United Biscuits seeks to boost McVitie’s brand
Fluffy kittens, corgi puppies and orange-eyed tarsiers are being marshalled to help sell more Digestives and Jaffa cakes by producer United Biscuits ahead of an expected sale this year by its private equity owners. The 160-year-old McVitie’s brand will be relaunched on Monday with a £12m advertising campaign, focused on "sweet" animals that Martin Glenn, chief executive, said was aimed at "supporting our efforts to drive growth for the category". The 53-year-old, who was head of Bird’s Eye and PepsiCo UK, joined United Biscuits in April last year with a mission from its owners PAI and Blackstone to inject growth into a stagnating business and increase overseas sales. He has embarked on what the group said would be a record level of capital investment this year, of more than £50m, compared with £38m last year. The private equity companies bought United Biscuits for £1.6bn eight years ago – an investment horizon that is longer than the norm in their industry. They sold the KP snacks unit last year for an undisclosed price, thought to have been £400m. Jeff van der Eems, chief executive of the international division, said: "The sale of KP Snacks in 2012 has allowed us to focus on our core businesses of McVitie’s and Jacobs, and to expand our international operations which we hope to account for 20 per cent of sales in three years." Mr Glenn has since regrouped the group’s products into two divisions – sweet products under the McVitie’s label; and savoury biscuits, such as Mini Cheddars and Carr’s, under the Jacob’s brand of crackers. PAI and Blackstone are eyeing the exit, and the business has attracted interest from China’s Hony Capital, a 13-year-old private equity group. Chinese companies have shown a growing interest in UK food brands after the acquisition in 2012 of Weetabix, the breakfast brand by China’s Bright Food group. United Biscuits is the second-largest biscuits group in the €12bn industry, with a 7 per cent market share, which is less than half that of industry leader, Mondelez. The maker of Oreo and Tuc biscuits has 17 per cent, according to Euromonitor. In the UK, where 90 per cent of households buy its products, United Biscuits has a 40 per cent market share. But it has had a tough recession in the face of "difficult market conditions" for at least the past three years as cash-strapped consumers focused on "value", the company said. The market is fragmented, highly competitive and is having to address consumers’ increasing health concerns. Marc Kennis, analyst at Rabobank, which recently issued a report into the sector, said biscuit makers faced volatile wheat and sugar prices and hard bargaining retailers. "This creates substantial uncertainty in the variable cost base for manufacturers, who have limited room to pass on any price increase to customers due to intense competition and the sheer size of food retailers. Biscuit companies are caught between a rock and a hard place," he said. United Biscuits made operating profits of £130.8m in 2012, down from £134.6m the previous year on flat revenues of £1.05bn. Pre-tax profit rose 10 per cent to £45.7m, after paying £95.1m to service its £1.2bn of borrowings.