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Pandemic exposes Sanford’s weaknesses as profit plummets

13th November 2020 By Bridget O'Connell | bridget@foodticker.co.nz | @foodtickernz

Sanford’s exposure to the foodservice sector and a sluggish response to the impact of Covid-19 in its international markets contributed to the company’s disappointing annual results, according to interim boss Andre Gargiulo.

Garguilo, who became acting chief executive on 18 September replacing Volker Kuntzsch, said that the pandemic exposed as weaknesses what were previously seen as strengths, leading to a 46% dive in net profit to $22.4m in the year to the end of September.

In the NZX-listed seafood company’s integrated annual report, Garguilo said Sanford’s focus on foodservice where its product yielded favourable margins had been a strength before the pandemic.

However, the pandemic hit out of home consumption hard in many of its key markets such as China, the US and Europe.

“In the past, if one territory experienced weakness, other markets might be strong. This time, we were seeing all of our markets impacted in waves – just as one settled down, others would shut down,” he said.

The pandemic also highlighted the tyranny of distance for the group, because when issues arose in key international markets, the previous solution of getting on an aircraft was not an option

“Without that instant access this year, our distance made it more difficult to respond rapidly to changing conditions in our key strategic markets.

He said the company has  “since addressed this, securing partners who share our values and understand the importance of close customer relationships, but we acknowledge there was a time lag in this response and that has been a factor in our results.”

The final weakness addressed in the report by Gargiulo, who is also chief customer officer, was a sluggish response to changing product demand at the hands of the pandemic in its international markets.

He said: “We have shown we can operate with great speed and flexibility in our domestic market, growing our online sales exponentially, but we couldn’t replicate this flexibility in our portfolio and in our international markets.

“We did not have sales access in new areas of demand, such as consumer retail. Again, we are addressing this weakness, but again, we have paid for the time lag.”

Both Gargiulo and the company’s chair, Sir Robert McLeod, addressed the broader strategic direction of the company in their respective reviews, in the light of a new chief executive taking the helm.

Kuntzsch departed as boss on 18 September after seven years at the helm.  An announcement from Sanford on 10 September said that “Volker and the Sanford board have agreed that now would be a sensible time for a new leader to drive the next phase of the strategy.”

Kuntzsch, who remains as a consultant until a permanent CEO is appointed, had led a drive from volume to value.

This saw Sanford start to move away from a reliance on the sale of large volumes commodity-based products, which still account for the substantial part of its revenues, into the development of value-added products.

Sir Robert said: “Our strategy emphasises a move towards higher value products. That remains the case.”

He added: “Volker’s resignation has raised the question as to whether that foreshadows a significant change in strategy. The board is clear that it does not alter the strategic direction of the company.

“Our strategy is a key contribution by Volker to our business and continues to be sound in major respects. New leadership will bring some different perspectives to the execution of that strategy, and the Board will capitalise on any improvement opportunity that arises.

“During Volker’s time, Sanford revisited its strategy each year to confirm its appropriateness to present and future conditions, and we will continue to do that.”

 

 


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