The world’s most depressing shopping list: We’ve heard of a number of indicators from the US about how the economic slum is forcing consumers to make changes in their lives. People are eating less, or going down market, or going to Wal-Mart instead of more expensive Target or JC Penny. Costco, the big food club chain, is reporting good sales as consumers opt for larger sized packets of pasta, rice and other essentials.

Now another important indicator has popped up on the consumer radar: condensed soups.

Campbell’s reported overnight that its first quarter sales of condensed soups rose 14% in the quarter and ready to serve soups rose 7% (that helped offset falls in the Chunky, more expensive line).

The company said in its quarterly statement:

Sales of “Campbell’s” condensed soups increased 14 percent with strong gains in both eating and cooking varieties, due in part to higher promotional activity. “Sales of ready-to-serve soups increased 7 percent for the quarter due to the successful launch of “Campbell’s Select Harvest” soups, which was partially offset by declines in “Campbell’s Chunky” soups. Sales also benefited from the introduction of “Campbell’s” “V8″ soups. Sales of soups rose faster than the overall 3% rise in group sales.”

Campbell’s owns Arnotts in Australia which quit salty snack foods last year, but which lifted sales of “savoury crackers” but horror of horrors, sales of chocolate biscuits were “lower”.

Are we going off our Tim Tams, just at a time when the economic slump drives us towards stay at home comfort foods? But from the quarterly statement of another food giant, HJ Heinz last Friday in the US, another indicator of what’s happening in Australia. Heinz said its second quarter sales here were lower because of ‘price timing problems with price increases, but a new “integrated marketing campaign” helped push up baked bean sales 21% in October.

I know October was a tough month, but a 21% rise in baked bean sales is pretty spectacular, especially when we are going off our Tim Tams. But baked beans are cheap, so is this another current indicator of changing buying habits here, along with cutting back on indulgences like choccie biscuits made by Arnotts?

Retailers hurting: Harvey Norman reported another fall in same store sales in the four weeks to last Sunday, and also revealed a 31% fall in pre-tax earnings in the first quarter, which saw the shares sold down. David Jones revealed plans to open three new stores and refurbish others; but that won’t be until 2011 which is hopefully after the present slump is over. The benefit to sales and earnings won’t appear until 2012. If we are still in a slump then, its curtains for a lot of retailers and others in the meantime.

The announcement, ahead of tomorrow’s first quarter sales update and Friday’s AGM, had the whiff of a bit of positive spin ahead of what is expected to be some grim sales figures. Premier Investments, which controls Just Group (It just finished a $400 million takeover), says sales have slumped and chairman Solomon Lew told the AGM in Melbourne it’s the worst time he’s seen in his 45 years in retailing.

This morning Lew said the company has just finished probably the worst timed acquisition, the $400 million buy of rag trader and fashion group, Just Group, bought as retailing was sliding mid year. From what Mr Lew said, the slide is continuing at Just Group. Mr Lew told the meeting that the retail environment is tough and that the Christmas and January sales periods will be critical to its performance.
He said retailers were living through “extraordinary times” as the global economic and financial crisis unfolds. Mr Lew said Premier’s outlook strongly depends on the performance of clothing operation Just Group, which it took over in September, in the current climate.

“The first 17 weeks of this financial year have been very challenging,” Mr Lew told shareholders at Premier’s annual general meeting in Melbourne.

“The retail environment is as tough as I have ever seen it. Just Group has managed to hold total sales flat, but like-for-like sales have fallen six per cent, with New Zealand continuing to be very soft.”

Premier currently sees Just Group’s fiscal 2009 earnings before interest, tax and amortisation around 10 per cent down on the previous year.

“Although we expect an improvement in the sales performance on current trading, we expect that like-for-like sales in some brands will remain negative for the balance of the half,” he told the meeting.

Mr Lew said that “In my 45 years in business, I have never seen anything like the challenging times we confront today.”

Car industry makes cuts across globe: The General Motors board is reported to be considering “all options” including bankruptcy, according to a Wall Street Journal report. GM, Ford and Chrysler are now preparing survival plans to put to Congress by next Monday. GM told the Journal in a statement that the board has discussed bankruptcy, but said the board did not view it as a “viable solution to the company’s liquidity problems” and a spokesman was quoted as telling the paper that management was doing everything it can to avoid a bankruptcy filing.

But GM will extend its holiday shutdown or make other production cuts at five US factories. Honda is another global giant to reveal plans to cut output in Japan, the US and the UK. It says it will cut production in Japan and Europe by 61,000 vehicles, as it continues to grapple with slowing global demand. That means Japan’s second-largest automaker will reduce annual production by more than 140,000 vehicles worldwide over the next year. Honda now expects to produce around 2.87 million vehicles globally for the financial year to March 2009, down from its earlier projection of 3 million. The cut in the US will be 50,000 vehicles annually.

Toyota will cut its Japanese domestic temporary workforce by 50% (or 3,000 people) because of the slump. That follows moves by Mazda and Isuzu, which said cut their temporary work forces in Japan by 2700 people by next March. Toyota will also extend the Christmas-New Year closure at its US and Canadian plants by two days. The carmaker will also cut minivan output in Indiana by half in January and slow one of two Georgetown, Kentucky, factory lines.

Nissan has revealed it will reduce its domestic production by an additional 72,000 units in Japan and its credit rating was cut on Friday. Also Friday, Ford said it will close two plants for longer than previously planned because of the slump. And London newspapers reported yesterday that Tata of India has approached the UK Government for a $US2.4 billion loan for its Jaguar and Land Rover business, just nine months after buying them from Ford. Tata paid $US2.3 billion for JLR and financed the acquisition with a $US3 billion bridging loan. Since then sales of new cars have plunged which has caused cash flow problems with the loan servicing.

The Times said Tata is also facing financial issues with the purchase in 2006 (For $US11.3 billion steelmaker Corus and steel prices have dropped sharply as demand has dried up. Tata Consulting Services, its American-listed IT business, have also dropped as have shares in Tata Motors which is a year late in its new cheap car project in India. It was forced to move the site for the plant from West Bengal as an undisclosed cost. 

Peter Fray

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