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February 25, 2011

CAGNY: Mead Johnson to pass on input cost increases

The CFO of infant food manufacturer Mead Johnson has said that he does not expect to find it difficult to push up prices on the back of higher commodity costs.

The CFO of infant food manufacturer Mead Johnson has said that he does not expect to find it difficult to push up prices on the back of higher commodity costs.

Speaking at the CAGNY conference in Florida today (25 February), Pete Leemputte said: “Parents will not skimp on nutrition for their children, which allows us to push up prices if inflationary pressures escalate.”

Leemputte said that dairy inputs are the company’s “single largest input cost” accounting for some 25% of expenses. He added that, while prices are set to increase, productivity would be an “important contributor to maintaining flat gross margins in 2011.”

Mead Johnson is looking set to push through higher prices but it also wants to generate productivity gains and reduce the cost of goods sold by 3% each year, driven down by supply strategies, material and formulation changes and manufacturing efficiencies.

Meanwhile, CEO Steve Golsby said the company’s greatest strength is its presence in emerging markets which are its “keystone for future growth”.

Golsby said China, which is the company’s second-largest market, recorded 26% CAGAR sales growth between 2001-2010. He said the country has a “strong premium market” with over 90% of the market purchasing premium products, with each child having “two parents and four grandparents determined to give them the best start in life”.

While the company was established in 193 Chinese cities at the end of 2010, the company is looking to have a full presence in 400 cities by 2015. Golsby said that the company is “replicating our proven business model in each new city”.

In Brazil, he said he sees the infant-formula category “rapidly growing”. The company is working to build its Enfa infant formula brand as Golsby breast feeding levels are quite high, but only for a short period of time before they move them onto cows milk.

The Mead Johnson CEO sees an opportunity to move them onto infant formula instead, adding that Brazil is the company’s fastest-growing individual market. It is forecasting 11% CAGR sales growth in the country between 2010-2015.

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