Keeping People

Operating review | Grocery & 66% In the first week the UK keeping went into lockdown, Allinson’s Mill delivered 66% more pallets of flour people to its customers than the fed weekly average. Read more about how Grocery rose to the challenge on page 25 22 Associated British Foods plc Annual Report and Accounts 2020 Strategic report GROCERY Grocery comprises consumer-facing businesses that manufacture and market a variety of well-known household brands both nationally and internationally. ABOUT STRATEGY Twinings Ovaltine Allied Bakeries Each of our grocery businesses The largest of our grocery businesses, Allied Bakeries produces a range of pursues an independent Twinings Ovaltine, has broad bakery products under the Kingsmill, strategy appropriate to its geographical reach. Twinings has been Sunblest, Allinson’s and Burgen brands, particular market position and blending tea since it was founded in with flour and semolina produced by stage of development. Twinings 1706 and now sells premium teas and sister company, Allied Mills. Speedibake Ovaltine, Acetum, Jordans infusions in more than 100 countries. specialises in own-label baked goods, Dorset Ryvita and AB World Ovaltine malted beverages and snacks such as muffins and mince pies, for Foods have had considerable are consumed throughout the day in retail and foodservice customers. success extending their reach countries across the globe. into new and emerging markets, George Weston Foods, Australia whilst some are focused on Acetum George Weston Foods is one of developing brands in their core Acquired in 2017, Acetum is the leading Australia and New Zealand’s largest food domestic markets. Italian producer of Balsamic Vinegar of manufacturers. Tip Top is one of the Modena. It sells vinegars, condiments most recognised brands in Australia All of our businesses are and glazes across the globe, trading with an extensive range of bread committed to the consistent under the Mazzetti brand. and baked goods. The Don and KR development of their brands Castlemaine brands manufacture and consumer research is AB World Foods a variety of bacon, ham and meat conducted locally and AB World Foods focuses on the creation products. Yumi’s produces hommus, internationally to establish and development of world flavours and vegetable dips and snacks and is the consumer needs and ensure its Patak’s, Blue Dragon and Al’Fez leader in the Australian market. appropriately targeted branded products are sold internationally. investment. Our production ACH Foods, North America Westmill Foods facilities are well maintained and ACH Foods includes within its range of Westmill Foods specialises in high- we take a long-term approach to branded products Mazola, the leading quality foods including rice, spices, capital investment, recognising corn oil in the US, Capullo, a premium sauces, oils, flour and noodles sold the merits of building for the canola oil in Mexico and renowned under brands such as Rajah, Lucky Boat, future. Acquisitions are baking brands such as Fleischmann’s Tolly Boy and Elephant Atta. undertaken when opportunities yeast, Karo corn syrup and Argo are presented to either Jordans Dorset Ryvita corn starch. Anthony’s Goods is an strengthen or complement Jordans Dorset Ryvita operates in the organic and natural flours, meals and existing businesses. better-for-you cereal and savoury food business, primarily for online. biscuits categories with increasing Silver Spoon international presence. Jordans has a Silver Spoon and Billington’s are heritage of using wholegrain oats in the our two retail sugar brands in the UK, production of its cereals and cereal bars. complemented by a range of dessert Dorset Cereal’s award-winning muesli toppings and syrups under the Askeys and granolas are renowned for the and Crusha brands. quality of their ingredients, which include wholegrain oats as well as fruits, nuts AB Sports Nutrition and seeds from around the world. HIGH5 and Reflex Nutrition are brands Ryvita has a strong reputation in healthy in the sports nutrition sector producing snacking and is the UK category leader protein supplements, recovery gels and in crispbreads. drinks in the UK and sold internationally. The HIGH5 brand sponsors a wide range of sporting events across the UK and internationally. Annual Report and Accounts 2020 Associated British Foods plc 23 Operating review | Grocery HOUSEHOLD FOOD BRANDS ENJOYED ALL OVER THE WORLD Revenue Our Grocery businesses delivered a Switzerland and Brazil. Overall margins very strong performance with adjusted improved and also benefited from a full operating profit growth of 15% and year of production efficiencies following £3,528m profit margin increasing from 10.9% the closure of our tea factory in China 2019: £3,498m to 12.4%. Their business plans, set last year. a year ago to achieve further margin Silver Spoon, Jordans, Dorset Cereals, Actual fx: Up 1% improvement through improved trading Ryvita and AB World Foods all benefited Constant fx: Up 2% and cost efficiencies, were realised. Our from significant increases in consumer