group.

“We are adjusting our plans and programs as Australian consumers increasingly reflect recessionary mindset, which is impacting a broad range of categories and brands in Australian supermarkets.”

Australian consumer caution comes despite the domestic economy never entering into recession in the wake of the global financial crisis in 2008. Australians are outdoing the bombed-out economies of the US and Europe when it comes to sagging confidence.
According to recent figures from the Organisation for Economic Co-operation and Development, Australia ranks fourth-highest in terms of projected household savings rates for 2012.

Albert Stroucken, executive chairman of the US-based Owens-Illinois, one of the world’s biggest suppliers of glass used for the beverage industries, earlier this year used the term “recession” to describe the mood of shoppers.

“I would say, and I tell the people in Australia, that it’s almost like they went into the recession with a two-year time delay.”

The $US16.4 billion Pittsburgh-based food group HJ Heinz has also singled out Australia to US investors three times this year, arguing that together with the intense competition between the major supermarket chains Coles and Woolworths, the environment was tough.

“There is no doubt that in terms of retail environment, the Australian market is the worst market,” said Heinz chairman and chief executive Bill Johnson. Those comments came soon after Heinz announced plans to close or downsize three manufacturing sites in Australia with the loss of 344 jobs.

Mr Johnson repeated the negative appraisal of the retail sector just last week during his second quarter presentation to US analysts.

“In Australia, we are confronting a combination of weak categories, relentless promotional pressure and growing private label, as well as executional issues.”
Weakness in Australia was blamed for significant margin and earnings decline.
Local CEOs are also warning that timid consumers could dent their earnings trajectory.
Last week, Woolworths boss Grant O’Brien warned investors that despite the Melbourne Cup day interest rate cut, “tough” and “patchy” trading conditions may linger until the middle of next year.

On the same day Paul Zahra, chief executive of David Jones said shoppers remained skittish because of Europe’s debt dramas and a high savings rate at home, although store sales had improved slightly in October and November.

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