Chemicals, plastic, packaging and logistics costs are major parts of our cost base. Volatile pricing feeds into margins; customer pricing arrangements generally don't see these changes reflected immediately in revised prices.
McBride embraces initiatives to improve safety for the consumer. More stringent regulations concerning the production, use and application of our type of products can drive a cost increase in the development, production, distribution and use of products.
Discounters have seen a steady increase in sales across Europe, with their combined market share of the EU grocery market rising from 8.4% in 1999 to a projected 22.0% in 2022. Most products offered by discounters are usually private label, as they compete on a superior price/quality offer with a simple range rather than offering a wider choice of brands.
The retail markets in many of the countries in which we operate are highly concentrated with a limited number of supermarket retailers, resulting in fierce competition. Retailers will increasingly rely on sophisticated large private label manufacturers to assist them with a range of options to deliver competitive advantage.
Brand owners often use private label suppliers to co‑manufacture their products; however, recently an increase in the demand for longer‑term, more structural arrangements is evident. For McBride, this is no different from direct supply to major retail customers, while such contracts support the objective of maximisation of asset utilisation.
Consumers are becoming more dynamic and mobile in their shopping habits. The desire for value and convenience are growing aspects of shopping behaviour. The response from the different channel players is diverse. With our staple products, overall demand patterns are steady and change only over extended time horizons.
Changing consumer habits and the battleground between discounters and retailers means that McBride must be present in many channels, including in the emerging arenas of pound stores and online.
Market research indicates that the European macroeconomic climate will not deliver substantial overall growth in our key territories in the foreseeable future. Growth rates in a number of product categories provide opportunity for McBride. Market share of private label versus brands is relatively stable in our categories, although some markets are starting to see retailers favour private label Household products, in the
same way as they have done already in other grocery categories.
Manufacturing excellence is an investment programme targeted at an optimised asset configuration supporting our market and growth ambitions. Continued investment in existing assets will further improve our operational cost and will be extended to additional investments, upgrading our five 'Anchor' sites, Estaimpuis, Foetz, eper, Middleton and Strzelce. Our strong asset base creates the opportunity to further develop manufacturing agreements with other industry players such as branders. This will give us a combined cost and efficiency leadership.
Our scale and reach across all key European markets enables McBride to provide customer-oriented service propositions aligned with channel requirements. We intend to have a tailored offering aligned with respective channel characteristics, combined with supporting customer service levels and agreements clear on content and commitment. Public company reputation and standards reassures customers of long‑term, sustainable supplier relationships.
Size to scale
McBride, as the largest player in the European market, can leverage its size by delivering scale benefits in purchasing, innovation, manufacturing excellence, legal know‑how and customer relationship management. McBride's balance sheet provides the opportunity for selective acquisitions, delivering further scale benefits.
We focus on the development of our people, organisational capabilities and skills. As a pan‑European employer, McBride has access to a wide variety of talent so that whatever we do, whatever organisation we build, McBride can deliver upon its ambition and promises - with its people engaged, developed and positively challenged.
With visibility across all of Europe, our presence in selected products and markets, well-resourced technical teams and colleagues hungry to offer new ideas, McBride can be at the forefront of customer innovation. Whether this is in product ideas, supply chain improvements, packaging ideas or customer contract arrangements, McBride stands out as a leader in our industry.