It’s the perfect dairy takeover target. A great brand with a quirky yet wholesome image, a top-notch own-label business that is the envy of its competitors, a celebrity following (hello, Jamie Oliver!) and - with a turnover of about £200m a year - reassuringly substantial rather than scarily big.
It’s little wonder Yeo Valley’s name often crops up in conversations about consolidation in British dairy. And with other medium-sized dairy businesses, such as Wyke Farms, now openly discussing the potential benefits of being taken over by a larger player, how long can it be until we see Yeo Valley as another division of, say, Dairy Crest?
A very long time indeed, according to the company’s MD, Tim Mead. In fact, Mead is rather fed up with the constant takeover speculation - yes, it’s flattering to be seen as an attractive target, “but to sell our business now would be a betrayal of everyone who works at Yeo: our suppliers, our customers and - most importantly - consumers on whose trust we rely,” he says.
But life is rarely that simple, least of all in British dairy. So as Yeo Valley publicly slams the door in the face of potential M&A suitors, is its anti-takeover stance really sustainable in the current climate?
Since the Meads started farming in 1961, Yeo Valley has carefully built a West Country powerbase. Its heritage in family farming is not just a matter of pride, it’s become a major selling point. Aldi - one of Yeo Valley’s key own-label yoghurt customers - has chosen it as one of just a few suppliers to be profiled on its website. “A family-run business with over 50 years farming experience, Yeo Valley supply over a quarter of all our yoghurts, including our West Country Specially Selected range,” it says.
“To sell our business now would be a betrayal of everyone who works at Yeo: our suppliers, our customers and - most importantly - consumers”
Tim Mead, MD, Yeo Valley
Hang on, Aldi? It’s a sign of just how strong the Yeo Valley brand has become, that it’s easy to forget how many pies Yeo Valley has its fingers in. Aside from its branded organic dairy business, the company is a major supplier of organic and conventional yoghurts, milk and ice cream, with own label accounting for roughly 50% of its total turnover. It also owns a little-known conventional yoghurt brand - Ubley - which launched in 2003 and is listed in Asda.
Aldi’s public support for Yeo Valley is particularly pleasing, given the discounter’s close association with rival yoghurt producer Müller in Germany. Earlier this year, Müller announced it would start producing own-label yoghurts in the UK (Big Interview, p24) - a potentially threatening move to Yeo Valley - but Mead doesn’t appear to be losing sleep just yet.
In fact, he is keen to stress increased yoghurt production on British soil would be great news for British farmers. “If all of the yoghurt didn’t come in from companies like Danone, Yoplait and Onken - and if we therefore needed half a billion additional litres of milk - that’s another 500 dairy farmers,” he says.
Keeping dairy British
Safeguarding British farming and standing up for British dairy production is a key motivation behind Mead’s resolute anti-takeover stance. He points out only five out of the 24 dairy brands in The Grocer’s Britain’s Biggest Grocery Brands (3 March 2012) are British - “four of them are owned by Dairy Crest and one is owned by us, so if you believe some of the rumours going around the industry (Consolidation, p10), you get to the fact that we could be the only remaining British dairy brand,” he says.
A cynic would suggest this would be great news for Yeo Valley, allowing it to play the British dairy card even harder, but Mead says a situation where Yeo Valley were the only major dairy brand owned by a British company would be “totally ridiculous”.
For a family whose heart is in British farming, the thought of dairy profits flowing abroad - because of the subsequent loss in UK corporation tax - “goes against every grain of Yeo Valley’s British farming roots,” says Mead. “If we protect our economic activity, we will become wealthy as a nation,” he adds. In particular, he fears for the many jobs supported by UK dairying and the traditional dairy farm structure. “There’s a natural balance in farming and the natural balance is to farm in harmony with what you have - building 10,000-cow units is not it,” says Mead.
Yeo Valley has been farming for 50 years, and Mead says the intention is to stay farming and producing its dairy products - branded and own label - for another 50, but he’s not blind or naïve to the pressures smaller players, such as Yeo Valley, are constantly under. “You look at the size of the companies and the pool we’re working in and you have to question whether we’ll make it,” he says. Yet he ends on a defiant note: “We’re quite simple people,” he says. “We just want to be here and do what we do.”