‘Playing offence’: Birds Eye owner on its strategy for volume growth in 2024

Having grown revenue through price increases last year, Nomad Foods is stepping up its marketing investment and innovation to return to volume growth.

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 committed to “playing offence” in 2024 in order to meet that challenge, with significantly stepped-up investment in advertising and promotion one key component of this.

The company, which owns frozen food brands including Birds Eye, Goodfella’s and Aunt Bessie’s, put up its prices last year amid inflation, like most consumer goods firms. In turn, its volumes fell, as some consumers turned to cheaper private-label alternatives.

In 2023, Nomad Foods grew its organic revenue by 4.9%; however, its volume and mix declined by 9.5% in the year. It more than offset this through price, which rose in the year.

Nomad is by no means alone in this pattern of volume declines and price rises to drive sales in 2023. Like others in the category, it is now aiming to return to volume growth in 2024.

How can brands drive growth in 2024?

The company’s CMO Steve Challouma spoke to Marketing Week at the beginning of the year about Nomad’s price-driven growth.

“We recognise, that’s not sustainable for a brand. Volume growth is an important marker for the long-term success of a consumer goods brand,” he said.

Last week, Nomad reported its 2023 results and affirmed its commitment to drive volume growth in 2024.

“The business is on track to return to positive volume growth in 2024,” it told investors, stating that it was proactively working towards that goal.

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.

Stéfan Descheemaeker, Birds Eye

It increased advertising and promotional spend by almost 30% in the final quarter of 2023, and plans to “go even faster” in 2024, CEO Stéfan Descheemaeker told investors as it goes after volume-winning opportunities.

It will increase marketing investment faster than its sales growth, he said, something that “makes total sense” in an environment where the business is looking to drive volume growth.

It saw strong results from stepping-up investment in the final quarter of 2023, although volume/mix still declined, it improved sequentially and was the lowest loss of the year.

The company is also being “selective” about how it deploys that spend. It is choosing to invest this primarily behind what it terms its “must-win battles”, “high-priority opportunities” that account for almost half its retail sales and over half of its gross profit.

Higher pricing allowed Nomad to increase its gross margin by 50 basis points to 28.2%. That’s something that was “absolutely crucial” to facilitate reinvestment into its brands, Descheemaeker said.

Activating the ‘flywheel’

Speaking to Marketing Week at the beginning of the year, Challouma admitted that the focus in recent times had been fairly myopic on price, but that Nomad would now be looking to the “full mix” of levers available to it to drive growth.

Descheemaeker and Nomad’s chief financial officer, Samy Zekhout, reiterated this to investors last week.

“We are really activating most of the parts of the flywheel together in a synchronised way,” Zekhout said.

That “flywheel” includes advertising spend, as well as pricing, promotion and innovation.

Make this the year you innovate

“Our pipeline of innovation, the last two years was a bit subdued,” Descheemaeker admitted, saying that the focus was on the cost of living crisis and playing on the “defensive”.

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.

“Innovation takes time, but we have the ambition to really create a best-in-class pipeline of new products as category leaders,” Descheemaeker said. “That’s something probably we didn’t do enough in the past and that we’re going to do with an obsession in the coming years.”

Higher advertising and promotional spend will also help “reignite” that innovation pipeline, he claimed.

I think it goes just beyond that managing this gap, we are really focused now on highlighting why our brands are of a premium.

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 gap between Nomad’s brands and private label products has increased in recent years, but rather than taking “drastic” price cuts, it will engage in “surgical” promotional activity, Descheemaeker said, adding that the company had developed a “scientific” approach to this aspect of revenue growth management.

“I think it goes just beyond that managing this gap, we are really focused now on highlighting why our brands are of a premium,” he added.