The company, which makes processed foods including ready meals and deli meats, said that it is grouping some of its divergent activities in France into a single operating unit that it said will be more “coherent”, “efficient” and “responsive”.
The company said the merger of “several subsidiaries” will come into effect at the beginning of next year. This will reduce complexity and operating costs, Fleury Michon claimed.
The group also wants to improve its innovation process through the reorganisation plan. Fleury Michon said this will allow it to respond to “new consumer expectations” in “different moments of consumption”.
The company, which produced 395m units of food last year and has a household penetration rate of 79% in France, added that it wants to “accelerate major launches”.
Two years ago, Fleury Michon launched a programme dubbed “helping people eat better every day”. Since then, the group has expanded its line-up of bio and vegetable-based options through product launches that aim to tap into sustainable eating trends. Recent product launches include vegetable burgers, falafels, bean and pea burgers, and soy-based steaks.
Fleury Michon said that it is “accelerating” the deployment of its “eat better” drive, which has enabled it to show retailers that it is both “relevant” and “credible”.
Fleury Michon also increased its investment in marketing to support newly-launched products. According to its first-half results update, Fleury Michon spent €2.7m more in the first six months of 2017 versus 2016. This enabled the company to run TV, digital and print campaigns behind its J’aime, Bio and vegetarian lines.
As part of Fleury Michon’s CSR initiatives, the group stressed that it is also participating in the government-backed Etats Généraux de l’Alimentation.
This is a policy from the French government to look at trade relations in the food supply chain. Fleury Michon said that it is necessary to achieve “balance and performance” and added that it intends to actively participate in the Etats Généraux de l’Alimentation.
Price hikes and profit pressure
Fleury Michon’s reorganisation initiative comes as the company reported declining profitability.
The group said it is being squeezed between the “price war” being conducted by French retailers and rising raw material costs. The company noted that pork costs, in particular, have hit “historical” highs and Fleury Michon said it was not able to push through price increases to reflect these elevated expenses.
As well as feeling the pinch in France, Fleury Michon reported lower revenue from its international operations, with overseas sales declining 3.9%. The company was nevertheless upbeat on its international business, noting the acquisition of a stake in Italian antipasti, vegetable, seafood and pasta group Sapore e Gusto Italiani allows it to “consolidate” its position in this market.
Turnover totalled €359.8m in the six months to end-June, a decrease of 3.3% year-on-year. Operating income plummeted to €3.7m, down from €13.3m in the comparable period of 2016. This drop was primarily driven by a lower operating margin, which fell to 1% compared to 3.6% last year. The net result dropped to €1.7m from €8.9m last year.
Fleury Michon said that it has now passed pricing through to its retail customers and noted that this action should help boost sales and earnings in the back half of the year.
Coupled with the group’s reorganisation efforts, this should enable the French food giant to “quickly recover” its “usual level of profitability”, the company forecast. Fleury Michon said that it expects second-half margins to rise to “approaching 2%”.