When it comes to ambitious goals, they don’t come much grander than aiming to be the largest company in UK fresh produce. Total Produce’s UK turnover of £380 million saw it top the FPJ Big 50 2015, but with Produce World aiming for half a billion pounds of sales within the next five years, there could be change at the top of the chart.
That’s no mean ambition for a company that was worth just £20m two decades ago, and whose £186m turnover last year saw it land in 11th place in the Big 50. But in the last few months Produce World, in a significant signal of intent, has carried out a restructure and a string of deals designed to add scale and potency to its operation.
In recent times the Cambridgeshire-headquartered business has bought up Fenmarc’s Swinderby roots business, acquired organic operators TIO and Taylorgrown, and is now in the process of establishing a joint venture with Lincolnshire Field Products (LFP) to grow, pack and market brassicas. It has also streamlined its board of directors, consulted on the closure of two factories and appointed non-family member Neil Fraser as chairman and chief executive.
Most companies would want to stop and draw breath at that point, but inertia does not appear to be a word in the Produce World dictionary right now.
“We aren’t finished yet,” says Fraser as we chat in the meeting room at Wykeham in Lincolnshire alongside vice chairman William Burgess, head of HR David Frost and LFP commercial director Martin Tate. “We have plans to get real scale to give us real efficiency. That’s not just scale for scale’s sake, it’s about being the best at what we do. But my aim is to grow the business to £500m within five years. And in year one we are already halfway there. But it has to be on strategy – the right product and the right customer base.”
Indeed, expanding that product and customer base has been key to Produce World’s approach for some time, since it acquired Marshalls back in 2007 as a route into the brassica market. That particular move has been fraught with challenges, not least from the unfortunate timing of the purchase in view of world events. “We went into a recession straight after acquiring Marshalls, then we saw this change in consumer habits, less waste, people shopping more frequently, and we’ve just seen the competitiveness of the market get even more fierce,” explains Burgess. “That’s been the main thing. Sure, we’ve probably made a few mistakes along the way, but the ink was drying on the purchase and the credit crunch first started.”
Produce World is planning to close the former Marshalls site at Butterwick as part of the proposed JV with LFP, but despite the challenges it has had with that business – not least the discovery of a £8m accounting error back in 2012 – Burgess has no regrets: “It’s easy to be wise in hindsight, but our mission is to lead the vegetable category in its entirety and brassicas is key in that market, it’s very important to our retailers and we felt we had to be in it. I don’t think any vegetable category is an easy ride. We are in a two per cent net margin industry and it doesn’t take much to go wrong.”
As well as moving into new product lines, acquiring a wider customer base has been high up the agenda for Produce World, who have perhaps noted the risks to big businesses of having too many eggs in one basket. The supplier has a longstanding relationship with Sainsbury’s and Waitrose, but the Swinderby acquisition gave it a major foothold with Asda too in a move that helps it spread risk and better its crop utilisation.
Indeed reduction of risk, as well as economies of scale, were doubtless among the reasons for the tie-up with LFP. According to Fraser, discussions began over a year ago, and the two sides started to explore ways of working together. “We didn’t want to buy or sell each other, we wanted a cashless transaction,” he explains. “So we proposed we create something, we both put our assets in and share a single margin. We’ve combined both farming and packing operations into a single entity. It’s about scale, taking the cost out and investing in one site going forward rather than two.”
The partnership is just for brassicas to start with, but nobody is ruling out extending into other product lines, with potatoes looking the most likely proposition. For Tate, it is a natural move given the pace of change in the modern industry. “It’s about combining the strengths of both businesses,” he explains. “At LFP we are recognised as a good grower in the right area with the support of a good team of people. But we’ve got limited exposure to the retail arena. Clearly Produce World has tremendous strength.”
And with Burgess citing a need for reduced capacity in the brassica sector generally and a better-matched supply-demand balance, Tate suggests it is better to take the initiative and consolidate yourself rather that “sit back and wait to be consolidated”.
Fraser adds that the alternative is the industry continues to compete itself to death.
Tate acknowledges that the new entity will probably be the largest brassica grower in the country, but he prefers to think of it in terms of service and product quality. “I’d rather be regarded as the best rather than the biggest,” he insists. “But it’s reasonable to assume with the acreage we’ll be handling, the team we have around us and the breadth of product portfolio that we’ll be the biggest.”
The move sees Tate gain a seat on the Produce World board, a previously somewhat bloated operation that has now been trimmed down to size. The new management board will feature Fraser, William Burgess, Tate and Frost, plus a financial director, procurement director, commercial director and supply chain director. John Taylor of Taylorgrown will also have a role. Separately to that is an investment board with the three Burgess brothers and two other non-exec shareholders, as well as a further independent non-exec.
So where does all that leave the Burgess family? Andrew and Jason are known to be keen to pursue other interests beyond the day-to-day management of the company, and the new structure allows them to do that. It raises the question of what role the Burgesses will continue to play in a company run by their family since the 19th century. “The business is being set up to run without the next generation,” reveals William Burgess, who stresses that he himself is still as keen as ever to be involved. “It would be very nice if one of them did turn out to be the finished article to come and be involved in the business, but it’s too far away to be sure.”
Unlike other family businesses, Produce World is not afraid of putting their company – or their “baby” as Burgess refers to it – in the hands of ‘outsiders’, and there are no plans to sell up.
Instead it’s about hiring experienced professionals to grow the business, forming strategic relationships and targeting attractive acquisitions, and if the events of the past year are anything to go by, you wouldn’t bet against them hitting that lofty £500m goal.
