News that former chief executive Paul Monk and two ex-colleagues could be putting in a bid in for Golden Wonder, which went into administration this week, will have Nik Naks and Wheat Crunchies fans happily choking with disbelief.
The business seemed to be a lost cause at the start of the week, with administrator Kroll announcing the closure of the own label operation at Corby and the possible loss of all 850 jobs across its three sites.
Suddenly it appeared to have been thrown a lifeline by the potential deal, whereby Monk and Clive Sharpe, another former Golden Wonder chief executive, would retake the company reins, along with Steve Boyd, a former finance director.
If anybody can turn the fortunes around of what is still a much-loved brand, it will be Monk & Co. No one will be more aware of the challenges ahead for a company that reported losses of £10.8m in the year to December 31, 2004 and that has been bugged by overcapacity thanks to trading difficulties within its own label business.
But how did a company that pioneered the cheese & onion crisp and in its 1960s heyday was owner of the world’s largest crisps factory meet such an ignoble fate?
The story of Golden Wonder is one that inevitably features rival firm Walkers. The latter has played a crucial role in Golden Wonder’s downfall, thanks to its value pricing strategy in the 1990s and the marketing might afforded it by brand owner PepsiCo. But this is only half the story.
Monk declines point blank to comment on speculation that he may be making a move for the business he ran during 2003 and 2004. However, he says there were many more factors leading to collapse other than a powerful rival and the allure of Mr Lineker.
Owner Longulf’s failure to invest in distribution following the sale of Wotsits to Walkers played a crucial role, he says, as did its failure to rationalise fast enough.
Closing its own label Skelmersdale factory in 2002 when Longulf took charge, instead of in 2004, would have given the company a much greater chance of survival, he believes. “The company did not consolidate its cost base and did not invest enough in distribution. It had some successful and profitable brands, but you couldn’t buy them anywhere.
“The Skelmersdale factory should have been closed immediately and they should have closed another one a year later, then it wouldn’t have been losing money. If it had kept its cost base down and cut other costs so it could concentrate on sales and distribution it would have stood a chance.”
Monk does not lay the blame of Golden Wonder’s failure squarely at Longulf’s feet, however. A decade of management changes (the company has had three owners in the past 10 years) and a number of failed attempts to relaunch the brand as a viable competitor to Walkers have all compounded its problems. A plant fire in the mid eighties, which many industry commentators see as the tipping point in the company’s fortunes, allowing Walkers to capitalise on a sudden loss of production, also played its part.
Monk adds: “It was always going to take a huge amount of investment and risk to turn the company around. It is no one’s fault.”
So what now? David Lang, analyst at Investec, says that given Golden Wonder’s reliance on low margin own label production and that its biggest brand Nik Naks is only the UK’s 20th bestselling bagged snack, with sales down 6.5% last year [ACNielsen] - potential suitors are likely to be thin on the ground. “Crisps have never been a very exciting industry and the brand has always struggled,” he says. “All the profit in crisps is in the hands of Walkers.”
Monk, however, believes there is still life in the company, and points to smaller crisp companies, such as Kettle Foods, Red Mill Snack Foods and Tyrrells as examples of how smaller players can survive.“These companies are all smaller than Golden Wonder and are not going under. It is not impossible. You just need to be fleet of foot.”
Wise words. Whether Monk can put them into action remains to be seen.