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April 30, 2013

Interview: Cranswick looks to ramp up pig production business

UK pork processor Cranswick has acquired pig rearer East Anglian Pigs. Cranswick chief executive Adam Couch says pig production will form an "important" part of the group's operations going forward and plans to ramp up investment in this side of its business. Michelle Russell caught up with Couch to find out more.

UK pork processor Cranswick has acquired pig rearer East Anglian Pigs. Cranswick chief executive Adam Couch says pig production will form an “important” part of the group’s operations going forward and plans to ramp up investment in this side of its business. Michelle Russell caught up with Couch to find out more. 

Cranswick this morning (30 April) announced the acquisition of pig breeder East Anglian Pigs (EAP) for an undisclosed sum. 

Speaking to just-food following the announcement, chief executive Adam Couch says the acquisition means pig rearing will form “a very, very significant” part of its operations in terms of importance. The deal is designed to strengthen Cranswick’s position in the premium, high-welfare pork sector.

“We are very much into adding value to pork and pork related products. What is important is to add the integrated supply chain to that to give the end consumer ever greater confidence in it. So we will be looking to invest further into this new acquisition most certainly.”

Couch did not say how much the company would look to invest but revealed the group plans to expand EAP operations, increasing production and supply into Cranswick’s existing sites.

EAP is a key supplier to Cranswick’s operations in Norfolk and will continue as a separate operation with its own management team once the acquisition is complete. The company breeds, rears and finishes British pigs and is RSPCA Freedom Foods and Red Tractor accredited. It recorded gross assets of GBP11.8m (US$18.3m) as of 31 March.

Referencing the horsemeat scandal that has shaken confidence in the European supply chain, Couch says the motivation behind the deal is entirely strategic and based on creating an integrated supply chain.

“We’ve seen how fragile supply chains can become in the last few months and this was pretty important to us. We have been discussing with the business, for a number of months now, a potential acquisition.”

He added: “[EAP] are obviously well known to us, they have been a major supplier to us, so we account for a good proportion of the pigs it was producing. As a result, it made perfect sense for us to be involved back in pig production for what is a very well-run business.”

The purchase comes at an interesting time for the UK pig industry given the contraction of domestic supply in recent years, the imposition of a new EU-wide welfare rule and the fall-out from the horsemeat scandal across Europe.

In this light, there has been an increased demand for UK retailers to source higher quality and high welfare accredited British pork.

Couch says the acquisition of EAP will give its customers and the end consumer further assurance as to the provenance and quality of meat products.

“The deal is very much motivated by the transparency side of things and for us to get closer to our supply base so we have a completely integrated approach and supply for our customers. The end consumer is obviously looking for greater transparency as well in where their products and purchases are coming from and that was also a further motivation for us. That was very much in our forethought.”

On the downside, however, the acquisition opens Cranswick up to even greater exposure to the volatility in commodity markets that have hit the sector in recent years.

UK pork rearers have been hit by rising on-farm costs, driven in particular by a massive jump in feed prices caused by poor grain harvests. These costs have slowly been passed down the supply chain: Cranswick has faced “record” pig meat prices, but said earlier this year that it has been successful in balancing rising input costs through price negotiations with retailers.

Couch downplays any threat that increasing its exposure to commodity markets could have on Cranswick’s stability, suggesting that the company was always exposed to commodity price volatility. 

“What is very key for us whenever we make an acquisition is that the management in place make the decisions that they always made beforehand. We’ve got a history of taking businesses that are already well run and well managed and adding resource where needs be in order to improve that scenario. They are very good and adept at managing the risk already within the business and we’ve seen some very volatile feed prices over the last two years. The business we’ve acquired has been able to manage that very well so it’ll be very much business as usual in that regard.”

As for other acquisitions, Couch remained coy over any additional purchases this year.

“There is nothing I would report at this stage. We’ve got nothing in the pipeline but we are always open and pretty swift at turning things around. There is nothing imminent at this stage but we are always looking.”

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