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UK MID-MARKET FIRMS COULD UNLOCK SIGNIFICANT GROWTH POTENTIAL BY INCREASING EXPORTS

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UK MID-MARKET FIRMS COULD UNLOCK SIGNIFICANT GROWTH POTENTIAL BY INCREASING EXPORTS

** Largest global study of mid-market enterprises finds only 17% of UK firms’ revenues are derived from exports**

**The estimated 9,100 MMEs in this country support over $1tr of sales and $520bn of GVA and employ 4.6m**

**Should UK MMEs boost their exports by just 5%, they could add a combined $4bn to their economic impact** 

HSBC today releases a report revealing that mid-market enterprises could take advantage of huge opportunities from international trade. In fact, exports currently account for only 17% of UK MMEs’[1] revenues. Although, the total value of turnover accrued through these export sales is almost $180bn.

HSBC Commercial Banking, in conjunction with Oxford Economics, explored the views of 1,400 MME senior executives in 14 countries in addition to in-depth economic analysis. The findings reveal that MME leaders in the UK are significantly less confident in the local economy than average (50% vs. 69%) and as to be expected they view Brexit as a far greater threat to growth than average (50% vs. 6%). However, despite this these leaders are focused upon increasing revenue from current markets as a strategy for growth rather than seeking out sales opportunities in new geographies. The US and neighbouring European economies such as France, Germany and Ireland are currently the largest export markets for UK-based MMEs.

Furthermore, there is good news for policymakers for who decreasing the skills gap has been a priority in recent years in that UK MME leaders see much less of a threat from skill shortages than average (40% vs. 56%). Meanwhile these leaders were comparatively less optimistic when it comes to technology driven growth (45% vs. 55%) and the domestic opportunities that exist in general for entrepreneurs in the UK (39% vs. 47%).

Jane Galvin, Head of Corporate Banking, HSBC UK said: “MME firms are making a huge and growing contribution to the UK economy, with our estimates showing the number of MMEs in this country increased by 5% over two years. These MMEs have the potential to deliver even greater growth if they considered going to new markets. Many of the concerns they have, could in fact be addressed with an international strategy – whether that’s overcoming local economic uncertainty or capitalising on new skills and expertise. In an environment of lower growth, we must help these companies reap the benefits of international commerce, and just as importantly work to raise their profile as major economic contributors, and potentially influential government stakeholders”.

MMEs are the backbone of the global economy, making significant contribution to growth and employment. It is estimated that the 433,000 MME companies across 14 countries covered by this study directly employed 208 million people – equivalent to the population of Brazil – and support $3.4 trillion in exports. It is estimated that in just two years the direct contribution of MMEs to global GDP increased by 9% and the number of jobs they support grew by 3%.

Further economic analysis predicts that if mid-market enterprises (MMEs) boosted their export-based revenues by just 1%, they would increase their economic impact by $12.5 billion across the 14 economies.

Half of all MMEs are estimated to be in China; a further quarter in India but per capita they have a larger profile in countries like Singapore, the UAE, Canada and Germany. In the UK MMEs are mostly likely to operate in the business services sector, which account for almost a third of mid-market activity in terms of economic value and employment, followed by manufacturing and financial services.

In our sample, the MME sector makes the most important contribution to local employment in United States (20% of market sector employment) and the UK (18% of market sector employment), while their share of local GDP is highest in the USA, followed by Mexico, the UAE, Australia and Canada.

Direct GDP contribution Direct employment contribution
Country $bn % of market sector GDP 000s % of market sector employment
Australia 291 24% 1,050 12%
Canada 346 24% 2,464 18%
China 2,251 23% 95,639 15%
France 404 18% 3,021 16%
Germany 699 22% 5,823 18%
Hong Kong 44 17% 409 15%
India 349 19% 52,667 12%
Indonesia 172 21% 12,170 13%
Mexico 296 25% 6,663 15%
Saudi Arabia 141 22% 1,054 14%
Singapore 58 20% 553 17%
United Arab Emirates 90 24% 847 16%
United Kingdom 519 21% 4,589 18%
United States 3,485 25% 20,743 20%
Total (14 countries) 9,144 23% 207,691 15%

 

Business

Packaged food giants push direct online sales to gauge consumer tastes

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Packaged food giants push direct online sales to gauge consumer tastes 1

By Siddharth Cavale and Nivedita Balu

(Reuters) – Packaged food giants including Kraft Heinz, General Mills and Kellogg are pushing sales of their products to consumers directly via their own online channels, in a quest to gather more data about shoppers’ purchasing habits.

