Food and beverage sector mergers and acquisitions comment – January 2008

Date

Over the last 10 years private label products have been taking an increasing share of the overall grocery market, and according to research by market intelligence group Key Note, own label sales are set to grow to 42% of the grocery sector by 2011.

The growth has been fuelled by the growth of premium own label ranges and the expansion of sub-brands such as organic and better-for-you brands. However, the buoyant market belies the fact that private label suppliers have faced increasing margin pressure from retailers over the same period and that the sector has been highly fragmented. These issues have caused consolidation amongst private label suppliers and this looks likely to continue. For example, Finsbury is leading the consolidation in the cakes, breads and morning goods sector, whilst Zetar is doing the same in the confectionery and healthy snacking sector.

Deals completed in the UK

Donatantonio, the importer and distributor of Mediterranean ingredients, has been acquired in a BIMBO. Terms of the deal were not disclosed. Donatantonio supplies more than 450 product lines, including pasta, olive oil, vegetables, fruit, cold meats and cheeses. The buy-in team was backed by Beringea and led by Steve Asplen, who is joined by Tanya Bedford, the incumbent commercial director of Donatantonio.

Northern Foods, the UK maker of ready meals, snacks and other edibles, has acquired Baxters Food Group’s chilled soup manufacturing. Terms of the deal were not disclosed. The acquisition complements its recent purchase of Ethnic Cuisine.

Tangerine Confectionery, the privately owned sweet manufacturer, has acquired Monkhill from Cadbury Schweppes for £58m. Monkhill manufactures sugar confectionery and popcorn for the UK market. The sale of Monkhill will complete Cadbury’s programme, which began in October 2005 to dispose of non-core brands and businesses.

Danisco, the listed Danish food ingredients group, has acquired the UK-based Abitec Ltd. Abitec supplies emulsifiers and medium-chain triglycerides (MCT) mainly to the European market. Terms of the deal were not disclosed.

Lloyd Maunder, the Devon-based poultry firm, has been acquired by 2 Sisters Food Group. Terms of the deal were not disclosed.

AG Barr, the manufacturer of Irn-Bru and Tizer, has completed two acquisitions. It acquired the Vitaminsmart and Vitsmart brands of functional water for £350,000. It also acquired Taut International, whose branded sports drinks are supplied into the sports drinks market with wide distribution across a number of sales channels including grocery multiples, the impulse sector and also health clubs.

UK brewer Scottish & Newcastle has agreed to be acquired by Heineken and Carlsberg for £7.8bn. The deal is contingent on gaining regulatory approval in the US, European Union, Russia and Ukraine.

Irish Food Processors, the beef processing group, has acquired WA Turner, a Kent-based producer of sausages and savoury bakery products. Terms of the deal were not disclosed, but IFP is rumoured to have paid around €9m for the acquisition. WA Turner will operate alongside IFP’s British arm, Anglo Beef Processor Holdings, which processes about 20% of beef produced in the UK.

Kerry Foods, the Irish food and ingredients group, has agreed to acquire the sandwich production division of Bernard Matthews. Terms of the deal were not disclosed, but it is expected to allow Bernard Matthews to focus on its core business of turkey farming.

Meadow Foods, the dairy processing and ingredients group, has acquired West Lakes Dairy Park for an undisclosed sum.

Cargill has acquired Freeman’s of Newent Ltd, a Gloucestershire-based chicken processing business. The acquisition will complement Cargill’s existing Sun Valley poultry operations in Hereford.

Burton’s Foods, backed by Duke Street Capital, has acquired Northumbrian Fine Foods, the cereal bar and biscuit manufacturer. Terms of the deal were not disclosed.

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