|ProductsFruit preparations, fruit juice concentrates, not-from-concentrate juices, fruit wines, natural flavours and beverage bases
|Raw materials processedFruits (leading raw material for fruit preparations: strawberry; raw materials for fruit juice concentrates: apples and berries)
|Key marketsMarketed worldwide
|CustomersDairy, ice cream, bakery, food service and beverage industries
|Special strengthsCustom-designed, innovative products
Fruit segment revenue in 2022|23, at € 1,481.9 million, grew significantly from the year-earlier level (by 18.5%). The fruit preparations side of the business saw revenue growth stemming from higher sales prices. In the fruit juice concentrate activities, the growth was additionally powered by volume, with a compelling revenue expansion not just in apple and berry juice concentrates but also in the value-added business. The Fruit segment was responsible for 40.7% of Group revenue (prior year: 43.1%).
Like the year before, the segment’s EBIT was negative, at a loss of € 38.5 million, which was 143.0% larger than in the prior year. Weighing on the Fruit segment EBIT result, as in the prior year, were non-cash one-off effects of the war in Ukraine (higher cost of capital). The € 91.1 million impairment on goodwill and assets, as well as the other exceptional items (income of € 1.4 million in the juice concentrate business) are explained in more detail in the Fruit segment report and the Notes. In fruit preparations, operating profitability before exceptional items was significantly below that of one year earlier. The deterioration was attributable mainly to a mixed business performance in the Europe region (including Ukraine) and Asia-Pacific (particularly South Korea and China). In the fruit juice concentrate business, pre-exceptionals operating earnings rose very significantly thanks to improved contribution margins for apple juice concentrate from the 2021 and 2022 harvests. In addition, better contribution margins from berry juice concentrates and premium natural fruit flavourings known as FTNF (“from the named fruit”) flavours were factors in the EBIT growth.
After a 2021 calendar year contraction of 2.9% in the global market for spoonable fruit yoghurt (the main market for the fruit preparations business), the market stabilised in 2022 with slight growth of 0.2%. The current forecast by Euromonitor from February 2023 calls for average annual volume growth of 0.4% in the period to 2027. The Western Europe region is predicted to see a slight decline (of 1.2% per year), while the North American market is expected to have slow growth (at 0.6% p.a.). An expanding market is also projected for Australia and New Zealand (2.5% p.a.) and the Middle East and Africa (2.3% p.a.). An important category within the dairy market segment is drinkable yoghurt, estimated to grow at a rate of 2.1% p.a. globally over the same period. The niche category of plant-based yoghurt alternatives is a further market for fruit preparations, predicted to grow briskly at an average annual rate of 4.8% to 2027.
Besides yoghurt, the main market segments significant to the diversification of the fruit preparations activities are ice-cream and food service. The ice-cream market is forecast to grow globally by 1.7% p.a. in the period to 2027. Within it, the new and dynamic market for plant-based alternative products is projected to attain 8.5% average annual growth. In the food service segment, the main markets served by AGRANA are quick service restaurants (QSR) and coffee & tea shops. The predicted future trajectory of these segments in the period to 2027 is very positive, with average annual growth of 5.7% in QSR and 7.3% in coffee & tea shops.
The market environment for fruit preparations is determined by consumer trends in the global markets for dairy products, ice-cream and food service. The top trends continue to revolve around naturalness, health, pleasure, convenience and sustainability. At the same time, due to the economically challenging times, with high inflation and continually rising energy costs in many parts of the world, consumers are increasingly also focusing on affordability, with a tendency to limit themselves more to essential products. Broadly speaking, food is among the essential product categories, and demand for it is thus less negatively affected than other categories, such as leisure spending. Nevertheless, an effect on sales is noticeable in the food sector, too. Brand loyalty is declining in many places and consumers are more often reaching for products with promotional prices or for cheaper private label products. However, as foods serve not only nutritional needs but also for everyday moments of pleasure, there is potential for the industry here, too.
The fruit juice concentrate business remains subject to the trends towards lower fruit juice content in beverages and towards not-from-concentrate 100% juices. As a consequence, there is growing demand for beverage bases with a reduced fruit juice content. AGRANA addresses this trend with its strategic emphasis on the increased production of beverage bases and natural aromas.
In fruit juice concentrates, customer call-offs were very high overall in the fourth quarter of 2022|23. Amid very good market demand, the contracts for both apple and berry juice concentrates made from the 2022 crop were concluded at contribution margins well above those of the prior year.
Sales volumes and contribution margins in the value-added business increased very strongly. The growth targets were exceeded, especially in from-the-named-fruit aromas.
The logistical challenges that defined the export-heavy concentrate business since the COVID-19 pandemic (high transport costs and low availability of containers), notably for shipping to the USA, eased in the course of the 2022|23 financial year.
In 2022|23, about 343,000 tonnes of raw materials were purchased for the fruit preparations activities. The volatile market setting for commodities and the fact that the global trend in freight costs for the full year was still rising drove an average increase of about 20% year-on-year in raw material costs for fruit and ingredients. There were increases in purchasing prices across all fruit categories, as well as for sugar and starches used. AGRANA sought to pass these higher input costs on via adjusted contracts with customers.
The Group’s global requirement of 55,000 tonnes of strawberry, the most important fruit by volume in the fruit preparations business, was contracted at significantly higher prices than in the year before, due largely to higher production costs on the supplier side. In the harvests begun in the fourth quarter of 2022|23 in Mexico, Egypt and Morocco, there are indications of very good raw material availability with average prices lower than those for the past 2022 crop.
The second most important fruit for fruit preparations by processing volume was peach, at just over 18,000 tonnes. Weather-related below-average harvest volumes in the European growing regions as well as in China led to significant price increases.
Blueberry ranked third in volume with a global requirement of about 11,000 tonnes. Despite war-related challenging harvesting conditions and logistics, the crop yields in the Eastern European production areas (which include Ukraine) were above expectations. The Canadian harvest also delivered stable yields, in line with the previous year.
Prices for tropical fruits from the Asian and South American growing regions increased compared to the prior year, due mainly to globally high freight rates. The pineapple harvest that started in the third quarter of 2022|23 and has now ended brought good availability of raw materials with significantly lower prices.
Energy costs in the fruit preparations business rose considerably since the financial second quarter. What became more expensive was primarily the natural gas and electricity supply of the European production sites.
In the fruit juice concentrate business, the 2022 apple harvest was characterised by very good raw material availability in the Polish growing regions. The higher apple quantities harvested there largely made up for lower availability of apples in Hungary, Romania and China. At the Ukrainian site as well, the apple processing volume reached 90% of normal, despite the difficult circumstances. There was good availability of red berries (an industry term that includes strawberries, raspberries, black and red currants, sour cherries, chokeberries and elderberries).
Capital expenditure in the Fruit segment in 2022|23 was € 37.7 million (prior year: € 37.4 million). The various investment projects across all 40 production sites represented primarily capacity expansions, plant modernisation and energy efficiency improvements. The following individual investments were made, among others:
1 „Brown flavours“ include, for example, chocolate, caramel, toffee and nougat.