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| Deeply Fragmented Market Has Seen 450 Businesses Go To The Wall |
Smaller companies are ripe for the
picking as retailer power increases
By Elaine Watson |
A surge of takeovers in prepared salads, frozen foods, fruit and
veg, meat, fish and poultry firms is on the cards as retailers crank up the pressure on suppliers, according to a study of consolidation in UK food manufacturing.
Following big deals in sectors such as butters, spreads, sugar and canned soups in recent years, |
other categories were ripe for the picking, claimed the study for Grant Thornton and Inflexion Private Equity.
A huge number of small food companies was making only marginal profits and faced closure or takeover, said Jonathan Smith, MD at Axis Consulting, which conducted the research.
In the snacks and crisps |
market, for example, own label firms were squeezed between category leaders like Walkers and niche branded suppliers, he said.
Sugar confectionery was also "ripe for a well-funded consolidator", said Smith. "And we would not rule out the possibility of a multinational player acquiring market share if a suitable business became available." |
| HOT FAVOURITES FOR TAKEOVERS |
| Category |
Sales |
Year-on-year change (%) |
Consolidation activity |
| Fruit and veg |
5,900 |
+3.7 |
Very high |
| Total meat, fish and poultry |
3,000 |
+1.0 |
Very high |
| Snacks and
crisps |
1,700 |
-2.3 |
Very high |
| Frozen savoury |
1,100 |
-3.5 |
Very high |
| Prepared salads |
649 |
-1.0 |
Very high |
| Frozen desserts |
325 |
-5.2 |
Very high |
| Milk |
2,500 |
+3.5 |
High |
| Bread/morning goods |
1,800 |
+5.0 |
High |
| Cheese |
1,800 |
+4.1 |
High |
| Chilled ready
meals |
1,500 |
+6.6 |
High |
| Sugar
confectionery |
1,200 |
+0.1 |
High |
| Ambient
cakes |
872 |
+4.7 |
High |
| Fruit juices |
795 |
+5.5 |
High |
| Sandwiches |
635 |
+7.7 |
High |
| Cooking aids |
295 |
+3.4 |
High |
| Home baking |
264 |
+17.3 |
High |
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Source: AC Nielsen/ Axis Management Consulting estimates for year to April 30, 2005
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More than 150 UK food manufacturers went into receivership and 300 were dissolved in the last two and a half years, said Smith.
The food sector was extremely fragmented compared to other industries, with just a handful of sizeable players and thousands of companies turning over less than £10m, he claimed.
Although many niche suppliers and some multinationals were enjoying strong growth and healthy profit margins, many mid-tier players lacked strategic direction and were unable to identify their competitive edge, claimed Smith. "People get so embroiled in the day-to-day running of their business and keeping customers happy that they are not thinking strategically about where they will be in five years time and how they are differentiating themselves in the marketplace." |
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