Dairy Crest seals St Hubert spreads deal
increase its collection of brands and capture leading market
positions abroad after signing a deal to buy French and Italian
spreads firm St Hubert.
Dairy Crest, which also announced a six per cent sales rise for the last six months, said it had agreed to pay St Hubert owner, the Uniq group, €370m (£248m) in cash.
The deal, if approved by shareholders, would see the UK firm grab nearly a third of the French spreads market and become leader of the smaller Italian market. St Hubert sales were €93.5m last year.
Many in the UK dairy industry believe the sector has a better chance of raising earnings by improving its focus on higher value products and competing on an international level.
Dairy Crest's move for St Hubert marks the group's latest attempt to shift its portfolio more heavily into branded products, and follows the sale of its private label cheese business recently.
Around 90 per cent of the French spreads market is branded, providing a higher earnings platform.
Dairy Crest said St Hubert would significantly increase the proportion of its profits coming from brands, helping to relieve margin pressure in the UK.
The group will especially look to benefit from healthy spreads, an added value category which grew 10 per cent in France in the year up to August 2006. France's spreads sector as a whole expanded by just one per cent during the same period.
St Hubert has dived into health trends, launching France's first omega-3 spread in 2002 and its Cholegram cholesterol lowering spread in February 2006.
"St Hubert is a strong business with a 100 per cent branded portfolio in a sector that we know and understand well," said Drummond Hall, outgoing Dairy Crest chief executive, and Mark Allen, his replacement.
The UK group recently launched its own omega-3 spread under the St Ivel brand. It also this week announced 26 per cent value growth for the spreadable version of its Country Life butter brand over the six months ended 30 September.
There were signs of stagnation in some areas of the UK spreads market, however. Sales for Dairy Crest's Utterly Butterly and St Ivel Gold brands fell 11 and 18 per cent respectively during the half.
Dairy Crest said the move into continental Europe with St Hubert should provide more growth opportunities. It said the acquisition could be complete by early 2007 and predicted St Hubert would contribute to group earnings within the first year.