Brand backlash benefits McBride

McBride pointed out that in both of its key UK and Italian markets, own-label sales of household cleaning products grew 5 per cent - faster than the respective overall market growth of 3 per cent and 2 per cent. That reflects recession-struck consumers choosing to turn their backs on branded products in search of better value. "Fundamentally, a brander cannot provide the same performance and value that private label can," said Mr Roberts, although he noted that branded suppliers have responded to the own-label threat with "ferocious" price promotions. "I'm quite surprised just how much they are responding on promotional activity," he said. "They're having to cut their prices to where private label is or else the consumer ain't going to buy them because their products aren't any better."

The aggressive price response of the branders meant the 4 per cent organic sales growth McBride achieved was all the more impressive. The organic growth rate was also suppressed by a deliberate withdrawal from low-margin product lines to focus on "strategic priority categories" including personal care, specialist cleaning and dishwashing. Like-for-like growth in these higher-margin categories was 7 per cent, and McBride increased its research and development resources by 12 per cent to push its growing competitive advantage. "We've got to keep pace with the major branders who put a huge amount into product development," said Mr Roberts.  

Profitability was also boosted by significant cost restructuring, particularly in the UK where two older factories were replaced by a single facility that will save around £3.5m a year. Overall, £7m was spent across McBride's European operations to generate annualised cost savings of £6m a year. Adjusted operating margins increased from 3.9 per cent to 4.6 per cent.

Broker KBC Peel Hunt expects 2010 pre-tax profit of £36.5m and EPS of 15p (£31m profit and EPS of 12.9p in 2009).

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