Cost-cutting will become part of Nomad Foods' strategy to achieve growth, as the frozen food group tries to respond to pressure from private label.
At the Barclays Global Consumer Staples Conference yesterday (8 September), Nomad CEO Stefan Descheemaeker blamed own label for the company's fall in second-quarter sales.
Nomad, which this spring bought Iglo Group and last month struck a deal to buy most of Findus Group's assets in Europe, booked a 2.4% decline in net revenue to EUR743.1m on a pro-forma, as adjusted basis.
The company said it would look at saving to re-invest with cost-cutting and "disciplined" cost management used as tools to fund top line growth.
Descheemaeker said: "It is absolutely critical that we respond to pressures from private label. Today they are doing well. We know what we have to do, it is going to take some time, we don't want to cut corners. But yes, we are in a position to save so cost-cutting will come back to Iglo. Iglo lost it a bit over the last few years but we can do better."
He added that, before Nomad's ownership, Iglo operated under the belief sales could be created from a "virtuous cycle" comprising innovation and renovation, brand building, sales excellence visibility and net sales and gross margin. He said Nomad would bring back the 'save to reinvest' facet.
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"My belief is that you have to first save to re-invest. Cost management is going to come back, synergies extraction from Findus and revenue management. By doing so, yes operationally you are going to create the right tension at the top level."
He pointed at the second quarter for Nomad being "difficult" due to "the fight and challenge with private label in terms of price and promotion".
"This is something we are going to fix…it's very simple, we just need to bring the difference price wise to become a very low cost player and at the same time need to offer the kind of quality in terms of functionality [as private label] to our consumers."
One way he said Nomad would look to do this would be to re-invest savings into innovation and renovation, something he said Iglo had started under Permira and tried to "expand the industry and move to other food occasions".
"This is very interesting but at the same time you need to protect your base line and your base sales with making sure you keep the difference with private label. So that's what we are going to do, we are going to move the needle more to renovation – so with existing products".
Descheemaeker, meanwhile, reiterated Nomad's interest in acquiring businesses outside of Europe. He had previously told reporters Nomad is considering the acquisition of neglected frozen food brands in the US.
"Food is fragmented. We are not limited to Europe, we want to go to the US but need to find the right platform. Iglo as a starting point is a fantastic platform – it fits the bill in terms of size, the management team, positioning – it is number one in seven countries – brands like Birds Eye which resonate well with consumers in the US and UK and Iglo which resonates well with consumers in continental Europe."
He added the company could also look beyond the frozen sector.
"Nomad doesn't want to limit itself to frozen foods [but] we want to build a stable business starting with frozen food. Our ambition is to become a best in class integration machine. We believe between the EUR1.5bn net sales we currently have in the EUR52bn [Europe net sales] size of the prize, we can do a lot. It's not finished. Obviously we need to digest Findus but back to the strength of the team, I think this team is able to digest other deals."