Following rumours in recent days, the 2 Sisters Food Group has confirmed that it has entered into an agreement to sell part of its Fox’s Biscuits business to Italian confectionery giant Ferrero for £246m.
A “Ferrero-related company” will acquire Fox’s biscuit manufacturing sites in Batley and Kirkham which mainly produce biscuits sold under the Fox’s brand. 2 Sisters said it will be retaining a third site in Uttoxeter which produces own label biscuits for retailers.
Fox’s is a significant player in the biscuits sector with brands including Rocky Bars, Party Rings, Crunch Creams, Crinkle Creams, Chocolatey and Viennese.
Meanwhile, Ferrero is the world’s third-largest chocolate and confectionery business with brands including Kinder, Nutella, and Tic Tac. It has also owned Thorntons in the UK since 2015 and last year snapped up Denmark-based biscuit maker Kelson Group from Campbell Soup for $300m.
2 Sisters Food has been closing underperforming sites and off-loading non-core businesses over the last couple of years as part of its group restructuring plan aimed at cutting debts and restoring profit growth.
It a third-quarter results statement back in June, 2 Sisters stated that Fox’s sales had been positively impacted by the COVID-19 driven shift towards in-home indulgence.
Commenting on the disposal, Ranjit Singh, President of 2 Sisters parent company Boparan Holdings said: “Fox’s Biscuits has always been an attractive brand and as one of only two major independent biscuit makers in the UK, it is a prized asset in this market.
“We have listened to many interested parties over the years, but we have always been clear that Fox’s would only be sold to the right new home, at the right time and for the right value. This sale represents another significant deal for us, underlining our commitment to our business turnaround.”
Ronald Kers, CEO of Boparan Holdings, highlighted that the deal would strengthen the group’s liquidity position and reduces its leverage ahead of a planned refinancing of the business.
He added: “We believe the sale to Ferrero is not only beneficial for 2 Sisters Food Group, but it means a positive future for the Fox’s brand with an owner who has a compatible culture and a global reputation for high-quality branded chocolate and biscuit products.”
Ferrero is believed to have completed the deal through its Belgian holding company CTH.
A short statement from the Italian family-owned firm said: “The Ferrero-related company acquired Fox’s as we believe there is significant scope to grow the business, building on its history in the British biscuits’ market and leading position in every segment of the biscuits’ category. Through this acquisition, and our two previous acquisitions of Biscuits Delacre and Kelsen Group, we expect to increase our relevance in the rich and fine biscuits category.”
The transaction is expected to be formally completed on 31 October 2020.
Commenting on the deal, GlobalData analyst Dean Best said: “There’s no doubt Ferrero sees opportunities in biscuits … However, the competitive UK biscuit market could prove a challenge even for a business that clearly believes in the sector.
“Ferrero knows the UK well, selling Nutella and confectionery including Ferrero Rocher, Kinder, Thorntons and Tic Tac in what is one of the group’s largest European markets. The company should know how tough trading can be in UK biscuits, even if, in recent months, Covid-19 would have boosted sales across the category amid elevated demand for food for at-home consumption.
“McVitie’s owner Pladis and Mondelez International, with its Cadbury and Oreo biscuits, present formidable competition in a market forecast last year by GlobalData as being set to have a compound annual growth rate of 2.6% between 2018 and 2013.
“Even allowing for a boost from Covid-19 in recent months, that growth signals how mature the market is in the UK, with intense promotional activity and private label significant challenges.”
“The macro trend of health may also weigh on the growth prospects of some of the more mainstream parts of the biscuit market, although there are other underlying trends, such as indulgence and convenience, that can provide manufacturers platforms upon which to build.”
He added: “Ferrero has experience in building brands and will be looking to boost the performance of Fox’s, which GlobalData says had a market share of 3.1% in 2018, ranked 7th behind the likes of McVitie’s and Cadbury. In years gone by – many years, some would argue – Fox’s had something of a premium cachet, which Ferrero might decide to try to re-capture, albeit in a segment where there is a plethora of rivals.
“Ferrero does have the resources to back in the Fox’s brand in terms of product development and marketing, while the group may also be able to capture synergies in areas like raw-material procurement to add fuel to that investment.
“Nevertheless, while driving growth from Fox’s isn’t impossible, it may take a lot of work for Ferrero to find a sweet spot for the brand.”
NAM Implications:
- A quick injection of £246m.
- A move out of the highly competitive UK branded biscuit category…
- …but more importantly, the ability to piggy-back growth of the mults…
- …as the mults build traditional brands and private label, for the next ten years?
