Further consolidation in the poultry sector is certain as suppliers wrestle with rising costs and EU competition. Neil Sutton reports

The last three months have seen significant changes in the structure of the meat and poultry market in the UK. OSI has made two UK acquisitions (GW Padleys and Dove Valley) to add to its existing Moy Park business, based in Northern Ireland.
Meanwhile Flagship Foods, which was itself formed through the merger of Dalehead Foods and Roach Foods in 1999, has merged with Tulip, the UK subsidiary of Danish Crown. The combined organisation will have sales of close to £1bn.
All this recent activity follows on from Grampian’s purchases of St Merryn in November 2003 and Uniq’s UK poultry business in April, and there are a number of reasons why we may see further transactions in this sector.
As well as meeting the demands of their supermarket customers, poultry suppliers must also compete with a number of continental European players and absorb the impact of higher feed costs.
Consumer concern at outbreaks of avian flu earlier this year added to the pressure and the combined factors are forcing companies in this market to reappraise and develop new strategies.
Although the focus of this column is usually on food and drink manufacturers, it is impossible to ignore the enormous amount of merger and acquisition activity in the convenience store sector recently. Tesco has acquired Adminstore and sold Dillons and Supercigs, Sainsbury has bought Bells Stores and Jacksons while the Co-op has picked up Conveco, Leathleys and Balfour.
The protracted battle for control of Londis further highlighted the level of interest in this area, with Musgrave emerging as the eventual acquirer. In contrast to most other retail sectors, these businesses are being bought by trade rather than private equity. A limited number of independently owned regional c-store/CTN chains remains and, doubtless, some are considering their options in the wake of such frenzied activity.
We are often asked what the next hot sector in retailing will be after convenience stores and one area worth keeping an eye on is ‘pound stores’ or single-price retailers such as Poundland and 99p Stores.
In the US, the leading dollar store chains have more than 5,000 stores, and the retail format is one of the few that have been able to prosper and co-exist alongside supercenter operators such as Wal-Mart.
The format is much less developed in the UK, but both the chains mentioned above have received backing from venture capitalists in the last couple of years and are looking to expand.
n Neil Sutton is head of consumer products, PricewaterhouseCoopers Corporate Finance