Former manager at Upfield Europe BV
- European volume dynamics and category share movements between butter and margarine
- Cost price increases and subsequent impact on price and category shares
- Upfield portfolio review, expansion opportunities and potential strategies
- Upfield’s growth outlook
Could you outline which 2-3 longer-term trends are shaping the European plant-based spreads market? How has this market developed over the past 18 months?
On margarine and butter as well as spreadables, I suppose that’s one anomaly in growth, the industry seemed to be in structural decline pre-pandemic. Has there been any change in the market and consumer behaviour that would have resulted in volumes across margarine and butter returning to growth? Alternatively, are both these markets still in structural decline as they were pre-pandemic?
Have you noticed any return of the volume in the foodservice sector? Obviously, that was really impacted by coronavirus.
Do you think it’s just a matter of time before volumes return to the full extent of pre-pandemic, or could any significant change limit volumes from ever hitting pre-pandemic levels?
What price increases have we started seeing in the market across butter and margarine?
What’s driving the low price of butter?
What’s happening around the price of margarine? You mentioned market share pushing towards butter because of its low price.
Is the share of promotion in margarine sustainable, or are we seeing significant costs come through that might force prices to go up and promotions to decline?
Does Upfield have the possibility to switch between types of oils if it wanted to move from sunflower to rapeseed oil? Sunflower oil is obviously really key and comes from Ukraine.
The vegetable oils being sourced in Ukraine are a key factor for Upfield. Is there any flexibility? How are the contracts with suppliers already set up? Will Upfield be getting the full increase of these prices coming through to it or has there been any hedging from the company’s side?
Do you think Upfield could pass on the cost increases it’s getting to the customers in full? It seems you have cost impacts and the market share category impact stemming from this, so two negatives.
How are contracts negotiated with the customers? Are there clauses for automatic pass-on of the raw material prices we’re seeing, or any kinds of special situations in the contracts on the customer side?
How might Upfield think about passing on any cost to the retailers? Is there anything the company can do to try and sneak it through, perhaps decreasing the amount of promotion?
How do you think Upfield performs vs other margarine players and private label players? Do you think this kind of environment promotes the cheapest and most value brands out there?
If the environment promotes trading towards private label, does this alter Upfield’s margin structure at all, with more private labels being bought vs the branded products?
Are there any other situations that might pertain to Upfield, either on the material side or the Russia-Ukraine conflict? Is there anything from the production side we should think of?
You touched on the issues Upfield has faced since its December 2017 separation from Unilever and the original separation was quite problematic. Do you have any sense of why it was a bit more problematic than expected? Has Upfield been able to stabilise the situation and cost base since then?
How do you view Upfield’s new strategy, now pivoting into clean labels and refocusing the brand to more plant-based vegan products? Do you think this is a fit-for-purpose strategy? Obviously, it makes sense, but is the company capable of pivoting towards such a strategy?
Would Upfield’s new strategy require higher R&D and marketing spends vs what is currently included?
Can Upfield pursue its new strategy to full effect, given it has pressures around P&L and raw materials? Alternatively, would you expect the company to scale back a bit on pursuing such a strategy, even though it’s vital for longer-term success?
You said Upfield’s European business is starting to decline. Is there any way the company can turn this around in the coming years? I know its management speaks about the 20% of the business that still needs to be fixed. Can it fix that or is this a structural issue which cannot be overcome?
Do you have any concerns around the Upfield assets and its manufacturing footprint? Are the company’s manufacturing plants up to date or is additional CAPEX needed?
What happens to Upfield’s factories with volumes decreasing and inefficiencies rising? Is there any way the company can mothball some of the assets?
What’s a reasonable CAPEX-to-sales ratio for Upfield, given you mentioned it needs to invest?
Are there any competitive forces within the margarine market that might pose a threat to Upfield and could take market share from the company? Obviously, the market is now moving away from Upfield and consumer decisions.
Do you think there’ll be any justification for Upfield to push spend towards its margarine brands, given these seem to run the market? Would that help the company with volumes and sustain market share at all? It is entering new categories, which will take a lot of the marketing and R&D spend.
Are there any other levers that you think Upfield has at its disposal to accelerate top-line growth?
What are your thoughts on the cost side and cost base? Is there any more room there that Upfield can play with to really help sustain margins?
Who do you think would buy Upfield if its current owner KKR looks to sell it? Would it be a trade deal? How do you see that playing out from an exit standpoint?
Do you think KKR would ever look to split the Upfield businesses?
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