RF Brookes loses M&S contract, 200 jobs at risk
Confirming the news, which could lead to 200 job losses at the Leicester firm, a Premier Foods spokesman told FoodManufacture.co.uk “With that factory, almost 90% of the production is for M&S, so the loss of the pie contract is a fairly large proportion of the business.”
He saidthe announcement followed a competitive tender process [which RF Brookes reportedly lost to Samworth Brothers] and added: “After intensive negotiations to mitigate the impact of this decision on the workforce, the contract will transfer in two stages, in September 2011 and in June 2012.
“Regrettably, this could lead to the loss of 200 jobs from the site which currently employs 720 people. Consultation with the workforce over these plans will begin immediately.”
Significant M&S supplier
He added that Premier had alluded to a phased contract transfer, because it was hoped that it RF Brookes might be able to win new business at a later date relating to certain segments of the pie business, and thus avoid some job losses.
RF Brookes also supplies M&S with pizzas and battered foods, and the spokesman added: “M&S remains an important customer and RF Brookes remains a significant supplier to M&S for other food lines.
“The company remains committed to Leicester and will continue to invest in the site to make it more efficient and better able to compete for new business and safeguard the 520 jobs that will remain.”
In mid-February we reported that Premier was negotiating with M&S over pricing and ranging at RF Brookes and associated business Avana Bakeries (the pair make chilled foods, cakes and Christmas puddings) which both saw profits collapse from £15m to zero in 2010.
Constructive dialogue
At the time Premier said: "We are in constructive dialogue with our main customer, Marks and Spencer, which we believe will result in an amended product range and revised pricing and supply arrangements which we believe will return the business to profit in 2011."
Premier blamed a 4.7% divisional sales slump for 2010 on contract losses and lower volumes sold on existing contracts; the profit collapse was blamed on lower volumes, lower prices and higher commodity costs.
"The business operates in an industry characterised by overcapacity and, consequently, by decreasing margins. In addition, substantial escalations in the market cost of key commodities such as wheat, dairy products and packaging could not be recovered," the firm said.
Premier ceo Robert Schofield said in late April that the firm would be open-minded about a disposal fo its Brookes/Avana business if agood offercame in. This followed earlier City speculation that the division could be a takeover target for Greencore, with a figure of £120-140m mooted, although one industry source suggested that the contract loss could chip £30m off that price.
Analyst Damien McNeela, Panmure Gordon, said that the pie contract loss was "clearly bad news" and reduced the price Premier might achieve if it sold the business, although he said a more thorough examination of the figures was needed to decide by precisely how much.
