Interview: Ebro Foods keeps sharp eye on growth and diversification

By Michelle Russell | 26 March 2013

Ebro is keen to build on his growth further

Ebro is keen to build on his growth further

Spanish food group Ebro Foods has been busy transforming itself. Over the last year the pasta and rice producer has been hard at work building on the international presence the company has achieved to date, spanning 25 countries and four continents. Manuel Gonzalez de Luna, Ebro's director of investor relations spoke to just-food at this year's Consumer Analyst Group of Europe conference in London on the group's plans to double its global pasta sales and further diversify its portfolio.

As a world leader in the rice sector and the second largest manufacturer of pasta, in the last decade Ebro has transformed itself. While its origins lay in the sugar industry, the company has added rice, pasta, sauces and now frozen foods to its stable. Ebro has reached this mantle through both organic growth and acquisitions, and after a year of improving profits in 2012, the Spain-based company looks keen to build on this further.

Presenting in London at the Consumer Analyst Group of Europe conference, Ebro told attendees the company will start with its pasta business, sales of which it is aiming to double over the next seven years from EUR900m. The company has committed to organic growth, with increases of between 3-5% per year in existing markets and more than 5% per year in markets where it can get "synergies" with its local rice businesses.

Ebro revealed sales in its pasta division in Europe have grown around 40% since 2006 to EUR600m, while in North America sales have climbed 23% since its entry in 2007 to EUR300m.

"We have achieved this in the past and have grown our top line by 11-13%," Gonzalez de Luna told just-food on the sidelines of CAGE. "The way to do this is by leveraging on our existing platforms. So when we have a rice business in one country, we enter that country organically with a pasta unit. This will account for 5% of that [targeted] growth. Then we have the organic growth that comes mainly from our 1% market growth of pasta, and another 2% that will come from us stretching the product into, say, frozen pasta."

Frozen and ready meals is one of Ebro's newest categories. Although it has been operating the division since 2006 when it bought US firm New World Pasta, Ebro has been keen to expand, particularly given North America is the second largest contributor of sales at 38.6%.

Gonzalez de Luna, however, says the next challenge for Ebro will be to bring its fresh pasta to North America.

"Fresh pasta is available in Europe but in America the distribution of fresh is much more complicated because of the size of the country and the concentration of the size of the population," he tells just-food. "For example, Texas is the size of Spain and France put together, so from one factory producing fresh pasta we can only serve locations up to 600km away so you would need to fill the US with factories in order to supply."

Nonetheless, Gonzalez de Luna says Ebro will find a way to make this happen. "We will be entering fresh in the US," he says.

But while pasta and meal solutions is now the second largest division for Ebro, behind rice, a need to be less exposed to commodity volatility has led the Spanish food group to diversify further and add sauces to its stable.

"It's always about commodities and we always look to value," Gonzalez de Luna says. "We have entered sauces and we have a very large market share. We have been in France for ten years and we are entering the US and Canada now."

Gonzalez de Luna says Ebro entered the French sauce market in 2002 at a time when Mars Inc's Dolmio had a 30% market share and Nestle's Buitoni a 16% share.

"We entered leveraging on the pasta brand we had. It was a risky business for Ebro competing against the larger brands with no previous knowledge of the product. But we trusted our marketing team and we trust our products."

Ebro now has a 40% share of the pasta sauces market in France and Dolmio no longer has a presence. Gonzalez de Luna says the company wants to replicate this model in North America.

"We want to do the same. We have a brand in Canada that has 40% market share so why not try the same."

Beyond sauces he says the company will look to potentially launch into the snacking category.

"We have talked about snacks. It's certainly something we are looking at but I cannot tell you the products that we are going to launch into the mainstream. But we have demonstrated our success in sauces in just two years."

The company's plans for growth also includes acquistions. Ebro recently acquired a stake in Italian rice producer Riso Scotti. Gonzalez de Luna says it will use Riso's global presence to leverage its own products.

Broadly speaking, beyond the markets it currently has a presence, Ebro is keen to enter new markets.

Last year, the company opened up an office in Argentina for the purchase of commodities and CEO Antonio Hernandez Callejas suggested at the time that an investment might follow in the country.

Latin America is a region the company clearly has an interest in and, in particular, Mexico where Ebro bought food group SOS in April 2011. However, at the present time, Gonzalez de Luna suggests that acquiring here is not viable.

"We have a business in Mexico but it's a very small business. There is a major rice company there and we are number two but we don't see much value in the market in that category. In pasta there is a very large brand but they are not for sale. They are family owned and we have a very good relationship with them and they aren't selling."

Beyond that, Ebro recently made an acquisition in India where it bought Olam International's asmati rice milling business earlier this month. Gonzalez de Luna says this is Ebro "testing" the market.

"In India we have been looking at several companies ... but it is strange that every company in India is for sale. So we decided to enter organically. We bought a factory ... it's a very small acquisition at EUR18m. This is us testing the market in our own way, not through a partner. At this point it's just a starting platform."

As for the future of Ebro's portfolio of geographic presence, Gonzalez de Luna says its about having "a matrix of products and companies" and to be "as large as we can in both products and countries". As for its domestic market, this is not to be neglected.

"Here we will stretch the brand as much as possible into different products. We have not taken our focus off Spain. We have just been diversifying.

"We have a long term strategy. At the end, it's about filling in all those blanks of products and countries, either organically or non-organically. It could be with our own brand or it could be acquiring another."

Sectors: Condiments, dressings & sauces, Dried foods, Emerging markets, Financials, Fresh produce, Frozen, NPD & innovation

Companies: Ebro Foods, Mars Inc, Nestle

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