The Sardus food group, which focuses on a range of sandwich toppings from black pudding to cheese and also supplies caterers with frozen meats and salads, will acquire two Swedish sandwich and salad makers, Allt Smörgås and Smörgåsfabriken, in order to create a new business unit for light, ready-made meals.
The combined distribution network of the two producers covers much of Sweden, leaving Sardus well placed to supply restaurants, retailers and petrol stations nationwide. Allt Smörgås and Smörgåsfabriken also have combined annual sales of €13.4 million (SEK120 million).
Ragnar Bringert, Sardus president, said that the company wanted to tap in to the convenience food sector by providing meals that were easy to eat, easy to prepare and could also be low-fat. "Most of the products manufactured within the group can form part of a meal in one way or another," he said, adding that the market for ready-made sandwiches had grown rapidly in the last few years.
Sweden's convenience food market grew by 1.7 per cent in 2002 and Sardus says conditions are stable despite reporting a rise in raw materials costs and a drop in consumer prices. The company is confident that demand for convenience food will continue with the average Swedish household spending only 38 minutes per day on cooking and almost a quarter of Sweden's nine million population living alone.
The market for meat and processed meat actually rose quicker than the convenience sector during 2002, at a rate of 2 per cent, but Sardus is hoping its move to convenience can help the firm offset problems with increasingly stiff competition at home and abroad.
For example, in 2003 one of Sardus' major rivals in Sweden, Swedish Meats, used its Scan brand to invest more in sandwich toppings, while another Swedish company, Ostkompaniet, was established by the Skånemejerier, Milko and Falköpings Mejeri firms in 2002.
Sardus is still the biggest branded meat processor in Sweden with a 21 per cent market share, but it says the increasingly crowded Swedish market has hit profit margins in its fourth quarter this year.
The company was recently forced to decrease its pre-tax profit forecast for 2004 from €12.3 million to €10 million, taking it below 2003 levels, also as a result of falling exports and fierce price competition in the Danish processed cheese market from companies such as Arla Foods.
Now, Sardus' latest acquisitions have been portrayed as a win-win situation for everyone involved. Bringert said he saw international opportunities for the ready-to-eat sandwich sector and this could help Sardus to re-gain export markets and boost earnings per share in 2005.
Gabi Hakim and Rose Marie Ljungström, presidents of Smörgåsfabriken and Allt Smörgås, both said the Sardus takeover could improve development and marketing of their products.
Bringert said Sardus was looking to make more acquisitions for its new Light Foods business. The firm already has a good start and last year also bought domestic firm Gourmet Service in 2003, which produces sandwich salads and dressings as well as some fish for domestic supermarkets and caterers.