The 2019 annual results released by Glanbia on Wednesday are “disappointing”, in the words of the dairy processing group’s chief executive Siobhán Talbot. Yet unlike its two previous quarterly statements, this one did not contain any bad surprises. And a plan is emerging to address the difficulties behind Glanbia’s share price dropping from over €18 one year ago to just €10 at the end of last year.

As expected from updates provided through 2019, the year was very different depending on your position within the group. It was poor if you look at Glanbia’s historic performance nutrition business (GPN), whose protein powders and other sport or weight loss products have driven revenue and profit in recent years. Sales volumes fell by 9 per cent, while a 0.6 per cent price decline masks a drop in the first half corrected by price hikes from the third quarter. The division’s EBITA margin tumbled to 10.7 per cent, from a healthy 14.7 per cent in 2018.

It was much better if you include acquired growth from SlimFast, which Glanbia bought for $350 million in November 2018. While GPN’s like-for-like sales were down nearly €60 million last year, SlimFast made up for this four times over, contributing a €243 million revenue boost to Glanbia’s topline.

Last year was also strong for Glanbia Nutritionals, the ingredients and US cheese division of the group, where revenues and profits were both up. More manufacturers of healthy and high-protein snacks bought their pre-mixed ingredients from Glanbia. Another US-based acquisition coming on stream in 2019, Watson, contributed to this. Meanwhile, growing capacity at the group’s American cheese plants enjoyed rising prices on commodity markets. Margins were down marginally in the ingredients business, however, returning 5.2 per cent across the division.

Finally, joint ventures including more cheese processing in the US and the EU as well as Glanbia’s trading arm in Ireland increased their contribution to the group’s profits by €3.3 million, out of a 15 per cent growth in their revenue.

GPN may be the only division going through a rough patch, but it is a crucial one. While it accounts for a quarter of Glanbia’s revenue, it represents more than 40 per cent of its  earnings before interest, tax and amortization (EBITA). 

This measure of the group’s operating profit was remarkably flat, stagnating at €350 million in 2019. Of this, a €26.7 million drop in GPN’s EBITA erased all gains made by the rest of the group. As revenue grew, the corresponding margin dropped from 9 per cent in 2018 to 7.1 per cent last year, and 6.2 per cent once exceptional costs – primarily  to restore GPN’s profitability – are factored in.

Of course, this all weighs on the bottom line. Adjusted earnings per share are down 7.7 per cent, though the cheap dollar more than halves the pain when this is reported in euros. Once exceptionals are brought in, the reported drop in basic earnings per share is a lot more severe at 23 per cent despite the currency offset.

I reported on the problems flagged by Glanbia last year: currency and tariff headwinds in Brazil and India; too slow a reaction to meet Western consumers in their new shopping habits; and political upheaval in the Middle East. Now the focus is on recovery – but first, I asked Siobhán Talbot to conduct an exercise in hindsight on GPN’s breakneck growth prior to 2019.

Thomas Hubert (TH): Would it be fair to say that it’s grown very fast, maybe too fast, and it was too bloated, too complex to deal with difficulties when they came in some markets? How do you assess the previous years leading up to this?

Siobhán Talbot (ST): We have had very good growth momentum in our volumes as you quite rightly reference. I think the way I would characterise 2019 and that context is that that underlying growth has been good and it’s been absolutely backed up by underlying consumption growth. We have approached the international opportunity, by that I mean outside North America, in our brands in a very specific way. 

“The market shifted as relative currency and higher tariffs made our products more expensive  versus an improving local competition set.”

We had a very efficient model of leveraging the capability of North America and exporting from our North American manufacturing base into regions that would we would then serve with a blend of local resources, predominantly distributor partners. We had very good consumption growth, very good growth in those regions. 

The market shifted as relative currency and higher tariffs made our products more expensive  versus an improving local competition set. We have had to be agile to respond to that. So I would characterise it more as a market disruption that we have had to be agile in our response to, rather than anything that’s linked to historical growth rates.

TH: When I look at like-for-like results and the contribution of acquisitions – the two that are applying this year are Watson and SlimFast – it’s quite different. How would you characterise Glanbia’s performance with and without those two acquisitions in the past year? How different has it been?

ST: There’s no doubt that we had challenges in performance nutrition. We actually disclose what we call our like-for-like, branded revenue and that was back 9.8 per cent. So yes, our like-for-like branded revenue was challenged in 2019. 

In North America performance nutrition, our shipments lagged consumption, but our consumption was good and that’s a strong reason to believe in our future opportunity. Within the lifestyle portfolio, we ended the year better than we started. We relaunched our Think bars and that’s getting good momentum as we exit the year. And we’re continuing to get good momentum in our international markets outside the ones we’ve specifically referenced and in our direct-to-consumer business.

