Italy’s Newlat swoops for UK manufacturer Symington’s
Newlat, the Italy-based food group that had been looking to make an acquisition in the UK, has announced a deal to buy local manufacturer Symington’s.
Under the terms of an agreement unveiled today (4 August), bakery, pasta and dairy manufacturer Newlat will pay GBP53m (US$73.7m) for Symington’s, a supplier of branded and own-label food.
Last autumn, Newlat had gone public with its interest in Hovis and wanted to hold exclusive talks over a possible deal to buy the UK bakery group.
Hovis was ultimately sold to private-equity firm Endless but Newlat was open about its interest in making acquisitions. The company told Just Food in March it was eyeing five possible targets in “complementary sectors” across Italy, Germany, France and the UK.
In February, Symington’s, which had UK investment fund Intermediate Capital Group as its majority investor, said it had hired advisors “to scope the market for opportunities” to allow the company “to invest and grow”. The statement came after a media report suggested Symington’s could be put up for sale.
Angelo Mastrolia, Newlat’s chairman, said: “This is an interesting business with high potential for growth and we deem it to be a perfect fit into our strategic plan. We see a number of synergies between our businesses as we both produce complementary but different categories of products.
“Not only will there be significant cost synergies but, also, this acquisition allows us to enlarge and diversify our product range and our geographical reach. This opportunity enables us to set foot into the UK and thus consolidate our position in this extremely relevant market. We are ready to invest in the business and to support its international expansion.”
The Symington’s product range includes pasta, soups, noodles and cooking sauces. The company’s brands include Mug Shot, Naked, Ilumi, Chicken Tonight and Ragu. Own label accounts for 48% of Symington’s business, according to the company’s latest results filing with Companies House. Some 47% of the group’s sales come through its brands, with the remainder from business-to-business and the firm’s new direct-to-consumer service.
In the year to 30 August, Symington’s generated turnover of GBP114.2m, up 4.2% on the previous 12 months. The company posted an operating profit of GBP2.8m, versus an operating loss of GBP2.9m a year earlier. After-tax profit was GBP2.9m, compared to a loss of GBP3.1m the previous year. Outside the UK, the company’s sales were GBP8.6m, versus GBP4.9m a year earlier, helped by listings with Walmart.
David Cox, a former director at the UK firm Fox’s Biscuits, became Symington’s CEO last autumn, succeeding former Associated British Foods director John Power, who spent three years at the helm.
Cox described the sale to Newlat as “fantastic news for us”. He added: “Newlat wants to invest in our business and our brands. It provides long-term security for our business with an international ambient and dairy food player operating in mutually beneficial categories and is an exciting time for us both.
“By bringing together both businesses we can combine our strengths, accelerate our growth and increase our global footprint. Symington’s provides a strong springboard for Newlat’s brands into the UK market and Newlat gives us further opportunities for us to grow our brands internationally where Newlat has operations – in Italy and Germany.”
Newlat has 1,500 employees across 14 production plants in Italy and one in Germany. Symington’s has manufacturing and distribution centres spread over two locations in Leeds, one in Bradford and another in Durham.
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US intervenes to boost competition in meat industry
The US government is set to invest in the country’s meat-processing capacity and “revitalise” trading rules, arguing Covid-19 has demonstrated the industry needs more competition.
Some US$500m of the Biden administration’s “Build Back Better” investment in US infrastructure will be used for new meat and poultry processing facilities.
A further $155m will be used to support existing smaller processors in the US meat industry in areas such as expanding capacity and the cost of inspection fees.
The plan will also see the US government look to strengthen the country’s Packers and Stockyards Act, a law passed a century ago to protect farmers from unfair trading practices.
In response, The North American Meat Institute, the trade body representing meat and poultry companies in the US, warned of the “unintended consequences” of looking again at the Act.
Nonetheless, US Agriculture Secretary Tom Vilsack said the Biden administration’s announcement was a reaction to how Covid-19 had “exposed a food system that was rigid, consolidated, and fragile”.
Vilsack added: “The investments USDA [the US Department of Agriculture] will make in expanding meat and poultry capacity, along with restoration of the Packers and Stockyards Act, will begin to level the playing field for farmers and ranchers. This is a once-in-a-generation opportunity to transform the food system so it is more resilient to shocks, delivers greater value to growers and workers, and offers consumers an affordable selection of healthy food produced and sourced locally and regionally by farmers and processors from diverse backgrounds.”
The US government argues agricultural markets in the country have become “more concentrated and less competitive”, leading to a “squeeze” on farmers and ranchers.
It points to the US meat industry and how 80% of the country’s beef market is accounted for by “four large meat-packing companies”. During the early months of the pandemic, when processing facilities were closed, farmers faced an absence of customers and store shelves were short of products, the administration argues.
The US government believes the “risks” facing the market would grow amid the climate crisis and concerns over cybersecurity. Last month, JBS, one of the four beef processors that account for 80% of the US market, was hit by a breach that affected operations in the country.
