Elevating Growth: Nomad Foods' Strategic Approach for Volume Expansion in 2024

A return to volume growth is probably the number one challenge for consumer goods brands this year, as inflation begins to ease and the impact of price increases fade.

Nomad Foods has pledged to be proactive in 2024 to tackle challenges, with a major focus on increasing investment in advertising and promotion.

The company, known for brands like Birds Eye, Goodfella’s, and Aunt Bessie’s, raised its prices last year due to inflation, similar to other consumer goods companies. As a result, there was a decrease in sales volume as some customers switched to more affordable private-label options.

In 2023, Nomad Foods saw a 4.9% increase in organic revenue. However, there was a decline of 9.5% in volume and mix for the year. Despite this, the company was able to compensate through an increase in prices.

Nomad is not the only company experiencing a decrease in volume and an increase in prices to boost sales in 2023. Many others in the same category are also looking to achieve volume growth in 2024.

Steve Challouma, the CMO of the company, discussed Nomad's price-driven growth with Our Website earlier this year. He emphasized the importance of volume growth as a key factor for the long-term success of a consumer goods brand.

Last week, Nomad shared its 2023 results and reassured its dedication to increasing volume in 2024.

The company informed investors that it is making proactive efforts to achieve a positive volume growth in 2024.

A major pillar of that effort is Nomad Food’s advertising and promotional spending.

We are really activating most of the parts of the flywheel together in a synchronised way.

Birds Eye CEO Stéfan Descheemaeker informed investors that the company raised its advertising and promotional budget by nearly 30% in the last quarter of 2023. He also mentioned plans to further increase spending in 2024 as they pursue opportunities to boost sales volume.

He mentioned that the company will be boosting marketing spending at a quicker pace compared to its sales expansion. This strategy aligns with the goal of increasing volume growth.

Despite experiencing a decrease in volume/mix, the company achieved positive outcomes by increasing investment in marketing during the last quarter of 2023. The improvement seen was gradual, resulting in the smallest loss recorded for the year.

The company is careful about where it spends its money, focusing mainly on its "must-win battles" and "high-priority opportunities" which make up a significant portion of its retail sales and profit.

Nomad was able to raise its gross margin to 28.2% by charging higher prices. This increase was important for the company to be able to reinvest in its brands, according to Descheemaeker.

Embracing a Holistic Approach

Challouma revealed to Our Website earlier this year that Nomad had previously been too fixated on price as a growth strategy. Moving forward, the company will now be exploring all available avenues to drive growth, rather than just focusing on one aspect.

Descheemaeker and Nomad’s chief financial officer, Samy Zekhout, emphasized this to investors during the recent week. He mentioned, "We are effectively engaging all aspects of the flywheel simultaneously in a coordinated manner."

The "flywheel" consists of advertising spend, pricing, promotion, and innovation.

Descheemaeker acknowledged that our innovation pipeline was somewhat limited in the past two years. The focus was on addressing the cost of living crisis and taking a defensive approach.

Historically, new products accounted for almost 5% of Nomad’s annual sales, with that figure dropping in 2023. The company is committed to turning that around this year.

"We are dedicated to improving our innovation efforts and creating a top-notch lineup of new products that will lead their categories," Descheemaeker explained. "In the past, we may not have focused enough on this, but moving forward, we will be obsessed with delivering excellence in this area."

He claimed that higher advertising and promotional spend will also help "reignite" the innovation pipeline.

We are now really focused on highlighting why our brands are of a premium, going beyond just managing this gap.

Stéfan Descheemaeker, Nomad Foods

As well as investment behind its brands and innovation, Nomad will look to optimise promotional spending in 2024 to drive volume growth.

The price difference between Nomad's brands and private label products has grown in recent years. Instead of making significant price reductions, the company plans to implement targeted promotional strategies. Descheemaeker mentioned that Nomad has adopted a methodical approach to managing revenue growth in this area.

In addition, he emphasized that Nomad is not only focused on narrowing the price gap but also on showcasing the premium quality of its brands.

Editor's P/S:

The article highlights Nomad Foods' strategic focus on volume growth in 2024. The company, facing declining sales due to inflation-driven price increases, recognizes the importance of advertising and promotion to drive demand. Nomad's proactive approach, including a 30% increase in marketing spend and a commitment to innovation, is a promising sign that they understand the challenges and opportunities in today's market.

While Nomad's strategy is sound, the execution will be critical. Balancing price, promotion, and innovation requires a delicate touch. Nomad must ensure that their messaging resonates with consumers, who are still navigating inflationary pressures. By focusing on the premium value of their brands and delivering compelling new products, Nomad can differentiate themselves in the competitive consumer goods landscape.