Blog: Dean BestRelief at Inter Link, Mars

Dean Best | 25 May 2007

Turning around struggling UK baker Inter Link Foods is hardly going to be a cakewalk for the company’s management.

Inter Link lacks a presence in the growing, more premium and indulgent ends of the UK cake category. That, combined with fierce price competition in the own-label part of the sector, has led to falling sales, profit warnings and mounting debts. Things do not look rosy for the company. What’s more, this week, the company ended up in a bun fight with so far its most serious suitor, Irish food group McCambridge.

Inter Link’s perilous financial situation has left it open to possible takeover bids but, despite up to a dozen expressions of interest, McCambridge has shown the most serious intent. However, that intent almost disappeared this week. McCambridge threatened to withdraw its interest after a dispute with Inter Link over the need to sign a confidentiality agreement before due diligence could begin. On Wednesday (23 May), McCambridge signed the agreement and the deadlock was broken, paving the way for takeover talks.

Inter Link was right to stand its ground in insisting McCambridge sign the agreement. The need for the agreement was all the more pertinent given the competitive relationship between McCambridge and Inter Link.

However, Inter Link is only willing to entertain offers for the whole business. More than one party is understood to be interested in the whole of Inter Link but, so far, McCambridge seems keenest. Inter Link says publicly that it remains happy to go it alone in turning around the business but also acknowledges something needs to be done to get the company on a firmer financial footing. Talk of refinancing or a rights issue is all very well but there must have been some relief at Inter Link of its impasse with McCambridge being broken.

Meanwhile, Mars UK must also be relieved that the furore surrounding the ingredients in its chocolate bars has died down, albeit after a U-turn by the company.

Mars reversed its decision to use animal extract in the production of a range of confectionery products after a flood of complaints from vegetarian campaigners. The volte-face came just a week after Mars said that rennet, an animal enzyme, was to be used in the whey contained in products including Mars, Snickers and Maltesers.

The speed with which Mars reversed its decision demonstrates the power consumers can exert on food producers, particularly in an era of mass communication. And Mars would have recovered some of its standing by responding so rapidly to consumer anger.

However, it seemed likely there was a commercial rationale behind Mars’ original move to non-vegetarian friendly whey. Mars then told just-food that the move to animal extract was to “ensure the quality and availability of the supply of whey”. If the commercial benefit to the move was significant, would Mars have held out a little longer?

This coming Monday (28 May) is a public holiday in the UK. Suffice to say weather forecasts are predicting the current warm weather will turn swiftly into something of a cold snap over the weekend.

Normal coverage will resume on Tuesday. Enjoy your weekend.


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