Just Food’s week in data: Oatly, Saputo, Reliance

Alongside our daily news coverage, features and interviews, the Just Food team sifts through the week’s most intriguing data sets to bring you a round-up of the week in numbers.

Oatly shares sank on the Nasdaq exchange as the plant-based drinks business reported yet more losses, which have failed to shrink even as annual sales sequentially improved. An impairment charge added to the company’s woes.

Elsewhere, Saputo also booked an impairment linked to its Australian dairy business, driving the Canadian giant to an unusual net loss.

In India, Reliance Industries struck a local confectionery deal, while figures out of the UK showed grocery inflation extended its easing streak. Rounding out this week’s charts is Finland’s Raisio, which saw annual sales pressured by consumers tightening their purse strings.

Oatly losses widen

The branded oat-drinks maker for retail and foodservice set out a plan early last year under previous CEO Toni Peterson to reach profitability in fiscal 2024 under an “asset light strategy”.

New chief Jean-Christophe Flatin, who moved from president of the Sweden-headquartered business in June, said in this week’s results commentary for the 2023 financial year that Oatly’s focus for the new season is on its “top priority of driving toward profitable growth”.

However, he has a task ahead. The fiscal 2023 EBITDA loss widened to $405.2m versus the $347.4m in the previous year, although in adjusted terms losses narrowed to $157.5m from $267.9m.

Losses before tax remained in the red at $408.2m, compared to a $397.3m loss. Revenue did continue to increase, rising 8.5% to $783.4m, with volumes up 3.1% and price/mix 5.6%.

“As we enter 2024, our financial guidance calls for solid top-line growth, while delivering significant profit improvement as we focus on our top priority of driving toward profitable growth,” Flatin said.

Complicating Oatly’s endeavours was a non-cash impairment charge of $172.6m and “other costs” of $29m, “related to discontinued construction of certain production facilities”.

Oatly announced last year that it was abandoning plans for additional manufacturing sites, namely a plant in Peterborough, in the UK, another in the US city of Fort Worth and a third in China.

Saputo turns to loss

Saputo booked a loss in its third quarter on the back of a C$265m ($196.8m) impairment charge related to its Australia dairy division.

Chairman, president and CEO Lino Saputo Jr. explained the non-cash impairment charge in Australia in the context of falling milk supply and a mismatch in cheese and ingredients prices.

“In performing our annual goodwill impairment testing, our dairy division Australia cash-generating unit (CGU) estimates of future discounted cash flow were reduced due to the increasing disconnect in the relationship between international cheese and dairy ingredient market prices and the farmgate milk price in the context of a declining milk pool in Australia.

“While there is still uncertainty in the near-term market dynamics, we are dedicated to doing everything we can to maximise the results of the division.”

Saputo has been “optimising” its manufacturing network in Australia, with the number of plants reduced to six from 11.

Mr Saputo said current market trends are likely to continue.

“We expect the environment to remain volatile and challenging in the near term, from input costs to currencies to consumers and political dynamics.

“We are seeing a slowing milk production around the world and we see this in just about every dairy-producing country around the world,” he explained.

Reliance Industries snaps up Ravalgaon

The Indian conglomerate said it would pay Rs270m ($3.3m) for The Ravalgaon Sugar Farm business, a manufacturer of boiled sweets, including trademarks and intellectual property rights.

Ravalgaon produces confectionary brands including boiled sweets Pan Pasand Gold, Cheer, Mango Mood, Coffee Break, Tutty Fruit and Assorted Center. It also makes the toffee products Choco Cream and Supreme.

The deal comes as confectionery sales growth in India is forecast to start to build traction again from the softness in 2022 and 2023, which was likely linked to consumers trimming back purchases of treats in the context of inflation.

Ravalgaon said it opted to enter an agreement with Reliance as it had “found it difficult in recent years to sustain its sugar boiled confectionery business”.

The company added it had faced headwinds, including a loss of market share from increased competition, as well as rising raw material, energy, labour and production costs.

Monthly UK food prices turn south

January saw a notable decline in UK food prices, which fell on a monthly basis for the first time since September 2021, the Office for National Statistics reported.

In the broader grocery basket, including food and soft drinks, the ONS said price increases eased for a 10th straight month in January – another bright note after inflation for those categories broke through the double-digit barrier in November.

However, the ONS once again flagged, as it has in the past few months, that costs are still historically high in comparative terms.

“The overall price of food and non-alcoholic beverages rose by around 25% over the two years between January 2022 and January 2024. This compares with a rise of around 10% over the preceding ten years.”

Food and non-alcoholic beverages inflation for January came in at 7%, down from December’s 8% rate, and was the lowest level since April 2022. It peaked at 19.2% in March 2023, the highest in more than 45 years.

Nevertheless, risks remain on the horizon. Balwinder Dhoot, the director of sustainability and growth at UK industry body the Food and Drink Federation, had a warning about the possibility of a resurgence in inflation from shipping diversions around the Red Sea and the ongoing conflict in Gazza.

“Ongoing navigation challenges in the Red Sea, coupled with rising shipping costs, may soon exert pressure on energy prices, and, therefore, on food prices, given the energy-intensive nature of the food and drink industry,” Dhoot said.

“The extent of this impact hinges on the duration of ship diversions from the Suez Canal and any escalations in the Middle East.”

Raisio feels pinch

The finance chief of Finland’s Raisio, Mika Saarinen, said this week that the Benecol brand owner is likely to continue facing competition from own label.

As a consequence of those pressures, Raisio’s sales dipped last year, the first annual decline since the onslaught of the global pandemic in 2020.

However, the company’s sales did also tail-off in 2018 but that was a consequence of a change in strategy as Raisio divested its cattle and confectionery businesses to focus on healthy foods, namely plant-based.

Saarinen told Just Food: “In each category, and especially in the dire times as we are living now, even in this year, in the whole of Europe, purchasing power will be under strain.

“I don’t know whether it’s able to grow much further in the short term but at least it’s there as a one alternative for customers, that’s for sure.”

Raisio said it intends to shelve the company’s 2022-2025 growth and profitability targets following last year’s group sales performance.

In terms of brands, Raisio also saw sales fall for its low-cholesterol Benecol spreads and yogurt drinks, with particular pressure felt in the UK market.

“It seems that the category… didn’t drop that drastically but it did nevertheless and I think it must be due to the fact that, of course, those are premium-priced brands.”