Quintessentially British brand Tyrrells has already cracked France, Australia and Germany – now US snacks player Amplify is taking a £300m bet on Stateside consumers developing a taste for posh English crisps too.
US-listed Amplify Snack Brands brushed off any concerns about the post-Brexit attractiveness of UK food and drink assets by announcing on Monday its £300m grab for Tyrrells from Bahraini PE owner Investcorp.
Investcorp made a tidy profit on the hand-cooked crisp maker it bought for £100m in 2013, and it is precisely the transformation in Tyrrells over that time that convinced Amplify to flash the cash. Tyrrells is still growing in what CEO Dave Milner admits is a “tough” home market, but has evolved its business into an international brand sold in 40 countries. It now makes about 45% of its money overseas.
Tyrrells is the number one hand-cooked crisp brand in France and has become the top brand in Australia after its Yarra Valley Snack Foods acquisition in 2015. It is also rapidly growing in Germany after buying up Aroma Snacks and its Lisa’s Hand-Cooked Chips brand in May this year. All this has added up to average annual growth of about 24% over the past five years’ filed accounts. However, Tyrrells remains underweight in the biggest snacks market of the lot: North America. Although the brand is sold there, it is a tiny player in a huge and complex market.
Amplify aims to change that. “Our aspiration is to create the biggest premium snack brand in the world,” says Milner, who becomes Amplify’s international president. “We’ve made a decent start, but the biggest market by far is North America. It is a difficult market to get into and we have lacked the on-the-ground expertise to make this market work.” He describes Amplify as a “mirror image” of Tyrrells in that it is a fast-growing, entrepreneurial, premium-focused snacks player, but one with deep expertise in brand-building in the US with SkinnyPop popcorn.
“The US in enormous, but it’s also highly competitive,” he adds. “With SkinnyPop Amplify has taken a brand that didn’t exist a few years ago and got it everywhere. You can’t be a part-time competitor in this market, you have to give it 100% focus.”
A global snacking force
The deal creates a genuinely global snacks player with $317m in pro forma sales – 63% from North America, 23% from the UK and 14% other territories.
Amplify CEO and president Tom Ennis says the new entity’s proposition are “better-for-you” snacking brands – noting that even though Tyrrells doesn’t have a specific health focus, its products are made with “simple, clean and transparent ingredients” and have “quite a bit less fat than most of the other chips in the marketplace”.
But given the US snacking market is so advanced, is there really room for Tyrrells?
Chris Blythe, director of The Brand Nursery, sees a “clear opportunity” for Tyrrells to compete with existing players in the market like Kettle and Cape Cod. “Gourmet/artisan chips appears to be an ever-expanding category as US consumers look for premium, more home-cooked savoury snacks.”
One of the only issues inhibiting growth potential is that Tyrrells’ manufacturing capabilities are already straining to meet global demand after upgrades in the UK, Germany and Australia. Ennis says: “There is not a tremendous capacity for a major US launch, so we have a little bit to do to get ready for expansion into the US.” But Tyrrells has “great manufacturing knowhow”, he adds, and should be up and running quickly.
There are also plans to grow SkinnyPop in the UK and Tyrrells’ other existing markets, and potentially other Amplify brands such as Paqui tortilla chips and Oatmega protein bars at some point in the future.
“Tyrrells has a fantastic track record of building brands, not just in the UK but in many, many international markets,” says Ennis. “So very quickly we can start to realise great international revenue synergies on both parts.”
But Blythe is dubious over the potential of SkinnyPop, in particular, to succeed outside the US. “The popcorn sector is already flooded with brands seeking to occupy pretty much the same ‘healthy lighter’ savoury snack space and there are also signs the popcorn bubble is about to burst,” he says.
Tyrrells has its own Poshcorn popcorn brand that has just entered Australia. But despite the competition, Milner is convinced SkinnyPop and Poshcorn can thrive in the same markets.
“The SkinnyPop name suggests it’s all about permissible snacking, but it doesn’t allow you to move into the more indulgent area of popcorn that Poshcorn does,” he says.
He adds outside the US and Australia there is not much of a market for premium popcorn yet. As the first mover in these markets, Milner believes Tyrrells can build category leadership just as it has done with hand-cooked crisps in France.
Brexit impact
The deal also suggests international enthusiasm for British food and drink assets has not been dashed by the UK’s decision to quite the EU.
Ennis says an “ongoing dialogue” with Investcorp over Tyrrells “finally paid off several weeks ago”, with the £300m price agreed before Brexit.
Milner admits the vote caused a “blip” in the sales process, but Ennis says the vote ultimately offered a unique opportunity to buy. “Tyrells derives an excess of 40% of its earnings outside the UK and also manufactures abroad, so we believe there is a natural hedge against potential foreign exchange concerns,” he says. “Quite frankly, we’ve got a bit of a discount on the purchase price, so we’re pretty happy about that.”
The collapse in the value of the pound against the dollar took a little shine off Investcorp’s profit on the deal. Shaun Browne, MD at Investcorp’s adviser at Houlihan Lokey, admits that “had there had been any renegotiation on price the deal would likely have not happened,” but stresses that the fundamental valuation of the company did not change post-Brexit as Tyrrells’ sterling denominated EBITDA also fell against the dollar.
Amplify has been far from the only suitor for Tyrrells in recent years, but it was the strategic fit that eventually got the deal done. Milner points out the senior Tyrrells team all remain on board under the new ownership and have personally invested in the newly combined company.
Continuity is the name of the game, and Milner remains focused on growth in the UK as much as the new international opportunities, highlighted by two “huge” pieces of innovation in terms of packaging technology and organic crisps from Germany that it will launch this year.
“We want to keep growing the business,” he says. “Nothing will change.”
Well, almost nothing: “The only difference is we’re now a public company, so selling what we’re doing to Wall Street might take a bit of getting used to.”
| Amplify | Tyrrells | |
|---|---|---|
| Key brands | SkinnyPop, Paqui, Oatmega | Crisps, Poshcorn, Nibbles |
| Sales | $183.9m | £49.3m |
| Sales growth | 39% | 22.2% |
| Gross profits | $102.9m | £22m |
| Pre-tax profits | $24.2m | £8.2m |
| Amplify year to 31 Dec 2015, Tyrrells year to 27 Mar 2015 | ||
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