Uniq pulls plug on Minsterley everyday desserts
Annoucing the end of an “in-depth review” of its desserts division, Uniq told the stock market that it had chosen to focus on more profitable premium desserts at the expense of everyday (cheaper private label) products.
Around 100 staff will remain to produce Uniq’s other principal focus within desserts, licensed products for Muller and Cadbury.
"Somewhat surprisingly, given the extensive plant rationalisation, Minsterley will remain open," Shore Capital analysts Clive Black and Darren Shirley said in a note this morning.
The move will mean the transfer of “selected premium desserts sales” from Minsterley to Evercreech (which already produces desserts for Marks & Spencer (M&S)) Uniq said, ahead of the everyday desserts closure that will cost around £36m in sales.
Uniq also estimates that the restructure will cost approximately £10m. It follows the company’s decision to exit premium yogurt from 2012 at the cost of around £13m in sales.
Evercreech, which exited cottage cheese in 2011, will now become Uniq's dedicated premium desserts supplier.
Final closure beckons?
Rollits corporate finance partner Julian Wild told FoodManufacture.co.uk: "I think this could be one step towards a final closure. I can't believe that [the restructure] is going to make the site viable. It's always been very difficult to make a profit at that site [Minsterley]."
"It's a very complicated site, the products are complicated, and the margins are never good enough. Uniq has conducted numerous restructurings, and hasn't been able to make sense of it," Wild added, noting that he suspected the reorganisation was probably part of Greencore's takeover deal.
Wild said Greencore had been under pressure to do a deal after missing out on Northern Foods, to 2 Sisters Food Group, and that the Irish firm had overpaid for Uniq.
That said, he added that Greencore had secured Uniq's "very good, successful sandwich business" and now had the opportunity to cement a relationship with key customer M&S, provided this held good.
"For me the poison pill in Uniq has always been Minsterley," Wild said, adding that the major retailers would now face a major issue finding someone else to produce non-premium dairy desserts, given their commoditised status and low margins for manufacturers.
Aside from Uniq, Wild identified dessert and cake producer Elisabeth the Chef as another major player in the UK market, but said: "I suspect they're not having a great time of it either," given high input costs for dairy ingredients in particular.
Running sore
Shirley and Black greeted the Uniq restructure as a "welcome piece of tidying-up" and reiterated a 'buy' rating on Greencore's stock.
"With respect to Greencore, we deem this change to be a very positive development, as Minsterley has been a running sore for some years, going right back to the days when it was owned by Northern Foods," they said.
Despite their enthusiasm for Uniq's 'food to go' division (sandwiches, salads), and the benefits to Greencore of an M&S relationship, the analysts added:
"We remain somewhat sceptical as to whether the desserts operation of Uniq can ever make a materially positive contribution to the combined Greencore/Uniq group, albeit with this additional restructuring, there may now be a better basis to at least expect an improvement."
Uniq will publish its half year results to 30 June 2011 on 16 September 2011.
Greencore is close to sealing a £113m cash deal for Uniq, subject to approval from UK competition authorities.
The company had received valid acceptances of its offer from 97.9% of Uniq shareholders as of August 16.
