Horse meat scandal and flatlining UK brands fail to deter Kerry performance

Kerry Group posted strong half-year results with overall revenue and profit before tax increasing, despite UK brands flatlining and the impact of the horse meat scandal.

While the consumer food division’s UK brands performed well, with Mattessons seeing significant growth in the meat snacks category and Wall’s achieving good growth in the savoury pastry market, Kerry conceded “overall UK customer brands’ performance was flat compared to the same period in 2012”.

The company said overall volumes in chilled ready meals were unchanged but sales in the frozen category reflected the significant loss in consumer confidence in frozen meat products.

Confidence hit
"While Kerry Foods' products were unaffected by the equine DNA issues which unfolded during the first quarter, confidence in some meat categories, including the frozen meals sector, was impacted which resulted in lower sales due to the underlying weakness of the market."

Kerry also attributed the flat performance in UK customer brands to heavy branded promotional activity which hit sales of dairy spreads, and the decision to refocus its business model, which particularly affected the direct-to-store service to the independent and convenience retail sectors.

“Economic and fiscal pressures continue to impact consumer confidence in the Irish and UK consumer foods markets. As a result conditions in both markets remained highly competitive during the first half of 2013 with shoppers continuing to respond to promotions, pricing and value offerings.

“Cheese slices performed well but dairy spreads lost market share to heavily promoted branded offerings.”

Thus the underlying core business sales performance in the consumer foods division decreased by 5.8 per cent to €830 million, while trading profit fell by 1.8 per cent to €634 million in the consumer foods division.

The company said it had been distributing products not relevant to its strategy, and moving away from those products was part of the reason for the decline in volumes.

“We are now more focused on core brands and customer branded offerings,” chief executive Stan McCarthy said.

He said despite the growth of discounters and continuing economic pressures, things were looking up for second half of the year.

“One has got to draw some optimism from the revised GDP figures published on the UK economy. We would be more optimistic now looking forward.”

He said the company was continuing to consolidate its manufacturing footprint, having recently broken ground on its €100 million global technology and innovation centre in Co Kildare.

It is hoped the consolidation will leverage global scale and economies, eliminate unnecessary complexity, improve customer service and business connectivity and enable more effective capital utilisation.

“For us and many of our customers, having regional and country structures breeds a level of inefficiency,” said Mr McCarthy said, who added that the company was also investing in e-commerce.