UK: Cranswick opens new facility on Asda contract win
Cranswick secures Asda fresh pork contract
According to Bottomley, Cranswick already supplied Asda with some fresh pork products and the group has been able to pick up a contract to supply "the balance" of Asda's fresh pork needs. Previously, these were filled out of Vion's Hall's of Broxburn site, which closed last year. The deal will add annualised revenues of GBP30m (US$47.4m), Bottomley said.
In order to supply this new business, Cranswick is investing in a new retail packing facility, which will be located close to its existing slaughterhouse in Hull. In addition to meeting the Asda contract, Bottomley suggested the facility will provide additional capacity for Cranswick to secure new contracts.
"[It's] good news on two fronts: firstly we have got the facility. It is ideally situated, it is very close to our abattoir in Hull, it will give us more than enough capacity - we will still have an extra 700 tonnes of retail packing capacity per week. Secondly, it means the creation of a number of new jobs in the area," he said. Around 100 new jobs will be created by the move.
Cranswick plans to invest GBP5m to "kit out" the site, Bottomley said. "The bulk of the spend is on putting new packing lines in and bringing it up to our standards. That is going full speed ahead and will be completed over the next four weeks or so."
According to Bottomley, Cranswick's recent investment in its capacity has been a factor in the company's success.
"We have invested well over GBP100m in our infrastructure over the past five years. We see that as one of the key drivers of constant success. Both in terms of having state-of-the-art facilities - which our retail customers really appreciate - and the fact that for us state-of-the-art facilities mean that we can drive further efficiency improvements and have low cost production," he said. "We invest for capacity."
Yesterday, Cranswick reported that its third-quarter underlying sales were up 7% and total sales were up 8%, thanks to strong volumes.
The company indicated it had also been able to effectively manage its margins after successful talks with retailers. Cranswick has faced "record" pig meat prices, driven up by rising feed costs due to poor grain harvests.
"Discussions with retailers are never straight forward. It is a tough environment," Bottomley observed. However, he added the "well-flagged" nature of rising input costs meant retailers were "mindful" of this pressure. "There is a growing concern about being able to supply British pork," he added.
Sahill Shan, an analyst at stockbrokers N+1 Singer, suggested Cranswick was likely to build on its positive momentum because UK retailers are attracted to well-invested suppliers that can ensure stability of supply.
"We reinforce our point that Cranswick should benefit from an improving competitive landscape and supermarkets aligning closely with strongly invested and well capitalised players to ensure guarantee of supply. We expect the positive sales momentum and progressive margin recovery to be the catalyst for a re-rating."
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