Overseas businesses make up greater share of UK food sector

Brexit white paper: food and farming react
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Overseas-owned company make up an even greater share of the UK food sector, accounting for almost half the turnover of the nation’s foremost food companies, according to commercial law firm EMW.

Overseas owned companies now represent £14.9 billion of the £31.5 billion turnover of the UK’s Top 30 food companies.

EMW said that the increased ownership of the UK food industry by foreign-owned companies can be partly attributed to a rush of M&A deals targeting UK food manufacturers over the last decade.

Moreover, overseas companies often view UK food companies as undervalued compared to the valuations that they can achieve on the stock market. The UK food industry is often held in high regard for its advanced approach to food development, branding and high quality processes.

Along with the current weak value of sterling, these factors have made UK food companies an attractive target for overseas companies looking to enter the UK’s food market.

6 of the UK’s Top 30 “Big Food” companies have US owners – such as Kellogg, Mars and Mondelez. Three foreign-owned companies have owners from the Republic of Ireland, namely Greencore, Glanbia and Kerry Foods.

Previous EMW research found that M&A deals involving UK food companies increased fivefold to £5.8 billion in 2017/18, up from just £645 million the previous year.

Some recent examples include:

  • US Fortune 1,000 company McCormick & Co purchasing Reckitt Benckiser’s fod business for £3.2 billion in August 2017;
  • Weetabix was sold by China’s Bright Food Group to US-based Post Holdings, for $1.4 billion in July 2017;
  • Unilever’s spreads business, which includes Flora, was sold to US buyout fund KKR for $8 billion in December 2017 (expected to complete mid 2018).

Perhaps the most controversial deal in the last few years, however, was the purchase of Cadbury by US food giant Kraft for £11.7 billion in 2010.

Sebastian Calnan, Head of EMW’s Food Group, said: “Overseas-owned companies are now responsible for a very major and growing percentage portion of the UK food sector’s turnover.

“UK food companies are renowned for their internationally recognisable brands – it is no surprise that overseas companies have a strong interest in them.

“The UK food market in itself is also one of the most attractive markets, with consumers more willing than in other EU countries to pay for premium products.”

“We expect that, barring a shock failure in the Brexit negotiations, the shift towards overseas ownership will continue.”