Libstar looks to new products
Food manufacturer Libstar, whose brands include Robertsons spices and Denny mushrooms, says the rapid introduction of new and improved products helped it outperform peers in its first half to end-June. It is confident in its position as the industry grapples with rising input costs, more frugal customers and shifts in shopping behaviour.
Food manufacturer Libstar says rapid introduction of new and improved products has helped it outperform peers in its first half to end-June.
It is confident in its position as the industry grapples with rising input costs, more frugal customers and shifts in shopping behaviour.
The producer of a raft of products, including Lancewood cheeses, Robertsons spices and Denny mushrooms, grew revenue in its food business by 10% in its six months to end-June, CEO Andries van Rensburg said on Wednesday.
It compares with 4%-6% growth for peers, indicated by the data it has access to.
“The affordability of goods has become more important than before,” said Van Rensburg, adding that private-label brands are rapidly growing in importance. More people are cooking and cleaning at home, while health consciousness is increasing among consumers.
The group said it is also benefiting from efforts to tap into shifting consumer trends, evident in it launching 316 new or renovated products in its six months to end-June, when revenue grew 8.7% to R5.1bn.
Since listing in 2018, the group has launched 1,842 new or improved products, while removing others, bringing the total to about 9,000.
The group received more than 93% of its revenue from its food business to end-June, but operating profit was below par. Its household and personal care business also underperformed.
Libstar said its exposure to higher-income consumers provided some support in the first half of 2021, but while that bracket proved more resilient than others, demand constraints were more evident at all levels.
Food producers have noted that the industry has been trying to absorb rising costs to protect market share, with Libstar reporting on Wednesday that its first-half profit fell more than a quarter to R73.4m.
SA’s food inflation averaged 6% in Libstar’s first half, up 1.8 percentage points year on year, and prices of key inputs, such as wheat and soya, have risen amid robust demand from China as well as weather issues for some producers.
A stronger rand also affected the group, which generates about 12% of revenue from exports. It realised a foreign currency translation loss of R3.2m to end-June, from a gain of R20.1m previously.
Its biggest division, perishables such as cheese and valueadded meat products, grew revenue 13% to R2.4bn, while groceries rose 12.9% to R1.64bn.
The group’s gross profit margin, a measure of profits compared with revenue, in its food business slipped 0.8 percentage points to 23%, though Libstar noted volumes traditionally pick up in its second half.
Dirk van Vlaanderen, portfolio manager at Kagiso Asset Management, said it is a decent result for the food business, and the slight decline in margins point to good pricing to offset input cost inflation and good cost control elsewhere.
“Libstar’s decentralised nature and closeness to its customers continues to result in product innovation and agility to tap into emerging, highergrowth consumer trends,” Van Vlaanderen said.
The strong performance in food is overshadowed by a weak performance from the home and personal care division, he said.
Revenue in the group’s household and personal care division, 7% of the group’s total, fell 9.6% to R375.8m, with the division posting a core loss of R15.3m, from profit of R37m previously.
During the period the group consolidated four manufacturing and distribution sites to save costs, the benefits of which it expects to see from its second half, while it also noted sales of items such as sanitiser were strong in early 2020.
The underperformance of this division offset market share gains, with Libstar saying that, with the data for products it has access to, its share of the fastmoving consumer goods basket held steady at 12.8%, out of a basket of R27bn, in the 12 months to end-June.
Industry peers such as RCL Foods and AVI have also been grappling with a need to pass on rising costs to consumers, with the industry, like many during Covid-19, striving to cut costs.
Libstar’s retrenchment and settlement costs more than tripled to R16.87m, with the group cutting about 200 staff, or 2.5% of its workforce.
Libstar said keeping costs low is an ongoing feature of its business. It would not be drawn on how many new products it will launch in its second half, though some, including new condiments, are in the offing.
By the JSE’s close on Wednesday Libstar's shares had lost the most in a month, down 3.91% to R6.15, having fallen by almost a fifth since the start of 2020.