Ibrahim Najafi of R&R: the man with a lot of lolly

Acquiring a business involves a courtship, says Ibrahim Najafi. And as CEO of R&R Ice Cream, one of the most acquisitive of fmcg companies, he’s courted more businesses than most.

Started by a Yorkshire farmer in 1985 as Richmond Ice Cream, R&R has become the largest volume producer of ice cream in Europe thanks to a stream of takeovers. Producing ice cream for bransd such as Nestlé, Cadbury and Ribena, it also makes half the own-label ice cream in Britain’s supermarkets and turns over more than €700m a year - and it hasn’t stopped growing.

Najafi, who became CEO last summer when James Lambert stepped down, has travelled from “Russia to Scandinavia and down in the Middle East” in search of potential acquisitions. On the wall of his office at R&R’s Leeming Bar HQ in Northallerton, Yorkshire, he has a map showing the company’s nine sites across five countries. “There are still a lot of gaps - we are going to have a geographical footprint outside Europe and we are going to have a turnover of more than €1bn,” Najafi says. “An acquisition is about building a relationship. You knock and the door opens slightly, you knock again and it may open a little bit more. You have to be patient.”

That patience paid off last year when it acquired Lancashire-based Fredericks Dairies - and with it took on lucrative UK licensing deals for Mondelez brands including Cadbury. But, says Najafi, the business had been eyeing Fredericks for a long time before that.

Since before 2005, in fact, when the plc board of Richmond Ice Cream - which had acquired UK businesses including Nestlé Ice Creams and ABF’s Allied Frozen Foods over the previous six years - first looked overseas for expansion oppportunities.

“We said there were not many players left in the UK, so let’s cross the water and see what’s out there,” said Najafi, who had been appointed to the board in 2005, seven years after joining the business as a factory manager. What Richmond found across the water was Italian ice cream business Roncadin, but it was ultimately outbid by venture capitalists Oaktree Capital Management. “At that time the market was awash with private equity,” says Najafi. “Everyone was putting money on the table, and if we wanted to pay ‘A’, someone would be willing to pay two times ‘A’.”

As Richmond couldn’t beat players like Oaktree, it decided to join them. “We showed Oaktree our plans - and said they didn’t have the management to do it, and we did. It didn’t take a lot of persuading.”

Oaktree subsequently bought Richmond and merged it with Roncadin to create R&R Ice Cream. This foothold on the Continent was used to drive expansion in Europe under Najafi, who was appointed CEO for Europe and chief operating officer in 2009. Acquisitions included French businesses Pilpa and Rolland and Italy’s Eskigel.

Every acquisition had to be treated individually, says Najafi. “We buy family businesses and they have a huge amount of pride and passion. The first thing I do is spend time using what I call the ‘looking eyes’ and saying nothing. I believe you have to earn the right to speak - you can’t go in on day one and start telling them what to do.”

Najafi will sometimes bring members of the British R&R team into a European business to help with integration, but says this must also be handled carefully. “We have great people in UK - real superstars - but we have to be careful to not make it an invasion. And then these guys also have to earn the right to speak.”

He adds that, eventually, when an acquisition sees how R&R has treated other family businesses, “they buy into and want to be a part of it”.

Najafi is particularly pleased at the integration of Durigon, in Germany, which R&R acquired in 2011. “Not many companies have gone into Germany and succeeded,” he says, adding that even the mighty Walmart beat a retreat in 2006, nine years after making its debut there.

“The first thing I do is spend time using the ‘looking eyes’ and saying nothing. You can’t go in on day one and tell them what to do”

Like many of R&R’s acquisitions, the addition of Durigan has informed innovation that has made its way into UK stores. This Easter, British shoppers will be buying Creme Egg mini cones made at the former Durigan plant in Osnabrück. Meanwhile, mini ice cream sticks sold in the UK are produced in an R&R factory in France, while own-label gelato sold in one of the big five comes from the former Eskigel plant in Umbria, Italy.

