Grocery | 12 GROCERY BRINGING YOU GREAT BRANDS
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Strategic report | Operating review | Grocery | 12 GROCERY BRINGING YOU GREAT BRANDS GREAT BRANDS, FROM BREAKFAST TO BEDTIME About Grocery: Grocery comprises consumer-facing businesses that manufacture and market a variety of well-known brands both nationally and internationally. Twinings Ovaltine has the broadest geographical reach, selling premium teas and malted beverages in more than 100 countries. Associated British Foods plc Annual Report and Accounts 2015 Strategic report | Operating review | Grocery | 13 BRINGING YOU GREAT BRANDS Strategic report AB World Foods focuses on the creation in the production of its wholegrain cereals In Australia, Tip Top is one of the country’s and development of world flavours and and cereal bars. Ryvita has built a strong most recognised brands, with an extensive its Patak’s and Blue Dragon branded reputation in healthy snacking and is the range of bread and baked goods and products are sold internationally. UK category leader in crispbreads. Allied George Weston Foods also manufactures Westmill Foods specialises in supplying Bakeries produces a range of bakery a variety of bacon, ham and meat products UK restaurants and wholesalers with products under the Kingsmill, Sunblest, including the Don and KR Castlemaine high-quality ethnic foods including rice, Allinson and Burgen brands, with flour brands. ACH Foods includes within its spices, sauces, oils, flour and noodles and semolina produced by sister company, range of branded products, Mazola, under brands such as Rajah, Lucky Boat Allied Mills. Speedibake specialises in the leading corn oil in the US, Capullo, and Elephant. own-label baked goods for retail and a premium canola oil in Mexico and foodservice customers. Silver Spoon and a collection of herbs, spices and Jordans and Ryvita operates in the Billington’s are our two retail sugar brands corn-derived products. better-for-you cereal and savoury biscuits in the UK, complemented by a range of categories in the UK but with increasing dessert toppings and syrups under the international presence. Jordans has Askeys and Crusha brands. a heritage of using traditional methods Associated British Foods plc Annual Report and Accounts 2015 Strategic report | Operating review | Grocery | 14 GROCERY FROM TWININGS TEAS TO DORSET CEREALS – WE HAVE AN ENVIABLE PORTFOLIO OF LEADING FOOD BRANDS Grocery operating profit increased Revenue by 5% at constant currency with DORSET CEREALS Twinings Ovaltine and our US In October last year we acquired £3,177m vegetable oils business well ahead Dorset Cereals, a leading muesli of last year. Revenues were 3% lower, 2014: £3,337m brand in the UK that has generated held back by commodity price significant market growth over the Actual fx: -5% deflation, leading to an increase past ten years with a range of stylish Constant fx: -3% in margin. packaging designs and recipes made Twinings Ovaltine grew market share with delicious natural ingredients like Adjusted operating profit in a number of regions and generated a ‘luscious berries & cherries muesli’. strong profit increase. In the UK, where The Dorset Cereals brand is a perfect £285m the market for mainstream teas saw some fit for Jordans, Dorset & Ryvita (as the contraction, Twinings’ sales of premium 2014: £269m business is now known) given their teas grew. Black tea packaging formats expertise in creating cereals made Actual fx: +6% were relaunched, including a premium, from wholegrains; as well as their Constant fx: +5% loose-leaf, mesh teabag range, driving UK obvious association with the beautiful market share to an all-time high. Australia county of Dorset, which has been Adjusted operating also had another successful year with the home to Ryvita since 1948. profit margin relaunch of the English Breakfast range supported by advertising and in-store Dorset Cereals continues to be based 9.0% promotion. Ovaltine sales in Thailand, one at its home village of Poundbury in of its most important markets, were lower Dorset, and now benefits from the 2014: 8.1% than last year on the back of economic increased scale and cumulative weakness, although margins improved expertise of the wider Jordans, Return on average as less volume was sold on promotion. Dorset & Ryvita business community. capital employed Growth was achieved in Ovaltine’s The acquisition has helped to create developing markets, particularly south one of the most innovative and 22.5% east Asia and Nigeria. Strong factory dynamic wholegrain cereal businesses 2014: 20.8% performances across the business in the UK that is perfectly positioned delivered lower manufacturing conversion to benefit from long-term consumer costs, and overheads were also lower trends towards more healthy, benefiting