Northern Foods has reported improved full-year results. The supplier of sandwiches, pizza and other convenience foods is retaining its focus on the UK and Ireland rather than pursuing European expansion. This strategy seems to be paying off. Private label contracts with major retailers ensure a reliable income, while Northern is also doing well from building its portfolio of local brands.
It looks like Northern Foods’ strategy of transforming itself into a focused supplier of convenience foods is now paying dividends. It’s been three years since the demerger from Express Dairies and Northern Foods has taken time to refocus its business, but that effort now appears to be paying off.
Although sales for the year only grew by 2.9%, sales to its five largest customers (Marks and Spencer, Tesco, Sainsbury’s, Asda and Safeway) rose by 6.8%, as restructuring and investment in new technology have allowed it to deliver a higher quality product and service to its customers.
The new Northern Foods is focused on eight core product groups, supplying a mix of branded and private label convenience foods in the UK and Ireland. In contrast to its many of its competitors, Northern Foods says that it is not interested in international expansion because, in the words of chief executive Jo Stewart, “the UK and Irish food markets are the ones we understand.”
This means that acquisitions have been focused on picking up local brands, the very ones that food giants such as Unilever and Nestle have been shedding to concentrate their marketing resources on creating global brands. Northern Foods has therefore been buying smaller food producers, with product synergies to enhance its existing range and efficient plants to improve its margins.
In the UK, these have included Fox’s confectionery brands from Nestle and RK Wise a cake manufacturer. In Ireland, Northern Foods has acquired Lacemont Limited, a supplier of bread-based products including garlic breads and pizza products, which it is integrating into Green Isle’s branded and private label frozen food business.
Despite the deflationary environment of the food market, Northern Foods’ focus on faster growing categories and its partnerships with Britain’s largest retailers leave it well placed for continuing growth.
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