The deal by William Jackson Food Group (WJFG) to purchase organic food group Abel & Cole has garnered a mixed reaction from industry watchers, some of whom were surprised by the deal with others more confident of the fit.

The acquisition of the UK online retailer Abel & Cole by WJFG last week may have been a long-time coming for some.

The company, which was first put on the market in January last year, was reported to be preparing a fresh attempt to sell the business in February this year following a stalled sale process the previous year. However, nothing immediate happened.

Having also been purchased once before – by Phoenix Equity Partners in 2007 before undergoing a debt-for-equity swap in 2010 – an acquisition may have seemed inevitable.

The identity of the acquirer, however, may have been less predictable.

William Jackson, a privately-owned food manufacturer based in Hull, currently has no retail operations. The company counts the Aunt Bessie’s frozen food brand, as well as Jackson’s Bakery, Hazeldene Foods and Parripak Foods in its stable.

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Employing around 2,000 people at various sites around the UK, this will be the first venture for William Jackson into the organic vegetables market. It also ends an eight-year absence from the retail sector for the firm, which it exited in 2008 with the sale of its Jacksons convenience store business to Sainsbury in 2004.

Social media networks carried some messages of surprise on Friday that a processed food company would purchase an organic one. Abel & Cole had been widely expected to be sold to a retailer. When it was first put up for sale in late 2010, it was seen as an acquisition target for Morrisons, Ocado or the Co-operative Group.

Trefor Griffith, director of corporate finance for Grant Thornton, however, believes the fact that Abel & Cole is “still niche and quite small” may have meant larger retailers would not have seen the deal as one worth the focus or effort.

“It’s a much better fit with a family business such as William Jackson,” he tells just-food.

Colleague Tim Hansell adds that the existing online grocery presence for most major retailers may also have deterred any of the major retailers from pursuing such a deal.

Griffith believes the acquisition is an “exciting” one for WJFG.

“William Jackson is a long-established family business that in their own words have admired Able & Cole for many years. It is an exciting acquisition for them as it opens up significant new opportunities. They were a retailer themselves up until a few years ago and there is alignment with some of their other business, so it has the makings of an excellent acquisition.”

He also adds the deal will give WJFG “a lot of new opportunities” that would have been difficult for the company to develop itself.

“Abel & Cole is just another product category,” he tells just-food.

Indeed, the purchase of Abel & Cole may complement WJFG’s Hazeldene salads and Parripak vegetables business, and the company will also be able to offer its experiences in food manufacturing and retail.

An industry observer who wished to remain anonymous told just-food he was unsurprised by the deal but that the addition of Abel & Cole into WJFG’s fold could be a challenge for the firm.

“I don’t like the business (Abel & Cole), the margins are very low, the attrition rate in customers is very high, it’s a very difficult thing to get right in terms of quality and service levels and it’s not all that value-added,” he tells just-food. “Just finding fruit and vegetables from organic suppliers, putting them into a box … they’re not doing much more than quality control. It’s not an easy business to get right, everything has to be going right at the same time, so to speak.”

Indeed. Abel & Cole has had its fair share of difficulties. The company was started in 1988 by Keith Abel, who turned his back on a career as a barrister to set the firm up from a house in south-east London.

Its sales growth, however, stumbled with the onset of the recession, as some customers abandoned organic products for cheaper alternatives. The business recovered in the last two years though and recorded underlying profits of GBP4.6m in 2011 from GBP1.8m a year earlier.

The company is now controlled by Lloyds Banking Group and Keith Abel, who returned after a two-year break from operational involvement, replacing chief executive Stephen Richards.

Employing around 450 staff and working with a network of 150 independent farmers, Abel & Cole delivers groceries to around 50,000 homes in England and Wales on a weekly basis.

The industry observer believes that, despite the challenges the Abel & Cole business presents, WJFG may have been attracted to the idea of dealing with an alternative route to market when considering the acquisition.

“They have been looking for investment opportunities through different channels for a while, so I’m not too surprised from that perspective. I expect what they like about [Abel & Cole] is the attraction of dealing with an alternative route to market, other than supermarkets, and being attracted by the reputation for organic.

“[WJFG] has an understanding of how consumers behave, they’re good business people and they’re familiar with the UK food market. Maybe they feel they can do something with the brand, take it into the supermarket, probably do something like leverage their brand credentials into other channels.”

And despite the fact that UK organic product sales fell by 3.7% in 2011, according to figures from the Soil Association, the observer is confident WJFG can make it work.

“There are plenty of people doing it well in this market, so there’s no reason why it can’t do the same.”