UK's number one boosted by Nestlé ice cream buy

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Related tags: Ice cream, Nestle

Richmond Foods, the UK's leading producer of ice cream brands, has
reported excellent figures for 2002, boosted by the acquisition at
the start of the year of the Nestle business in the UK. Major
investments in production, and an increasing focus on the
fast-growing take-home market, augur well for further growth in the
coming year.

The acquisition of Nestle UK's ice cream operations and the consolidation of production facilities have contributed to an excellent performance in 2002 by ice cream maker Richmond Foods.

The company reported sales of £116.7 million (€182.4m) for the year to the end of September, up 32 per cent on the previous 12 months, while operating profits were ahead 63 per cent to £8.2 million, before exceptional items relating to the purchase of the Nestle business. Pre-tax profits were also well ahead of 2001, growing 63 per cent to £8.2 million.

But while the integration of the Nestle business is already bearing fruit, Richmond Foods is not prepared to rest on its laurels and is continuing to strive towards its stated goal of becoming " the UK's number one ice cream maker by value as well as volume"​.

This year saw it begin the first phase of a £25 million, three-year investment programme designed to facilitate organic growth, improve efficiency, lower costs and deliver innovative products to market.

Ross Warburton, chairman of the company, commented: "This has been a transformational year for Richmond Foods. Over the last twelve months, we have acquired Nestle's UK ice cream business and integrated it into our existing organisational structure. On top of this, we closed our Ashford site, and transferred production to Leeming Bar, following a major capital investment programme there. At the same time, we have continued to protect our share of the own label take home market where we are already the leader."

He said that the company had already benefited from a number of successful product launches under the Nestle brand, and that the relationship with the Swiss food giant was working well. Under the terms of the purchase agreement, Richmond Foods has right of first refusal to Nestle's ice cream brands in the UK.

The substantial investments in the production facility at Leeming Bar have helped improve efficiency there, but the upgrading of the plant took longer than expected and disrupted sales during the second half of the year, Warburton said. Further investment both there and at another facility in Crossgates is planned as part of the three-year programme to expand the range of products on offer.

James Lambert, chief executive of the company, said that the total ice cream market in the UK had continued to grow during the year, rising by 1.6 per cent overall, but with a shift away from the impulse sector towards supermarket sales. "This trend will continue to benefit Richmond as over 70 per cent of our business is conducted in the fast growing supermarket sector,"​ he said.

"Richmond's share of the total market has increased this year from 15 per cent to 21.4 per cent as a result of the Nestle acquisition. This has been achieved after rationalising our ranges and withdrawing from unprofitable lines both in own label and brand."

The rapid growth of the take home market was driven by a 29 per cent increase in the value of the dairy tub market and a 16 per cent increase in sales of individual ice creams, Lambert continued, adding that these areas were predominantly driven by major brands and that as such the Nestle acquisition offered Richmond real opportunities for growth.

"This year we will be driving our market share by the recent launches of a range of one litre Nestle Tubs which include Rolo, Smarties, Yorkie, After Eight and Mivvi. In the individual ice cream sector, where we have a small market presence, we will launch Rolo and Milky Bar on a stick, in multi packs this year and several other major branded products over this and the next two years. This objective will be supported by a significant capital investment."

In contrast, the impulse sector showed a further decline in 2002, and Lambert said that the market had halved in size over the last 10 years. "The reduction in corner shops selling ice cream and the widening price differential between buying brands individually and buying them in multi-packs in supermarkets are the major reasons for this decline."

However, despite the overall decline in the market, Richmond actually improved its share from 10 per cent to 22 per cent, boosted by the Nestle deal. Lambert added that Richmond would continue to target the impulse market, focusing in particular on the children's brands Smarties, Ribena, Rowntrees, Fruit Pastil and Fab.

"We have exciting plans to launch new Nestle products and to re-launch Ice Creamery [a smaller brand acquired by the company in April] with Nestle branding. We will continue to develop our factories to lower our operating costs, improve product quality, launch new innovative products and drive volumes. As a result, we expect to grow market share in a growing market,"​ Lambert concluded.

Related topics: Manufacturers, Consolidation, Ice Cream

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