from cost reduction initiatives. premium foods. Associated British Foods plc Annual Report and Accounts 2015 Strategic report | Operating review | Grocery | 15 Strategic report THE STRENGTH OF THE DON BRAND The last few years have been challenging In pre-pack ham, where DON continues for the George Weston Foods meat to be the market leader, we launched business in Australia but in the last a ‘premium tier’ with the addition of 12 months the DON brand has achieved a a Smokehouse Deli Style product to substantial improvement in performance. the range. We also gave the consumer A key element of the turnaround has more choice by introducing a wider been the development of strategies, range of pack sizes. Category staples in partnership with our key retailers, such as frankfurters were reinvigorated to optimise the deli and chilled cabinet with improved pack formats, new beef fixtures in store. Sales growth and varieties and innovation through DON margin improvement have been delivered Kransky Slims. The move to gas flushed through a focus on quality, by increasing packaging and shelf-ready shippers the range of products on offer, and by for bacon significantly improved Sales volumes at Allied Bakeries increased highlighting the brand’s key attributes. DON’s presence on shelf as well as over the financial year although the improving the overall appearance UK bread market continued to be very The retail chiller aisle in Australian of the bacon category. challenging and lower bread prices supermarkets is an area where resulted in a reduction in profitability. prepacked smallgoods (ham, bacon, We have also taken the DON brand The Kingsmill brand was relaunched in frankfurters, salami etc.) have historically into new segments with a range of May with new packaging across the range. underperformed against global cooking ingredients, including diced Following last year’s highly successful benchmarks. Shopper research bacon, ham and chorizo; and the launch launch, revenues from Sandwich Thins confirmed that the aisle was difficult of DONSKI salami sticks for anytime continued to build and benefited from to shop and the range lacked breadth, convenient snacking. the addition of a wholemeal variant to the appeal and inspiration. As Australia’s The results have seen a resurgence in range. We completed our major capital best known and preferred smallgoods DON brand awareness and increased investment programme during the year, brand, DON took the lead in transforming consumer preference. DON smallgoods introduced a variety of initiatives which the shopping experience. Strategies sales grew by 10% over the prior year reduced waste and further streamlined to drive increased volume included: with an increased retail market share, production, and delivered products of redesigning the way products are and there are more opportunities still a consistently high quality throughout presented on shelf; improving the value to pursue. the year. of everyday ham; creating a premium quality tier; expansion into new Silver Spoon substantially improved categories; and increasing marketing operational efficiency this year and and media investment. achieved commercial success with increased volumes to the major UK retailers. In the home baking sector, Allinson maintained its position as the leading bread flour brand. Since its acquisition in October 2014, Dorset Cereals has traded ahead of our business plan and its integration with Jordans Ryvita went smoothly. The business gained market share and three products won 2015 Great Taste awards. Jordans continued to perform well, also gaining market share in the UK and launching very successfully in Australia. It also launched its Jordans Farm partnership in conjunction with LEAF (Linking Environment and Farming) and the Wildlife Trust ensuring improved sustainability and biodiversity on the farms of our oat suppliers. Ryvita had a more difficult year with lower crispbread sales in a competitive market. The introduction of a second sweet crispbread variety, Apple & Cinnamon, was well received and Ryvita Thins continued to grow strongly. Associated British Foods plc Annual Report and Accounts 2015 Strategic report | Operating review | Grocery | 16 GROCERY Associated British Foods plc Annual Report and Accounts 2015 Strategic report | Operating review | Grocery | 17 Strategic report ENGAGING THE SENSES WITH OUR PREMIUM BLENDS Twinings is about creating This year, both within the UK and internationally, Twinings launched new brands people love – premium ranges of large leaf teas winning hearts and minds in transparent mesh bags, housed in striking and original packaging. Our by delivering inspiring master blenders have drawn on their tea experiences. expertise, and inspiration from their travels, to craft a range which engages Central to our strategy