Consumer sector comment – June 2013


Deal activity in branded food and multichannel.

The branded food space continued to see plenty of activity, including a couple of interesting cross-border transactions. Ella’s Kitchen, the manufacturer of premium organic baby food was acquired by US group, Hain Celestial, which also acquired Hartley’s from Premier Foods last summer. Following the acquisition, Hain Celestial will set up a new infant nutrition business combining Ella’s Kitchen and Hain Celestial’s Earth’s Best brands. Meanwhile, gelatine-free sweets company, Goody Good Stuff was acquired by Swedish confectionery company, Cloetta. Cloetta was founded in 1862 and owns a large range of brands, including Chewits. Cloetta was attracted by the “growing segment of natural candy”. We continue to expect large international food groups to acquire branded businesses particularly where the target business has developed high growth brands through a differentiated product.

This month has also seen further confirmation of the trend towards multi-channel with significant announcements from 2 major UK retailers. Firstly, the long-awaited move by Morrison’s into the online grocery space, was finally confirmed with the announcement of a 25 year partnership deal between the retailer and Ocado. This followed ongoing concerns over the lack of an online food offering at Morrisons, combined with weak Christmas trading (like for like sales down 2.5%). As part of the deal, Morrisons paid £170 million for a sale and leaseback of Ocado’s second customer fulfilment centre and will also pay £46 million to expand the facility, which it will lease back to Ocado. Morrisons has said it will launch online shopping by January 2014 and will retain its own branding for online deliveries. The service is expected to generate positive EBITDA by 2016/7. Meanwhile, Ocado has embarked on its own diversification strategy, announcing the launch of a standalone specialist pet website, Fetch which will sell pet food, toys and accessories. The plan is that Fetch will be followed by other specialist transactional sites focusing on a number of non-food areas including toys, homewares and health and beauty.

The other tie-up which hit the headlines was that between Primark and Asos. This is seen as an experimental arrangement and involves a “limited trial”, where a small selection of Primark clothes will be on sale via the Asos website to give Primark an “insight” into online retailing. The arrangement is nonetheless significant as it represents something of a U-turn for a retailer which, to date, has relied upon rapid store expansion for growth and has dismissed the need for an online offering. However, the company confirmed that its priority remains rolling out stores in the UK and Europe and recently opened its first stores in France. Retailers of all types will continue to develop their multi-channel strategies and for some an acquisition will be the quickest route to achievement.


Intertain, which operates 35 bars including the Walkabout chain, undertook a restructuring of their equity. In the process a stake has been acquired by Barclays Ventures, TPG Opportunities Partners and Goldman Sachs. The company now aims further site acquisitions to fuel future growth.

Pure Gym, the British gym operator, has been acquired by private equity firm CCMP Capital Advisors, for an undisclosed amount. Pure Gym is known for its offering of affordable memberships and always-open, no-frills strategy across 45 locations in the UK.

Blackwood, a manufacturer of alcoholic spirits, has sold Blackwood the Vodka and Gin, Diva and Jago brands to Blavod Wines & Spirits plc, a quoted owner of premium drinks brands. Blavod aims to roll out the brands in the UK and internationally.

The premium organic babyfood manufacturer Ella’s Kitchen has been sold to the US food corporate Hain Celestial. The acquisition complements their Earth’s Best line of infant, toddler and kids products. The company also plans to further expand their distribution platform across the UK and US.

Giles Foods, a UK based garlic bread and pastries manufacturer, has been acquired by the baker Warburtons for an estimated £10m. This is part of a broader strategy to diversify outside the traditional bread market. Jonathan Warburton, the chairman and CEO of Warburtons, said: “Innovation in bakery is going to be the lifeblood of the future. To do that in our present bakeries would be challenging.”

InterContinental, London Park Lane hotel has been acquired by Constellation Hotels, part of the Qatar Holding investment vehicle for £400m. The announcement came after Qatar invested £3bn in European real estate in the 12 months to mid-August 2012. Other investments in London include: the Shard skyscraper, Harrods department store and the athlete’s village in the Olympic Park.

The London based e-tailer Oki-ni has been acquired by French menswear-focused media and e-commerce group MenInvest for an undisclosed amount. MenInvest which is backed by AXA Private Equity, Partech International, 123 Venture and Orkos Capital aims to reach €100m revenues by 2016. The acquisition fits in well with their international expansion project.

With the aims of creating Britain’s biggest plant supplier, Verde Horticulture has been bought by the Butters Group. Butters currently backed by Bestport Ventures, expects significant economies of scale resulting from the acquisition, which will enable Verde to grow substantially in the near future.

AHL Online, the online retailer of body building and sports nutrition products has been acquired by the multi-channel retailer BVG-Airflo. The acquisition will enable the group to diversify further into the lucrative sports nutrition market.

Goody Good Stuff registered as FTF Sweets Ltd a manufacturer of gelatine-free sweets has been acquired by Swedish listed confectionary group Cloetta. The deal is part of the group’s strategy to broaden its product portfolio to meet the growing demand of natural candy.