Privately-owned Samworth Brothers is one of the UK’s largest chilled food producers, owns the Ginsters brand and makes own-label convenience food for the likes of Tesco and Waitrose but it operates away from the public eye. Dean Best spoke to CEO Brian STEIN about the company’s development and its ambitions.
The Ginsters brand is well-known by lovers of pasties and sausage rolls but few consumers would have heard of its owner, privately-owned UK company Samworth Brothers. The business only occasionally seeks publicity in the trade press, for that matter, even though it has grown to become one of the country’s largest producers of branded and own-label chilled foods, from pasties and pork pies, to sandwiches and ready meals. “We’re a private business. We keep very quiet,” Samworth Brothers CEO Brian Stein says.
However, just-food used the opening of a production facility supplying Tesco to ask Stein about Samworth Brothers’ recent performance, his thoughts on operating in an ever-competitive UK private-label sector and to find out more about his outlook for the business.
Stein, a straight-talking Liverpudlian, joined Samworth Brothers from Northern Foods in 1995 and became CEO four years later. The company, run by John and David Samworth, had been formed through acquisitions in the 1970s (Ginsters), 1980s (pork pie maker Walker & Son) and 1990s (a second pork pie firm, Dickinson & Morris). A decade ago, Stein says, Samworth Brothers decided to diversify its product portfolio to become a broader, chilled food producer. The company now also supplies salads, sandwiches, ready meals and desserts and supplies Tesco, Morrisons, Waitrose and Marks and Spencer.
Samworth Brothers’ last publicly available accounts, for the year to 2 January 2010, showed rising annual sales and profits. Turnover reached GBP668.8m, with net profit of GBP31.6m. Stein is guarded about more recent figures – “One of the advantages of being a private business, as opposed to a plc [is] you can keep very quiet” – but says the company’s turnover will reach GBP1bn in three years time, a feat, he describes as “nothing out of the ordinary”.
“That’s not an ambitious target, that’s replicating the growth that we’ve had,” he says. “I would hope we would be bigger than that if we do better but if we simply replicate our organic growth then we would hit GBP1bn turnover in three years time. We have an ambitious launch programme this year and a very ambitious launch programme next year. We have ambitions to continue growing at double-digit growth.”
Samworth Brothers has recently launched Flash In The Pan, a range of private-label ready meals for Tesco. It is also rolling out pie products for Marks and Spencer after securing a supply contract previously held by Premier Foods plc’s own-label arm Brookes Avana.
Despite Samworth Brothers supplying a number of UK retailers, over half its business remains with Tesco. Stein, however, brushes off the suggestion that having one retail customer accounting for 50% of sales could be a concern.
“I would prefer to be 50% of Tesco over the last 15 years than anybody else,” he insists. “With hindsight, you can decide whether you made a good decision or not. All those years ago, we hitched our flag to primarily Tesco and Waitrose and if you wanted to hitch your flag over the last 15 years to two retailers, those are the two that have been most successful.”
Stein, however, admits that chilled foods is a “very competitive” sector. Retailers, he explains, want low-cost production and they want flexibility. “It’s the combination of those two things that retailers are looking for. They don’t want one, they want both. In certain areas where the category is quite staid, they want the production to be able to compete fiercely in the marketplace. At the same time, they want to be able to change their products and put innovation on the shelves.”
And developing new products is vital to survive in the current trading environment, the Samworth Brothers chief argues. For the first time in Stein’s “30, 40 years in the industry”, food manufacturers have faced what he calls “a perfect storm” of raw-material costs increasing at an “incredible rate” and consumer demand slowing down. Retailers, he says, are “struggling”, which makes it difficult to pass on price increases. Innovation, Stein says, is critical.
“It’s very, very challenging. The only way forward for that is product innovation. You’ve got to be constantly churning the products out to make sure you’ve got new products coming through and hopefully get a slightly better margin out of new ideas, new products that you’re launching,” he says.
