Food industry vies to stay on top of the game

SQUARE melons, striped tomatoes and not a potato in sight? Who in their wildest dreams would have contemplated the prospect?

Last week’s announcement by Tesco that it will start selling the cubed phenomenon is yet another chalk mark for convenience.

The superstore giant says that cubed melons are easier to store and cut.

Not that we should be surprised. I believe the striped tomato is also making a return, in these days of anything goes.

Daft as some of these developments seem, they highlight the intense focus that major retail outlets are putting on the consumer.

Delivering what the consumer wants has become a major preoccupation.

Meeting those needs has put enormous pressure on food companies and research laboratories to keep coming up with the next healthy drink or convenience meal with added flavour and giving consumers what they want has turned into an unending quest.

One former food boss in Ireland once dreamed of producing a bar offering a fully balanced meal and who knows how near that breakthrough may be.

Meanwhile, companies like Kerry Group, Greencore, Glanbia and IAWS, some of the big players in Irish food, are enjoying different degrees of success.

Kerry, having gone through a massive period of expansion since its first acquisition in 1988, has seen its growth moderate and its earnings prospects move from double digit to single digit growth.

Part of the explanation is that Kerry drove its growth in ingredients though a succession of key strategic acquisitions that grew the bottom line but that also gave it a dominant position in the ingredients and flavours market.

The opportunities for fast growth have eased and it is significant that the group has been linked with Birds Eye, Unilever’s frozen food subsidiary.

Acquisitions played a big part in that. So, too, did the fact that, as we have already observed, consumer demands have been under pining one of the biggest revolutions in the history of the global economy over the past 10 years in particular.

Changes are continuing apace where convenience and health factors have become two of the biggest selling ploys in the food sector as consumers continue to juggle their daily lives.

In that context it pays to be on a particular consumer band wagon.

Several factors including variety, convenience and health, are the dominating concerns of today’s consumer and if, as a group you are meeting some of those needs, then you are ahead of the game.

Right now IAWS Plc looks to be riding that wave. In its part-baked and artisan breads and other bakery offerings as well as its savoury finger food offerings it is in a growing market segment.

Little of what it produces can be included in the healthy option category but certainly its La Brea artisan breads do tap into a quality end of the market that is reaching a bigger market in the US and here in Ireland.

The group is also lucky it is not reliant on the big multiples to reach its target market and the medium term outlook suggests the group has identified a segment of the food market that is set to grow.

From a growth outlook the group seems to have come up with a product range that meets the convenience criterion while it is involved in distribution outlets that will not wreck its margins.

In a recent review, Davy Stockbrokers said the group was in the upper quartile of food companies in terms of earnings outlook and suggests that earnings in the low double digit category are on the cards.

In the context of the highly competitive nature of retailing, that represents a pretty satisfactory situation if it can be sustained.