Illy coffee

Euro Food Brands demerged the foodservice part of Illy’s UK business in August as the Italian brand increased control

Specialist distributor Euro Food Brands has hailed a positive outlook despite the demerger and sale of Italian coffee brand Illycaffè’s foodservice arm.

The Northampton company – which distributes international brands including Hershey’s, Barilla and Campbell’s Soup to the UK – lost the bulk of Illy’s UK sales in August when the Italian firm decided to bring part of its UK distribution in house.

The sale included all assets as well as 67 staff members switching to a new subsidiary, with Euro Food Brands continuing to manage sales to the grocery retail sector and e-commerce customers.

In its most recent annual accounts, the distributor said the “good news” was that the outlook for the company remained “strong” with turnover expected to be in line with the previous year as the company “effectively replaced lost revenue” with new growth.

The lost revenues from illy’s foodservice business represented 11.6% of Euro Food’s total turnover and was replaced by the addition of brands such as Ainsley, Voss Water, Gunna Drinks, Gaea olives, Peppadew and Sweet baby Rays sauce. 

“We have been able to create a very stable business, with top line growth that has come from working with our existing customers on private label products, growing brands we have in the portfolio and attracting new brands into the business like Galaxy vegan chocolate,” MD Peter Butler told The Grocer.

He added that losing part of Illy’s business was not seen as a setback but rather a “positive thing” leading to a more streamlined and focused business.

“Post-Illy we are still forecast to grow significantly in the next three years, and we expect to continue seeing a healthy top line growth based on the same drivers,” Butler said.

The renewed outlook confidence was expressed as newly-filed accounts for the business showed “exceptional” revenue growth despite the “well-publicised” challenges of the UK economy and grocery retail market.

Turnover rose 17% in the year to March 2019 due to “continued investment in key brands” while operating profits before unrealised losses on financial instruments remained broadly stable around £2m.

Margins however reduced to 13.6% from 14%, mainly due to post-Brexit sterling weakness.

With regards to Brexit, Butler said the company was confident it had the right contingency plans in place to manage the UK’s exit from the EU.

“We think we will continue to attract new brands that want to invest and grow in the UK. We are confident that whatever happens we will be fine,” he added.

“Ultimately we are trying to be prudent, manage foreign exchange variances and getting ready for potential tariffs if there is a no-deal.”