Specialist
Former senior manager at Upfield Europe BV
Agenda
- Update on the UK spreads market dynamics amid inflationary pressures
- Butter vs margarine – pricing, health positioning and consumer perception
- Longer-term category innovation potential and competitive dynamics with butter
- Upfield’s UK growth and market share strategy, plus competitive positioning after spin-off from Unilever (LON: ULVR)
Questions
1.
What cost pressures are facing the butter and the margarine industries in the UK or more generally speaking, if you prefer to widen it out?
2.
Do you have a feel for the magnitude of the cost pressures and whether there’s any noticeable difference across butter and margarine?
3.
You spoke about a roughly 20% cost increase in margarine, and suggested things are beginning to taper off now. Are we at peak cost pressure in margarine?
4.
You alluded to butter probably still being earlier on the increasing cost curve. How possible is it to get a feel for when this might peak?
5.
To what extent can manufacturers, either in butter or margarine, hedge out? Obviously it just delays the inevitable, but if we’re keeping an eye on spot prices and P&L impacts, could you explain the hedging dynamic?
6.
You mentioned raw materials are the biggest cost for butter and margarine. What percentage of total costs are raw materials, and is there any significant difference between butter and margarine that might influence the required magnitude of price increases?
7.
Where do you think we are now in terms of margins and price increases given your comments on hedging and what you might have seen in terms of actual list price increases with retailers?
8.
You commented on substituting oils and mentioned rapeseed to coconut oil as one means. How significant a cost saving can this be? Presumably this is only in certain SKUs. What consumer pushback might you get from this?
9.
You spoke about margarine taking pricing roughly 5-7% and butter 3-5% in 2021. Are there any geographical highlights across Upfield’s markets in Europe or does that speak to most markets?
10.
How do you think about the pricing environment going forward? There are still more cost pressures to come through and hedges to unwind. How might this impact consumer behaviour?
11.
You said people could spread a bit less in this economic environment. Where were volumes trending prior to the change in dynamic you discussed? How should we think about the volume trajectory over the next 18 months or so for the category, including butter and margarine?
12.
To confirm, there’s a slight behavioural shift with consumers substituting meat for a spread when they might not have been using a spread before?
13.
Might the price increases we’re seeing have any impact on the interplay between butter and margarine? I’d also like to bring in private label, on either side, into the discussion. Alternatively, do you think pricing is just up broadly and uniformly and it won’t have any impact on the interplay between these categories?
14.
How long-lasting might the trend of customers trading down amid price increases be? Is there a risk to A brand manufacturers that a consumer might try private label in the category for the first time and just stick with it when things get better?
15.
What actually happens when the cost environment softens or normalises? Maybe we don’t get back to where we were but we have higher price levels. Could this be a longer-term margin benefit for branded players or the category or might these prices come off in time?
16.
What might be margarine vs butter’s health positioning?
17.
Can margarine be functionally healthy? I’m thinking of Omega-3 oils. Is it just less unhealthy than butter?
18.
How well do you think the facts you outlined are understood by the consumer? You were talking about the importance of marketing.
19.
What was the difference in the market in the Netherlands that made it easier to educate the consumer and drive the shift to margarine?
20.
How big a barrier is culture in converting a market? Alternatively, do you think it comes down to spend? You mentioned profit levels, but if you’re able to educate the consumer around the benefits, surely you ought to be able to improve the pricing architecture. Is this correct?
21.
Where’s the potential for conversion in the German butter and margarine markets? It’s a big market, with greater disposable income.
22.
We’ve spoken about some of the health credentials of margarine vs butter. Where does margarine sit in terms of its unnatural perception vs butter? On the flip side, it technically is a plant-based product, which should resonate with consumers.
23.
Is there a risk that margarine is seen as too old a product to be propositioned as a plant-based product, which is a relatively newer consumer trend? You made the reference to our mothers thinking of it as an unhealthy product.
24.
Should margarine be marketed as a healthier version of butter or as a plant-based product? Can you do both?
25.
Where can innovation go from here in terms of further improving the health benefits, and ultimately claims, for margarine?
26.
Is there any scope for further functional benefits for margarine, or is it just a category that can’t carry anything other than the Omega-3 benefit?
27.
Is there anything the butter industry can do to fight back on some of margarine’s functional health benefits or is butter just a non-starting point?
28.
What are your thoughts on Upfield and how it might have changed since it’s no longer been under Unilever’s ownership? Has it had a significant impact on strategy?
29.
Where might the competitive threat come from from Violife? Do we need to keep an eye on things?
Gain access to Premium Content
Submit your details to access up to 5 Forum Transcripts or to request a complimentary 48 hour week trial
The information, material and content contained in this transcript (“Content”) is for information purposes only and does not constitute advice of any type or a trade recommendation and should not form the basis of any investment decision.This transcript has been edited by Third Bridge for ease of reading. Third Bridge Group Limited and its affiliates (together “Third Bridge”) make no representation and accept no liability for the Contentor for any errors, omissions or inaccuracies in respect of it. The views of the specialist expressed in the Content are those of the specialist and they are not endorsed by, nor do they represent the opinion of, Third Bridge. Third Bridge reserves all copyright, intellectual and other property rights in the Content. Any modification, reformatting, copying, displaying, distributing, transmitting, publishing, licensing, creating derivative works from, transferring or selling any Content is strictly prohibited
