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United Kingdom Food and Drink Report Q2 2010
Market |
Food and Drink |
Report Type |
Market Research |
Country |
United Kingdom |
Published |
5 March 2010 |
Number of Pages |
90 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
The sale of Cadbury, one of the UK's best known food companies, to US-multinational Kraft has raised concerns that the current weakness of sterling has left UK companies vulnerable to foreign takeovers as global M&A activity begins to return to normal levels following the financial crisis. There are many successful UK food and drink companies that could be targeted by foreign predators and with sterling weak in comparison to many major currencies and global equity markets still depressed, there may not be a better time to buy.
In the dairy sector Dairy Crest and Robert Wiseman are both large firms when viewed nationally, but are dwarfed by the scale of the global leaders in the market. The phasing out of EU dairy quotas has led to rapid consolidation in the European sector and with economies of scale such an important feature of the industry, these two firms must be viewed as prime acquisition candidates. European dairy giants such as Lactalis, FrieslandCampina and Arla are perhaps best positioned to launch a bid and in 2005 Lactalis was actually rumoured to be mulling over a takeover bid for Dairy Crest.
Other notable firms in the food sector include Associated British Foods (ABF), Tate & Lyle and Premier Foods. However, none looks particularly attractive from an international point of view. No firm is likely to want to contend with the massive debts at Premier Foods, while ABF and Tate & Lyle are complex businesses focused in both agricultural and consumer segments, making any acquisition far from straightforward.
In the soft drinks sector two companies that stand out are Britvic and AGBarr. Britvic is another that can be described as large on a national basis – being the UK's exclusive bottler for PepsiCo products and also owner of the country's leading brand of squash – but considered only of medium size in international terms. The firm has previously been seen as a potential takeover target for the major Pepsi bottlers, now in the hands of the parent firm, and could conceivably become part of PepsiCo's plans to bring its bottling operations in-house. Meanwhile, AGBarr – a small, but high-growth firm that owns several unique drink brands including Rubicon, Tizer and Irn-Bru – may catch the eye of major soft drink firms looking for a relatively straight forward bolt-on acquisition.
With UK-brewer Scottish & Newcastle taken over in 2007 through a joint-bid by Heineken and Carlsberg, the UK brewing sector offers limited opportunities for overseas investors. However, acquisitions in the sprits sector are a possibility, with drinks firms looking to gain exposure to the highpotential Scotch whisky segment, perhaps by bidding for businesses such as The Edrington Group or William Grant and Sons. Whisky firm Whyte and Mackay was acquired by Indian conglomerate United Breweries Group in 2007; although this purchase has not proven to be particularly successful so far – largely because of the amount of debt that United Breweries was obliged to take on to complete the acquisition – it does point to where a bidder may emerge from given the high growth in demand for whisky in the Asian emerging markets.
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