Del Monte Foods chief Rick Wolford today (10 June) defended the company’s decision to boost its recent marketing expenditure and said the US food group was seeing the benefit of the higher spending.
The company spent 64% more on marketing during the three months to 2 May but saw fourth-quarter sales slide 9.8%.
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However, speaking to analysts after Del Monte published its fourth-quarter and full-year numbers, Wolford said the company’s revenues had been hit by “very specific” factors not related to its marketing expenditure.
Wolford said Del Monte had decided to move its promotional activity in its vegetable business to earlier in the year and had seen “competitive issues” within its pet food business.
“When I look at the weakness in Q4, that is due to very specific issues that are non-marketing investment related but are issues we believe we can deal with and don’t have much of an issue with,” Wolford said.
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The Del Monte boss said the company was already seeing improvements in market share for some of its brands and insisted it would continue to see the fruits of investment in marketing.
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By GlobalData“When we look at the benefit of marketing, we believe that we see significant impact coming forward across the entire portfolio,” Wolford insisted. “We see only continuing benefit from our marketing investment.”
Nevertheless, Del Monte will scale back its marketing spend throughout the next fiscal year. CFO Dave Meyer said the company’s investment will be 80 basis points lower to make more “efficient” use of its spending – and as the business “leverages” its expenditure in the previous year.
Shares in Del Monte jumped in the wake of the results after the company upped its dividend payment for the quarter. At 14:43 ET, Del Monte’s shares were up over 6% at US$15.57.
Meyer said Del Monte’s earnings per share in the first quarter of 2011 would be lower than the first three months of fiscal 2010. “EPS will trail last year’s first quarter to a more even flow of marketing spending across fiscal 2011, relative to lower levels of spending in fiscal 2010,” he said.
However, Wolford gave analysts an upbeat message of the company’s position for the year ahead.
“In fiscal 2010, we have moved Del Monte to a new level and, in fiscal 2011, we will be driving performance from this higher level. We’ve established a strong branded platforms and we expect to see volume growth through both innovation and existing products. Our marketing investment will be a key driver for us as we continue to enhance our brand strategy and equity across our portfolio.”
