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June 13, 2022

Saputo shifts to offensive price strategy on “path to recovery”

“We are progressive, and we're proactive at passing the increases that we need to pass,” Saputo’s CEO said.

By Simon Harvey

Saputo is confident the Canadian dairy major is on a “clear path to recovery” in its new fiscal year, with a key profit target still in sight.

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President and CEO Lino Saputo, Jr. admitted the results for the 12 months to the end of March were “disappointing” as net income and EBITDA both dropped amid persistent challenges around labour, supply-chain disruptions and inflationary input costs.

The CEO is partly resting his assumptions on pricing across Saputo’s main markets in North America, Europe – prominently the UK – and Australia, as well as cost and productivity initiatives. However, while pricing actions supported an increase in revenues in fiscal 2022, they were not enough to recover costs in full, with supply bottlenecks limiting the “ability to fully meet growing consumer demand”.

“Although inflation and supply-chain disruptions are likely to persist, we nonetheless expect a recovery in fiscal 2023, and we see a clear path towards it,” Mr. Saputo told analysts on a post-results call. “We’ve taken significant pricing actions throughout 2022 to offset inflation, and we expect these initiatives to be fully reflected in our results next year.”

While full-year adjusted EBITDA fell 22% to CAD1.16bn (US$901.3m), Mr. Saputo said the Cathedral City cheese maker is “aggressively working our plan, keeping a view on maximising long-term value creation”.

He added: “We’re poised for a recovery in fiscal 2023. And we are well underway with the full-scale rollout of our growth, cost and productivity initiatives. Together, this should set the stage for accelerated growth in the back half of our strategic plan, with a clear line of sight to our adjusted EBITDA target of $2.125 billion by the end of fiscal 2025.”

Australia and the US were especially challenging markets. A declining milk pool weighed on results in Australia, to the effect the supply “significantly impacted efficiency and costs”.

Mr. Saputo was questioned on the long-term plan for Australia given the suggestion the business has not performed as anticipated, but the CEO insisted the Asia-Pacific country is part of the “clear path to recovery”.

“What we’re looking at, in terms of our Australian platform, is not volume. It’s value,” the CEO countered. “And I believe that there is a way with the amount of milk that we’re processing, or we expect to process, to still drive very healthy profitability.”

In the US, Saputo as a company “faced the most adversity”, the chief executive said, “where challenges have been more acute in terms of labour, inflation and the supply chain”.

Mr. Saputo added: “We expect improved staffing levels in the US in fiscal 2023, following our aggressive hiring and retention initiatives and assuming lower Covid-19 related absenteeism. This should translate into better output, improved productivity and the beginning of a return to more normal sales volume levels.”

He said a new round of prices increases should get Saputo back to 2021 profitability. A new wave is about to be implemented in the UK and another round in Australia in the second quarter of the new fiscal year.

Saputo, meanwhile, is also in discussions to add to February’s increase in milk prices in Canada, most likely in August, with a “high” likelihood assigned to that probability.

Pricing in the US became effective in April with a further round planned to come in on 5 July.

“What you’re seeing is a little bit of a change from last fiscal year where we were playing defence. Now, we’re playing offense,” Mr. Saputo said. “We are progressive, and we’re proactive at passing the increases that we need to pass, irrespective of what impact that might have on volume, but we don’t suspect that volume will be impacted greatly.

“We are continuously monitoring input costs and are preparing ourselves and our customers to possibly go for further pricing rounds should we need it. Critical to improving our profitability is maximising our fixed-cost leverage and being staffed to our usual levels to run our plants full, specifically in the US.”

Saputo’s fiscal 2022 revenues rose 5.2% to CAD15bn. Adjusted EBITDA fell 22% to CAD1.16bn, while net income slid 56% to CAD274m.

Mr Saputo wrapped up: “The tone, the focus, the understanding of where our business is at is so much more clear this year. If you recall last year, when the economies were opening up, many companies were looking for labour, many companies had to get product to market in terms of supply chain and distribution, and it seems like everybody was looking for the same resources, all at the same time.

“This year, our sites are clear about our realistic headwinds, but also very clear about our mitigating factors and what we need to do to make sure that we have success.”

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Unilever- A Deep-dive into Product Launches and Advertising Strategy

Unilever product advertising is mainly through mainstream TV channels. Out of the products advertised so far at least 50% (over 850) of ads have been run on TV, while print media comes second with 496 ads. Unilever also utilizes social media platforms for advertisement. Unilever products are categorized by innovation ratings and tags in our product launch database. The North American region consists of almost 74 products with innovations related to the formulation of the product. Europe and other regions also have more products categorized under formulation-related innovation, followed by the packaging and positioning of the products. Most Unilever products are tagged with “High Vitamins”, “Recyclable”, and “Natural” tags to understand what the product differentiator is from other products available in the market. The majority of products belong to the personal care industry with a total of 5,788 products to date. This report, through the Unilever Example, illustrates how GlobalData Explorer enables you to:  
  • Track product launches by FMCG companies to get an understanding of the product-level strategies including geographic concentrations, innovation types, product claim, category focus and more
  • Monitoring the advertising strategies of various brands and gain insights into channel focus, regional focus, and more
  • Perform company-level analysis to understand business model, size, and geographic focus
Don’t miss out on key market insights that can help optimize your next investment – read the report now.
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