The biggest stock market winners in grocery this week were to be found in the household product aisles.
Reckitt Benckiser had advanced 3.8% to 3,510p by Thursday lunchtime after announcing a global shake-up of the business on Wednesday. Its North American and European operations will be merged and run out of Amsterdam to free up more resources for emerging markets, which currently account for 38% of sales and will make up 45% by 2016 if all goes to plan.
It will be hoping the move accelerates its share gains. In 2009, the success of products such as Vanish and Cillit Bang sent shares in the opposite direction to the market - up by about 25% - but since 2010, sales growth has lost its lustre. As a result, shares have settled on a downward trajectory of peaks and troughs and today’s share price stands at just over 100p above 2009 values.
As part of the reorganisation, Reckitt announced plans to close the German private label business Propack - a move that will play into the hands of McBride. Peel Hunt analyst Charles Hall described the exit as a “major opportunity” for the UK manufacturer, which makes private label household and personal care products for 49 of the top 50 retailers in Europe.
McBride’s shares rose 3% in trading to 125p on Thursday morning after the company reported a 2% increase in underlying sales for the final six months of 2011. The share price had been on a downward trajectory since the start of 2010, falling from a high of 240p as profits came under pressure from input price hikes. In the second half of last year, raw material costs continued to erode margins. Adjusted operating profits were 49% below 2010 levels, at £10.3m, but analysts welcomed that fact they were 17% up on the first half of the year. “McBride is steadily coming through a tough period,” said Hall.
Fellow private-label manufacturer Greencore, which makes chilled ready meals and sandwiches, also had a good week. An 11% jump in underlying sales for the three months to 27 January sent share prices up almost 5% to 71p in Thursday morning trading. However, the share price remains a long way below the 400-500p range seen in 2007 before Greencore was hit by an accounting fraud involving the concealment of millions of pounds in cost at its Scottish mineral water business.