Strauss seeks NIS 300-400m savings in new strategic plan

Strauss logistical center in Shoham  credit: Shutterstock/Igal Vaisman
Strauss logistical center in Shoham credit: Shutterstock/Igal Vaisman

Food company Strauss Group's revenue surpassed NIS 10 billion in 2023 for the first time.

Food company Strauss Group (TASE: STRS) surpassed NIS 10 billion revenue for the first time in 2023. Revenue last year totaled NIS 10.5 billion, 11% more than in 2022. Strauss Israel accounted for NIS 4 billion of the total, 16.5% more than last year. Strauss Group posted a net profit of NIS 440 million for last year, and has announced a new strategic plan aimed at saving NIS 300-400 million by 2026.

The group will distribute a dividend of NIS 270 million. The compensation cost of president and CEO Shai Babad was NIS 8.2 million last year, including NIS 4.9 million in stock-based compensation. The compensation cost of chairperson Ofra Strauss was NIS 2.8 million.

Strauss Group’s market share in the confectionery segment contains to strengthen, reaching 25.4% in the fourth quarter. The company has still not restored the market share it had before the recall of products in 2022 following the discovery of salmonella at its Nof Hagalil factory, but this is partly because it decided not to resume production of its entire product portfolio.

Following the streamlining program announced in 2022, in which the group was restructured, an updated strategic plan has been approved, under which activities with low profit margins will be closed, and investments will be made in Israel, among other things in the plant-based products factory north of Ahihud, due to open next year at an investment of NIS 250 million. 5-7% of sales turnover will be devoted to capital expenditure.

In the water segment, the company is examining entering other markets besides Israel, the UK and China, where it currently operates, and in the coffee segment it will focus on mergers and acquisitions in Brazil and in expanding the proportion of revenue from activity other than roast and ground coffee.

Strauss identifies effects of the war on consumer trends. In response to price hikes, including by Strauss, which raised prices in January for the fourth time in fourteen months, consumers are buying less. At the same time, there is demand for products considered "treats" that provide some kind of emotional compensation.

Another trend that the company identifies is one of nostalgia, which the company expects will strengthen because of the need for a sense of belonging and national pride in time of war. The sustainability trend is also strengthening, boosted by a desire to support the economy and Israeli agriculture.

The company says that the growth of retailers’ own brands threatens its market share in certain categories, something that should interest supermarket chain Shufersal’s new owners, the Amir brothers. It was recently reported that they were considering a strategic change in the chain’s own brand, which accounts for over a quarter of its sales, and diminishing its importance.

Strauss is also concerned at the possibility of a consumer protest movement following its price hikes, despite the bill to freeze prices of basic products in wartime. It says that protests against manufacturers and retailers are liable to spur regulatory activity that might erode profits.

"We concluded 2023 with a rise in most of the group’s financial metrics, following a series of business moves that we began to implement during the year and that will continue into 2024," Babad said. "The main thrust of the change process is strengthening financial resilience alongside building infrastructure for strategic growth engines."

Published by Globes, Israel business news - - on March 27, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.

Strauss logistical center in Shoham  credit: Shutterstock/Igal Vaisman
Strauss logistical center in Shoham credit: Shutterstock/Igal Vaisman
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