China Food

Abbott milk powder, fight back


“The attention of the public” was described by a local media in the United States before Abbott’s latest performance was released.

Last night, Abbott released its first semi annual report after the milk powder recall. According to the financial report, the total sales of Abbott in the first half of 2022 was US $23.152 billion (about RMB 156.572 billion), with an organic year-on-year increase of 15.9%. The total sales in the second quarter was US $11.257 billion (about 76.129 billion yuan), with an organic year-on-year increase of 14.3%. In addition to milk powder and other nutritional products, the company also operates diagnostics, drugs and medical devices. “We achieved another quarter of strong growth.” Abbott chairman and CEO Robert Ford said in the financial report that thanks to its diversified business, the company continued to maintain resilience in a challenging macro environment.


雅培今年上半年及第二季度各部门业绩


Xiaoshidai noticed that in the first half of this year, Abbott’s diagnostic business had the highest growth, mainly driven by novel coronavirus rapid detection products. The nutritional products in which milk powder is located are the only one with an overall decline in the four businesses. At the analyst meeting held last night, Abbott executives said that the sales of nutrition products in the second quarter were negatively affected by the recall of milk powder factories in the United States. In addition, Luo Fude also talked about the progress of the restart of the factories involved and the recovery of milk powder. Let’s pay attention together.


召回影响


Let’s take a look at the latest performance of Abbott nutrition. According to the financial report, in the first half of this year, the total sales of Abbott nutrition products was US $3.847 billion (about RMB 26.016 billion), an organic decline of 4.4% year-on-year. Among them, the total sales in the second quarter was $1.953 billion (about 13.208 billion yuan), an organic decline of 4.5% year-on-year. Specifically, infant nutrition is the reason for the decline. According to the financial report, Abbott medical nutrition still achieved growth during the period. The total sales of this category in the first half of the year was US $2.075 billion (about 14.033 billion yuan), an organic increase of 8.3% year-on-year. Among them, the total sales in the second quarter was US $1.028 billion (about RMB 6.952 billion), an organic increase of 5.2% year-on-year. Luo Fude added at the meeting that medical nutrition was led by the international market in the second quarter, with an increase of 7.6%, mainly driven by “safety factor” and “Yilijia” for people with high blood glucose.


Abbott nutrition sales in the first half of this year and the second quarter

The total sales of infant nutrition products in the first half of the year was US $1.772 billion (about RMB 11.983 billion), an organic decline of 16.1% year-on-year. Among them, the total sales in the second quarter was US $925 million (about RMB 6.256 billion), an organic decline of 13.4% year-on-year.

Caibao said that the total sales of global nutrition products and infant nutrition products in the second quarter were affected by the voluntary recall and shutdown of milk powder factories in the United States. According to xiaoshidai, Abbott took the initiative to recall Similac, Alimentum and EleCare milk powder produced by its Michigan factory in the United States in February this year. The reason was that four consumers complained that infants had bacterial infection after eating related products, involving cronobacter sakazakii or Salmonella Newport. Subsequently, Abbott’s largest milk powder factory in the United States was shut down for investigation, which aggravated the phenomenon of “milk powder shortage” in the United States. In order to alleviate the supply shortage, Nestle, Mead Johnson and other major suppliers in the country increased production. At the same time, the United States eased import restrictions on infant milk powder and accepted products from Danone, bubs and other enterprises.  


Abbott lost a lot of business due to the shutdown of its own factory and the influx of other brands. “Global sales were negatively affected by the voluntary recall and shutdown of certain infant formula products produced by one of Abbott’s U.S. factories in February.” Abbott said, “in the second quarter of 2022, the sales of specific infant formula products in the United States was $116 million (about 784million yuan). In the second quarter of 2021, the sales of specific infant formula products in the United States was $280million (about 1.894 billion yuan).” According to the financial report, excluding the decline in U.S. sales related to specific products, Abbott’s total global sales of nutrition products in the second quarter achieved an organic growth of 3.8%. “Since the recall, we have lost about half of our infant formula share (in the United States).” Luo Fude said at the meeting. According to Euromonitor International data, Abbott originally accounted for more than 40% of the market share.



抢回份额


Now, with the restart of the factory involved, Abbott milk powder business has improved. In May this year, Abbott announced the factory survey results that “there is no conclusive evidence that Abbott’s formula products are related to the illness of these infants”. It has reached a settlement agreement with the U.S. Food and drug administration to restart the factory. But not long after the resumption of work, in June, the factory was shut down again because of extreme weather. According to Luo Fude at the meeting, the factory was restarted on July 1 and began to produce special formula EleCare and products for metabolic problems. In response to analysts’ questions, he also said that Abbott would soon resume the production of ordinary infant milk powder such as Similac.

雅培CEO罗赋德(Robert Ford)(资料图片)

“I don’t want to give an exact date here, but we don’t mean months or weeks (that long), so it will be soon, and our team is ready.” Luo Fude said that Abbott has a special team to speed up the resumption of normal production, and also knows that efforts must be made to shorten the time between production and the launch of products. “I am satisfied with the current situation and will continue to use the global production network to strengthen and regain share.” Luo Fude said that compared with Abbott’s expected situation in April, its milk powder business has recovered well and has recovered some of its lost share. “We have regained half of the share we lost in the past few months.” He said, “we have made progress in nutrition to promote the recovery of share, and the growth opportunities of medical nutrition and the international market are still very strong.” He said.


While promoting the resumption of normal production in the factory, Luo Fude said Abbott would also increase its investment in nutrition. “We will spend part of our funds on brand recovery, which is a necessary investment, which will enable us to get back our original share and return to our due position before next year”. In addition, Bob Funck, Abbott’s chief financial officer, revealed that Abbott is working to improve the operation of the Michigan plant, and at the same time, it is taking measures to increase production capacity and mobilize idle production capacity in the entire production network. In addition to helping “recover lost land”, the restart of the factory is also related to the profit performance of Abbott nutrition. Luo Fude said at the meeting that the cost of Abbott nutrition was facing challenges in the first half of this year. On the one hand, it is caused by the rise in commodity prices, on the other hand, it is caused by the increase in one-time costs, including the freight of milk powder to the United States by air and the payment of WIC fees for competitive products.



 
资料显示,WIC是一项由美国当局拨款支持的社会福利计划,会向符合资格的家庭免费提供母乳喂养支持等服务。服务该计划的生产商,需要为WIC消费者购买的每罐婴幼儿奶粉向当地州机构退还一部分款项。这些款项可支持WIC每年可为数百万消费者提供服务。
 
雅培曾在今年5月时表示,其将在今年8月31日前继续为竞品支付相关费用,确保WIC计划的参与者能继续免费获得奶粉。
 
罗赋德表示,工厂重启后,雅培预计无需继续为竞品支付WIC费用,并且减少对空运奶粉的依赖也将降低运费。Bob Funck则在会上表示,随着份额恢复,以及部分一次性成本影响变小,营养品盈利能力将逐渐得到改善。

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