Bonduelle, the French vegetable processor, reported a 16.3% jump in sales for the year to the end of June, with revenues rising to €2.3bn.
The group’s chief financial officer believes that – while this reflects the contribution of both M&A and currency exchange – organic growth was also key to getting Bonduelle over the line and enabling the group to reach its target of breaking €2bn in sales.
“We are very happy that for the first time, we reached over €2bn of sales. We missed this target for the last two years. This is not due to the acquisition of Ready Pac Foods. It's not due, either, to the exchange rate,” Sanson said.
Growth at a constant scope of consolidation stood at 2.7%. Bonduelle was able to achieve this despite headwinds including weak consumer sentiment, economic “crisis” in emerging economies and “difficult” harvests that limited its ability to capitalise on growth opportunities.
Global ambitions
Bonduelle grappled with poor consumption trends in Europe, where it generates more than 50% of group sales.
Sanson said Bonduelle reported flat revenue here this year, compared to a drop in the prior year period. In particular, Bonduelle saw improved sales trends in the fourth quarter of the year. However, Sanson cautioned against interpreting this as a sign of recovery in the region.
“This does not mean that we had better success in Europe this year. Unfortunately, that was not the case. We did not see any real recovery in the consumption climate. But we did perform pretty well with our brands on cans and frozen, both in retail and foodservice. It has not been a very good year for the fresh business, mainly due to some bad weather conditions that we had during winter time,” he revealed.
Difficult conditions and flat consumption in Europe have prompted the company to pursue a strategy of internationalisation that has seen it beef up its business in non-European markets.
In March, Bonduelle acquired US salad supplier Ready Pac Foods for $409m. Sanson said that this will drastically alter the profile of the business. “North America - Canada and US - will represent in 2018 50% of our sales… We are more and more international. The USA will become our country number one [market] and France will represent only 25% of our sales.”
Sanson predicts that the majority of Bonduelle’s future expansion will come from outside Europe.
“Clearly, in Europe, the demographic is stable. We have a pretty good market share, so we might have some small acquisitions of some brands in some countries, but the growth will be limited.
“The growth for Bonduelle will come from the non-Europe zone, firstly through Ready Pac Foods. We do expect from this acquisition [to deliver] a double-digit gain. But we will continue to have acquisitions. We have used [M&A] to fuel half of our growth since the IPO in 1998. So that's what we did in the past and that's what we have in mind for the future.”
M&A priorities
While Bonduelle would consider bolt-on acquisitions in Europe, the company is principally targeting growth in emerging markets where it can build leading market shares.
“We are looking for growing activities, meaning some businesses which have to be developed in emerging countries, for instance. We are looking for strong market share and brand, so leadership positions,” Sanson explained.
Bonduelle also wants to expand its fresh vegetable business ahead of canned and frozen activities, he continued. “As far as we can, we are looking for businesses which are less capital intensive than our past historical businesses… Our priority would be in the fresh business. But we might also consider, and especially in emerging countries, some acquisitions in canned and frozen, provided that you have brands attached to those businesses.”
Branded push
Brands have been central to Bonduelle’s strategy as the company sheds less profitable private label contracts in order to boost its sales/mix.
“We are pushing on our brands. We decided a few years ago to focus on our brands,” Sanson said.
To this end, Bonduelle sold its stake in Spanish private label joint venture Ardo last year. The group is also working to right-size its production capacity in Europe as it cuts its private label production volumes. This initiative has included the closure of Bonduelle’s production facility in Russy Bémont in northern France.
In order to support the branded growth, Sanson said innovation and marketing are “key”.
“When you promote brands, you have to first innovate, and, second, to invest in your brands. That's what we are constantly doing at Bonduelle. More than 15% of our sales are made of innovation coming from the last three years. And we increase our investments in marketing so we clearly invest in our brands.”
Bonduelle’s business includes fresh, frozen and canned vegetable products. In 2016, the company opened a new innovation centre in Saint-Priest, to the south-east of the French city of Lyon, to support innovation in the fresh segment. However, Sanson suggested that while NPD in the fresh and frozen sectors might be most evident, it is nevertheless important for all of the group’s business units.
“If you would have to rank innovation among our segments, I would say fresh first, frozen second, and cans third. We can innovate in cans but it's limited compared to the fresh business because we are talking about snacking products, and clearly snacking is growing fast. Also in frozen, you can have more added value products.”
Sanson pointed to the introduction of vacuum-sealed cans – a range of products called 'Vapour' – as evidence of innovation in the tinned aisle. “Vacuum cans show that we can innovate in this segment. We do estimate that part of our sales on vacuum cans cannibalised our existing products. But clearly, for half of our sales, we are talking about additional products. So that's why we
launched [vacuum cans] in France and in all the other European countries.”
For Bonduelle, innovation is a tool to grow market share. “In stable markets like canned and frozen, if you want to expand your market you have to innovate. We gain market share through innovation."
Centre store migration
Bonduelle is in a unique position as both a beneficiary of – and hostage to – trends that see consumers migrating from the centre to the periphery of the store and increasing their consumption of fresh products.
Sanson is upbeat on the prospects for the canned and frozen aisle, however.
“The magic thing in our business is that we do have the competition from the fresh vegetable, but that's only for a limited period of time, during summer time mainly. The rest of the year, if you want to eat peas or corn, you have to buy processed vegetables, except if you accept to buy fresh products, but coming from far away.”
With food miles a growing hot topic for consumers, Sanson believes canned and frozen brands can capitalise. He also thinks frozen and canned foods resonate with a growing awareness of nutrition. “You have more nutrients in canned and frozen[vegatables] than in fresh because we harvest the vegetables at maturity, and once it is harvested, within three hours it will be processed.”
Growth channels: foodservice and e-commerce
As well as growing the company’s share of branded retail sales, Bonduelle’s product development and marketing initiatives aim to open up growth markets for the group.
In particular, the finance chief suggested foodservice sales will be an important growth area moving forwards. The sector in developed markets such as Europe and North America is expanding as the need for convenience prompts many consumers to increase their out-of-home consumption, Sanson observed.
“We see an increasing demand in this area. Pressure has been made in these segments due to the economic environment, but we do expect [growth] for the near future, with clear recovery in these segments.”
Elsewhere, Bonduelle has invested in expanding its presence in e-commerce. In January, Bonduelle launched a service enabling French consumers to have the company's products delivered to their homes, My Secret Basket.
However, Sanson said that, because Bondeuelle’s products have a relatively low unit price, the opportunities in direct-to-consumer are relatively muted in the near-term.
“We… sell directly to consumers online. But we are selling low priced products, so it's not totally appropriate to this channel. We pay a lot of attention to what Amazon is currently doing. But it's true that, for the time, it's pretty limited.”
Nevertheless, he expects growth in e-commerce in the longer term. “It will be a growing segment and there's no reason why we should not be in those segments.”
Bonduelle plans to cater to this demand by being the branded “leader” because brands typically over-index online. “We only have to be the leader, because [online] channels, [e-commerce] companies, will need the branded leaders to promote the channels.”