Then we’ve overlaid that with a very, very strong performance from an the acquisition of SlimFast that we did in November 2018. 

TH: Would that confirm that the price paid at the time was right? Is SlimFast really performing in line with what you were expecting, or above or below?

ST: It’s exceeding our expectations, it’s fair to say. SlimFast has a 49 per cent increase in consumption in its core North American market last year. I think by anybody’s measure, that was a really strong performance. We’re not saying that we’re going to continue that rate of growth for sure. Of course, it will normalise, but we had a really strong year in 2019. 

One particular success for the team was the keto lifestyle range of products that we launched at the very, very back end of 2018 and then really got momentum through 2019. That weight management is very, very much on trend in North America and we have a very strong keto range that plays into that.


Change is afoot at Glanbia performance nutrition. In fact, some of it has now happened. The division has been divided into four, each with new senior management dedicated to growing it in its particular context: North America performance nutrition, North America lifestyle, International and Direct-to-Consumer.

GPN is applying its new taste for SlimFast to its own catalogue. The business is in the process of culling 1,200 stock-keeping units (SKUs), refocusing marketing efforts on its sport performance brand Optimum Nutrition and on SlimFast, which will attract the bulk of continuing growth in marketing expenditure this year – at “double digit levels”.

TH: Across the performance nutrition portfolio, you’ve announced a lot of simplification, especially in the range of products available. How did you go about choosing which ones to discontinue? I saw there was a lot of a associated impairment with that, how much is it costing? Are there actually stocks that will have to be destroyed or that were unsold and as a result, the brands are being discontinued?

ST: We set about an overall, comprehensive review of GPN and we really looked at that. We took the opportunity, as I guess one should around the challenges of 2019, to look at our strategy across brands, across how we think of the business, at the resourcing and the reorganisation of the business, and about our operating model, our supply chains, our routes to market. 

When we looked at the brands, thinking of our strengths and the various components of the portfolio, we were very clear that ultimately, while we have great brands, a number of great brands in the portfolio, our focus, particularly now post the acquisition of SlimFast, will be on Optimum Nutrition as a platform brand in that performance space, and on SlimFast as the platform brand in the weight management space. 

“That concluded in a decision to remove 35 per cent of the of the items, but that’s about 5 per cent of the revenue.”

When we were going through that, again in recognition of some of the international challenges of 2019, there was no doubt that we could see that the SKU proliferation over recent times had led to complexity in the system and increased cost of some of our manufacturing footprint. 

So we took the opportunity to really deep dive into the profitability of the various elements of the portfolio. Ultimately, that concluded in a decision to remove 35 per cent of the of the items, but that’s about 5 per cent of the revenue. And in fact, our expectation is that the revenue isn’t lost to that extent. We believe that a lot of that demand will just go into other products. 

We might be taking out flavours, for example, so in some of our channels, we will still have good shelf space and it’ll just be other flavours or the bigger products that will be going in there. It was very much part of an overall programme of looking at how we can best grow our brands and streamline our activities. 

Because in that focus on streamlining, that gives us then options around how we think about our manufacturing footprint. It gives us options to think more about the blend of using contract manufacturers and our own resources. 

Glanbia performance nutrition is discontinuing 1,200 of the products on its catalogue.

Also part of that was the decision to exit the contract manufacture business that we do in North America. Really, they’re all very complementary decisions that are ultimately about driving our top line focus, particularly around Optimum and SlimFast, and then releasing funds to both fuel investment in brands which will drive that of itself, but then equally to improve the margins.

TH: What was the contract manufacturing business you were doing in the US?

ST: They were powder products generally. We had a long, long standing relationship with one of the specialty retailers in North America – about 5 per cent of our GPN business. We will still have it for for a period through 2020 on to the back half of the year, but we will exit that business and focus on our own brands.


In Brazil, GPN has changed its distributor in the wake of falling sales as currency exchange hit price competitiveness. Talbot hopes that Glanbia’s new local partner, allied with the group’s streamlined offering, can grow them again. 

In Europe, the group hopes to counter the loss of business to online competitors with the recently addition of Hybris e-commerce software to its Body and Fit direct sales website at a cost of around €30 million. Body and Fit is due to increase its reach to 14 countries this year and has moved its HQ to Amsterdam to attract better senior staff.

Deeper changes yet are taking place in Asia, and this is what I ask Tablot about next. All this is costing money – Glanbia booked €7.9 million in consultant’s fees and €4.8 million in redundancy or relocation costs as it moved staff around in 2019, and “this restructuring programme will continue in 2020”. The mass cull in product references has resulted in nearly €15 million in stock impairments.

