Food manufacturers will need to follow the example of the leading retailers and carry out major consolidation, according to Uniq chief executive Bill Ronald.
He said it was imperative to drive out cost and run supply chains more efficiently because retailers were applying intense downward pressure on prices, and with upwards pressure on raw materials prices, margins were being badly squeezed.
“Food manufacturers will have to concentrate more scale in more specialised areas in order to achieve critical mass to get the prices retailers are demanding,” he said.
Ronald’s views echoed the
findings of a survey of other suppliers by The Grocer last week (p46) which found many were reacting to price pressure by consolidating production.
And his comments came as Uniq announced it was closing sites at Evercreech and Newton Abbot to concentrate desserts production at the 26-acre Minsterley site it has just acquired from Northern Foods for £16.5m. Minsterley is working at just 35% capacity and made a loss of £3.8m on sales of £58.6m in the year to March 31.
Ronald said: “Minsterley will continue to be loss-making for the best part of this financial year but within three years it will be making £10m more profit than it did last year.”
Overall in the UK, he said, Uniq would be investing £20m across the business in the next two and half years.
In the business as a whole he said that annual supply chain savings of £17m would be achieved 2006/2007.
Ronald said it was unlikely there would be any more disposals. In the last year, Uniq has sold off its St Ivel yogurts and spreads businesses, its sauces business and its poultry company.
“Minsterley was the first step. We won’t be going on a spree but if the right opportunities come up we will be in a position to take advantage,” said Ronald, speaking as Uniq unveiled its results for the year to March 31.
Operating profits on continuing business were up 46% at £39.5m and turnover on continuing business was up 7% at £891.1m. However, exceptional items, primarily a loss of £29m on the disposal of the poultry business, dragged it into a pre-tax loss of £15.6m.
John Wood