Yorkshire Corporate Review – October 2016
Wednesday 19th October 2016
Corporate buyouts continue to be a key theme in the food and drink sector in Yorkshire and beyond, with an ongoing trend for the purchase and revitalisation of well-known brands. In what is perhaps a sign of things to come both in our region and further afield, the owner of the largest food manufacturer in the country has purchased Bernard Matthews. To be specific, the 2 Sisters owner, Ranjit Singh Boparan, has a private investment vehicle, Boparan Private Office, which has bought the assets of Bernard Matthews.
It should not be forgotten that Bernard Matthews has been losing money since 2007 when its stock of birds was struck by avian flu and feed prices started to increase. It has also been suggested that its sales were hit when Jamie Oliver criticised the brand in 2005. In 2013 private equity firm and turnaround specialists, Rutland Partners LLP, bought the business and injected £25,000,000. It was reported that, only 16 months later in August 2015, Rutland Partners were seeking a further £10m to keep Bernard Matthews afloat.
Finances are not the only difficulty Bernard Matthews has faced in the following decade. In the last ten years Bernard Matthews has been through four rebrands, the last of which cost the business around £3m. Bernard Matthews is, of course, a very large business. It employs around 2,000 people on 56 farms in the UK and has around 900 staff in Germany and Hungary. It also has a turnover of around £275m, but its operating losses over the last ten years have varied from around £1.8m to almost £10m.
Whilst suggestions that avian flu and celebrity criticism contributed to the downturn of the business, perhaps more significant is the fall in turkey production and increase in chicken production in the last 20 years, which reflects consumer demand. Turkey production has fallen by 30 per cent since 1994, whilst chicken production has increased by 45 per cent during the same period. This is probably because chicken is viewed as a more affordable, healthy and versatile option for consumers that competes with red meat on price, health and versatility. On the other hand, turkey is often seen as a seasonal meat. The NFU calculates that the average UK consumer eats around 4kg of turkey per year, which is low when compared to Germany’s 6.1kg and France’s 5.3kg, and almost half of the USA’s 7.9kg.
Whilst there may be lots of challenges for Bernard Matthews, the 2 Sisters owner Ranjit Singh Boparan is as savvy as they come and has grown 2 Sisters to become the largest food manufacturer in the country. Those who follow the food industry closely will know that there is a rise in consumer desire to eat healthy food. Turkey is a very lean meat and judging by our continental neighbours and the USA, there is plenty of scope to increase consumers’ desire for this product. Couple that potential growth with a pre-pack administration, which is likely to mean Ranjit Singh Boparan obtains a business free of debts and liabilities, and Bernard Matthews is arguably – and, perhaps, finally – well placed for a turnaround. If anybody can make it work, it has to be the 2 Sisters owner. Having just a signed a deal with ITV to licence their Thunderbirds brand, Bernard Matthews ‘are go’!