IAWS invades specialist French bakery
confectionery and foodservice sectors by acquiring leading domestic
distributor Groupe Hubert, and could exploit the declining number
of independent on-site bakers in the country, argues Chris
IAWS, which already supplies French-style patisseries and breads to retailers and caterers in the UK, Ireland and North America, will initially pay €105 million (£72.5 million) to Hubert owners Apax Partners France and up to a further €25 million if its new business achieves certain profit targets over the next five years.
In the last five years, Hubert has become well-respected for its pioneering development of part-baked premium and value-added products, including a variety of patisseries and breads, which are distributed nationwide. This has helped the group's flagship brand, Coup de Pates, to double sales to €111 million and the whole firm to quadruple its operating income to €10.9 million since 1999.
Owen Killian, new IAWS chief executive, said Hubert's proven ability would hand his company a central place in the French bakery market, the second largest in Europe. "The acquisition of Groupe Hubert is another key step in the internationalisation of our business in the specialist artisan bakery subset of the food market," he said.
IAWS has revealed little of its plans for Hubert, although existing management will be kept. But the move itself marks the company's biggest venture in mainland Europe so far and may position IAWS nicely to take advantage of the emerging market for part-baked and ready-to-eat baked goods distributed to retailers and boulangeries from a central bakery.
The UK Federation of Bakers' 2003 report on the European baking industry says that younger people on the Continent are no longer willing to put in the long hours required to run an independent craft bakery and instead prefer to work shifts in modern industries. Craft bakers still control 68 per cent of the French market, around three times more than plant bakeries, though the gap is closing, according to the federation.
Part of this shift is being driven by commercial and product development as well. "In France, frozen dough and part-baked baguettes have transformed the market so that co-operatives and industrial baking companies are flourishing at the expense of the craft sector," the report says.
The dominance of hypermarkets and supermarkets in French food retail also provides IAWS with opportunities to supply part-baked patisseries and bread that shops can then bake-off in a matter of minutes.
France has one of the highest numbers of hypermarkets per 100,000 inhabitants in Europe. As a result, hypermarkets and supermarkets together account for nearly 67 per cent of France's grocery market, whereas small specialist retailers like bakers have lost almost 5 per cent of their market share on average since 1995, according to a recent French food industry report by the British embassy in Paris.
IAWS chief executive, Killian, said the Hubert acquisition put his firm's products in more than 50,000 outlets across the UK, Ireland, France and North America, and with the company's other brands, such as Delice de France and Cuisine de France, its specialist bakery and confectionery sector is now worth €670 million.
IAWS was originally an agriculture and ingredients company but has poured money into food acquisitions since it bought the then Northern Irish firm, Cuisine de France, in 1998.
Now the company's food division provides 70 per cent of operating profits and investments in other companies, such as premium Swiss baker Hiestand, drove operating profits up by around 20 per cent to €109 million in the year up to June 2004. IAWS also owns the La Brea speciality bread business in the United States and has a joint venture with the Tim Hortons café chain in Canada.