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Changing face of retail hits Kerry Group

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By Rod Addy+

Last updated on 07-Aug-2014 at 19:00 GMT

Kerry Foods makes a range of consumer brands
Kerry Foods makes a range of consumer brands

Consumer food sales took a hit at Kerry Group from the fragmenting retail market, despite UK brands holding up well, and overall sales growth, the firm said in its interim management report.

Commenting on the first half of 2014, the company, which is active in areas such as ingredients and flavours and ready meals, stated: “Increased fragmentation of food retailing coupled with prioritised spend and drive for value by consumers in the Irish and UK markets continued to impact performance in Kerry Foods’s chilled foods categories.”

Underlying value and volume sales and trading profit in its consumer foods division had fallen over the period, it said.

“Kerry Foods’s UK customer brands’ business was adversely impacted by category performance at major multiple retail accounts,” it added. “In chilled ready meals, reduced retailer promotional activity led to a 4% decline in sales in Kerry Foods' meal categories.”

In February, the company reported that sales of frozen and chilled ready meals had been hit by the consumer reaction to the horsemeat scandal.

While Kerry Group had achieved sales and profit growth in the first six months of 2014, Investec analyst Ian Hunter said the results were “slightly below market expectations”.

Hold its own

However, the group said product launches had enabled it to hold its own against competition to its branded sausages and cooked meats in Ireland from discounters and own-label alternatives.

In addition, it said, its Yollies yogurt lolly range, launched after the close of the interim period in Ireland, had gained leading retailer listings. It plans to introduce it to the UK later this year.

It also stressed that the consumer foods division had continued to become more efficient and that its focus brands were still doing well, particularly in the UK.

The group was also making positive progress through new product development, “winning a strong pipeline of new product development projects and briefs from major global and regional food and beverage accounts”, it said.

“Recent major investments in Kerry global technology & innovation centres continue to drive industry-leading innovations and are a key differentiator in the marketplace.”

Taste and nutrition

The company said it was successfully rolling out its taste and nutrition services in developing markets.

“Despite relatively weaker economic conditions in some regional developing markets and political instability in some zones, Kerry continues to record solid growth − in particular through nutritional applications in Asia,” it added.

Construction of the Kerry global technology & innovation centre in Ireland to serve Europe, Middle East and Africa customers was well-advanced and on schedule to be operational in early 2015, the company said.

In May the group opened a new regional development & application centre in Durban, South Africa to serve its expanding global, regional and local customer base in sub-Saharan Africa.

Kerry Group, which makes brands such as Wall’s, Mattesons and Cheestrings, reported group revenue up 3.2% to €2.9bn (£2.3bn) in the six months to June 30. Volume sales also rose by 2.7% and trading profit by 3% to €275M (£218.4M).

“We are pleased to report a solid group-wide performance in H1 2014 with good underlying sales growth and margin improvement,” said Kerry Group ceo Stan McCarthy.

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