Israel’s Strauss Group is set to shed further assets this year as part of efforts to boost profitability and streamline the business, it has said.
Speaking to investors following the food and beverage company’s second-quarter results this week (15 August), recently appointed CEO Shai Babad said the company was constantly looking to “optimise” its portfolio.
The group posted declining margins and profitability in the quarter, which it put down in part to double-digit raw-material inflation and the weakened shekel.
It follows the sale of Serbian coffee business Strauss Adriatic in May, including brands Doncafe and C Kafa, a production facility near Belgrade and 220 employees.
Babad, a former director at Israel’s Ministry of Finance who joined Strauss Group as CEO last year, said: “We are looking the whole time at portfolio optimisation, asking ourselves which businesses are in line with our strategy, which businesses are in line with our growth rates with [our] targets and which are profitable enough to meet our strategic goals.
“According to those categories, we will divest some activities. We already divested some in the first half of 2023 and will continue that in the second half of 2023 and into 2024. So, a general note, yes, we will continue portfolio optimisation and, right now, we won’t go into any specific category of the company.”
Upon joining the company, Babad brought its Israel plants under one division and streamlined the supply chain, “flattening the organisation and reducing management layers” in a strategy called StraussOne.
Yesterday the company posted profit of NIS1.7bn ($400m), down 32.4% year on year, with EBIT of NIS379m, down 7.3%.
“We do see declining margins and we do see a decline in profitability,” Babad said. “Going into Q3 and Q4 we are doing a lot of efforts, which we have started already, on productivity, wanting to increase profitability. We hope to see some of the fruits already in Q3 and Q4 and a lot of the fruits going into 2024 and 2025 sequentially.”
Strauss Group’s business is divided into four main categories: Strauss Israel, which constitutes around half of the group’s sales; Strauss Coffee, which operates in Israel, Europe and Brazil; Strauss Water, which is predominantly in Israel and China; and Sabra Obela, a dips venture run with PepsiCo.
Last year, Strauss Group found itself at the centre of the largest product recall Israel has seen.
In April, the Israeli government suspended production at the plants in Nof Hagalil, which had been under the spotlight after a nationwide recall of products made by Strauss subsidiary Elite at plants linked to a salmonella scare.
Strauss was given the all-clear to resume production in August.
Babad said the confectionery business had “made a nice turnaround” in the months since the recall, but “still has a way to go”. He was unclear on when the arm’s profitability would be restored.
