Hannah Abdulla

Analysis: Samworth Brothers swoops for Soreen

By Hannah Abdulla | 19 February 2014

Analysts say there will be plenty more Soreen like acquisitions for Samworth

Analysts say there will be plenty more Soreen like acquisitions for Samworth

UK food group Samworth Brothers supplies own-label products and brands to the country's retailers - although private-label accounts for the majority of sales. However, in a surprise deal, Samworth has moved to buy the fruit and malt loaf brand Soreen. Hannah Abdulla looks into the move.

Last week, Samworth Brothers, a supplier of own-label salads, sandwiches, ready meals and desserts to the likes of Tesco, Morrisons and Marks and Spencer, swooped to buy fruit and malt loaf brand Soreen.

Family-owned Samworth does own brands. Through acquisitions in the 1970s and 1990s, the company snapped up pasty business Ginsters and pork pie supplier Dickinson and Morris.

Nevertheless, Samworth has largely preferred to focus on organic growth over expansion via M&A. Three years ago, it did show interest in another UK own-label chilled foods supplier, Uniq, but the company was bought by Greencore. That said, despite insisting it does look at acquistion opportunities, Samworth has preferred to grow its existing businesses.

However, just under two years ago, Samworth appointed a new CEO, Lindsey Pownall, who, promoted from a role as director, replaced Brian Stein, who had been in the hot seat since 1999. Industry watchers have suggested the acquisition of Soreen could reflect the change at the top and a review of its growth strategy.

The last available financial figures for Samworth Brothers, for the year ending 29 December 2012, indicate some top-line growth but mixed profits.

Turnover rose 3% year-on-year to GBP767.2m, which Samworth described as "strong sales growth". It said it boosted sales by gaining "additional business with key customers".

However, Samworth's profit figures were mixed. It said its gross margin was up 30 basis points to 20.5%. It reported a 1.2% increase in net profit to GBP30.9m. However, the company's operating profit was down 5.2% at GBP42.5m on higher higher selling, distribution and administrative costs.

Samworth's strategy of investing in areas like NPD to build its business with existing clients was continuing to grow the top line. However, could one argue Samworth moved for a brand like Soreen - reinvigorated by McCambridge Group - to boost its top line and bolster its profitability?

Asked why Samworth acquired Soreen, a spokesperson for the company told just-food: "This is an opportunity that fits well with the rest of our portfolio."

Asked whether this was a direction Samworth could take on any future deals, the spokesperson said: "Our main focus is having a strong business producing high quality foods."

So what could have attracted Samworth to Soreen? Euromonitor food analyst Ildiko Szalai believes the move to add another brand to Samworth's largely own-label operations will be beneficial for the firm's profit margins "in a largely value growth driven market environment, as the UK," she says.

Soreen has improved under the ownership of McCambridge, which acquired the brand when it bought ailing UK firm Inter Link Foods in 2007. McCambridge's confidence in the brand was signalled by NPD that included mini loaves

"Expanding the portfolio towards categories which are strongly driven by snacking/ healthy snacking trends is a positive move from Samworth," Szalai says.

David Murray, partner for transaction advisory services, at Ernst & Young, agrees the brand was rejuvenated under McCambridge's management. "Soreen's management team did well with the product in bringing it out of the dark ages," he says.

The deal is the latest disposal to be made by McCambridge. In December 2012, it sold its own-label cake business to private-equity firm NBGI. The deal for Soreen leaves McCambridge with a bakery business in Ireland.

No-one at McCambridge was available to comment when approached by just-food.

Murray, however, suggests Samworth could build on McCambridge's work with Soreen. "They know the food retailers and will put in the cash to take it to the next level," he says.

Samworth has indicated it will keep Soreen operating as an independent business, with its own management team, the way each of its businesses operate. It has acquired Soreen's bakery site at Trafford Park in Manchester and the 125 staff as part of the deal.

This choice to keep Soreen's team and running it as an independent operation do suggest Samworth has no plans to change the brand or the product. Instead, the firm will continue to "support the product's growth" through the facilities it can offer Murray believes.

Nonetheless, Szalai says Samworth is entering a competitive segment. "The company will have to count with some level of competition from the larger national and even international players," she says.

Sectors: Bakery, Mergers & acquisitions

Companies: Soreen, McCambridge Group, Samworth Brothers

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