Patties Foods has decided to exit the frozen fruit category following the highly publicised recall of its Nanna’s frozen berry products, which were linked to a Hepatitis A outbreak, in February.
Patties Foods has confirmed it’s selling the Creative Gourmet frozen fruit business to Entyce Food Ingredients and will also soon begin withdrawing its Nanna’s frozen fruit products from supermarkets, with the removal set to be completed by early 2016.
Patties Foods said it intends to focus on its core business, savoury and sweet pastry products business, which makes up around 90 per cent of the company’sales and pre tax earnings, as well as the management of brands Four’N Twenty, Patties, and Herbert Adam’s.
Following the sale of Creative Gourmet frozen fruit business, Patties will also undertake a managed exit of the Nanna’s brand of frozen fruits sold in supermarkets and the Chef’s Pride foodservice brand of frozen fruit products sold to distributors.
The Nanna’s brand will continue to focus its effort on the sweet dessert pastry and fruit pie market, while the Chef’s Pride business will continue to focus on providing ingredient-based solutions to the food service industry.
Patties Foods said it will work with all retailers and distributors on a program to exit the frozen fruit category entirely during early 2016. While the specific terms of the sale have not been disclosed, the sale is expected to generate around $1.8 million in proceeds and to have immaterial profit effect on the FY2016 result.
Patties Foods Chairman, Mark Smith, said the sale of the Creative Gourmet frozen fruit business, which it acquired in 2007, forms part of Patties Foods’ “refreshed strategic roadmap”.
At the company’s annual general meeting last month, Patties Foods reported that even with the significant impact of the frozen berries recall in February 2015, total company revenue for Patties grew by 3.7 per cent, $9.2 million, compared with the previous year. The group expects first half profit to be between $7 million and $7.5 million.
The berry recall in February 2015 was the primary reason for around $14.6 million reduction in net profit after tax compared with the previous year. The recall impacted the company with a reduced margin from lower post-recall sales of frozen fruit and the frozen fruit category continues to have a significant impact upon the company. Despite this total company revenue grew to $257 million.
The sale of Creative Gourmet frozen fruit business is expected to be completed by the end of the month.