Grupo Lala reveals cheese inventory shortage in Mexico

By Beth Newhart contact

- Last updated on GMT

Promised Land milk hit US Costco stores this quarter, and yogurt is being refocused in Hispanic retail channels.
Promised Land milk hit US Costco stores this quarter, and yogurt is being refocused in Hispanic retail channels.

Related tags: Grupo lala, financial report, Mexico, Sales growth

In the company’s third quarter report, Grupo Lala discussed an ‘operational issue’ at one of its Mexican cheese plants, resulting in an inventory shortage and 8.8% volume loss.

In Grupo Lala’s Q3, net sales in Mexico increased by 3.2% year-over-year to MXN $14,057m. The company said the strongest performances came from yogurt, cream, plant based, cold cuts and milk.

Lala-branded milk and cream were up 6.9% in Mexico, plant based was up 84.2% and cold cuts were up 28.9%. But a setback in cheese cost Grupo Lala MXN $207m. Inventory dropped by 8.8% thanks to an operational issue at a plant in Mexico.

Grupo Lala said, “immediate operational actions have been taken to control the problem and stabilize inventory. Volume in Mexico contracted due to reduced consumption and the inventory shortage.”

Company-wide, total net sales grew 2.7% year-over-year and branded sales were up 2.9%. Mexico accounts for 75% of the company, followed by Brazil (16%), the US (5%) and Central America (4%). Milk is still the largest segment accounting for 53%, and Other Dairy at 43%.

Plant-based drives growth, yogurt set for Hispanic retail

In Brazil, Grupo Lala saw a slight decrease in sales, mostly due to an economic slowdown which hampered consumption. But Brazil did increase its market share in yogurt and cream cheese this quarter, and increased sales for value-added dairy.

Milk sales increased in Mexico, the US and Central America, driven by innovation and expansion of the core portfolio. Grupo Lala said this offset the decrease in Brazil’s ultra-high temperature processing (UHT) milk sales.

The US division of Grupo Lala reported a 1.6% increase in net sales at US$45m. Promised Land milk products rolled out to Costco stores during the quarter, causing overall milk volumes to continue growing.

Yogurt sales were down in the US, but Grupo Lala said this was a result of its plan to scale back presence in unprofitable retail outlets and relaunch Lala-branded products in targeted Hispanic retail channels.

In Central America, sales were up by 11.4%, hitting MXN $717m. Grupo Lala said this was due to “an increase in local currency denominated sales expansion of 16.3% in Nicaragua and 12.1% in Guatemala, driven by double-digit volume growth in the region.”

In all regions, plant based beverages and cold cuts were major growth drivers, offsetting decreased Mexico juice sales, which Grupo Lala said was in line with its strategy to focus on higher profit categories.

Mauricio Leyva, CEO of Grupo Lala, said, "Through impactful top line creation, operational discipline and a motivating working culture, this quarter we continued to evolve in our Virtuous Cycle to extract value for all stakeholders and keep the company on track of accomplishing our targets."

Also in the third quarter, Grupo Lala noted that it started reporting ‘Raw Materials and Others’ sales as a separate category. It’s comprised of sales of surplus raw milk, milk by-products and packaging.

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