UBUK pulled the plug on a multimillion pound deal with Aldi for an own-label version of its iconic McVitie’s Digestives biscuits earlier this year, The Grocer has learned.
New UBUK CEO Martin Glenn made the “board level” decision despite the sales it was delivering to the fast-growth German discounter because the contract was damaging the McVitie’s brand, said Glenn. The last supplies went in in February.
“We were very respectful of the relationship with Aldi. They are a good outfit. We spent six months letting them down gently. It wasn’t a row. It was a strategic shift. It was not the kind of business I wanted. The logic was ’the discounters are growing, so let’s supply the fastest-growing one with own label. But it’s flawed thinking. We’ve got to support people who support our brand. It’s a fool’s errand to supply a product that is effectively cannibalising sales from the brand.”
A 400g pack of Aldi’s Belmont-branded Digestives sell for 31p - around a third of the price of McVitie’s Digestives.
“The other absolute compelling reason [for resigning the contract] was that they were so close to us on the packaging, and we didn’t even have the balls to challenge them,” Glenn added.
But Glenn stressed that UBUK was keen to do more business in the discounter channel. “We are very positive about the discounters. The channel overtrades five times in biscuits.”
“There’s a heck of a lot of discounters that support brands. And plenty of growth if you can get the brands to them at a price that’s defensible compared to your big customers.”
Glenn has also invested in the convenience channel, introducing a new 60-strong field sales force. As a result, the business is “in good shape”. “Nielsen data shows value sweet biscuits up 1.8pp share ytd, to 27.4% share, which is 5% growth. McVitie’s sales continue to grow very nicely.”