Hibernia to expand Entenmann's brand
Ireland's Hibernia Foods to extend the range of Entenmann's and
Sara Lee products it produces under licence for the European
market. But the range extension was not enough to stop a decline in
second quarter sales.
Hibernia Foods, the Dublin-based food group, has said it plans to extend the number of products it sells under the Entenmann's brand, produced under licence from the US group Sara Lee, in a bid to tackle the increasing competition from arch rival HJ Heinz.
The Irish group is the sole licensee for Entenmann's in Europe, marketing the sweet-baked cakes throughout 52 countries in Europe. It also sells other Sara Lee frozen desserts in the UK and Ireland, as well as its own ready meals and frozen desserts.
Oliver Murphy, chairman and chief executive of the company, said that the continued development of the Entenmann's brand, along with other portfolio extensions, was part of Hibernia's response to an aggressive marketing campaign by Heinz - a campaign which also took its toll on both sales and profits during the second quarter.
Sales for the quarter were €48.8 million, a 5 per cent drop on the same period a year earlier, due almost entirely to the intense competition in the frozen dessert market from Heinz. Pre-tax profits for the period were also affected, dropping from €10.6 million to €7.2 million. Net losses for the quarter were €4.4 million, compared to €938,000 a year earlier, while EBITDA dropped €1.0 million into the red from profits of €2.2 million in 2001.
"Our response to the aggressive HJ Heinz marketing campaign has been to successfully broaden our Sara Lee brand offerings to include cheesecake, apple pie, roulade and pavlova, thereby positioning Sara Lee as the complete branded-desserts solution. These products were launched in the current quarter (the third) but the associated costs were largely reflected in the second quarter. In particular, we have made a strategic decision to strengthen our position with the frozen cheesecake sector, both in branded and private label, a sector that has shown 27 per cent year-on-year growth,"Murphy said.
Murphy said that he was also pleased with the success of the Entenmann's brand. "We have developed a range of Entenmann's frozen desserts having a unique 'eat from the freezer' characteristic, sharply focused on the premium end of the market. These are scheduled to be launched in the first quarter of fiscal 2004. We are also expanding the Entenmann's product line to include individual frozen premium desserts and the initial offerings of these products will be test marketed at selected Sainsbury stores, the UK's second largest grocery retailer, in the fourth quarter of the current fiscal year."
But Hibernia produces more than just desserts. Its private label and branded ready meal operations performed well during the quarter, and gross margins for the year as a whole are expected to be 10 per cent higher than in 2001. Murphy added that the Mr. Brain's pork faggot line was in the early stages of a new marketing campaign, which he hoped would increase sales of the brand by the fourth quarter.
The innovation at Entenmann's and the focus on private label ready meals are both expected to help Hibernia to a marked improvement in results in the second half, according to Murphy. "Assuming that present business conditions continue for the remainder of this fiscal year, we believe that revenues will increase in the current quarter and demonstrate double-digit growth in the fourth quarter. Continuing with this momentum, we believe that we will be profitable in fiscal 2004," he said.
