Tyrrells, the private equity-backed UK crisp maker, has enjoyed robust growth in recent years and, through exports, steadily built a business outside its domestic market. However, the company, under CEO David Milner, has started to use M&A to boost its international operations. Last month, Tyrrells snapped up Aroma Snacks, a German supplier of organic crisps. In the first part of a two-part interview, Milner tells Dean Best why Tyrrells moved for Aroma Snacks.
M&A has become an important tool for Tyrrells.
The private-equity backed UK crisp maker has, according to CEO David Milner, been “lucky enough” to grow at “about 30% a year” for the last six years, on the back of expansion at home and a growing international business, built on exports to over 30 countries from its domestic plants.
However, Milner, who first invested in Tyrrells six years ago, says the company had started to consider how it could maintain that rate of growth, or even speed up, and decided acquisitions was a way of doing so.
“We got to a point where we were doing nicely but … most small companies, when you grow, it’s good to start with and then you kind of flatten out and become less exciting. My thought was: ‘How do I continue to accelerate or continue this level of growth?’ Well, those markets where our exports work very well so why don’t we look if we can find a business there that we like, that’s a good fit with Tyrrells and [where] we can then produce Tyrrells in the market for that market?” Milner says.
Milner is speaking to just-food in the week Tyrrells made its second acquisition in nine months. On 16 May, Tyrrells announced it had bought Aroma Snacks, a German supplier of organic crisps. It followed a deal made last August, when Tyrrells snapped up Australian organic snacks business Yarra Valley Snack Foods. The purchase of Yarra Valley gave Tyrrells its first manufacturing site outside the its domestic market and the move for Aroma Snacks has provided the UK firm with its first plant in continental Europe.
“We’ve been lucky enough to grow about 30% a year, every year for six years – and this year is actually 35%,” Milner says. “One of the problems with that is you run out of capacity all the time. We make all our own crisps, we don’t co-manufacture anything. What [the Aroma Snacks acquisition] provides us with is an opportunity to expand their existing factory and produce European crisps in Germany.”
The privately-owned Aroma Snacks is based in the town of Amtzell in the south-western German state of Baden-Württemberg. Tyrrells plans to use its plant to support its business in Europe. Three of Tyrrells’ five largest markets outside the UK are in Europe – France, Germany and Switzerland.
Milner says Germany is Tyrrells’ “fastest-growing” market in Europe and is “catching up” with France, a market that represented the company’s first foray onto the continent. “It’s not as big yet,” Milner says. “Probably about EUR10m in sales of Tyrrells, so it’s a very attractive market. We’re completely nationwide, in the big supermarkets, which there are Edeka and Rewe, as well as Kaufland, which are department stores and we’re pretty much in all of those.”
Beyond France, Germany and Switzerland, Tyrrells has a presence in the Netherlands and Italy and has fledgling businesses in Iberia and Scandinavia, where Milner describes the company as “there but not well established”.
Milner believes the acquisition of Aroma Snacks will help Tyrrells grow in its current suite of European markets, with Jochen Krumm, the German firm’s owner, staying on as managing director of the group’s wider European business. “We think it’ll help enormously. Despite me feeling quite chuffed that we’ve grown 30% a year, we’re still a relatively small business and we have limited resources. Having people based over in Germany, you get more people, more expertise. Jochen Krumm is German, he’s worked in the UK and he loves what we’re doing with Tyrrells. Whilst we’ve bought his business, he wants to stay on. He’s staying on as the managing director of the European business. I think he’ll be better. He has one advantage over me, I can only speak English. He’s multilingual and he’s a tremendous, proper European businessman.”
Aroma Snacks has a presence in markets east of Germany from which Tyrrells could benefit, Milner explains. He says there could be an opportunity to launch Tyrrells crisps in more European markets, though there is not yet a firm idea of when the brand could be rolled out further. “We have no business in the east of Europe. We’re not in Romania, Hungary, any of those countries and he [Krumm] is. We’re hoping with his expertise there to build our business. Obviously we’re much bigger than he is in the rest of Europe but that’s where he’s got a strength so we’ll be hoping he can teach us a thing or two there,” Milner says. “I would think we’d be hoping to [launch the Tyrrells brand in the region] next year.”
Beyond supporting Tyrrells’ existing business in Europe and providing the company with a platform for potential geographic expansion, there is another critical reason why the UK business moved for Aroma Snacks – the German firm’s status as a supplier of organic crisps. Tyrrells’ two recent acquisitions are signs of the company’s bid to participate in what Milner calls the “better-for-you” part of the crisps category.
“I love the fact they are premium like we are but they’re also in the better-for-you camp because they’re organic so that was a really motivating part of it,” Milner says. “Yarra Valley Snacks were Australia’s number one organic crisp and this is Germany’s number one organic crisp. It’s definitely strategically where we want to be. We want to be in premium and we want to be in better-for-you – and organic is a great better-for-you stroke premium category or sector of the category.”
Germany is a market with a well-established organic food sector and one which withstood the recent economic downturn in Europe, unlike in, say, the UK. Sales of organic food and drink in Germany rose 11.1% to EUR8.62bn in 2015, according to the Bund Okologische Lebensmittelwirtschaft, the umbrella association of agricultural producers, processors and distributors of organic food in Germany.
Could owning organic brands boost the company’s margins? Milner instead sees Tyrrells’ moves in organic as a means of differentiating the company’s portfolio from its competitors. “I wouldn’t say we’re hoping to make a higher level of margin than we do in our regular business but what I said before is you don’t want to be making what everybody else makes. If you’re just making a standard product then it ultimately comes down to price even if you’ve got a brand on it. If it’s not different and better, it comes down to price,” he says.
In markets like Germany and France – where demand for organic food also remains robust and growing – there are strong specialist channels. That said, the data from the Bund Okologische Lebensmittelwirtschaft indicates Germany’s mainstream retailers already account for the majority of organic food and drink sales in the country. The association says sales to the organic food trade rose 10% last year to EUR2.71bn. However, sales made through conventional grocers increased by 13.2%. Germany’s mainstream retailers account for over half the sales of organic food and drink, the association says.
Nevertheless, Milner believes there is an opportunity to grow Aroma Snacks and its Lisa’s brand with Germany’s conventional retailers.
Milner believes Germany’s mainstream retailers are starting to build a more significant presence in the sector, providing an opportunity for growth for the Aroma Snacks business, which he says has “national listings for some retailers” but is “stronger in the south” due to its base in that part of Germany. “My view is, as bio becomes bigger and supermarkets look to growth, they’re not going to stand by and let these other stores have all the organic business,” Milner reflects.
Check back next week for the second part of just-food’s interview with Milner in which he discusses Tyrrells’ plans for the UK market and its broader growth strategy.