Meanwhile, the integration of SlimFast and Watson cost €6.8 million last year, and Glanbia spent €2.3 million planning and stockpiling for Brexit as uncertainty reigned.  All in all, exceptional costs came to €34.6 million – compared with zero in 2018.

TH: I want to look in a bit more detail at what’s happening in India. That’s one of the countries that are both identified as a key markets for growth for GPN, and also where serious difficulties happened and you’ve been reorganising. What’s the concrete change happening on the ground? Are you developing your own manufacturing there, are you actually building, hiring manufacturing capacity? 

ST: First of all, we are ambitious for future growth in India. We have calibrated our near-term expectations be quite modest, in truth, as we’re going through some of the changes. Yes, we are doing some local manufacture currently for some of our products. Again, there we will focus our product range on Optimum Nutrition and some of the key products within that range. Some of those we’re already manufacturing locally and we will evaluate whether it is the right thing to do to some of the bigger brands. 

We’re still in evaluation mode on aspects of this, but we are potentially moving further down the value chain, taking out some of the parties in the supply chain, which itself will potentially free up costs and either give us the option to reinvest that in pricing, or to improve margins.

We have a new team on the ground in India, we have changed some of our route-to-market partners already. We have already started some in-country manufacture and there will probably be some further activity through 2020.

TH: There was a tariff that came onto your your products going in from the US at the end of 2018. There is a US visit at the moment there by President Trump. Do you see the geopolitical climate evolve in your favour? 

ST: We’re not presuming anything in that context at this point of time. So we’re presuming the current tariff regime continues.

“We’ve been building and will continue to build, essentially, a center of excellence-type approach in e-commerce, and I think that will be a key route to market for us.”

TH: Another country first on that list of targets for development is China, where only 2 per cent of GPN sales are at the moment. How are you planning to go into China from this small base?

ST: Currently, we service that market from our North America base. Interestingly for us in that region – and indeed, in a number of geographies – e-commerce is a really significant route to market. One of the capabilities that we have been building internally is the direct-to-consumer platform that is the Body and Fit brand. We’ve been building and will continue to build, essentially, a center of excellence-type approach in e-commerce, and I think that will be a key route to market for us. 

We use distributor partners in China currently. We’ve got really nice growth in that region and I think that will continue. It will be a blend of building our own capability for consumer engagement, but also using partners in the region.

TH: In China, a lot of exporters have realised, especially online, that they’re really reliant on the likes of Alibaba and all of the local online platforms, more than direct sales as you’ve been developing with Body and Fit. Do you see Body and Fit having a place in China, or will it have to go through what consumers are used to – the existing online platforms there?

ST: I think having the capability to do that blend of both could be really interesting as you rightly say. So we  will build that capability and then deploy it. We can deploy it in a number of forms: that can be just for consumer engagement, and then fulfillment is done through the existing platforms, or it could also be deployed and fulfilled by ourselves. I think that will be a journey that we will ultimately move along depending on the opportunity, and how the opportunity grows.

TH: Body and Fit, or the Hybris new platform behind it, has the capacity to cover other brands. What can you say at this stage? Some big brands like SlimFast would come to mind, would you consider rolling it out to it and doing direct sales that way?

ST: Yes, potentially. We effectively take what they call a house of brands strategy for Body and Fit. When we bought it, Body and Fit was already distributing a number of brands and we actively engaged with our consumers, really seeking to establish would they just like to get Body and Fit or do they like having access to other brands? And the clear view from consumers was that they like that house of brands strategy, so we will continue that. That gives us optionality on our own brands, on other third-party brands, etc. as well as having, obviously, a strong platform in the Body and Fit brand itself.

TH: There was a big charge for exceptionals this year and they’re related to all the changes we’re talking about. Are they really exceptional? Or can we expect this to continue in the coming years, as you said yourself that a lot of these changes will continue to be rolled out? It’s not over at the end of 2019.

ST: I would characterise those as costs that were really underpinning our top line and margin growth ambition in the future. When we’re doing programmes of change, like the current one, we actually look at the decisions that flow from those programmes through the same lens as any capital programme or acquisition programme. We bring all the financial rigour around return on capital investments to that. 

That will be the lens through which we will look at anything else that comes along the way for 2020. The particular themes that we have taken costs of in 2019 absolutely were exceptional and non-recurring items as we go forward. And anything that arises in 2020 will be looked at through that same lens. If there are opportunities we believe may have some costs now, but can actually either grow our top line or improve our margins in the future – if there’s a cost associated with, it will still be a very good return on investment for our shareholders. 


Talbot has acknowledged that the breadth of changes under implementation will take time, and Glanbia’s new horizon is 2022. By then, the group targets €6 billion in revenue and 5 to 10 per cent average annual EPS growth.

