Northern Foods sells dairy
its plans to sell its dairy division to compatriot Uniq. The
Minsterley fresh dairy products business has struggled financially
in past years, especially after the group sold its major dairy
brands to Nestlé in 2002, but both parties say the move strengthens
their business focus, writes Danny Vincent.
The dairy company, which is being sold for £16.5 million later this month, made an operating loss of £3.8 million for the year ending 31 March, and it was this poor performance, almost entirely brought about by the disposal of Northern Food's leading dairy brands Ski and Munch Bunch brands last year, that prompted the sale of the business to Uniq.
Although the company has invested £35 million in the Shropshire site over the last four years, the group said that the amount it would need to invest in order to bring the business back into profitability was more than it is willing to make.
The company's finance director, Sean Christie said, "its losses arise from the reduction in turnover that followed our sale of the Ski and Munch Bunch brands to Nestle UK in 2002. Although we have been successfully rebuilding sales in new areas, it would clearly be a long haul under our ownership to return the business to satisfactory levels of profitability."
"It makes sense for us to sell to a company that is focused on these areas and can realise synergies with its other operations," Christie added.
This is by no means the first disposal by Northern Foods, which has been streamlining its diversified product portfolio in recent years, stripping out those businesses which have persistently underperformed. In 2003 the company disposed of Fox's Confectionery, and earlier this year it sold the Batchelors and Beck Smith grocery operations, as well as the Emile Tissot frozen ready meal business.
Uniq, which has turned itself from a pure UK dairy player (then called Unigate) into a pan-European convenience food producer over the last few years, said that its first aim for the Minsterley business was to bring it into profitability within the next two years.
Once it has achieved this, however, the potential for growth is significant. The dairy business supplies own label products to Marks & Spencer and Asda, two of the largest retail groups in the UK, and with Asda in particular going from strength to strength in recent years, there is still plenty of room for further development.
"This will be a very positive step for Uniq - the investment in a top class facility will reinforce our leadership position in the growing UK desserts marketplace, which is the largest market sector for Uniq Prepared Foods. In particular, the proposed purchase further enhances our relationship with our two biggest UK customers, Marks & Spencer and Asda", Bill Ronald, the company's chief executive said.
