Glanbia shares plummet as company highlights SlimFast successes

01 Nov 2019 --- Despite increases of 16.9 percent in Glanbia’s wholly-owned revenues, Glanbia Performance Nutrition (GPN) is lagging behind with a volume decline of 7.9 percent. This is according to the global nutrition group’s third quarter 2019 interim management statement, which covers the nine-month period ended October 5. According to Reuters, shares in the Ireland-based company fell 11 percent following the release of these results. In contrast, Glanbia highlights the success of its recent US$350 million SlimFast acquisition, which reported growth. The company declined to provide NutritionInsight with further comments.

Siobhán Talbot, Group Managing Director, notes that the overall revenue growth was driven by “a strong performance from Glanbia Nutritionals as it meets demand from its global and regional customers for dairy and non-dairy solutions, as well as a good contribution from acquisitions.” The growth was also influenced by volume being up 2.4 percent, price up 3.2 percent and acquisitions adding 11.3 percent.

“In GPN, while we are very pleased with the performance of the SlimFast acquisition, our like-for-like volume performance is disappointing,” she continues. She notes that this 7.9 percent volume decline is largely driven by specific challenges in key non-US markets, including Europe, the Middle East, Brazil and India. 

GPN is actively addressing these issues, giving the example of Europe, where channel shift to online has accelerated. As a result, the company has enhanced the direct-to-consumer online platform. Additionally, the Body & Fit brand is being rolled out across the region.

Meanwhile, local market conditions have remained difficult in Brazil, Middle East and India as a result of currency and tariff headwinds. Each market requires different actions to address these challenges. These tactics focus on moving further down the value chain to ensure that GPN’s brands are supported by the right infrastructure and resources to compete locally. 

Siobhán Talbot, Group Managing Director at Glanbia.In the Middle East and Brazil, the route to market is currently being assessed to drive further optimization. In India, GPN is well advanced in developing alternative supply chain options, notes Glanbia. These initiatives will continue into 2020.

Acquisition integration
SlimFast saw growth accelerate across multiple formats along with successful innovations. Pro-forma like-for-like sales in the first nine months of 2019 were up 34.8 percent, with strong growth expected for the remainder of the year. The company acquired SlimFast late last year, in the hopes that the weight management and health and wellness brand family would play into consumer trends focused on convenient formats and snacking. 

In an analysts’ conference call yesterday, Talbot refused to comment on SlimFast results in terms of velocity versus points of distribution, although she noted that the company is getting good velocity across some of its key retail partners. 

“Within SlimFast, the big addition for us this year has been the growing bedrock of advanced energy products. The team have done a great job in the very on-trend keto category in this space within North America. They have been progressive in format development. This can be seen in going first with the ready-to-eat space, and really owning that space in keto. They are owning that overall category, which we believe will be sustained within keto for a period of time,” she elaborated on the call.

Additionally, lifestyle brands in North America delivered volume and price growth in Q3, driven mainly by the re-launch of the “think!” brand, which gained momentum despite a competitive market environment for bars. Formerly thinkThin, the brand gained its new moniker last April, which Talbot explains was in a bid to broaden its consumer base. She notes that “thin” resonates more with female consumers, but that the company aims to expand its reach. In the call, she also flagged the potential for products aimed at children or the plant-based space under the think! brand in the future. 

Following the acquisition of non-dairy ingredient solutions business Watson last February, the brand is “performing well with integration on track.” Part of Nutritional Solutions (NS), Watson has helped expand the NS supply chain footprint and bring added technical capability into NS.

Other key results include: 

• Strong performance from Nutritional Solutions (NS) growing revenue 25.4 percent. The Watson acquisition notably added 12.2 percent, with volume up 9.3 percent and price up 3.9 percent. Good growth across global dairy and non-dairy solutions was observed.
•  GPN increased revenue by 16.5 percent, with the SlimFast acquisition adding 25.8 percent. This was offset by a price decline of 1.4 percent and a volume decline of 7.9 percent. In Q3, a price increase was successfully implemented as planned in the US.
• Guidance reiterated for full year 2019 adjusted earnings per share on a reported basis being in a range of 88 cent to 92 cent.

Looking ahead, NS and US Cheese are expected to deliver good revenue growth along with a positive contribution from the Watson acquisition. GPN is expected to deliver good overall revenue growth as like-for-like revenue declines of mid-to-high single digits are countered by a strong performance from the SlimFast acquisition. The SlimFast acquisition is expected to have a very strong year as a result of growth across multiple product formats and successful innovation.

By Katherine Durrell