Valora Group | Switzerland

On the way to recovery

avec is Valora's strongest foodvenience brand. The network is supposed to grow to 300 units within the next years.
IMAGO / Geisser
avec is Valora's strongest foodvenience brand. The network is supposed to grow to 300 units within the next years.

In the 2021 financial year, the Group generated EBIT of CHF 30.3 million, well in line with its guidance and corresponding to a year-on-year increase of +115.5%. At the same time, Valora returned to a positive Group net profit of CHF 8.3 million (FY 2020: CHF -6.2 million).

Overall, the Group’s net revenue increased by +3.1% while external sales remained stable compared to 2020. As of March 2021, the recovery increasingly gained traction thanks to the easing of governmental COVID-19 orders and vaccination progress, with food net revenue rebounding almost to its pre-crisis level of 2019 (-5%) in the second half of 2021.

Although Valora’s business was still impacted by the pandemic in 2021, the recovery increasingly gained traction as of March thanks to the easing of governmental orders and vaccination progress. During the second half of the year, the recovery progressed further, most notably in the food category, peaking in September and October, respectively.
 
While food net revenue had remained -26% below its pre-crisis level of 2019 in the first half of the year, it rebounded to -5% in the second half of 2021. The most pronounced catch-up effect was in the Food Service division with a substantial operating leverage effect on profitability and EBIT clearly above break even again. Michael Mueller, CEO of Valora Group, says: “While the Retail division has shown high resilience throughout the whole COVID-19 crisis, Food Service demonstrated in the second half of 2021 its ability to translate incremental sales recovery into significant leverage on profitability – even though frequencies still were negatively impacted by COVID-19-related constraints. At the same time, there is still potential to be exploited, both from growth in the B2B and B2C businesses and from synergies related to the Back-Factory acquisition completed in November 2021.”
 

Accelerated food sales increase

In the 2021 financial year as a whole, including the two additional COVID-19-affected months of January and February, Valora’s net revenue increased by +3.1% to CHF 1,749.6 million (FY 2020: CHF 1,697.4 million) while external sales remained fairly stable at CHF 2,230.1 million (FY 2020: CHF 2,233.3 million). For March to December – the comparable period that was impacted by the COVID-19 crisis in both years – year-on-year growth was +8.9% and +6.0%, respectively, while food sales even showed an accelerated increase during that period of +22.7% and +18.1%, respectively.
 
Thanks in particular to the increased share of food sales, the gross profit margin rose by +0.8 percentage points from 43.8% to 44.6% in the 2021 financial year. Gross profit increased from CHF 743.3 million to CHF 780.2 million.
 

Foodvenience business with more food

Beyond its business performance, Valora progressed considerably with the implementation of its foodvenience strategy in 2021. The most notable achievement was the acquisition of the German-based snack specialist Back-Factory. By adding the around 80 Back-Factory sales outlets to its network, Valora was able to make further inroads into the inner cities and to expand the purchasing power of its German food service platform. In addition, Valora is now one of the five largest German catering companies compared to pre-crisis levels (previously top 10 according to foodservice magazine 4/2020). First consolidated to the Group’s results in November 2021, Back-Factory already contributed with slightly positive EBIT, offset by related transaction costs.
 
A further milestone was reached with the partnership with the service station operator Moveri in Switzerland which along with the Back-Factory acquisition creates significant synergy potential in operations, provides Valora with further access to attractive convenience locations and increases the higher-margin food share in the Group’s category mix. From 1 January 2022 Valora will take over 39 Moveri service station stores, thereby almost doubling its Swiss service station network size in terms of stores and related net revenue. As the stores will be converted into the avec format, the avec network as a whole will grow to around 300 outlets (after the complete SBB roll-out).
 
Moreover, Valora continued to bring more convenience to the customer experience by expanding the availability of its bricks-and-mortar foodvenience offering beyond the usual opening hours, similar to online retail. In this context, Valora has entered the vending machine business with k kiosk and plans, as a first step, to roll out 300 machines in Switzerland by the end of 2022. In the digital area, Valora follows a 24/7 approach in different variations all based on self-checkout via app as part of its Autonomous Stores initiative. This includes the cashier-less avec box, which is now also being tested in a smaller format. The hybrid avec 24/7 stores are also part of it. Equipped with the same technology, they have so far been implemented at four locations, operating partly with staff and partly autonomously. The team is now scaling the 24/7 solutions further.
 

Attractive market perspectives for B2B

Looking at the B2B pretzel business, the topline fully recovered in 2021 and shows strong growth particularly in the US. After the successful ramp-up of the second line at Ditsch USA in 2020, further production capacity expansion of around CHF 10 million is planned for 2022 to keep up with the expected US market growth of around +2 to +3% per annum. Looking at current inflation development, the B2B pretzel business has been most exposed among Valora’s business units. In addition to raw and packaging material as well as logistics and labour costs were heavily affected in 2021. In the US, however, the effects of inflation have already been successfully passed on to customers to a large extent, while price increases in Germany are expected to take full effect with a time lag in 2022.
 

Longer-term targets confirmed

The Omicron wave brought renewed restrictions to Valora’s business at the end of 2021 and start of 2022. As regards future business development, Valora sees a continuation of the rapid recovery from March to October 2021 with the lifting of major restrictions. Valora still expects EBIT of CHF 70 million (+/- ~10%) for 2022 based on the 2021 results and outlook for a continued recovery.
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