The success of the L’OR EspressO capsules, continued good performance of Senseo in Spain and France, and the termination of private label production in France each contributed to positive mix growth. Price increases were enacted in multiple markets to offset commodity price increases in fiscal 2011. Barring any unforeseen spikes in green coffee prices from current levels, price increases and cost savings are expected to offset higher commodity prices from the second quarter of fiscal 2012 onwards. Reported net sales increased 27 percent to $922 million.
Although the Western Europe businesses continue to operate in a challenging environment, these operations showed a marked improvement compared to the fourth quarter of fiscal 2011. Spain, the Netherlands and Denmark improved volume trends compared to the preceding quarter. In the Netherlands, the company increased its value share in each of the last 4 months. L’OR EspressO continues to perform well in France, the Netherlands, Belgium and most notably in Spain where it commands 10.6 percent value share of the total retail coffee market only 20 weeks post-launch.
Businesses in the rest of the world delivered strong volume and sales performance, led by Brazil, Australia and Poland. Australia continued to gain market share in the retail instant coffee market, aided by increased MAP spending and the introduction of Moccona Café Classics Frappé, a unique offer in the cold instant coffee mix segment.
The newly-named North American foodservice and specialty meats segment is comprised of the North American foodservice meats and bakery businesses (the beverage business is now reported as a discontinued operation) and the company’s specialty meats business, currently consisting of Aidells and Gallo. The results for Aidells and Gallo previously had been included in North American retail.
The North American foodservice and specialty meats segment reported another quarter of solid top-line growth.
Adjusted net sales increased 2 percent to $280 million, driven largely by pricing actions taken across the portfolio, while volumes increased 2 percent, including the contribution from the Aidells acquisition. Excluding Aidells, volumes declined 2 percent versus a strong prior year quarter driven by soft restaurant traffic and declines in foodservice bakery. Reported net sales grew by 12 percent, largely driven by strong performance from Aidells, which outperformed expectations with double-digit volume and sales growth.
Adjusted operating segment income increased 7 percent to $27 million driven by manufacturing and SG&A savings.
The adjusted operating margin expanded 40 basis points over the prior year to 9.6 percent. Reported operating segment income grew 16 percent while the reported operating margin also increased 40 basis points to 8.9 percent.