Licensed manufacturing deals set to rise

“I think we will see an increasing number of this sort of deal. There’s no point in investing in manufacturing if someone else has got the expertise,”​ Julian Wild, food group director at law firm Rollits, told FoodManufacture.co.uk.

He added that he thought it highly likely that Premier Foods in particular would pursue that strategy, because it would enable it to slash processing costs while keeping hold of its brands.

‘Slimming down core brands’​

“I should think they [Premier] would be interested in similar licensing agreements. I suspect they would have to look at ways of slimming down their core brands and if they haven’t got the manufacturing capability they will look to people who have.”​

Martin Deboo, consumer goods analyst at Investec, said biscuit manufacturing represented only a small part of Premier Foods’ total business.

It therefore made sense for the company to outsource it and underlined the professional approach taken by its boss since he seized the reins in February, he said. “I am increasingly impressed by the sensible, thoughtful things Gavin Darby has done. This is good business for Premier Foods.”​

Deboo said he believed similar licensing deals offered real potential to the food industry. “There’s a big opportunity for own-label manufacturers to start partnering branded manufacturers. I’m surprised we haven’t seen more of this in the food industry.”​

Drive growth​

Darby went on record in The Telegraph​ earlier this year saying he intended to retain the brands Premier Foods now had and drive their growth.

And it emerged earlier this month that Premier aimed to slash its supply base by as much as 50% of its 3,000 suppliers in a bid to simplify supply and cut costs.

Deboo said he could see how the deal worked for 2 Sisters Food Group. “If there’s potential volume in the Fox’s Biscuits factory, it makes sense. Obviously it all comes down to the terms.”​

He stressed the deal should not be blown out of proportion, as it represented a relatively small sales figure.

Wild denied the deal was likely to signal any closer tie-up between 2 Sisters and Premier and believed it was unlikely that 2 Sisters would want significant interests in branded manufacturing. “It’s a licensing deal. I would be surprised if there’s anything much more to it than that,”​ he said.

According to the terms of the agreement​, Premier Foods has kept ownership of the brand, while 2 Sisters Food Group will make the biscuits at the Fox’s Biscuits factory at Uttoxeter, Staffordshire. It took over the plant, which was previously owned by Premier Foods, when it bought Northern Foods in 2011.