Nomad Foods has become the latest branded manufacturer to report a significant fall in volumes after hiking prices to offset cost inflation.
The owner brands, such as Birds Eye, Aunt Bessie’s, and Goodfella’s, saw its total revenue increase 7.7% on an organic basis to €750m during the fourth quarter of 2022. This was driven by a 15.8% increase in prices which offset an 8.1% decline in volumes as cash-strapped consumers switched to cheaper supermarket own-label ranges.
The company noted that its adjusted gross margin fell 80 basis points to 25.7% as increased raw material costs were only partially offset by higher pricing.
Adjusted after-tax profit for the quarter slipped 1% to €58m, reflecting several one-off costs, including a €4.5m cost of living payment to its staff.
Total revenue for the full year increased 12.8% to €2.94bn, boosted by its acquisition of Fortenova’s frozen food business. However, organic revenue increased only 1.8% after a 5.9% drop volumes was offset by a 7.7% increase in prices.
Helped by the acquisition, annual adjusted EBITDA increased 8% to €524m, while profits after tax increased 6% to €293m,
Despite the weaker volumes and the consumer shift towards own-label, Nomad Foods’ Chief Executive remained upbeat.
“We are pleased to report that 2022 was another year of record revenue, adjusted EBITDA and adjusted EPS for Nomad Foods, again proving the resilience of our operating model in a challenging macro environment,” said Stéfan Descheemaeker.
“Most importantly, we adjusted our business model in response to extraordinary changes in the market, especially in raw material sourcing and portfolio pricing. Looking ahead to 2023, the frozen food category remains great value for consumers, and we have exciting plans in place to deliver strong operational results to build value for our shareholders.”
Over recent weeks, the likes of Kraft Heinz and PepsiCo have said they won’t be raising prices much further in the immediate future as consumers react to surging inflation by moving away from brands and into cheaper supermarket own-label. However, Coca-Cola, Unilever, P&G, and Nestlé have all stated that they will keep increasing prices to offset higher costs, showing the diverging paths consumer goods companies are taking to drive sales amid the tough economic conditions.
