Blog: Dean BestWessanen urged to consider US exit

Dean Best | 2 March 2009

Stick with health and wellness. But consider your future in the US.

That's the message to Dutch food giant Wessanen, which endured a tumultuous few days last week with news of falling profits and the exit of its chief executive.

Problems with Wessanen's branded business in Europe was a central factor behind the drop in 2008 profits, while the departure of CEO Ad Veenhof raised further questions about the future direction of the business.

Wessanen admitted that there had been a clash of opinions between Veenhof and the company's board over business strategy, although it remained coy over the exact details of the disagreements. Still, whatever the source of the division, industry watchers remain sure Wessanen should remain focused on health and well-being even if the recession means the sector is less buoyant than in recent years.

Some commentators believe Wessanen would also be better served selling its US businesses and focusing on Europe. Wessanen is mulling a possible sale of a beverage unit across the Atlantic but it remains unclear as to whether that disposal could herald a full-scale retreat from the US. Wessanen has said it would consider further acquisitions in Europe, although it remained tight-lipped over whether it would look to buy the Alpro soy foods business, which looks set to be sold this summer.

While the downturn means the health and wellness category is looking less attractive, confectionery - and chocolate in particular - is looking a pretty sweet place to be. Cadbury, the UK confectioner, injected a tone of optimism into the gloomy business climate last week with a set of robust 2008 figures. Cadbury also signalled its confidence by sticking to a key margin target although not everyone is convinced that the company will meet its goal. Will Cadbury be able to secure the price increases it won last year? And could Mars and Wrigley get more aggressive on price in the gum category?

That said, Cadbury believes innovation will be key to success in the gum category (and, by extension, will prove key to helping it reach its 2011 margin target) and is lining up a clutch of new products for the UK and the US this year.

And it is innovation that researchers in the US believe will help consumer goods companies prosper in 2009. Food makers should look at brand extensions and tap into the trend for cooking at home to thrive in the economic downturn, a study from IRI suggested last week.

"Innovative companies thrive, while weaker companies struggle and fail. To be a success in this recessionary environment, you must anticipate and respond to change before it happens," IRI said.

Alas, that is, perhaps, easier said than done.


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