CAGE 2014: Kerry eyes consumer foods growth through snacking
Kerry focuses on snacking
Kerry Group CEO Stan McCarthy has indicated the Ireland-based food maker believes increasing demand for snacking presents an opportunity to grow the company's consumer foods business.
Speaking to the Consumer Analyst Group of Europe conference in London, McCarthy said developing snack foods in Kerry's two key sectors of meat and dairy would enable the company to "eke out growth" from its consumer foods division.
"[There is a] need for product versatility and snacking on-the-go offerings, which is something we view as very significant for our business in the future," McCarthy said.
The group's consumer portfolio, which includes brands like Wall's sausages and Dairygold spreads, is the smaller of its two divisions.
In 2013, consumer foods accounted for just 28% of Kerry's revenue of EUR5.8bn. In recent years, the proportion of Kerry's turnover generated by consumer foods has been in decline. However, the company's consumer division has enjoyed year-on-year sales growth for the last four years despite challenging trading conditions in its two main markets, the UK and Ireland.
Last year, Kerry managed to increase margins from its consumer business, something the company has not always been able to do during the downturn.
UK grocers look set to be competing more on price in a bid to win back customers from discounters like Aldi and Lidl. Last week, Morrisons announced plans to "permanently" lower prices, which followed similar moves from Tesco and Asda.
Asked what impact those efforts could have on trading conditions in the UK, McCarthy questioned whether the moves met consumer demand.
"I'm not sure how it is all going to play out. Those strategies are nothing new to the food industry over the years. We would question it a little bit in terms of whether that is what really matters from a consumer perspective. Obviously it matters to some but in terms of moving the needle in the big picture we would wonder if that's the right strategy," he said.
The Kerry chief conceded the company "could not ignore" what retailers had done but felt the company could enjoy growth by developing products that focused on factors other than price.
"We continue to reinvest in those brands and obviously create a difference from a marketing or technical perspective. Our ability to be able to eke out growth - we've talked about convenience and snacking in the meat and dairy category - we feel we can eke out growth by being a little bit different and not just competing on price," McCarthy said.
"Certainly private label and the growth of the discounters, that is a phenomenon that is changing the overall structure and something we do not ignore. We do play in some private-label categories, particularly in the spreads area for exampled in the UK. We'll continue to support those sectors but we won't compete with our brands. We put the emphasis behind our brands and they're pretty resilient and they've got good resources behind them."
McCarthy said Kerry planned to put "more emphasis" on eight brands, including Wall's, Dairygold, Richmond sausages and Mattessons meat snacks, and indicated the company would look to dispose other brands this year.
"We have reviewed the portfolio and some parts of this business don't meet our requirements or meet our objectives or perhaps may be better suited to a different portfolio and hopefully over the course of 2014 that will be addressed."
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