Britain's food industry was rocked by two announcements over the past month. Premier Foods broke the news that it was to close bakeries in Birmingham and Greenford, west London and restructure its distribution operations with the loss of 900 jobs. Meanwhile, Dutch meat processor Vion announced plans to quit the UK food sector, putting another 13,000 jobs at risk.
Both announcements received a mixed reception. City analysts were, in general, supportive of Premier's plans to resolve rising input cost issues around its bakery operations, but workers and unions at all Premier plants were devastated.
Similarly, analysts described Vion's plans as "almost an inevitability" and its chairman Peter Barr said trade buyers and management had shown interest in acquiring some of its businesses. But unions and workers feared for big job losses.
Raise questions
Vion's news will raise questions about the future of the UK's meat processing sector, given that experts held up its 'vertically integrated' production as a role model.
More recently, Morrisons has come under flak from Shore Capital analyst Dr Clive Black for its vertically integrated approach. Black said the retailer lacked the competitive supplier/purchaser edge needed to take cost out of the supply chain.
Black and his colleague Darren Shirley also questioned Vion's strategy. "Vion entered the UK via the purchase of Key Country Foods and augmented that through the acquisition of Tranfield," they said. "However, it was Vion's acquisition of Grampian in 2008 that changed its commitment level to the UK market; raising an eyebrows across the trade as Grampian had proved to be a somewhat troubled business over the years."
'Bust when they bought it'
Julian Wild, food group director at legal firm Rollits, said: "The Vion businesses in the UK are essentially, the old Grampian Country Food Group, which was bust when they bought it."
Vion's UK operations range from pig breeding to poultry processing; beef and lamb production to pies. Last year's UK revenues generated £1.17bn.
Welcoming Premier's news, Investec Securities analyst Martin Deboo said: "This is a decisive move to improve long-term profitability and create the option value on further rationalisation or an eventual, profitable exit."
Jennie Formby, national officer for union Unite, said: "This is just another stage of the disaster story that has been Premier Foods over recent years, which has consistently struggled ever since its decision to buy Hovis [RHM] in 2006."
