Out of catastrophe, the stars can sometimes happily align. “Only last week I talked about bringing our food closer to home,” Philip Clarke beamed in a statement this week, responding to news that one of Tesco’s key suppliers - Ranjit Singh Boparan’s 2 Sisters Food Group - was buying Vion’s UK poultry operations, with a move into British red meat to boot.
The deal - worth about £30m - puts 2 Sisters in prime position, following the horsemeat scandal, to take advantage of Tesco’s and other UK supermarkets’ newly declared love for British meat. As a 2 Sisters spokesman puts it: “It’s not a coincidence that within a week of a major customer speaking about more British sourcing, 2 Sisters agrees to buy a business with a short and British supply chain.”
Of course, it would be stretching the point to suggest Boparan got the idea for buying the Vion operations while listening to Clarke’s speech at the NFU conference last week.
Vion put its UK operations on the market in November, and 2 Sisters had been taking an interest for some time. The company needed to boost its poultry capacity, and the Vion poultry business was a quick way of adding volume, says one poultry source. Vion, on the other hand, was keen to sell off its UK units in one package, and was prepared to make a red-and-white meat combo worth Boparan’s while - with the £30m price tag looking like a snip for an estimated £1bn sales operation.
But the equine revelations of the past six weeks did have an impact. They “reinforced the view this was a good time to move into British red meat it was almost a case of being swayed by events,” suggests one source.
Taking advantage of the opportunity created by horsemeat will be about more than just tapping into greater interest in UK meat. Boparan’s swoop on the red meat sector comes at a difficult time for one of the UK’s biggest red meat suppliers, ABP Food Group, whose Silvercrest plant supplied the 29% horse burger to Tesco. And industry tongues have already started wagging about Boparan going head-to-head with ABP on key accounts.
2 Sisters itself is keeping tight-lipped on its plans while the deal is pending (it is due to complete later this month, unless the competition authorities raise concerns), but Boparan’s actions after he bought Northern Foods in April 2010 should provide some clues: Northern was the subject of a three-month strategic review, and a review on a similar timescale is likely for the Vion units.
As well as back-end efficiencies, procurement was one of the areas that delivered big savings for 2 Sisters after the acquisition, so similar gains in packaging and feed, once it has integrated the Vion businesses, can be expected.
Beyond that, poultry and red meat are likely to need separate approaches. While Vion’s UK red meat assets are in generally good health, the poultry side is expected to require heavy restructuring - and investment - after losing a number of key contracts in the past year.
Despite this, 2 Sisters has stressed its commitment to both sectors is sincere, and long term: “We are business builders,” its spokesman says. What kind of business Boparan plans to build with his new assets should become clearer in the coming months.
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