Retail Food Group reports loss and new marketing plans

Poor financial results amid ongoing efforts to turn around the business and address issues with brand relevance and challenging retail conditions

The Retail Food Group (RFG) is continuing the rollout of a raft of new product marketing initiatives for its Michel’s, Brumby’s and Gloria Jean’s network amid poor financial results, including a statutory net loss after tax of $149.3 million.

The food group’s new product and marketing strategy will deliver a rolling pipeline of 62 new campaigns over the next 12-18 months, which the company hopes will turnaround its profitability. So far, this has included new campaigns aligned with popular brands, such as the Nestle Kit Kat Chillers campaign in Gloria Jeans, which was complemented by a social media campaign. 

“While the rollout of this new program remains in its infancy, its recent launch via nine bespoke new product campaigns has so far generated annualised incremental network revenue growth of over $5 million. This is a very positive indicator of the potential impact of these new initiatives, which we expect will materialise throughout FY20,”  RFG executive chairman, Peter George, said in a statement.

RFG has also focused on social media and influencer campaigns, including partnerships with celebrity ambassadors to connect with consumers. Some of these initial marketing initiatives have reached between 6 to 12 million customers, per campaign, the company said. 

In other plans, it has improved point-of-sale displays and new packaging has been introduced to better align the brands to their target markets and drive brand recall and recognition. A new coffee and loyalty program has been created to target customer growth, aimed at generating a 6 to 7 million customer database in the first 24 months. It has also reduced the wholesale price of coffee and re-introduced fresh cakes into Michel’s retail shops in several states.

“These new initiatives demonstrate the focus of RFG’s new management team who are dedicated to developing and cultivating every single one of our stores and providing our franchisees with the best possible support and opportunities to build successful and sustainable businesses,” George said.

Financial outlook

It couldn't come at a more needed time. For FY19, Retail Food Group reported underlying EBITDA of $50.7 million and underlying net profit after tax of $15.4 million. Yet it reported a statutory net loss of $149.3 million, attributed to $185.2m in no-cash impairments including provisioning and restructure costs. The group is looking to cut $20m from the annual costs of operations in the next year.

The company said intense competition and changing consumer trends, set against declining retail performance, contributed to challenging operating conditions. RFG pointed to high occupancy costs in shopping centres and changing tenancy mixes and foot traffic contributing to its lacklustre performance.

In its executive suite, there have been some key changes including the appointment of turnaround specialist, George, as executive chairman to drive business improvement and refocus the group on its core competencies of retail food franchising and coffee supply.

George said RFG expects to see stabilisation and future growth through the work currently underway, and expect improvements to come. 

“The new management team is rebuilding the culture of RFG and will continue to strengthen our franchisee-first focus and position the group for growth in the medium term,” he added.

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