Dairy Crest (LON:DCG) describes itself as “the UK’s leading dairy company, processing and selling fresh milk and branded dairy products in the UK and Europe”. After the previous post on Robert Wiseman Dairies (LON:RWD) we have some idea of what processing is all about but Dairy Crest is also involved in selling a wide variety of dairy products. Again, the main area that drives operating results are margins. There are three divisions: Spreads, Cheese and Dairies (which is really a kind of residual for what doesn’t fit in elsewhere). In these divisions DCG has a fairly impressive roster of brands. In Spreads DCG has Clover, Countrylife, St.Hubert (30% market share in France) and Valle (“undisputed leader of Italian spreads market”, according to 2011 AR). In Cheese DCG has Cathedral City (9% share of retail cheese) and has just launched Davidstow. In Dairies DCG has Frijj, sells its processed milk to retailers and runs the milk & more delivery service which delivers a limited range of everyday groceries (link). The company also offers the details below about its brands:
(On the right axis, we have COGS and on the left, we have ADMIN and S&D)
(On the x axis we have the sum of ADMIN, COGS and S&D costs as a % of revenue, roughly equal to the inverse of EBITDA margin. On the y axis we have RNOA)
Operating Metrics – The first thing to point out is how thin margins are. Like Robert Wiseman this is due largely to the processing business but we also have some other stuff going on here. The dairies division produced revenues of £1.09bn operating at 2.5% margin, the cheese division produced revenue of £285m at a 19% margin with cheese somewhere in the middle with £223 of revenue and 13% margins. This means that while spreads make twice as much profit as dairies and cheese makes roughly the same amount of profit as dairies, spreads and cheese make only 25% of the revenue in the dairy division. Most of the question to ask here will probably come in the “Recent Trends/Competitive Position” section but…