And it’s a two-way street, with the Northallerton factory shipping products out to Europe, including Fruit Pastille lollies into Germany and super-premium ice cream tubs to France. “We are very pleased to be supplying super-premium ice cream to France,” says Najafi. “They’re not going into Italy yet - but we’re working on that.”

Cross-border NPD

To encourage cross-border NPD, R&R holds an ‘innovation day’ once a year. “It is like a market,” adds Najafi. “Everyone brings their own market stall and we see all those fantastic Polish products, or German products.”

But there are differences in every market that mean some products won’t sell everywhere, he adds. “We serve local markets with local knowledge,” says Najafi, adding that walnut - a popular ice cream in Germany - was unlikely to work in the UK, for example.

“Even vanilla ice cream isn’t the same in France, Germany or the UK - the relative sweetness is different,” he adds. “And chocolate on a stick is different - consumers in different countries like a different sweetness level. Give a German Cadbury chocolate and they would want to know what it is.”

For a business with as many key confectionery licences as R&R, that’s not a huge problem. It might not be able to tempt a German ice cream fan with a Cadbury product - but it can offer them a Milka one. R&R must also take into account differences in retail structures and practices across Europe: for example, while about 30% of the ice cream sold in the UK and France is own label, the figure is closer to 50% in Germany because of the strength of the discounters.

And European retailers have catching up to do with merchandising, says Najafi. “The UK really is the benchmark,” he says. “UK retailers make the space work for them. They make sure their portfolio is not too diverse and make sure every SKU works. It is getting that way in Europe, but we are not there yet.”

Category management challenges of an unusual sort - for the UK - arose last July when the heatwave struck and retailers reported dwindling supplies of some ice cream lines. Najafi says his business coped “better than most”, and claims a heatwave is the kind of pressure his staff love. “The team here is battle-hardened: they’ve been through consolidations, hot summers and cold summers, wet summers and dry summers.”

Like everyone else in the ice cream industry, he is hoping for hot weather again this year, although he accepts: “The weather is the one thing you cannot control. We have contacts and suppliers in the Middle East, Italy, Ireland and France - and I often joke we can get all the prayers from all religions and pray for a good summer.”

While Najafi can’t control the weather, he can develop products that will extend the ice cream season. “The beauty of our French business is that it has capabilities other suppliers don’t. In France, everyone buys ice cream logs for Christmas and they can come in all sorts of shapes, such as a bottle of Champagne,” he says. “We brought them into the UK last year and will do the same this year. The key is to have the talent, capability and flexibility. You must be able to develop product and get it out because once January is here Christmas has gone.”

Najafi has had to weather storms of his own since taking charge.

These have included the recall of some products it makes at Northallerton for Tesco, after painkiller tablets were found in two cones last November. He can’t comment on the case - which is still being investigated by police - but says the business has taken steps to prevent such things happening again, including the introduction of cameras to all parts of the production line and a ban on medicines entering the plant.

Evolution not revolution

And last summer, Najafi announced the closure of the Crossgates factory in Leeds - acquired in 1998 when R&R merged with Treats Ice Cream. The 135 staff affected were all offered jobs 40 miles up the road at Leeming Bar.

The announcement came the same week the sale of R&R to PAI Partners completed. Najafi gives the impression it is business as usual despite the change of ownership, a phrase that - to a degree - would also apply to Najafi taking over from Lambert. “I have my way of doing things and James has his, but this has been an evolution rather than a revolution,” he says. “James and I had been discussing me becoming CEO for three years.”

Indeed, he says the pair have had a shared vision for the business since they first met in 1998. “We always had the ambition to grow to this scale,” says Najafi.

While expansion into some territories is unlikely (Najafi says China is a big market but will need to develop further before he puts a factory there, for example), he asserts: “M&A is key - it is part of our DNA - and every business is for sale for the right price.”

In short, it is a matter of when, not if, Najafi has to get a bigger map for his wall.