Inter Link launches cakes in Europe
buying its way into Poland - hoping to benefit from the growing
dominance of multinational supermarkets across eastern Europe while
also using its new plant to ship cakes back home, writes Chris
Mercer.
Ten-year-old Inter Link, which this year became Britain's third biggest cake maker, says it has bought Polish cookies and cakes firm Cukiernia Mistrza Jana (CMJ) for around £1 million.
The deal marks Inter Link's first venture in mainland Europe and, according to Chris Neilson, the company's business development director, the UK firm "just saw an opportunity" to expand its private label network in what he believes is a strongly emerging market.
The company should get a good start as CMJ already supplies private label cakes and cookies to major retailers across Poland and neighbouring eastern European countries. But CMJ only has a 1-2 per cent market share in this sector, and Inter Link will be hoping to use CMJ's spare capacity at its 70,000 square ft factory to improve this by making more British-style cakes.
"We can manufacture UK-type products locally which we can then sell into the growing number of international supermarket chains in the region," said Neilson who added that Inter Link would prioritise on Poland but with a view to expanding further in neighbouring eastern European countries as well as Germany.
There are now 200 hypermarkets owned by foreign companies in Poland and multinational retail chains have also made inroads in other eastern European states over the last decade.
Market analyst John Band, of the Datamonitor group, said that Poland and Czech Republic "are now amongst the most supermarket-dependent in the world," and this influx of international retailers is increasing the shelf-space for 'foreign' products on the market.
British companies like Inter Link may have a particular advantage due to UK retailer Tesco's strong position in eastern Europe. The chain leads the Polish hypermarket sector with 261 stores and a fifth of all sales, and is also present in the Czech Republic, Hungary and Slovakia.
Of course, Inter Link's success in expanding CMJ's operations will also depend on whether Poles and other eastern Europeans will accept its variety of British-style cakes, such as small tarts and mini-rolls.
Signs from the savoury snacks market suggest there is potential in this area and that many Poles, as well as Czechs and Hungarians, are quite open to new ideas. Band said that flavour innovation was driving this sector in all three countries and many of these flavours reflected UK and US trends, such as paprika and cheese and bacon.
Even before Inter Link has established itself in Poland, the firm plans to exploit the position of CMJ's factory, only 30 miles from the German border, to produce and transport small cakes and mini-rolls back to Britain.
The firm claims it can have its cakes in a British distribution centre within 24 hours and that shipping costs will be more than offset by cheaper raw materials and labour in Poland - an interesting development in the current business trend for out-sourcing services to poorer, and therefore cheaper, nations.
The move provides a useful way of increasing Inter Link's presence on the UK cake scene, particularly as it strives to become Britain's number two cake maker by filling the £30 million gap in private label left by leading baker Rank Hovis McDougall earlier this year. RHM moved out of the sector in May to concentrate on its brands.
CMJ, which used to be a subsidiary of another UK cake firm, Lyons, currently has an annual turnover of around £5 million, according to Neilson, who said that in time Inter Link would like to double CMJ's existing production capacity, though he advised caution for now.
"This is a big move for us but we are just seeing how this develops before taking things further. We've got to be sensible," he said.
