Select Harvests ponders what's best for breakfast in strategic review

Select Harvests reviews food business margin options

Agribusiness
Aa

An expanding Select Harvests' food business operations is one of several strategies under consideration

Aa

Intense competition in the diverse breakfast food and health snack market has prompted almond business Select Harvests to think seriously about its food business options.

Expanding the company's food operations is one of several strategies under consideration in a review due to be completed later this year.

Select is Australia's largest almond producer and processor, and indeed the world's third largest almond grower, but its food products business is relatively modest in comparison to the many big international and domestic names in the grocery game.

"It's fair to say we've suffered from a lack of scale in what is a pretty busy and competitive category," said managing director Paul Thompson.

"Our food division has not really performed to where we've wanted it to be for some time.

"Now is a good time to review our strategic growth options across the supply chain."

Select Harvests' signature brands are the Sunsol and NuVitality muesli ranges, and Lucky snacking and cooking nuts and health snack mixes.

It also services the food manufacturing sector via its Renshaw bulk almond product range and, as Australia's biggest exporter, is well known offshore, particularly Asia, through its Allinga Farms brand.

Higher margin focus

While the business review was looking at a broad range of changes, including potential cost savings such as relocating from its current headquarters and packing plant site in Melbourne's Thomastown, Mr Thompson said the company was exploring openings into new, higher margin food categories, too.

Cost cutting strategies had potential to improve the bottom line, but needed to be weighed up against building earnings capacity in the business.

He said it was no surprise to anybody involved in Australia's $950 million breakfast food market the muesli category alone had many new and established players achieving varying levels of success as consumer habits evolved.

RELATED READING: Select Harvests buys $129m Piangil orchard

Food industry analysis show pockets of strongest value growth in the breakfast market last year came from health and wellness cereals such as the free from gluten and organic ranges, while a proliferation of probiotic products entered the scene or expanded their portfolios.

Select Harvests was one of those launching into the probiotic space with a Sunsol toasted muesli range, while Freedom Foods dominated the fast growing gluten-free breakfast muesli and related cereal market.

However, Mr Thompson, said different challenges faced by the likes of Freedom Foods and Murray River Organics in the past year suggested optimistic consumer buying trends were no guarantee of business success.

Nestle's Uncle Tobys brand has the strongest position in Australia's breakfast cereal market thanks to a strong brand engagement and a health and carefully promoted nutrition reputation across breakfast cereals and cereal bars.

COVID-19 challenges

This year Select's food division challenges have been intensified by the coronavirus pandemic which saw the domestic market shift away from the food service sector to erratic retail demand.

The company responded with the release of six new Lucky cooking product lines for supermarket shoppers as home cooking climbed in popularity and out of home eating shrank.

"We've had a big increase in sales to supermarkets, but I don't see a dramatic shift over the long term," Mr Thompson said.

Similarly, export activity stalled suddenly when the pandemic hit.

Global prices and cash flow slowed noticeably as ports in key markets such as India and China closed, but activity had cranked up again as the year progressed.

In fact, US trade figures indicated India's import appetite was now significantly above last year, suggesting consumers were seeking out healthy foods and ingredients to help fight the virus.

On balance...

"We've also been fortunate to be able to offset a lot of this year's market price risks with a larger crop to sell, so it's pretty much balancing itself out," Mr Thompson said.

Early this month Select Harvests further bolstered its crop prospects for 2021 announcing it was buying the 3000 hectare Piangil Almond Orchard in northern Victoria from United Almonds, Bright Light Agribusiness and Lake Lucas Almonds.

The $129m purchase will expand Select's total orchard area by about 20 per cent.

It was immediately endorsed by investors buying almost $82m in extra shares to help pay for the deal

Select Harvests has farms spread from Hillston and Griffith in south western NSW to Paringa and Loxton in South Australia, with a big production and processing focus around Mildura in Victoria.

  • Start the day with all the big news in agriculture! Sign up below to receive our daily Farmonline newsletter.
Aa

From the front page

Sponsored by