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Trends > Diversification

Shift to grocery boosts ABF

04-Nov-2003

An increased presence in the branded food sector helped Associated British Foods lift its profits by 10 per cent to £473 million in the year to 13 September, while sales were 8 per cent ahead at £4.9 billion.

The diversified company now obtains 47 per cent of sales and 33 per cent of its profits from grocery brands, including Twinings Tea, Ovaltine malt drink, Mazola corn oil, Silver Spoon sugar, Kingsmill and Tip Top bread and Ryvita crispbread.

Total grocery sales were £2.35 billion for the year, up 15.8 per cent on the previous year, helped by a 12-month contribution from Mazola and the first nine months since the Ovaltine acquisition. Operating profit from the grocery arm was ahead 37 per cent at £140 million.

The addition of Mazola to the group's existing foodservice and own label business more than doubled the profit from the edible oils business, ACH, while the acquisition of Ovaltine and its integration with the Twinings unit created an international hot beverages business and gave the group a good foothold in Asia.

There was also strong growth from the existing businesses, particularly George Weston Foods in Australia and Twinings, which grew both European and US sales, while the Allied Bakeries unit in the UK showed increased volume and continued to invest in the Kingsmill brand.

Ryvita, a brand synonymous with healthy eating, saw demand for its traditional crispbread range remain strong in its UK home market, and the brand has now been extended to include Rice Cakes and Tondo's, both targeting the growing demand for tasty low-fat snacks.

The Westmill Foods business specialises in ethnic foods - mainly rice and mainly for the wholesale trade - but has moved rapidly into the ready meal sector over the last year with the launch of a range of innovative microwaveable products for the retail trade.

Four new rice products, Basmati, Pilau, Garlic & Coriander and Coconut & Mustard Seed were rolled out under the licensed brand, Patak's, while a range of Ken Hom stir fry sauces and microwaveable rice and noodles were launched at the end of the year.

Silver Spoon sugar benefited from its market leading position to introduce a number of brand extensions during the year, including a reduced calorie sugar option, Silver Spoon Light, which is currently being test marketed.

The George Weston Foods business in Australia is now wholly owned by ABF following the acquisition of minority shareholdings during the year, while Tip Top retained its position as Australia's favourite food brand, helping to further boost profits there.

ABF's other divisions also improved, with sales at the primary food and agriculture unit up 4 per cent to £1.6 billion and operating profit ahead 5 per cent to £176 million. Results were boosted by a good performance from British Sugar in the UK, where a larger, purer crop helped lift profits.

The ingredients business, meanwhile, saw sales rise 8 per cent to £314 million and operating profits increase 7 per cent to £32 million, while the Primark retail business registered a 15 per cent increase in sales to £752 million and a 21 per cent gain in operating profit to £87 million.

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