Geest improves thanks to ready meal focus

Related tags Retailing Meal Geest

The fast-growing fresh ready meals market in the UK - and even
higher growth rates in France and the Benelux - helped UK food
group Geest to a 15 per cent increase in sales last year.

A focus on fresh prepared foods continues to pay off for UK-based Geest, helping the company post a solid increase in sales of around 15 per cent to £762 million (€1.1bn) in 2002.

EBITDA growth for the year was 10 per cent, taking the figure to £73.9 million, while profit before interest and tax grew 2 per cent to £44.3 million.

Chairman Sir John Banham said he was pleased with the performance, which came in a year "not without its issues for Geest"​. The focus on the fast-growing prepared foods market - which grew 9 per cent in 2002 - and the launch of more than 600 new products during the year were the main drivers of the growth.

"We continued to see good sales growth reflecting strong consumer demand for fresh prepared foods in the UK and elsewhere in Europe, alongside a step jump in our whole head produce business,"​ Banham said.

"We remain focused on the fresh prepared food market where growth will easily outstrip that for the food sector as a whole. With its valuable market positions, high quality products and facilities and its innovative abilities, the board is confident in Geest's future growth prospects,"​ he added.

The acquisition last month of the French company Crudi​ was expected to bear dividends this year, Banham said, since the fresh prepared foods markets in the Benelux and France are growing faster even than that in the UK. Geest is now one of the three largest producers of leaf salads in France.

Sales of UK fresh prepared foods grew by 8.5 per cent to £582 million, with an excellent 16 per cent increase in sales of ready meals - well ahead of the market as a whole which showed 13 per cent growth. Ready meals is Geest's biggest fresh prepared food market, but with ready meals accounting for less than 1 per cent of all UK meals (according to the company) there is still huge potential for growth.

The UK market for salads was affected by lower-than-usual demand in the summer, with Geest's prepared leaf and tray salad sales growing by 8 per cent in a market which rose by an estimated 11 per cent. Sales of other convenience salads grew by 4 per cent, less than the market.

In the pizza market, Geest​ recorded 14 per cent growth, helped by a number of new product launches and an extension of the PizzaExpress brand into a second retailer. The company said it was investing in new production facilities to meet growing demand for its products in this market.

Stir fry sales also outperformed the market, growing 4 per cent, while prepared fruit sales growth of 6 per cent was disappointing in a market which rose by over 20 per cent. However, Geest pointed out that growth in the previous year had been near 30 per cent.

Geest's dips business had a good year and outperformed the market with sales growth of 13 per cent. In the pasta and bread division, the focus was on investment in new facilities rather than on driving sales, which meant that sales growth in pasta was 1 per cent and in bread 4 per cent, both behind the market sector growth rates. However, these are clearly sectors with massive potential - hence the investment - and the company is hopeful of driving profitability at both businesses during the current year.

In the pasta sauces sector, Geest continued to improve its market position and saw sales growth of 10 per cent , with particularly strong sales towards the end of the year. In the soups sector, the company's growth was a disappointing 1 per cent, mainly because it is focused on the low growth private label market. The UK soup sector grew 14 per cent in 2002, but almost all of this was due to new branded products.

Geest entered the desserts market late in 2000 through the acquisition of Isleport Foods, and last year was a year of restructuring at the unit, including the decision to stop supplying frozen desserts to the foodservice sector. The tighter focus on the retail trade paid off, however, with overall sales increasing by 29 per cent, including a 54 per cent rise in sales to supermarket groups.

The company also posted sales of around £13 million in other areas, such as sandwich wraps and fresh salad dressings, while the foodservice business grew by 13 per cent.

Outside the UK, sales of fresh prepared foods in Continental Europe rose by 26 per cent to £48 million, with a 21 per cent increase from Dutch unit Vaco helped by a product relaunch programme. In France, the Cinquième Saison business grew 30 per cent in a market sector which grew by 11 per cent, helped by the acquisition of Brittany-based SBLP in May

"Despite more uncertainty in the economy than there has been for many years, we still see strong growth in our market,"​ Banham said. In the UK, there is evidence that many consumers are trading up into higher value products and Geest is well positioned to benefit from the increase in the value growth that this represents. Additionally, further consumer growth is made more likely by retailers investing in convenience stores, where sales of fresh prepared foods are proportionately much higher."

He continued: "Our home market for fresh prepared foods is showing good growth and our leading market positions ensure we are well placed to benefit. Our growth is likely to be in more than one country, as evidenced by our recent acquisition, which strengthens our position in the French market and allows opportunities in Spain.

"We estimate that fresh prepared foods account for only about 5 per cent of the total food retail market by volume - suggesting substantial headroom for further growth. We are confident in our ability to exploit this and while our rate of sales growth is dependent on a recovery in prepared salads, we are seeing good growth in our other areas."

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