Mexican dairy company Grupo Lala has posted third-quarter sales of MXN 15.02 billion ($785 million) – up 9.6% on the same period last year despite sluggish performance within its US business.
Lala reported pre-tax earnings of MXN 1.86 billion ($97.2 million) – 25.7% higher than the third quarter of 2016 – with net income growing 33.7% to reach MXN 1 billion ($52.26 million).
CEO Scot Rank said “2017 has been a year with strong sales performance, productivity improvements, and some challenges in the US dairy market.”
The group’s American business – Lala US – has not posted a significant increase in sales since this time last year.
“I remain confident that our business and operational fundamentals are solid, and that Grupo Lala has the capacity to successfully expand our footprint in the Americas,” Rank added.
Lala set up a US division after acquiring the branded business of Laguna Dairy and, this August, also acquired the Brazilian dairy business Vigor from J&F Investimentos.
By region
The company’s third-quarter results were driven by 7.8% organic growth in Mexico and Central America, which came from pricing, improved sales mix and volume growth. The remaining 1.8% of inorganic growth was derived from an expansion to Lala’s business in the US, where it consolidated results starting in August 2016.
In the US, Lala net sales reached $42 million, driven by drinkable yoghurt and Promised Land speciality milk. But contraction in other areas – including Lala’s cultured dairy business, which includes sour cream, dips and cottage cheese – contributed to overall losses during the quarter of $3.7 million. Lala’s drinkable yogurt business, based at the firm’s manufacturing facility in Omaha, Nebraska, is the only portion of Lala US that turned a profit before tax.
The recently formed management team of Lala US is implementing turnaround plans that will be launched at beginning of the first quarter of 2018 that will put it on a path towards profitability. Plans include a complete reconfiguration of Lala’s manufacturing strategy in culture and speciality milks, as well as a Promised Land portfolio uplift, which incorporates new packaging designs and pricing brackets.
“While we acknowledge these results are disappointing, we are convinced that investing in expanding our distribution in both drinkable yogurt and Promised Land is the right thing to do in the midterm, as well as the fastest way to gain scale and to become profitable,” Lala said. It believes that EBITDA for its US business will breakeven a year later than previously expected.
By category
By segment, milk remained Lala’s largest category, accounting for 62.4% of total sales. Other dairy products accounted for 32.9% of sales, while the remaining 4.7% was taken up by beverages and miscellaneous. ‘Other dairy products’ (including cream, butter, yogurt, cheese and ice cream) continue growing above all segments, with 12.8% increase driven by strong performance in cream and cheese. The milk segment increased 9% compared to last year, with growth coming from Lala 100 and Nutrileche.
The highlight of the quarter was the opening of a new cold cuts operation, which has been incorporated into Lala’s ‘beverages and other products’ reporting segment.
In the past few months, it has launched a sliced and packaged panela cheese; sour cream in squeezy containers; and is implementing a US-wide rollout of its Promised Land speciality milks.
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