The proposed changes to the Packers and Stockyards Act will see the USDA “clarify the conduct” it believes breaks regulations. The department, meanwhile, said it will “address oppressive practices in chicken processing” and “reinforce the longstanding USDA position that it is not necessary to demonstrate harm or likely harm to competition in order to establish a violation of the Act”.
Julie Anna Potts, president and CEO of the Meat Institute, said: “President Biden’s executive order calling for USDA to change the Packers and Stockyards rules will have unintended consequences for consumers and producers. Government intervention in the market will increase the cost of food for consumers at a time when many are still suffering from the economic consequences of the pandemic.
“These proposed changes will open the floodgates for litigation that will ultimately limit livestock producers’ ability to market their livestock as they choose. These proposals have been considered and rejected before and they are counter to the precedent set in eight federal appellate circuits.”
PepsiCo extends restructuring programme
PepsiCo is extending its “productivity plan” – announced in 2019 and designed to lead to US$1bn in annual savings – through to the end of 2026.
Two years ago, the Lay’s and Quaker owner set out a range of measures in manufacturing, distribution and information systems to “simplify” its processes and organisation.
In 2019, the measures led to more than $1bn in what PepsiCo called “productivity savings”. PepsiCo said in that year’s annual report the plan was to “deliver this amount annually through 2023”.
Yesterday (13 July), alongside the publication of the company’s first-half financial results, the US giant said it would look to continue the programme for another three years.
“The expansion of the programme reflects further initiatives to leverage new technology and business models to further simplify, harmonise and automate processes; re-engineer our go-to-market and information systems, including deploying the right automation for each market; and simplify our organization and optimise our manufacturing and supply chain footprint,” PepsiCo said in a statement. “As a result, we are extending our target to deliver at least $1bn in annual productivity savings through 2026.”
Just Food has asked for further details for what the continued push in savings could mean for jobs and for PepsiCo’s manufacturing network.
Speaking to analysts after PepsiCo published its second-quarter results, CFO Hugh Johnston said: “Part of what we’re trying to do is shape the company for the future. And in doing so, we’re obviously taking cost out in certain places and then we’re investing in certain places, like digitalising the supply chain and making our interactions with customers and consumers much more efficient than they were in the past.”
In the 24 weeks to 12 June, PepsiCo’s net revenue rose 14.1% to $34.04bn, or by 8% on an organic basis.
Organic sales from Frito-Lay North America were up 4%, with volumes rising 0.5%.
Quaker Foods North America saw its sales drop 7% on an organic basis. Volumes were down 12%.
PepsiCo’s half-year operating income increased 28% to $5.44bn. On an underlying basis, it was up 15%.
Reported group net income was $4.01bn, compared to $2.98bn a year earlier.
“Given the strength of our results, we now expect our full-year organic revenue to increase 6% and core constant currency earnings per share to increase 11%,” chairman and CEO Ramon Laguarta said.
PepsiCo had previously forecast “mid-single-digit growth” for annual organic revenue and “high-single-digit growth” for core, constant-currency EPS.
PepsiCo unveils new healthy snack commitments in Europe
US food and beverages giant PepsiCo has outlined plans to expand its healthier snacking portfolio in Europe.
PepsiCo has revealed ambitions to sell more snacks that have scored highly on the Nutri-Score front-of-pack labelling system, which ranks products by their nutritional value based on a five-colour coded scale going from A to E.
The company wants to increase sales of snacks rated B or better by Nutri-Score tenfold by 2025 starting from a baseline of 2019.
The Walkers and Lay’s owner said it wants to diversify its snack portfolio to include healthier options, “learning from its success in growing sugar-free beverages”.
PepsiCo said this will make healthier snacks its fastest-growing food category over the next four years and it wants to expand this to a US$1bn portfolio by 2030.
The company has also committed to reducing the average level of added sugars in its beverages sold in Europe by 25% by 2025 and 50% by 2030.
It said the new goals will be achieved through the reformulation of existing products, expanding the company’s existing brands, including Lay’s Oven Baked, to more markets, and introducing new snacking ranges such as PopWorks, its newly-launched popped corn crisps range.
Silviu Popovici, CEO of PepsiCo’s European options, said: “Over the past decade, we’ve reformulated and launched new products to bring more options to consumers. As a result, in Europe today, almost one in three beverages we sell is sugar-free and we believe this trend will continue to grow over time. With this pledge, we can use our experience with sugar reduction to accelerate our shift to a healthier snacks portfolio.”
Just Food asked PepsiCo for further details on its commitments around the Nutri-Score labelling system, which has not been adopted in every European market.
Garrett Quigley, general manager and senior vice president, categories in western Europe at PepsiCo, said: “We are in favour of a single pan-EU labelling scheme. The current, fragmented situation is not satisfactory. It is costly and confusing to consumers.
“We have chosen to align our snacks portfolio commitments to Nutri-Score. We believe it is the most researched nutrition system available. We will be using this labelling scheme in those markets that have formally adopted legislation endorsing the scheme – and where it does not cause us commercial difficulty.
“We will continue to use other nutrition front-of-pack labelling schemes in markets where Nutri-Score is not endorsed and where existing alternatives are well accepted by consumers.”
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