Vion business can expect ‘major cost savings’ from Boparan

06-Mar-2013 - Last updated on 06-Mar-2013 at 10:46 GMT

2 Sisters has acquired 11 of Vion’s poultry and red meat processing sites

The Vion red meat and poultry businesses acquired by 2 Sisters Food Group (2SFG) can expect some “major cost savings” by their new owner Ranjit Boparan, according to a leading City analyst.

The Vion facilities were acquired in a deal announced this week (March 4). The deal is believed to be of a similar size to 2 Sisters’ Brookes Avana acquisition.

The 11 processing sites in the UK employ approximately 6,000 staff and supply poultry, beef and lamb to the retail and foodservice sectors in the UK and Europe. The poultry business in particular has suffered from challenging trading conditions, with the loss of a number of major contracts.

Announcing the acquisition, Boparan said: “Our immediate focus will be to improve performance, as we have successfully done with our previous acquisitions.”

Julian Wild, food group director with Rollits, told FoodManufacture.co.uk: “There’s probably quite a lot of potential for taking cost out. The Vion sites are coming out of a much larger European business and they’ll have to be integrated into 2 Sisters’ existing business. I’ve no doubt 2 Sisters will be able to run them in a more streamlined way.

Taking cost out

“Boparan has got a great reputation for running a lean business. He’s very good at taking cost out by a whole variety of means: he buys better and he’s not a great one for big head offices, he runs his businesses very leanly. They can expect some pretty major cost savings.”

Welcoming the news as “a broadly constructive outcome in aggregate”, City analyst Clive Black of Shore Capital said the acquisition had brought “a disciplined owner to these factory units”.

Both Black and Wild noted the potential for 2 Sisters to capitalise on the horsemeat scandal, to which retailers have responded by making moves towards shorter supply chains.

Black said: “Following on from the ‘horsegate’ scandal, we have noted the plethora of commitments by retailers with respect to shorter and more simple supply chains and the desire to procure more meat from the UK; only last week Tesco’s ceo Philip Clarke made clear commitments on this front at the National Farmers Union (NFU) conference.”

Shorten the supply chain

Boparan said: “At 2 Sisters, we put the customer at the heart of everything we do and, in line with our customers’ strategies, these businesses will help us to shorten the supply chain for consumers and meet growing demand for British sourced food.

“The acquisition will help to meet growing demand from 2 Sisters’ poultry customers and further diversifies the company’s offering to include red meat, supporting 2 Sisters’ strategy of serving more meal occasions.”

Wild noted: “He probably sees an opportunity in red meat post the recent scandals and thinks UK red meat has a very good future.”

Welcoming the news, the NFU told FoodManufacture.co.uk: “This supply chain is underpinned by British farmers and the NFU has already been in touch with both 2 Sisters and Vion to ensure a smooth transition for farmer suppliers.”

Black said Shore Capital would not be surprised to see “some form of referral and investigation” from the Competition Commission.

However, Wild thought this was less of an issue as the majority of the Vion business was held in own-label contracts.

Wild commented: “Own-label tends to be less of an issue from the competition standpoint, as it’s ultimately down to the retailers even if 2 Sisters has acquired the business.”

The Vion sites acquired by 2 Sisters Food Group are:

Vion UK Poultry

Scotland