Velveeta-cheese maker Kraft Heinz saw its e-commerce sales double in 2020, now representing more than 5% of its global sales, Chief Executive Miguel Patricio said at the virtual Consumer Analyst Group of New York (CAGNY) conference this week.

The company sells Heinz baked beans and tomato soup by subscription or in bundles directly to consumers on a “Heinz To Home” website in the United Kingdom, Australia and Europe.

Sales on the site are “giving us valuable insights into consumer behavior, enabling us to quickly test and learn from innovations,” Kraft’s head of international business, Rafael de Oliveira, said at the conference.

Kraft would continue to use the site as a channel to generate strong sales in developed markets, he said.

The company also counts sales of its products through marketplaces such as on Amazon.com and Walmart.com as part of its e-commerce sales.

U.S. shoppers spent on average $1,271 buying groceries online last year, 45% more than they did in 2019 as the pandemic spurred shopping online, according to market research firm Earnest Research. In contrast, the average dollars spent in stores rose only about 7% to $3,849.

PepsiCo sells products including Doritos, Quaker oats and Gatorade directly to consumers through two websites, pantryshop.com and snacks.com, both launched in 2020.

Chief Financial Officer Hugh Johnston said that more than 45% of the company’s capital investments over the next few years would be dedicated toward manufacturing capacity, automation, and a “ramping up of investments in our e-commerce channel.”

As major online retailers including Amazon.com and Walmart.com continue to gather valuable data on shoppers, many packaged food manufacturers are keen to gather their own data on shoppers, too.

“COVID (has) simply accelerated our digital growth and has provided us with yet another source of data and insight,” Monica McGurk, chief growth officer at breakfast cereal maker Kellogg Co., told the conference.

Kellogg, producer of Corn Flakes as well as Pringles chips, said on Wednesday it had launched a direct-to-consumer website focused on digestive wellness. The group plans to sell its new Mwell Microbiome Powder for gut health via the site to gather data on customer interest before it launches the product more widely.

E-commerce sales have doubled in the past year and now represent about 8.5% of the group’s $13.77 billion in annual sales, Kellogg said.

Pillsbury dough-maker General Mills also sees the benefits of tracking consumer habits more closely.

“We’re aggressively investing in data and analytics. We are gathering unparalleled insights from the first-party data we collect through our brand websites,” General Mills’ Chief Executive Jeffrey Harmening said at the conference.

On its Bettycrocker.com website, General Mills provides hundreds of recipes using Betty Crocker cake mixes and frosting. The site leads people to the closest store or an online retailer where they can purchase the products, thereby generating data for General Mills on what a particular customer from a certain zip code is buying. The company does not sell the food products directly on its website.

Consumers, however, may have to shell out more if they shop directly from brand websites.

Prices on the two PepsiCo sites, for example, were generally higher than those on Walmart.com or Amazon.com, Reuters checks show. On Walmart.com, for example, a 10 oz pack of Doritos Nacho Cheese was on sale for $2.50 compared to $4.29 on Pepsico’s website.

Kraft Heinz offers tins of soup, beans, pasta and baby food bundled into packs ranging from six to 25 items and costing between 10 and 20 pounds ($14.01-$28.03) on its UK website. It told Reuters the relatively higher prices of items and bundling of packs than on some other online marketplaces was to be able to eke out a margin after including delivery costs.

“Longer term, we see real value in this channel to be an insight and data channel for us,” Jean-Philippe Nier, head of e-commerce for Kraft Heinz’s business in the UK and Ireland, told Reuters. People are more prepared to order directly from manufacturers than they were before. The time is now.”

Graphic: Direct online sales to cross $20 billion in 2021 – https://graphics.reuters.com/PACKAGEDFOODS-ECOMMERCE/rlgpdexngvo/chart.png

($1 = 0.7137 pounds)

(Reporting by Siddharth Cavale and Nivedita Balu in Bengaluru; Editing by Vanessa O’Connell and Susan Fenton)

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Siemens Healthineers gains EU nod for $16.4 billion Varian buy

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Siemens Healthineers gains EU nod for $16.4 billion Varian buy 2

BRUSSELS (Reuters) – EU antitrust regulators on Friday cleared with conditions Siemens Healthineers’ $16.4 billion acquisition of U.S. peer Varian, paving the way for the German health group to become a world leader in cancer care therapy.

