Just Food’s week in data

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.

European heavyweights took the stage this week to report on how they fared through 2023, with dairy giants Danone, FrieslandCampina and Arla Foods outlining how they have traversed the challenges.

Nestlé hogged the limelight, with industry watchers eager to learn how the world’s largest food company plans to restore volumes, a topic now among manufacturers’ key priorities as inflation, and pricing, starts to abate.

However, many global food producers have stressed of late that deflation is not yet upon us, with further pricing still in store, albeit not at the same lofty pace.

Elsewhere, Unilever is investing in mayonnaise in Brazil, while TreeHouse Foods in the US is encountering volume pressures linked to private-label broth.

An indicator of Nestlé’s volumes turned negative last year, in what the Swiss giant said was partially, but largely, down to “softness” in consumer demand.

Nestle’s volume fight

The branded food maker failed to return real internal growth (RIG) to positive territory in the back half of 2023, as was envisaged by CEO Mark Schneider and his finance counterpart François-Xavier Roger.

They both admitted this week that cost-pressured consumers were trading down to private label.

For 2024, Schneider said he is “committed to delivering real internal growth”.
Schneider explained, in the context of the “historic food-inflation spike” over the last two to three years, that “this is important in a day and age when this has to take over as the main bedrock of our growth from pricing”.

He added: “We have to come back to what is the long-term recipe for success and that is a continued focus on volume and mix.”

Roger provided some perspective: “After several years of progress on RIG until 2020, we went through a period of heavy turbulence beginning with the pandemic and followed by a period of unprecedented inflation.

“During 2023, we have seen clear signs of normalisation with the lower contribution from pricing and the higher contribution from RIG. We are confident in our ability to return to positive RIG and expect RIG to trend back towards pre-Covid levels over the course of 2024.”

Dairy plight

It was a mixed bag of commentaries this week in the dairy category. Danone registered a decline in net income, while FrieslandCampina slipped to a loss. Arla Foods’ sales were flat but the company noted consumers were beginning to return to branded products.

“The consumer market is in much better balance and we have seen significant growth in our brands come back again,” Arla CEO Peder Tuborgh said. “We have navigated a deflated and volatile global dairy market as well as a headwind from several currencies.

“While we anticipate continued volatility on multiple levels, our strong performance in the second half of 2023 makes us face 2024 with great confidence.”

For Danone, the France-based business booked net sales last year of €27.6bn, an increase of 7% on a like-for-like basis. Net income, however, declined 8.1% to €881m.

“In a context which remains challenging, the progressive improvement of our volume-mix, turning positive in Q4, the visible progress made by EDP Europe, and the continued strong momentum of our medical nutrition activity are encouraging signs, even if lots remains to be done,” CEO Antoine de Saint-Affrique said.

FrieslandCampina Challenge

The Dutch cooperative slipped to a net loss in 2023 amid what new CEO Jan Derck van Karnebeek described as “challenging market conditions”.

“Business results, particularly with respect to our global consumer dairy and trading activities, were severely under pressure,” van Karnebeek said. “By contrast, the specialised nutrition and ingredients business groups had a good year, although this was insufficient to compensate for the disappointing results of the other two business groups.

He launched the Expedition 2030 strategy last October and reorganised FrieslandCampina’s business structure, effective from 1 January. Job cuts were also announced before Christmas with a view to realising up to €500m in cost savings from 2026.

The co-op said 2023 was characterised by “difficult market conditions”, replete with “one-off restructuring costs”.

The company reported a net loss of €149m ($151.1m), compared to a profit of €292m in 2022. Revenue also fell, dropping 7.1% to €13.1bn, while operating profit slid 84.1% to €75m.

Van Karnebeek outlined some of the challenges in FrieslandCampina’s annual report, including input-cost pressures and a preference for private label over branded dairy products.

Consumers “changed their spending patterns”, the CEO said, adding: “In the Western world, consumers spend less on branded products. They increasingly opted for cheaper private labels, which meant lower margins for us.”

Unilever mayonnaise

FMCG major Unilever is investing in Latin America to take advantage of what is forecast to be a pick-up in appetite for mayonnaise.

Unilever is injecting 80m reais ($16.2m) into its Hellmann’s mayonnaise plant in Brazil, located in Pouso Alegre within the state of Minas Gerais, the company’s “largest food operation in Latin America”.

Edmundo Mollo, director of the Pouso Alegre factory, said the investment demonstrated the company’s “priority of meeting the consumption potential of the market”.

He added: “With the increase in production capacity, we have structured ourselves to accompany the growth of the Hellmann’s brand in Brazil and continue generating more and more environmental and socioeconomic benefits for the region.”

First opened in 1974, the Pouso Alegre facility produces more than 200 SKUs, Unilever told Just Food, which include Hellmann’s mayonnaise, as well as Knorr bouillon cubes.

The new line is expected to provide the site with a “double-digit” increase in production capacity when completed in 2025.

Broth roils TreeHouse

TreeHouse Foods is experiencing a greater-than-expected impact on production from a broth recall, which hit last year’s volumes and will spillover into 2024.

The largest private-label supplier in the US initiated the recall last September, affecting major food retailers. It has since been ploughing funds into the affected plant in Cambridge, Maryland, to modernise the facility and restore manufacturing to previous levels.

“Our ability to grow sales in 2024 will be temporarily constrained by the efforts to restart our broth facility,” chairman, president and CEO Steven Oakland said.

“We expect the net sales impact due to our broth facility will be approximately $60 million, which partially mutes the growth contribution from the rest of the business, particularly in the first half of the year.”

The New York-listed business estimates its sales in the first quarter will decline by around 7% from a year earlier at the “midpoint” to about $780m to $810m. They dropped 8% on an organic basis in the final three months of fiscal 2023.

TreeHouse CFO Pat O’Donnell said fourth-quarter pricing “was roughly flat as we’ve now lapsed the pricing actions that we’ve taken over the last couple of years primarily to recover from inflationary pressure”.

He added: “We’re not seeing significant deflation, perhaps some modest disinflation in a couple of key commodities. But overall, we’re seeing things that still remain relatively elevated to history.”