Sales down at Wessanen

Related tags Food industry Food processing

Dutch food group Wessanen has reported full year sales of €2.8
billion in 2002, down from €4 billion a year earlier, but continues
to stress that its efforts to restructure the company will pay off
in the long term.

Wessanen, the Dutch group currently aiming to turn itself into a 'wellness' business, has reported full year sales of €2.8 billion in 2002, down from €4 billion a year earlier, but continues to stress that its efforts to restructure the company will pay off in the long term.

The decline in sales was due primarily to the disposal of the UK-based meat group Golden Foods International business and the dairy operations in North America and Europe, Wessanen said, but there was also a continued downturn at its US health food retail business, Tree of Life.

"The year 2002 was a difficult year for Wessanen, as we were unable to meet the expectations set forth in February and August of 2002. Our largest subsidiary, Tree of Life North America (TOL NA) experienced a particularly challenging year, as the group struggled with a difficult market environment, intense pricing pressure and changes in the customer base,"​ the company said in a statement.

"Disappointing results at TOL NA were partially offset by solid performances in other areas of the company, most notably Tree of Life Europe (TOL Europe) and the Convenience Food Group (CFG)."

But as usual, the company reiterated its commitment to turning itself into a leading producer and retailer of wellness foods. "With the sale of Leerdammer in December 2002, Wessanen has completed the transition towards its wellness strategy. The year 2003 will be the first year to reflect results solely related to the wellness business,"​ it said.

The company declined, however, to make any predictions for sales and profits in 2003, other than to restate its target of exceeding 2002 figures. It did say that it expected to see sales growth at Tree of Life Europe, as well as operational benefits from improvements of efficiency and service levels at Tree of Life North America, while it also predicted a significant improvement in the UK cereals business as a result of increased focus on the value-added end of the market.

TOL Europe was the best performing Wessanen business in 2002, with sales of €407.4 million, up from €343.5 million. EBITDA from the division also increased, from €19.6 million to €23.9 million.

"In 2002, almost all TOL Europe companies increased the market share of their products on the shelves of the large supermarket chains,"​ the company said. "The EBITA increase of 22 per cent was driven by marked sales increases of some of the group's key brands and by good contributions from UK companies Nature's Store and Kallo Foods, both of which were acquired during 2002."

The figures for TOL NA did not make such attractive reading, however, with sales dropping from €1.9 billion to €1.8 billion. "Sales lost to two major customers, HEB and Albertson's, were offset by sales to Wild Oats Markets. The new relationship with Wild Oats, effective from September 2002, is expected to generate annual sales of over €150 million,"​ the company said.

The cereals business increased sales during 2002 from €231.1 million to €236.6 million, although EBITDA declined as a result of difficult market conditions and losses at the Telford Foods business in the UK which was sold in July. But a new focus on added value products, including cereal bars, should help improve the situation in 2003.

Wessanen's convenience food group showed a slight rise in sales, from €162.4 million to €163.4 million, driven in particular by sales under the Beckers brand and a number of product innovations. In Germany, sales decreased primarily because of the economic climate and the rationalisation of the German product portfolio. The integration of KK-Convenience and Beckers at the end of 2001 gave a major boost to EBITDA, however.

Wessanen's last remaining dairy product unit, Leerdammer, was sold to Fromageries Bel in November, but contributed €253.1 million to sales for the year.

Wessanen has been putting a positive spin on its financial position for some time now, but 2003 will be the real test of whether its wellness strategy will pay off. The group is certainly now much more streamlined, but there is still a lot of work to do at TOL NA, the cereals and convenience foods businesses before they start to perform at anything like their potential.

On the surface at least, the company seems to be taking the right approach - wellness and convenience are two of the fastest-growing segments in the food industry - but it cannot afford to take another year to turn before it starts to make a mark for itself in these markets.

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