Wessanen, the Netherlands-based food group, has a number of questions to answer after last week posting a drop in annual profits – and seeing the departure of its CEO. Industry watchers insist that, despite the downturn, Wessanen’s focus on health food is correct but some believe an exit from the US market could help the company’s core European business thrive.
Dutch food group Wessanen has much to ponder.
The company, which sells a portfolio of products, including a number of health food brands, on both sides of the Atlantic, is not looking in top condition.
Last week, Wessanen endured a tumultuous few days with news of falling profits in 2008 and the surprise departure of its chief executive.
Ad Veenhof, who had been at the helm since 2003, stepped down from his role as Wessanen CEO amid differences with the company’s board over the future direction of the business. The exact reasons for Veenhof’s departure are unclear, although Wessanen has admitted that there was “a difference of opinion” over the group’s strategy.
Former Wessanen CEO Ad Veenhof
Amid news of the company’s disappointing 2008 results, Wessanen said it had cancelled its final dividend in a bid to strengthen its balance sheet. The company also did not provide sales or margins guidance for 2009, although that caution was perhaps understandable without a full-time CEO in place.
The year ahead will prove a tricky one for Wessanen. Profits from the company’s European branded business, which accounts for around 60% of earnings, were down in 2008, hit by problems at its frozen foods venture on the continent.
Across the Atlantic, Wessanen is mulling whether to sell a US beverage business, American Beverage Corp. (ABC), and there have been some calls for the group to dispose of all its operations in North America.
“Wessanen should offload all of its US activities. If you are ea niche player, a small company, you have to stay quite close to home. Wessanen operates from the Netherlands, so that means Europe,” says Fernand de Boer, an analyst at investment bank Petercam. “You have a better grip of the market conditions and of what’s going on.”
For its part, Wessanen is keeping its cards close to its chest, refusing to divulge whether it will even sell ABC. However, the company has hinted that any proceeds from a sale could be used to fund acquisitions in Europe.
“If we sell ABC for a good price, part of that money will be spent to better our balance sheet and we will have the opportunity to look at acquisitions, which would be focused on Europe,” a Wessanen spokesperson told just-food on Friday (27 February).
One business that commentators see as a good fit for Wessanen is soy foods maker Alpro. The firm’s owner, Belgium-based group Vandemoortele, put Alpro on the block in January as it looks to focus on its frozen bakery and lipids divisions. Vandemoortele has received some interest from Alpro and is planning for a summer sale but it has refused to be drawn on whether Wessanen is a potential suitor. Wessanen, too, is coy over any interest it could have in Alpro, although one industry watcher believes the business would be a good addition to the portfolio.
“It would obviously depend on price,” says Marco Gulpers, an analyst from ING. “It looks to be a EUR250-300m (US$314.9-377.9m) ticket but it makes sense for [Wessanen].”
Some have questioned the strength of a Wessanen portfolio including health food brands like the Bjorg organic range, the Kallo bakery stable and Allos fruits spreads in a recession. There have been some indications that consumer demand for organic products has been impacted by the downturn, while food brands have come under increasing pressure from private label.
However, Wessanen’s management, under interim CEO Frans Koffrie, has been urged to keep the company’s focus on health and well-being. “Wessanen should focus on health as a long-term trend. Consumers that are very conscious of their health are willing to spend more on it,” de Boer says.
Gulpers insists that, despite the downturn, there has not been a “massive slowdown” on spending on healthier products. “Health and well-being is a reasonable secure area of within the food portfolio,” Gulpers says. “You don’t throw your convictions overboard. You might not buy your fancy refrigerator that saves you money – because they might be the same consumers who buy these kind of products – or you might not be buy a Toyota Prius but you still want to apply those convictions to food.”
Just how Wessanen chooses to navigate the downturn, however, remains to be seen.