For this year, performance is expected to remain in line with last year’s. While GPN’s reorganisation is hoped to start bringing in additional revenue and margins, the costs of commissioning new factories on the nutritionals side and at joint ventures will hit the profitability of those businesses. 

After an annus horribilis for shareholders, however, directors want to show them some love. Although profits are down, cash conversion remains good and the board recommends a 10 per cent increase in dividends. This would bring the total distribution to shareholders for 2019 to €78.8 million or 30 per cent of EPS.

In a new departure for Glanbia, the board also wants to propose a share buyback to the next AGM in April.  Of €350 million cash currently available, a potential 40 per cent could go towards repurchases while 60 per cent is set aside for acquisitions. It will be interesting to see how the Irish farmer-owned Glanbia Co-op, with 31.5 per cent of plc shares, and its members who directly own another estimated 20 to 30 per cent will consider the group’s first ever buyback proposal.

TH: The programme you’ve outlined out to 2022 is to bring GPN’s margin back up to 13 per cent in EBITA terms – where it was before. I was looking at previous guidance, even a year ago, you were targeting more like 13 to 15 per cent margin across the group, across several years out to 2022. This seems less ambitious, obviously after the difficulties of the past year. Is that range of 13 to 15 per cent margin across the group over several years out the window for the time being?

ST: What I would say to you is that we remain very ambitious for margin progression. We’re realistic in terms of the challenges that we had in 2019, and so have set a minimum of 200bps for GPN to 2022. I think that’s appropriate for where we are now. If we get opportunities to accelerate that, absolutely, we will. But the other point I would make is that we are very much in investment mode in our brands as well. Part of the margin reduction in 2019 was a significant increase in investments behind our brands. That increase in investments will continue into 2020. 

For us, and I believe for our shareholders, it is about having that right blend of investment to drive top line, and then freeing up what I would call the fuel for that investment either by doing things smarter around the business, but growing top line margins over time as well. So we’re very conscious of that mix of top line and margin improvements and we’ll be very keen to maximise that. The costs that you reference are all part of that maximisation journey.

“While we might have somewhat dialled down our acquisition focus for GPN, just in the very short term, absolutely we will continue to be acquisitive in that space.” 

TH: The other sides of the business are doing well, whether it’s nutritionals or joint ventures. I see there’s more capacity coming on stream in the next 12 to 18 months, especially on the cheese side. Would you expect the balance between those activities and the shape of the group to change? After all this is finished – a restoration of GPN profitability and growth, and those new investments in cheese – are we going to be back on the same mix of revenues and profits, as we were in 2018, say? Or are we going to see a changed Glanbia with more weight away from performance nutrition at the end of this process?

ST: No, I believe the weight will be similar to what we set historically. In fact, when you look to the overall group ambition for the $6 billion of revenue, we said we remain very ambitious to still have that $2 billion top line GPN business that we’ve referenced historically. And as we said historically, acquisitions will very much become part of that. While we might have somewhat dialled down our acquisition focus for GPN, just in the very short term, absolutely we will continue to be acquisitive in that space. Particularly now as we have two very interesting portfolios across both performance and lifestyle. 

So I think our ambition for GPN to be $2 billion, for Nutritional Solutions to be $1 billion, absolutely sustains. When we had set out that $6 billion ambition, in fact, that was cognisant of some of the investment that we’re doing on the joint ventures side. 

TH: About the share buyback plans for this year, looking at your shareholder structure, why would especially Irish farmers support this – considering that every time I talk to them, they’re not really interested in the immediate share price? They’re more interested in the dividends that go back to the co-op and ultimately to their milk price. And they are, as far as I understand, half of your shareholding. So why would they be in favour of this?

ST: I think it is really about having the option within the toolkit of the organisation. The board will speak at the AGM. And we’ll obviously engage with shareholders over the coming days, and see if it’s something that people think is of value. 

We’re not opining definitively on proportionality yet. I think what the board would like to do is to have that option, and then when we’ll look at it in the context of what is in our M&A pipeline. Remember Glanbia is very cash-generative. We have actually increased our dividends by 10 per cent again for 2019 and our shareholders, I think, like that, not least the largest shareholder. 

I think from the largest shareholder’s perspective, they will look at it, quite honestly, through the lens of every other shareholder and look at it in the round of M&A opportunities, look at it in the round of returning capital to shareholders through a buyback format. I think for for all shareholders, this is really about the option of capital return. 

And then obviously, there’s M&A as well. We wouldn’t want to to give the impression in any way that we are any less acquisitive than we’ve been historically. I think what it is really reflecting is the balance sheet strength of the organisation, to good cash conversion, and just having that option that we can have a view on as we go through the year.