Meat packer Hilton Food Group has deepened its relationship with Tesco by signing a long-term deal to produce and supply fresh food for the supermarket’s stores in central Europe.
The five-year deal will involve the building of a new factory in Poland that will produce items including sandwiches, pizza, ready meals and soups.
Hilton said the venture would require an investment of about €6m (£5.5m) in plant and equipment, in addition to the cost of construction of the factory itself, for which it is planning a sale and leaseback. Production is expected to begin in the first quarter of 2019.
Hilton and Tesco have also agreed to sign a further five-year long-term supply agreement for Hilton to continue servicing Tesco’s central European stores with pre-packed meat. The deal does not affect Hilton’s existing long-term relationship to supply Tesco with red meat in the UK.
Tesco has about 1,000 stores spread across Poland, the Czech Republic, Hungary and Slovakia.
“We have a long and successful history of working with Tesco,” said Hilton CEO Robert Watson.
“This agreement represents an opportunity to enter a growing food segment of the market,” he added. “We look forward to seeing the positive effect our tried and tested business model will have on this relationship, which will be supported by our flexible and versatile approach to meeting local requirements, and continue to look for further opportunities for geographic expansion.”
Tesco central Europe CEO Matt Simister said the new deal with Hilton would bring new manufacturing investment and capability to Poland. “Our collective experience and expertise will bring new, innovative and high-quality fresh and convenient products to our customers in central Europe.”
The announcement was a “further step in the process” of Hilton increasingly being seen as a “food, rather than meat supplier”, suggested Charles Hall of City analyst Peel Hunt.
“Clearly this significantly increases the scope of the business and potential for new contracts,” he said, particularly in light of Hilton’s potential acquisition of Saucy Fish Co owner Icelandic Seachill. Hilton confirmed earlier this month it was in talks to acquire the seafood supplier.
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