Birds Eye says tough conditions will persist as sales dive again

The decline in sales at Birds Eye has accelerated with another £31m wiped off the top line in the challenging frozen market created by the supermarket price war.

Revenues tumbled 7% to £415.3m in the year to 31 December 2015, coming on top of a near 5% fall in the previous 12 months.

The latest accounts for Birds Eye Ltd show the struggle new owner Nomad Foods, which bought the iconic brand along with parent Iglo Group for €2.6bn in April 2015, has on its hands in turning the business around.

Birds Eye said in a statement the rate of sales decline had been expected to slow this year, but conditions remained challenging.

“Birds Eye and our grocery retail partners continue to invest in price, to remain relevant to value-seeking consumers for whom the discounters now represent a very real shopping alternative,” it added.

Operating profits slumped from £62.5m to £8m in the year as cost of sales ballooned by more than £30m to £371.4m. Birds Eye said this was the result of a change in the way inter-company transactions were accounted for following the Nomad deal.

It added the impact of lower volumes actually resulted in a decrease in cost of sales, helped by ongoing factory efficiencies and a benign commodity environment.

Exceptional costs of £6m also hit the bottom line, including £1.8m redundancy pay after it sold off its pea processing factory in Lowestoft and £1.9m paid to management after the sale of Iglo to Nomad.

Birds Eye said in the accounts that a new strategic focus on the core business, as well as the launch of a new frozen breakfast range, would help the company to “remain relevant and competitive”.

The business also set out plans last year to unlock an additional £676m of revenues in frozen food over the next three years. Its blueprint includes an overhaul of supermarket layouts, building the online channel and capitalise on the growth of convenience.

MD Wayne Hudson, who took over from Andy Weston-Webb last year, said online sales continued to outperform traditional supermarket business across the frozen category, but growth had slowed significantly year on year.

“However, we continue to see high long-term growth potential and this channel is a priority for us as an organisation. We have a clear online growth footprint and, working in partnership with our key customers, we continue to outpace the market in terms of growth.”