Rivals are circling luxury ice cream producer Loseley after venture capitalist Foresight Group pulled the plug on its funding, The Grocer has learnt.
Investment manager Acuity Capital refinanced the business and was expected to invest a further £2m this year but ceded control this month to Foresight's private equity team, which has decided not to invest, according to industry sources.
In accounts filed at Companies House for the 18-months to 31 March 2010, Loseley posted an £8.7m turnover and a £4.7m pre-tax loss, which it blamed on business review costs and reduced turnover of the legacy Hill Station business.
However, industry sources suggested production inefficiency was also to blame. "Foresight decided it didn't make sense to chuck good money after bad. The factory isn't running at the efficiency it should be and raw material prices of cream and sugar are moving against them," claimed one rival.
Aggressive promotional activity had also hurt the business, added an M&A source. "This is a real hotch-potch amalgamation of brands," he said. "No-one seems to be able to make a lot of money out of premium branded ice cream and that's down to the power of supermarkets they demand promotions and destroy the premium."
Although its Loseley, Thayers, Granelli's, Hill Station and Yorkshire Dales brands only accounted for a relatively small amount of its overall turnover, they were likely to generate a lot of interest from potential buyers, said experts, with Frederick Dairies and Lovingtons tipped as possible suitors.
Despite the high profile of its brands, the bulk of Loseley's turnover an estimated £7m is generated by its own-label business with retailers such as Morrisons and Iceland.
Morrisons had been linked with Loseley's 80,000 square foot factory in Cwmbran, South Wales, but told The Grocer it was no longer interested.
Loseley and Foresight declined to comment.
Focus On Ice Cream (12 March 2011)
Former Rachel’s MD Neil Burchell lands top role at Loseley (20 November 2010)