Wholebake underwent an MBO backed by Elysian Capital in 2021

Snack maker Wholebake has sold its own-label cereal business to Weetabix in a drive to simplify operations as part of a turnaround effort.

It follows three years of widening losses as the group battled the pandemic, Brexit-driven labour shortages and significant input cost inflation.

Weetabix said it would continue to operate Deeside Cereals as a standalone business and did not plan to make any changes to the North Wales factory or workforce in the “foreseeable future”.

Wholebake acquired Deeside, which accounted for about 25% of the group’s £46m revenues, in 2021 shortly after undergoing an MBO backed by Elysian Capital.

The 2021 deal helped maintain rapid growth at the company but added ‘considerable complexity’, according to Peter Tichbon, who was appointed as Wholebake CEO by Elysian this summer to lead a turnaround.

He added the sale to Weetabix simplified the business and coincided with a return to profitability for Wholebake.

“We’re still a go-to supplier for third-party branded healthy snacking bars and despite a turbulent couple of years we are still growing and expect that to continue at a double-digit rate,” Tichbon told The Grocer.

“The business is winning new customers, launching new products with third-party brands and the group as a whole is now streamlined to focus solely on the core snacking bars operation.”

Wholebake also owns the Brynmor, Nine and Bounce brands.

Delayed group accounts for the year ended 1 April 2023 revealed losses surged by almost £5m to £6.7m despite a 27% jump in revenues to £45.7m as soaring energy bills and raw material costs saw gross margins almost halve.

The company encountered “accounting problems coupled with irregular entries and omissions” during the year, which led to inaccurate monthly reporting. The documents filed at Companies House added the inaccuracies meant the board was unable to make the changes needed to stabilise the business.

A number of senior management staff left the business in the second half of the financial year, including CFO Nigel Hebron.

CEO Simon Faithfull, who took part in the Elysian-backed MBO, also stepped down from the helm and took on the role of COO.

Wholebake also breached its banking covenants and stretched creditor agreements, with supplies of products to customers disrupted, which hit its reputation and resulted in tighter terms and credit limits, according to the accounts.

Elysian injected a multimillion-pound sum into the business to help re-establish normal trading terms.

The PE firm also took temporary control of the business in early 2023, with partner Tim Dornan becoming interim CEO until Tichbon – who has more than 30 years’ experience in fmcg, including with the former Unilever spreads business Upfield, as well as Valeo Foods, Allied Bakeries, Palmer & Harvey and Coca-Cola Enterprises – was appointed to take charge.

Wholebake has now returned to profitability after resetting its prices and recovering costs.

The accounts added the banking arrangements had also been restored and the prospects looked “encouraging for a profitable year”.

“Suppliers, customers and our bank were supportive as Wholebake managed through the recent challenges, clearly recognising the underlying strengths and capabilities of the business,” Tichbon said.