Product recalls slash Strauss Group profit 90%

Strauss-Elite confectionary factory in Nof Hagalil  credit: Strauss PR
Strauss-Elite confectionary factory in Nof Hagalil credit: Strauss PR

The Israeli food company posted a profit of just NIS 64 million for 2022.

2022 was a year Israeli food company Strauss Group will want to put well behind it. The huge recall of products from the company’s confectionary factory at Nof Hagalil, after salmonella was found in some product samples, caused a NIS 482 million hit to sales and a NIS 293 million hit to net profit. The company posted a net profit for the year of just NIS 64 million, down 90% in comparison with 2021.

The good news for Strauss is the public remained loyal to its confectionary brand. Data from Storenext indicate that Strauss’s share of the confectionary market, which plummeted in 2022 because of the shutdown of the factory, has bounced back to 24% currently, not far below the 27% market share that the company enjoyed before the recall.

Strauss’s humus line also caused it problems last year. In 2021, salmonella was discovered at the Sabra factory in the US, held in equal shares by Strauss and PepsiCo. Humus production was restored only in late August 2022, and Sabra’s share of the US retail market sank from 62% to 31%.

Strauss’s 50% share of Sabra’s revenue totaled NIS 382 million in 2022, 45% less than in 2021. Sabra posted an operating loss (50%) of NIS 104 million for the year, which compares with an operating profit (50%) of NIS 35 million in 2021.

Despite these events, Strauss managed to maintain annual sales at NIS 6.1 billion, thanks to its international coffee business, which offset the effect of the confectionary product recall.

Strauss’s overseas sales totaled NIS 4 billion, 45% more than in 2021. The profit of the café sector jumped 87% to NIS 363 million.

Strauss Group, which is controlled by the founding family headed by chairperson Ofra Strauss, has a market cap of NIS 9.5 billion, after a 17% decline in the past year. CEO Shai Babad, a former director general of the Ministry of Finance, was appointed last year, after the recall. He replaced long serving CEO Giora Bardea. Strauss’s financials show that Babad’s compensation cost was NIS 1.1 million monthly, more than half in stock-based compensation. Bardea’s annual compensation was NIS 5 million.

Published by Globes, Israel business news - en.globes.co.il - on March 23, 2023.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.

Strauss-Elite confectionary factory in Nof Hagalil  credit: Strauss PR
Strauss-Elite confectionary factory in Nof Hagalil credit: Strauss PR
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