IAWS purchase extends its bakery business
Its potential looks to be huge and if the takeover goes well it has the potential to change the dynamics of this core IAWS business.
The move is not without risks, given the stubborn streak in the French.
They refused to bend the knee to McDonalds, who in the end had to serve wine in their restaurants in order to get the consumers through the doors.
If the French show a strong desire to hold on to their traditional bakeries then the huge potential the purchase of Hubert offers could be hard to achieve.
Even the French are changing, however, and Hubert’s has something like 20,000 customers buying their part-baked goods and breads.
The market is huge. France has a 60kg per capita consumption of bread annually, whereas the Irish figure by comparison is tiny.
Another favourable point in that market is the restriction on big supermarkets under French law which underpins the local independent store.
That in itself says the playing field for IAWS is stacked in its favour. All that is required now is for the Irish group to continue to develop what Hubert, located outside Paris, has been doing for the past few years.
Apparently it fits the Cuisine and Delice de France models pretty much so that the culture of the business is not new to the Irish group.
Hubert’s management is also staying put, ensuring continuity and probably pretty good fat salaries into the bargain for those at the top.
If that’s what it takes, then why not? Reading between the lines, this is a long term play and will add just a few cents to the IAWS earnings profile in the short term.
On the basis of the information presented, Hubert is profitable and the only thing required is to ensure this group is supported to drive the maximum benefit from a market it has opened up.
The company generated sales last year of €120 million and earnings of €10.6m.
On that basis the price suggests full value was paid for the business.
That really isn’t the point, however. IAWS has entered another major market, where up to 70% of the baked bread is still made by artisan bakers. That figure is falling as the cost of master bakers becomes prohibitive.
Hubert offers a significantly cheaper source of baked bread and part-baked goods to the retail sector and it’s a market that is just being opened up.
From a strategic point of view it is totally complimentary to the group’s broader ambitions and should result in further expansion in mainland Europe.
At this point IAWS is in Switzerland, France, the US, Canada, Britain and Ireland.
Cracking the potential of the French market will probably be a tougher task than wringing the best out of the non-mainland European markets, but there is a growing sense that the Irish group has a global plan that, if delivered on, should see it continue to grow this business at a very solid rate for quite some time to come.
Meanwhile, Glanbia is also beginning to dip its toe in the consumer focused end of the dairy market.
Glanbia has paid out €14.5m for the assets and goodwill of privately owned Germany company, Kortus Food Ingredients Services, based in southern Germany.
Kortus’ speciality is the production, research and development of customised nutrients systems for the infant formula, clinical nutrition and dietetics markets.
Initially €10.5m in cash will be paid over, with a further deferred payment of €4m, of which €2m will be subject to the achievement of a pre-determined performance target.
IAWS has stuck a similar deal on Hubert, which links the last payment to profit performance.
Like IAWS, this looks to be a critical strategic move for Glanbia, aimed at building up its expanding nutritional business.
