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AVI wants to be less sweet

While revenue and operating profit saw an uptick, the group must keep up with new trends.

Consumer brands company AVI has plans to include healthier, low-to-no sugar biscuit products under its food portfolio in light of the sugar tax rates and in accordance with consumer lifestyle changes.

The company, which has a number of categories under its portfolio, including food and beverages, personal care, footwear and apparel, reported a 2.3% growth in revenue for its interim results for the year ended December 31 2017.

AVI CEO, Simon Crutchley, speaking at a results presentation on Monday, said the business managed this despite finding the last six months challenging.

AVI’s operating profit increased by 8.7%, headline earnings rose 8.3% and headline earnings per share increased 7.5% to 325.6 cents. An interim dividend of 175 cents per share was declared, which is an 8.0% increase from 2016.

The Snackworks brand, which is popular for biscuits and snacks, was the highest contributor to segmental revenue at R2.18 billion, even though it was the only category in which revenue declined, by 0.8%. The operating profits however picked up by 9.6%.

AVI chief financial officer, Owen Cressey said biscuits was one of the key areas of spend, while Crutchley maintained that AVI has also worked to protect its biscuit volumes and its market share.

Crutchley mentioned that AVI is continuing innovation in biscuit production and will be launching two new products in coming weeks. Without revealing too much, Crutchley mentioned that there is a drive towards including more “no-to-low sugar” biscuits in the market as per market demand.

“We have a number of projects in the Bakers business to look at no-sugar or low-sugar formats in our biscuits portfolio,” he said.

He said at this point he can’t say that there will be a fundamental shift in the demand environment, however the need is relevant and “it represents an opportunity for growth”.

Chief economist at South African Institute of Race Relations, Ian Cruickshanks said the shift to a healthier portfolio will certainly be welcomed by the market, however it is a gradual process and he expects progress to be slow.

With the announcement of a sugar tax, companies are taking heed of the effects on their production, and Cruickshanks said AVI is working on reducing sugar in some of their major sellers, however this will also happen at a slow rate, because an immediate and total removal of sugar from their products will just drive customers away.

“They are trying to reduce the sugar they use, so one (sugar tax) helps the other (shift to a healthier assortment) to a certain extent,” he said.

Cruickshanks said since there was an emphasis on a challenging and difficult environment, investors should expect relatively slow growth compared to last year, however, AVI remains a leading company in consumer goods, which is well managed and has always been protected against currency volatility.



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