Of course, if only it were that easy. With raw materials putting pressure on costs and retailers fighting for consumers who increasingly look for value, suppliers face being squeezed. It is, Stein says, “very difficult”. Amid the tough trading conditions, there have been a number of high-profile companies sold in the convenience food sector in recent months. Kerry Group snapped up fellow frozen ready-meals maker Headland Foods (although the acquisition is still being scrutinised by the Office of Fair Trading). In a high-profile takeover battle, Boparan Holdings trumped Greencore and acquired Northern Foods. Eight months later, Greencore did secure a deal with the takeover of desserts and sandwich maker Uniq.
Stein believes there will more consolidation. “What you will see at the end of this, I think, is quite a shake-out. You’ve seen the weaker players disappearing, taken over. In the last couple of months, you’ve seen Northern Foods [and] Uniq disappear. The strongest will survive but even the strongest are weaker than they were.”
And how does Stein characterise Samworth Brothers? “As I said, our turnover will be GBP1bn in three years time. Will we survive? Yes. Will life get tougher? Yes.”
Stein insists Samworth Brothers “constantly” looks at opportunities to acquire businesses. The company, for example, was in the running to buy Uniq before the firm’s pension trustee owners accepted Greencore’s bid.
Uniq moved into the ownership of its pension trustees in April after its board gave the trustees over 90% of the business in a bid to solve the company’s GBP436m pension deficit. As well as the pressure from the deficit, Uniq has faced some operational issues in recent years, notably in its desserts business.
However, when Greencore made its GBP113m offer for the company in July, the Irish company’s CEO Patrick Coveney said Uniq was an “excellent fit” for its strategy in the UK and would give it “greater scale” in food-to-go and chilled desserts.
“We were very interested in Uniq when it came up for sale. We put in a bid for Uniq which we thought was a very fair price and we lost out to somebody that was prepared to pay a silly price,” he says. “Their desserts business will be very challenging. Very.”
Acquiring Uniq would have added to Samworth Brothers’ own-label operations but the company does not only operate as a private-label supplier. In Ginsters, it has perhaps the most visible pasty brand and a business that accounts for 25% of its business. “It’s now the market leader and growing quite nicely,” Stein says. “It’s been hit like everybody else in the recession. People are not spending as much money in the forecourts and in the service stations, or if they are they’re spending it on petrol rather than on food, so it’s challenging times even for Ginsters.” However, he adds: “I think we’ll come through it and it will be a strong brand in the years to come.”
Samworth Brothers recently looked to improve its own and the brand’s environmental credentials when it announced the palm oil used in its Ginsters products would be certified by the Roundtable on Sustainable Palm Oil. Like other food manufacturers, the company has been using GreenPalm certificates and, although Stein says the use of the certificates was “clearly not enough”, he says it was a step on the right direction. “The issue was to deliver fully sustainable steering and to be the first to get there,” Stein says, pointing out that Ginsters is the first branded pasty manufacturer to use “100% sustainable palm oil”. He adds: “As availability builds we will offer it to own-label customers if they are happy to pay small premium associated with this specification.”
Balancing owning a brand with private-label operations is seen by some as a difficult task. Questions are raised when a company looks to build a business that operates in both areas. Stein says it is a concern he has heard before. “What I’ve heard people say on many occasions is you can’t have a business that grows with brands and grows with own label. What I tend to do and have done for the last 20 years is applaud people who say that because we do,” Stein says. “It can be done but you have to have a different mindset for each.”
The key, he argues, is to not dictate to the retailers. “If you’re producing own label, you certainly need to have a level of pride and less arrogance than branded players. When you are dealing with retailers and telling them what to do, they resent that, whether it be a brand or an own label. You have to give advice. That’s what we try and do,” Stein says.
“We try not to tell the retailers what they should do but help them to make decisions and try to work with them. It’s their brand. They’re very, very precious about it. Sometimes people who are branded players forget that Tesco is a brand, Sainsbury’s is a brand.”