businesses responded to the increased demand in the second half of the year. Adjusted operating profit demand for food sold through the retail Westmill and AB Sports Nutrition saw channel as a result of the restrictions sales and profit declines due to the imposed by governments to contain the reduction in foodservice demand and spread of COVID-19. Workplaces were £437m sports events respectively. The rapidly adapted to ensure a safe working 2019: £381m acquisition of the fast-growing Al’Fez environment for our employees. We Middle Eastern brand complements Actual fx: Up 15% overcame the logistical and operational AB World Food’s existing brand portfolio Constant fx: Up 15% challenges posed by COVID-19 and and we have already achieved new retail produced higher volumes throughout listings in the UK and internationally. Adjusted operating the second half. These higher volumes profit margin more than offset the decline in those Allied Bakeries revenues declined this products sold to out-of-home and year following the termination of our foodservice channels. largest private label bread contract earlier in the financial year. The business 12.4% Grocery revenues were 2% ahead of implemented a significant cost reduction 2019: 10.9% last year with growth in Twinings, UK programme during the year. Combined 2019 IFRS 16 pro forma: 10.9% Grocery, ACH and George Weston with a COVID-19 related uplift in sales Foods in Australia. This growth was held the underlying operating result improved. back by lower foodservice sales and a Return on average Following our announcement in July of decline in Allied Bakeries. Adjusted capital employed our exit from the Co-op contract, the operating profit growth of 15% was carrying values of some of our driven by cost efficiencies and, distribution assets have been reviewed, particularly in the second half, lower resulting in a write-down charge of 31.3% promotional spend more than offsetting £15m. In the second half we received 2019: 27.4% a one-time non-cash asset write-down £30m for the insurance claim relating to 2019 IFRS 16 pro forma: 26.2% in Allied Bakeries of £15m. the fire in February at our Speedibake Twinings made good progress this year Wakefield factory. This has been treated with volume growth in black tea and as exceptional and more than offsets the infusions in the retail channel in each of exceptional charge of £25m taken in the its major markets. In the second half of first half. the year the benefits from an increase in Acetum delivered profit growth with home consumption more than offset a increased sales of balsamic vinegar decline in the much smaller out-of-home in North America and a further channels. A key driver was the growth in improvement in margin. ACH’s Mazola healthy teas with the launch of a became the leading US brand in cooking Twinings Infusions range in France for oils earlier this year and the second half the first time and the expansion of the saw extremely high demand from the Wellness range in the US. Sales of retail channel for our products. Since the Ovaltine were held back by the impact of introduction of government restrictions COVID-19 on impulse sales, particularly related to COVID-19 in North America in Thailand and Vietnam, partially offset there has been an exceptional increase by successful new product launches in 24 Associated British Foods plc Annual Report and Accounts 2020 Strategic report Grocery in action HOUSEHOLD FOOD FEEDING BRANDS ENJOYED ALL OVER THE WORLD THE UK in the demand for ingredients for Associated British Food’s grocery home baking. Although successful in businesses worked around the clock to At peak demand significantly increasing production meet the unprecedented consumer our businesses saw: capacity for baking ingredients, demand for high-quality, affordable food demand has still exceeded our ability during lockdown, when public to supply. Anthony’s Goods, the movement was severely restricted. supplier of high quality natural and Orders for everyday staples surged after organic food products acquired in lockdown began in March and at peak 13% September last year, performed demand Allied Bakeries saw a 13% strongly this year also driven by this rise in bread production at increase in bread production. Orders demand for home baking products. Allied Bakeries for Jordans, Dorset Cereals and Ryvita George Weston Foods delivered products rose by 28% and demand for excellent sales growth and margin Westmill’s retail noodles, both retail improvement, with strong sales of brands and own-label, rose by 97%. bread and breakfast goods by Tip Ingredients for family meals were also Top more than offsetting weaker highly sought after, with sales of Patak’s 28% foodservice sales of meat products sauces up 45% and Blue Dragon meal rise in demand for Jordans, by the Don KRC business. Yumi’s kit purchases increasing by 75%, Dorset Cereals and Ryvita products has seen continued strong sales reflecting the fact that more people growth and we have invested in new were eating three meals a day at home.

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