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May 29, 2020

Covid-19 – Australia’s Freedom Foods expects “material” impact on profits

Australia's Freedom Foods Group has said in a trading update it expects full-year profits to be "materially impacted" by the Covid-19 outbreak.

By Dean Best

Australia’s Freedom Foods Group expects full-year profits to be “materially impacted” by the Covid-19 outbreak as the crisis hit sales in the out-of-home segment.

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What’s the forecast for the food and grocery industry?

The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
by GlobalData
Enter your details here to receive your free Report.

The free-from cereals and snacks manufacturer, which also supplies fresh milk and milk drinks and plant-based beverages, said in a trading update today (29 May) it also expects to incur an estimated writedown of AUD25m (US$16.6m) on the carrying value of inventory linked to the consolidation of the company’s “external warehousing activities, together with a detailed review of product offerings and formats”.

And the Sydney-listed business also revealed it had made “some redundancies” across the company as a result of the “reshaping of its commercial and organisational structures to reflect the new operational footprint”, which is based around Freedom Foods focus on markets in Australia, China and south-east Asia.

just-food has asked the company for finer details on the numbers and affected business units.

While Covid-19 has weighted on the company’s foodservice segment, retail sales experienced “strong growth” in March and April as more people ate at home and as it adjusted the product mix across those sectors. However, Freedom Foods said it is seeing early signs of a pick-up in both channels.

Chief executive Rory Macleod said: “The recent macro-environment has highlighted that the company’s unique scale, diversification of activities and channels, strong brands and Australian-based food manufacturing capabilities, provide an important hedge against the adverse impacts from the current disruption. 

“We continue to see increasing demand and customer enquiry across our key brands and markets with an emphasis on dairy, nutritionals and plant beverages. This indicates a strong signal about the opportunities ahead for the company as Covid-19-related market uncertainties recede.” 

Nevertheless, the company expects operating EBITDA to take a material impact in the second half due to the “combination of the level of sales, changed sales mix from March to June, the impact of doubtful debts and an unrecovered higher seasonal milk pricing”.

Freedom Foods added sales to south-east Asia and China accounted for 17% of the group total in the first half, although the latter witnessed a 35% decline “relative to the pre-Covid-19 plan” as a result of government restrictions in February and March.

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Free Report
img

What’s the forecast for the food and grocery industry?

The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
by GlobalData
Enter your details here to receive your free Report.

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