Australian food and drink group Lion has admitted returns from dairy and soft drinks business remain “a long way from acceptable” after a challenging first quarter.
Lion, which sells Dairy Farmers milk and Tasmanian Heritage cheese, as well as acting as the local licensee for Yoplait, said sales from its dairy and drinks business fell 6% in the quarter to 31 December.
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The company, part of Japan’s Kirin Holdings, did not provide a specific figure on profits from the business but said the fall in sales had offset benefits from efficiency.
“Our dairy and drinks business operates in a highly competitive environment with discounting on white milk, juice and everyday cheese impacting margins. Lion has invested significantly in a range of efficiency initiatives and expects to realise the benefits of past site rationalisation during FY13, however we are still a considerable distance from making an acceptable return, and this cannot be delivered by a focus on costs alone,” Lion CEO Stuart Irvine said.
Lion has stopped selling “unprofitable contract volume”, primarily in the convenience channel. On a more upbeat note, it said sales of its milk brand Dare were up and said its share of the yoghurt category increased after a local relaunch of Yoplait last year.
Figures published by Kirin on Friday said sales at Lion as a whole, which also sells beer, spirits and wine, increased 19.3% to JYN127.6bn in the quarter. Operating profit edged up to JYN19.4bn.
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