Young’s Seafood has blamed hefty internal investment for an alarming slump in profits but admitted it hasn’t secured wide enough distribution for some of its new lines.
Despite increasing gross profit from £47.6m to £48.3m and turnover from £381.9m to £475.6m in the 15 months to 31 December 2009, Young’s recorded a pre-tax loss of £23.4m, according to the latest accounts.
It attributed the fall partly to a £13m hike in administration costs and a £7m rise in the share of interest due on loans to parent Findus Group. Exceptional operating costs of £2.56m relating to redundancies and factory rationalisation had also hampered growth.
Management was seeking “manufacturing efficiencies, cost rationalisation and improved promotion of branded products” to combat the decline in its profit margin, the directors added.
The company has not necessarily had an easier ride this year, warned experts. While Findus has enjoyed success with frozen pasta unlike rival Birds Eye, which is pulling the plug on its Italian range other launches had failed to hit the mark with consumers, they claimed. One cited Young’s ‘It’s In the Bag’ fish range, which was launched last September.
Unlike Birds Eye’s Bake to Perfection range, which had to be oven-baked, the Young’s range was microwaveable and this raised doubt in consumer minds over quality, claimed the source.
“Research shows consumers prefer ‘cooking’ fish in the oven as opposed to ‘heating’ in the microwave. This begs the question, why did they launch a product that nobody wants or needs,” he said.
Young’s admitted that the range had failed to hit its £6m first-year sales target, achieving less than half that at £2.9m.
However, it insisted the problem was not quality but a failure to seccure the widespread distribution it had hoped for. Where it had been listed, the range had been “well received” by consumers, it claimed.
The latest accounts did not accurately reflect Young’s performance, it claimed, citing the complex financial and legal organisational structure of Findus Group. It added that it was happy with the figures given the significant investment made in the business last year.
However, PwC chief retail and consumer adviser Christine Cross warned that with Birds Eye firing on all cylinders to improve the perception of frozen with significant NPD and marketing, new Findus UK MD Leendert den Hollander would have to work hard to deliver on his pledge of overtaking Birds Eye in five years.
“There’s room for both brands” but Young’s must up its game, she said.
Young’s cuts the weight of salmon packs (16 October 2010)
New Findus boss vows to reignite frozen food (9 October 2010)