TORONTO — Maple Leaf Foods Inc.’s big plans for sustained growth in the market for meat alternatives are getting smaller. The company is “rightsizing” its business to address forecasted demand that never materialized.
“We now understand why it did not materialize, and we no longer believe that it will materialize,” said Michael McCain, president and chief executive officer, during an Aug. 4 conference call to discuss the company’s second-quarter results. “So, we are altering our business model and dialing back our investment to reflect the goal of profitable growth …”
Maple Leaf’s Plant Protein Group sales during the quarter ended June 30 were C$40.8 million, down from C$48.1 million during the same period of the previous year. The second-quarter sales result reflects a further deceleration of category sales, which were C$44.9 million during the first quarter.
“The decrease was driven by lower retail volumes as consumers adjust to higher prices, partially offset by higher foodservice volumes, as well as pricing action to offset inflation,” said Geert Verellen, chief financial officer.
Plant Protein Group gross margin was negative 25% during the quarter as a result of low sales volumes, low capacity utilization, raw material inflation and startup expenses, according to the company.
Efforts underway to scale back the business include adjusting spending to reflect current market conditions, normalizing revenue management and moving excess capacity to Maple Leaf’s Meat Protein Group.
An analyst participating in the call noted that any reduced spending may impact the business’ ability to compete, but McCain noted everybody in the category is dialing back efforts to gain “share of voice.”