Despite the ongoing “softness” in the meat-alternatives category, Quorn’s gross margins have shown signs of recovery.
Monde Nissin, the owner of Quorn, continued to experience challenges in the meat-alternatives sector, although the decline in second-quarter sales was less severe than in previous quarters.
The results for the three months ending 30th June presented a mixed picture for the meat-free category. While the Philippines-based Monde Nissin reported a recovery in gross profits and margins, there was also a widening in EBITDA and net losses.
Conversely, the company’s core Asia Pacific branded food and beverage business (APAC BFB) recorded a 5.7% increase in comparable sales, reaching 16.46 billion pesos (US$287.2 million). Group sales, which include both meat-alternatives and APAC BFB, grew by 4.2% to 19.82 billion pesos on a comparable basis.
CEO Henry Soesanto commented: “For our meat-alternative business, we saw some gradual improvement in gross margin, which we expect will be maintained and improved upon as the year progresses. Our focus remains on optimising costs and seeking efficiencies with the goal of maintaining EBITDA neutrality or better for the year.”
While the EBITDA outlook was sustained, Soesanto also noted the group’s overall performance: “During the second quarter, APAC BFB experienced modest top-line growth and continued expansion of gross margin and core net income on a year-on-year basis.
“Our APAC BFB gross margins have substantially rebounded from last year’s levels, and while we believe further sequential gains will be limited, we expect to see continued improvement in Q3 on a year-on-year basis.”
In a follow-up call with analysts, Soesanto mentioned that “despite continued challenging business conditions” in the meat-free sector, margins improved as input costs began to ease.
Monde Nissin’s comparable second-quarter sales in the meat-free segment decreased by 2.7% to 3.37 billion pesos, compared to a 4% decline in the first quarter. These figures have been adjusted to reflect changes in accounting standards implemented in the final quarter of last year.
However, Nick Cooper, CFO of the Quorn business division, noted that underlying sales, adjusted for customer de-stocking, were down by 9%. He added that this decline was consistent with the first quarter’s performance.
“This top-line trajectory is worse than we’d anticipated at the start of the year and is largely driven by the continued double-digit decline in the UK retail market,” Cooper explained.
“In this environment, we’re very much focused on protecting cash and profitability, while at the same time funding targeted investments to drive a return to top-line growth.”
Breaking down the performance by channel, Cooper reported that meat-alternative sales in UK retail fell by 10.2% during the quarter, leading to a “small erosion” in Quorn’s market share.
In contrast, foodservice sales showed growth, with daily sales figures up by 8%. Out-of-home sales accounted for 20% of the category’s revenue over the quarter, including further expansion of the business with the fast-food chain KFC.
Elsewhere in the meat-free segment, gross profit increased by 3.9% to 778 million pesos, following a 14.5% decline in the first quarter. The gross margin rose by 146 basis points to 23.1%, recovering from a previous 376-point drop.
EBITDA for the category remained in negative territory, standing at an 84 million peso loss compared to the same period last year. This followed a 60 million peso loss in the first quarter, which had narrowed from a 116 million peso loss in the corresponding period of 2023.
Meat-free net losses amounted to 270 million pesos, following a 216 million peso loss in the first quarter of the year.
During a Q&A session with analysts, Quorn CEO Marco Bertacca was asked to provide insight into the trading environment for meat-alternatives and volume expectations.
“I think the key element that we are monitoring is really the UK retail environment because currently we see some relative growth in Europe and in foodservice, while the UK retail environment is still under pressure,” Bertacca responded.
“We are the market leader here and we need to continue to consolidate or to strengthen our gross margin in order to be able to invest in consumer attractiveness propositions.
“Certainly, we expect for this year and possibly also for next year some pressure on volume, and we are continuously looking at ways to optimise our footprint to adjust for that so that we can become stronger for the future.”
