Eaton demands just desserts for Uniq

By Ben Bouckley

- Last updated on GMT

Related tags Uniq Cadbury plc Marketing Geoff eaton

Eaton demands just desserts for Uniq
Uniq ceo Geoff Eaton says retailers cannot continue to demand bespoke desserts for rock-bottom prices, following his firm’s recent review of this arm of its business.

Speaking to following the conclusion of Uniq’s review of its desserts business at the end of April, Eaton (pictured) hailed Uniq’s premium desserts, which performed well despite a loss of £2.7m for the firm’s wider chilled desserts arm.

Premium desserts saw sales growth of 21% in the year ending December 31 2010, and Eaton said that in the aftermath of the review management wanted to focus on those parts of the business that deliver strong returns, where this also includes premium yoghurt.

For instance, Uniq produces Cadbury desserts for Muller at Minsterley under a co-packaging agreement, and Eaton said the firm wanted to spend more on marketing, innovation and promotional activity to “create long-term profit growth and much greater value”​, although this depends on co-financing from Uniq’s partners.

Everyday woes

Uniq’s losses in desserts stem from its ‘everyday’ division, which produces private-label desserts, and in March the firm announced plans to shed up to 85 production roles​ at its Minsterley site in Shropshire after a £10m contract loss.

Cream costs have risen 80% over the past two years, and Eaton said that the principal problem was that customers demanded too many bespoke products that were unduly costly to much to make given the low margins involved.

Consequently, he said Uniq needed to either gain higher prices for products or reduce their complexity. “If they ​[customers] think about taking the same products as other customers then we will be better able to deliver… but if you want differentiation then you should want to be prepared to pay for it.”

Asked whether this meant that Uniq could exit everyday in the medium- to long-term, Eaton said: “We’re actively reducing overheads, improving efficiencies, but we have to look at changes – product design, tiering, reducing complexity.”

Eaton said the current ‘carrying’ or book value of its factory in Minsterley, which in addition to Cadbury chocolate desserts produces premium yoghurts, premium desserts and everyday private-label desserts (such as trifle) was fine.

“We have to look at the carrying value of the site, but will only know all the facts when we’ve finished discussions with customers.”

However, he admitted that if Uniq was unable to stem further losses in its everyday division then this could raise a question mark over the site’s medium- to long-term viability, but that this depended on clients and he remained “hopeful of a solution that will lead to profitable results in everyday desserts”

“We know we can improve efficiencies in our desserts business. It’s just a question of whether we achieve higher margins in a larger business or run a smaller business.”

Buyers in pipeline

Asked whether the issues within Uniq’s desserts division risked deterring a potential buyer for the company – given that its pension trustee owners would favour selling the entire business, rather than just the most profitable parts – Eaton said:

“There’s no question that a sale of the whole is the most suitable and value creating solution for pension trustees. We have a very clear idea of what we can and need to do for the desserts business.”

As for interest in Uniq from potential buyers, with Greencore reportedly interested​ in some or all parts of the business, Eaton said: “We’ve seen strong interest, we have a great management team. The business is growing and profitable, and there aren’t too many businesses of this scale and quality in the sector.”

Related topics Bakery Chilled foods Dairy

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Posted by John Smith,

The Uniq situation reflects the overcapacity of the entire desserts sector. It will remain a buyers market until we see some consolidation.

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Retailer Reality

Posted by j Freestone,

Eaton is simply commenting on the reality of high retailer differentials required where producers are too dependent on high street retailer demand. Recent years have seen the demise of many good quality producers who have failed to obtain adequate returns for the capital invested.

Without doubt this is a position that is not in the interest of anyone - retailers or producers. Without some change, gradual or rapid, retailers will see another reduction in suppliers and choice and producers will continue to limit investment - to the detriment of the market as a whole, and consumers.

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