Dean Best

Best bits: Vion UK exit set to strengthen rivals

By Dean Best | 26 November 2012

Cranswick and Hilton Food Group could benefit from cuts in capacity in UK meat sector

Cranswick and Hilton Food Group could benefit from cuts in capacity in UK meat sector

In 2008, after Dutch meat giant Vion landed the acquisition of UK peer Grampian Country Food Group, it talked about becoming a "major player" in the country's food industry.

There is no doubt the combined company became a significant supplier of meat products to UK retailers. But, four years on, amid over-capacity in the sector, claims of intense competition and after a series of attempts to reshape its enlarged UK business, Vion has decided enough is enough.

Last week, Vion announced it would quit the UK, blaming excess supply and "extremely challenging" trading conditions. 

Vion's problems were well known. It has been at the centre of one of the more controversial plant closures in the UK this year but the decision to completely exit the market - where it has 38 sites and employs 13,000 people - was a surprise.

That said, industry watchers have reflected on the problems Vion has had with Grampian. One City analyst told just-food earlier this year owning Grampian had not been "an easy ride" for Vion. Another described Grampian as "a basket case".

Vion's UK employees will be concerned about their future, although the company says it is in "detailed" talks with "a number of interested parties, including management" about the sale of some of its assets.

Vion's UK rivals Cranswick and Hilton Food Group will likely at least take a look on what is on offer, although they would need to be very certain about adding more capacity to their businesses.

In the short term, Vion's plans to exit the UK could strengthen the hand of Cranswick and Hilton in their negotiations with retailers on price increases amid pressure on feed costs. Retailers will be keen to shore up supply. Cranswick's first-half results, announced this morning, has provided evidence of this, with the sausage and bacon supplier saying "constructive" talks with retailers on price had helped it offset higher feed and pig costs.

Later this week, we will publish our latest category crunch two-part feature, which focus on the UK pork sector and will take an in-depth look at the industry, including the pressure from costs, the upcoming EU rules on animal welfare and NPD.

Meanwhile, the UK meat sector has received an apparent boost with the news that Russia has lifted a 16-year ban on British beef and lamb imports.

Moscow brought in the ban amid fears over BSE and the opening up of the emerging Russian market to UK beef and lamb has cheered the country's government and farmers.

The news follows a GBP50m deal struck in May for the UK to supply pork to China.

Last week, we interviewed Owen Paterson, the UK's Secretary of State for Food, who insisted the potential of the country's food industry was "absolutely enormous".

Paterson had just returned from China, where he was part of a trade delegation to showcase the UK's food and drink exports. UK manufacturers, he said, must target overseas markets, particularly developing countries like China. EBLEX, the organisation for the English beef and sheep industry, was part of the delegation and told just-food from Shanghai it was planning to develop a "more sophisticated" approach to marketing its products in China to build on its presence in the country.

Notably, Paterson told just-food he did not agree with claims the UK government could do more to support the country's food industry and enable it to compete on an even international playing field, which will raise eyebrows among some in the sector, facing competitors in countries like Ireland battling hard for the growth in the east.

Sectors: Emerging markets, Meat & poultry, Mergers & acquisitions, Private label

Companies: Vion, Cranswick, Grampian Country Food Group, Hilton Food Group

View next/previous articles

Currently reading -

GERMANY: Metro tight-lipped over Real eastern European sale talks

Currently reading -

Best bits: Vion UK exit set to strengthen rivals

There are currently no comments on this article

Be the first to comment on this article

Related research

October Monthly Deals Roundup - Consumer Packaged Goods

The report provides a review and understanding of mergers and acquisitions (M&As), capital-raising, partnering deals, and agreements entered into by CPG companies during October 2012....

Related articles

On the money: UK pork group Cranswick open to more acquisitions

UK pork group Cranswick has said it is open to making more acquisitions and will continue to chase opportunities for growth in a bid to develop the business further.

What the analysts say: UK meat group Cranswick reports "positive" FY

UK pork group Cranswick this morning (20 April) booked an increase in adjusted annual earnings and in sales. Profits exceeded analysts' expectations. Overall, analysts offered a positive review of the results.

UK: Cranswick shares climb on "positive" FY

Cranswick saw its share price climb this morning (20 May) as the UK pork group reported a "pleasing" set of annual results.

Read more on this hot issue

Dutch meat giant Vion plans to quit UK

The meat processor has announced it wants to leave the UK, a market where it has had problems in recent months.

Welcome to the home of food information, insight & intelligence

Not a member? Join here

Decrease font sizeDecrease font sizeDecrease font size Increase font sizeIncrease font sizeIncrease font size Comment on this article Email this to a friend Print this page