The OC&C Grocer Index 2015

September 21, 2015 | PRESS RELEASE

String of acquisitions makes Boparan the UK's largest grocery supplier.

  • Boparen, parent company of 2 Sisters Food Group, has added £2.5bn of revenue through acquisitions over five years
  • After a five year reign as the largest food and soft drink producer in the UK, Associated British Foods slips into second place in OC&C's Food & Drink rankings
  • Producers are responding to a tough market by increasing Capital Investment (Capex) and driving more international sales
  • Despite margins falling to historic lows, M&A activity has ramped up with £300 million more deals taking place in the first half of 2015 than in the whole of 2014

Boparan has seized the top spot in OC&C's Food & Drink 150 rankings, becoming the biggest food and drink producer in the UK. A string of acquisitions - including household names like Goodfella's Pizza, Fox's Biscuits and Matthew Walker Christmas Puddings - has helped the company to quadruple its revenue in five years.

Now in its 27th year, OC&C's Food & Drink 150, in collaboration with the Grocer, is the only sector-wide analysis of the financial statements of the top food and soft drinks firms in the UK, ranking companies by revenue.

Between 2010 and 2014, Boparan climbed from 20th place to number one in OC&C's rankings, with revenue increasing from £838 million to £3.36 billion in the same time period. In 2014, the company grew its protein business by 30 per cent year on year. As a result of Boparan's meteoric rise, after five years as the UK's largest grocery supplier, Associated British Food's grocery division has been pushed into second place, despite aggressive cost-cutting helping the company to achieve a 30 per cent increase in operating profit

Boparan’s stellar performance has enabled the company to buck the trend of an otherwise depressed sector, where intense competition among the grocers has had a knock-on effect on producers’ revenues. The average rate of revenue growth slumped from 5.8 per cent in 2014 to just 2.9 per cent this year.

Will Hayllar, Partner at OC&C Strategy Consultants and author of the report said: “Changing shopping habits, supermarket price wars, and the continual rise of discounters’ share of the market in the UK have pushed grocery suppliers’ revenue growth to historic lows and squeezed margins ever tighter. However, there is cause for some optimism. Producers are now tackling these challenges head on by investing heavily in efficiencies and innovation, and we’re seeing M&A activity ramping up right across the sector, reflecting greater investor confidence and an appetite for growth among players.”

The first half of 2015 saw six deals in the food and drinks industry worth a total of £3.1 billion, compared to ten deals worth £2.8 billion across the whole of 2014.

This trend is particularly evident among own label producers which are benefiting from the supermarkets’ desire to differentiate in an extremely competitive grocery environment. Own label producers continue to consolidate, with revenue growing at an average rate of 5.9 per cent, in comparison to 0.4 per cent for branded players.

Across the sector, companies have been investing in efficiency and innovation to tackle changes in consumer demand, resulting in an 18 per cent year on year increase in capital expenditure (CapEx). Haribo, Frank Roberts, and Dairy Crest lead the pack, spending 20 per cent, 12 per cent and 6.3 per cent of their revenues on CapEx respectively.

Will Hayllar continued: “The biggest success stories in this year’s Food & Drink 150 have ambitions far beyond aggressive cost-cutting. McCain, for example, launched six new products over the course of 2014 to meet changing consumer tastes. Equally, Alpro hasn’t rested on its laurels - innovating on its core offering with new tastes and pack sizes, and expanding into adjacent categories such as yoghurt and cream delivered a step change in the company’s performance over the past year. By meeting changes in customer demand head on, McCain and Alpro have delivered revenue growth of twice and six times the industry average respectively. Producers can take their cue from these success stories: relentless innovation, investment in your core and international growth are crucial for sustainable long-term revenue growth.”

This year's report identifies five companies that have pursued winning strategies in a challenging marketplace:

  • Moy Park has been buoyed ahead of its sale to JBS by 10.5 per cent revenue growth in 2014. Organic growth across its core UK and Irish markets, tight cost controls to drive profitability and targeted investment in its proposition delivered a turnover of £1.2 billion.
  • McCain's innovation pipeline is giving the company reasons to be chipper. The company launched six new products in 2014 helping to deliver 6.8 per cent revenue growth at an impressive 12% margin.
  • Ferrero's sweet deal with Thornton's and significant investments in brand marketing have delivered on the company's aggressive revenue growth plans - turnover grew by more than a fifth to £260 million in 2014, even before accounting for the growth from the Thornton's deal.
  • Alpro's non-dairy offer and range innovation has allowed it to milk shifts in consumer preference: 19.5 per cent revenue growth over the year pushed he company up eight places in the rankings to number 131.
  • Adelie's laser-like focus on the food-to-go  customer to deliver best-in-class process, packaging and product has paid dividends for the producer - turnover grew by 19.1 per cent to £256 million.

For further information please contact:

Lucy Hopkins, Lucy Butterfield, Kathryn Harnett or Veronica Rossini at Blue Rubicon

oc&c@bluerubicon.com

0207 260 2700

Notes to Editors

OC&C and The Grocer's Food & Drink Top 10 2015

  1. Boparan Holdings (up one from number 2)
  2. Associated British Foods (down one from number 1)
  3. Arla Foods (up five from number 8)
  4. Unilver UK (down one from number 3)
  5. Mondelez UK (down one from number 4)
  6. Coca-Cola Enterprises (down one from number 5)
  7. Nestle UK (down one from number 6)
  8. Bakkavor (up one from number 9)
  9. Princes (down two from number 7)
  10. Mulller UK & Ireland (up 31 from number 41)

Methodology

Now in its 27th year, OC&C and The Grocer's Food & Drink Top 150 analyses the latest available public company accounts of the 150 largest food and soft drink companies in the UK to provide a unique insight into the overall performance of the sector. The Top 150 aims to include businesses whose primary function is manufacture of food and soft drinks and analyses performance of the statutory accounts of the entity that is most relevant to the UK operations (e.g. the subsidiaries of multinational businesses and overall accounts of smaller UK focused businesses). A consistent methodology is applied to define Operating Profits and Return on Capital employed of all businesses, hence the figures shown may be adjusted from the headline published Operating Profits and Return on Capital Employed. Firms are classified as 'branded' or 'unbranded' based on whether the majority of their sales are generated by branded or unbranded / own label products.  

An infographic of the report can be accessed here.

About OC&C

Founded in 1987, OC&C is a leading global strategy consulting firm that brings clear thinking to the most complex issues facing today's management teams. OC&C's client roster includes some of the world's most respected companies throughout the retail, consumer goods, media, business services and private equity sectors.

For more information about OC&C Strategy Consultants, please visit http://www.occstrategy.com