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Massimo Zanetti profits fall, as it rides out switch towards own brands

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Massimo Zanetti revealed a drop in sales volumes, but a rise in revenues, as it absorbed the impact of a focus on own-branded products, a strategy which undermined in particular sales in the Americas.

The Italian-based group said that sales volumes of roasted coffee dropped by 0.7% to 63,239 tonnes in the first half of 2017 – with the decline even greater, at 4.1%, excluding the contribution of Nutricafes, the Portugal-based coffee group bought last September for E74.5m.

However, sales rose by 7.4% to E475.6m during the half-year – or by 3.2% excluding Nutricafes – in a reflection of a shift by Massimo Zanetti away from lower-value business bagging coffee under customers' brands.

"There was a continued development in the sales mix towards more profitable products," said the company, whose brands include Segafredo, Chock full o'Nuts, Puccino's and Boncafé.

"The increase in revenue can be attributed to the more effective mix of channels and products, as well as to the improvement in average sales prices."

Americas lag

By volumes, sales under private label contracts fell by 5.2% to 30,504 tonnes – slipping below 50% of group volumes, to 48.2%.

With Zanetti's private label business particularly strong in the Americas, sales in the region suffered too, dropping 6.1% by volume to 37,134 tonnes.

Revenue growth in the Americas, at 3.0% to E227.2m, also fell behind that in other regions, with northern European sales up 5.1%, and those in southern Europe soaring 17.0%, feeling a particular boost from the Nutricafes takeover.

Segafredo spending

By market segment, the growth baton was picked up by the group's food service operations, which raised revenues by 13.4% year on year.

Revenues from single service coffee jumped 42%, fuelled by launches and marketing drives under the Segafredo brand in France, Greece, Italy, Portugal and Spain.

However, "higher investment" in advertising and promotions came at a cost, which helped curtail operating profit for the half year to E10.81m, a drop of 3.1% on the same period of 2016.

Earnings dropped 14.6% to E4.40m, with the decline also fuelled by foreign exchange factors.

Shares in Massimo Zanetti - which said it was sticking by its full year targets, which include growth of 2.0-4.0% in sales and 10.0-12.0% in ebitda - closed up 1.1% at E8.15 in Milan.

By Mike Verdin

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