String of Acquisitions Makes Boparan the UK’s Largest Grocery Supplier
Boparan has seized the top spot in OC&C’s Food & Drink 150 rankings, becoming the biggest food and drink producer in the UK. A string of acquisitions – including household names like Goodfella’s Pizza, Fox’s Biscuits and Matthew Walker Christmas Puddings – has helped the company to quadruple its revenue in five years.
Now in its 27th year, OC&C’s Food & Drink 150, in collaboration with the Grocer, is the only sector-wide analysis of the financial statements of the top food and soft drinks firms in the UK, ranking companies by revenue.
Between 2010 and 2014, Boparan climbed from 20th place to number one in OC&C’s rankings, with revenue increasing from £838 million to £3.36 billion in the same time period. In 2014, the company grew its protein business by 30 per cent year on year. As a result of Boparan’s meteoric rise, after five years as the UK’s largest grocery supplier, Associated British Foods’ grocery division has been pushed into second place, despite aggressive cost-cutting helping the company to achieve a 30 per cent increase in operating profit.
Boparan’s stellar performance has enabled the company to buck the trend of an otherwise depressed sector, where intense competition among the grocers has had a knock-on effect on producers’ revenues. The average rate of revenue growth slumped from 5.8 per cent in 2014 to just 2.9 per cent this year.
Will Hayllar, Partner at OC&C Strategy Consultants.
Will Hayllar, Partner at OC&C Strategy Consultants and author of the report, says: “Changing shopping habits, supermarket price wars, and the continual rise of discounters’ share of the market in the UK have pushed grocery suppliers’ revenue growth to historic lows and squeezed margins ever tighter. However, there is cause for some optimism. Producers are now tackling these challenges head on by investing heavily in efficiencies and innovation, and we’re seeing M&A activity ramping up right across the sector, reflecting greater investor confidence and an appetite for growth among players.”
The first half of 2015 saw six deals in the food and drinks industry worth a total of £3.1 billion, compared to ten deals worth £2.8 billion across the whole of 2014.
This trend is particularly evident among own label producers which are benefiting from the supermarkets’ desire to differentiate in an extremely competitive grocery environment. Own label producers continue to consolidate, with revenue growing at an average rate of 5.9 per cent, in comparison to 0.4 per cent for branded players.
Across the sector, companies have been investing in efficiency and innovation to tackle changes in consumer demand, resulting in an 18 per cent year on year increase in capital expenditure (CapEx). Haribo, Frank Roberts, and Dairy Crest lead the pack, spending 20 per cent, 12 per cent and 6.3 per cent of their revenues on CapEx respectively.
Will Hayllar continues: “The biggest success stories in this year’s Food & Drink 150 have ambitions far beyond aggressive cost-cutting. McCain, for example, launched six new products over the course of 2014 to meet changing consumer tastes. Equally, Alpro hasn’t rested on its laurels – innovating on its core offering with new tastes and pack sizes, and expanding into adjacent categories such as yoghurt and cream delivered a step change in the company’s performance over the past year. By meeting changes in customer demand head on, McCain and Alpro have delivered revenue growth of twice and six times the industry average respectively. Producers can take their cue from these success stories: relentless innovation, investment in your core and international growth are crucial for sustainable long-term revenue growth.”
This year’s report identifies five companies that have pursued winning strategies in a challenging marketplace:
* Moy Park has been buoyed ahead of its sale to JBS by 10.5 per cent revenue growth in 2014. Organic growth across its core UK and Irish markets, tight cost controls to drive profitability and targeted investment in its proposition delivered a turnover of £1.2 billion.
* McCain’s innovation pipeline is giving the company reasons to be chipper. The company launched six new products in 2014 helping to deliver 6.8 per cent revenue growth at an impressive 12% margin.
* Ferrero’s sweet deal with Thornton’s and significant investments in brand marketing have delivered on the company’s aggressive revenue growth plans – turnover grew by more than a fifth to £260 million in 2014, even before accounting for the growth from the Thornton’s deal.
* Alpro’s non-dairy offer and range innovation has allowed it to milk shifts in consumer preferences: 19.5 per cent revenue growth over the year pushed the company up eight places in the rankings to number 131.
* Adelie’s laser-like focus on the food-to-go customer to deliver best-in-class process, packaging and product has paid dividends for the producer – turnover grew by 19.1 per cent to £256 million.