The European Commission said Siemens Healthineers pledged to ensure that its medical imaging and radiotherapy equipment will work with rivals in return for its approval, confirming a Reuters story. The pledge is valid for 10 years.

“High quality medical imaging and radiotherapy solutions are crucial to diagnose and treat cancer. The efficiency and safety of treatment relies on the ability of these products to work together,” European Competition Commissioner Margrethe Vestager said in a statement.

Varian is the leader in radiation therapy with a market share of more than 50%. The deal received the U.S. antitrust green light in October last year.

 

(Reporting by Foo Yun Chee)

 

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Battling Covid collateral damage, Renault says 2021 will be volatile

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Battling Covid collateral damage, Renault says 2021 will be volatile 3

By Gilles Guillaume

PARIS (Reuters) – Renault said on Friday it is still fighting the lingering effects of the COVID-19 pandemic, including a shortage of semiconductor chips, that could make for another rough year for the French carmaker.

Renault reported an 8 billion euro ($9.7 billion) loss for 2020 which, combined with gloomy take on the market, sent its shares down more than 5% in late morning trading.

“We are in the midst of a battle to try to manage a difficult year in terms of supply chains, of components,” Chief Executive Luca de Meo told reporters. “This is all the collateral damage of the Covid pandemic… we will have a fairly volatile year.”

De Meo, who took over last July, is looking at ways to boost profitability and sales at Renault while pushing ahead with cost cuts. There were early signs of improving momentum as margins inched up in the second half of 2020.

The group gave no financial guidance for this year, although it said it might reach a target of achieving 2 billion euros in costs cuts by 2023 ahead of time, possibly by December.

Executives said they were confident the carmaker could be profitable in the second half of 2021, but that they lacked sufficient market visibility to provide a forecast.

Renault struck a cautious note, saying it was focused on its recovery but warned orders had faltered in early 2021 as pandemic restrictions continued in some countries.

The group is facing new challenges as the European Union tightens emissions regulations and after rivals PSA and Fiat Chrysler joined forces to create Stellantis, the world’s fourth-biggest automaker.

The auto industry endured a tough 2020 but a swift rebound in premium car sales in China helped companies such as Volkswagen and Daimler to weather the storm.

Auto companies globally have since been hit by a shortage of semiconductors that has forced production cuts worldwide.

“The beginning of the year has shown some signs of weakness,” De Meo told analysts, but added the chip shortage should be resolved by the second half of 2021. “We have taken the necessary measures to anticipate and overcome challenges.”

Renault estimated the chip shortage could reduce its production by about 100,000 vehicles this year.

SHARP HIT

The group was already loss-making in 2019, but took a sharp hit in 2020 during lockdowns to fight the pandemic, which also hurt its Japanese partner Nissan.

Analysts polled by Refinitiv had expected a 7.4 billion euro loss for 2020. The group posted negative free cash flow for 2020.

The 2018 arrest of Carlos Ghosn, who formerly lead the alliance between Renault and Nissan, plunged the automakers into turmoil.

In a further sign that the companies have been working to repair the alliance, De Meo told journalists that Renault and Nissan will announce new joint products together in the coming weeks or months.

Renault has begun to raise prices on some car models, and group operating profit, which was negative for 2020 as a whole, improved in the last six months of the year, reaching 866 million euros or 3.5% of revenue.

Analysts at Jefferies said the operating performance was better than expected. Sales were still falling in the second half, but less sharply.

Renault is slashing jobs and trimming its range of cars, allowing it to slice spending in areas like research and development as it focuses on redressing its finances. It is also pivoting more towards electric cars as part of its revamp.

It was already struggling more than some rivals with sliding sales before the pandemic, after years of a vast expansion drive it is now trying to rein in, focusing on profitable markets.

De Meo told journalists on Friday that the French carmaker will make three new higher-margin models at its Palencia plant in Spain, where manufacturing costs are lower, between 2022 and 2024.

($1 = 0.8269 euros)

(Reporting by Gilles Guillaume and Sarah White in Paris, Nick Carey in London; Editing by Christopher Cushing, David Evans and Jan Harvey)

 

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