Associated British Foods Plc Business Information, Profile, and History
London, SW1X 7LQ
Associated British Foods plc is dedicated to making key investments for the future. In order to remain a market leader, the company strives to focus on investments in research and development, capital expenditure, its employees, and environmental policy.
History of Associated British Foods Plc
With high-ranking positions in several categories of foodstuffs, Associated British Foods plc (ABF) stands as one of the United Kingdom's top producers of consumables. From its roots as a Canadian bakery, the company grew and evolved to become Britain's top manufacturer of bread, with more than one-third of the U.K. market. By the early 1990s, the company had diversified within the food business into tea and coffee (sold under the Twinings and Jackson brands), biscuits and crispbread (marketed under the Burtons and Ryvita names, respectively), as well as frozen foods and edible oils. Its British Sugar subsidiary ranked as the country's dominant producer of sugar. The company's activities throughout the United Kingdom, Australia, and the United States encompassed grocery product manufacturing, milling and baking, and soft goods retailing. Notwithstanding its geographic diversity, the vast majority of its revenues continued to be generated in the United Kingdom and Ireland into the new millennium. In 2001, AFB was the largest customer in the U.K. agriculture industry.
ABF, operating as a multibillion dollar international conglomerate, characterizes itself as a 'family of businesses.' ABF subsidiaries, whether self-developed or acquired through merger or acquisition, retain their individuality in name, operations, and clientele, yet maintain strong connections with the parent's central management core. The company's major business divisions include Primary Food and Agriculture, Ingredients and Oils, Grocery, Retail and Packaging, and Australia and New Zealand, which focuses on George Weston Foods. For more than half a century, one family has controlled ABF: the Westons. In 2001, the Westons owned slightly more than half of ABF's equity through Wittington Investments Ltd. In May 2000, Garry Weston retired as chairman of the company due to poor health.
The family saga began in Toronto, Canada, in 1882, when George Weston, then 18, bought a bread-delivery route. During the following 36 years, he built a number of successful bakeries in that area. George Weston Ltd., the Toronto-based chain of bakeries and supermarkets that resulted from that growth, consistently ranked among North America's top businesses throughout the 20th century.
When George Weston's son Garfield took over the bakery business at his father's death in 1924, he had much more in mind than simply maintaining or building up the chain of local bakeries his father had founded; he was determined that it grow into an international business. Eleven years later, in November 1935, he took a giant step toward that goal by purchasing seven bakeries in England, Scotland, and Wales and adding them to his newly formed Food Investments Ltd., which was promptly renamed Allied Bakeries Limited. All seven bakeries remained in operation throughout the 20th century, three under their original names.
Within four years, Garfield had 18 bakeries and four biscuit factories throughout the British Isles, beginning decades of expansion into Europe, Africa, Australia, Asia, and North America. The expansion went beyond food products to encompass seed production, milling, canning, retail grocery and clothing outlets, restaurants, vehicle parts, fuel, and basic research.
The expansion was not always steady, however. At the onset of World War II, wartime restrictions and shortages of supplies began to slow production, while high taxes and voluntary defense contributions reduced profits. But expansion picked up again in the postwar period. A postwar excess-profits tax refund was wholly invested in expansion and equipment. In 1948, Garfield's son Garry joined the board of directors. The following year, the company purchased two Australian firms: Gold Crust Bakeries in Adelaide and Gartrell White in Sydney. By the end of the decade, profits had surpassed £2 million a year.
A growth spurt in the 1950s added dozens of new bakeries, teashops, restaurants, and catering businesses, many of them in newly constructed shopping centers, which provided one-stop convenience for consumers. Food stores purchased by the company were refashioned into supermarkets to suit new shopping habits. This diversification led to a name change in 1960, to Associated British Foods. By 1964, the company claimed to be the largest baker in the world and one of the largest millers, in addition to being one of the largest grocers in the United Kingdom.
Rapid growth continued during the 1960s, with the acquisition of A.B. Hemmings, Ltd., a chain of 230 bakery shops in the London area, the entire chain of Fine Fare food shops, and a 51 percent interest in the South African Premier Milling Company.
In 1970, ABF also opened the largest bakery in Western Europe, in Glasgow, Scotland. A year later, ABF's Fine Fare opened its first two 'superstores.' As the 1970s progressed, the Stewart Cash Stores in Ireland, which ABF had acquired some 20 years before, followed suit, opening their first hypermarket. In 1978, ABF expanded into a new market--frozen foods--by buying an ice cream factory and a pizza bakery.
Garfield died in October 1978 and Garry advanced to the chairmanship of ABF. The family no longer sought the public eye, keeping a low profile since 1983, when an attempt by six Irish Republican gunmen to kidnap a family member was foiled.
Despite difficulties such as fluctuation of the pound and climatic conditions affecting crops, ABF continued to expand and prosper. In 1980, a subsidiary, Twinings Tea, opened its first North American factory, in Greensboro, North Carolina, and also opened the Grosvenor Marketing Company in Paramus, New Jersey. Additional bakeries and other businesses were acquired, and ABF's continual program of monitoring and modernizing kept products and services up to date and operations efficient.
Growth of Major ABF Subsidiaries in the 20th Century
Some of ABF's subsidiaries are much older than their parent. The Twining Crosfield Group, for example, dates back to a coffee shop purchased by Thomas Twining in 1706, when coffee was the fashionable drink for men. Tea, introduced early in the 17th century, had been popularized as a drink for ladies by Queen Catherine, the wife of Charles II, at midcentury. But men usually drank it for medicinal purposes only (it was widely regarded as a remedy for headaches). When Twining introduced tea as a sideline, he found it was so popular that in 1717 he converted Tom's Coffee House into the Golden Lyon, London's first tea shop.
Twinings Tea, exported to nearly 100 countries in 2000, may be ABF's most widely known brand name. It has won the Queen's Award for export achievement, and it consistently dominated its market. In 2000, Twinings acquired a Sweden-based food distributor, introduced four new organic teas, and introduced new packaging to the Australian market.
The Ryvita Company, purchased by ABF in 1949, also won the Queen's Award for export with the crispbread that has long been its principal product and probably ABF's second best-known brand name. Increasing interest in health foods made Ryvita and the company's other main product, Crackerbread, popular in many countries in the 1980s. By the early 1990s, Ryvita eclipsed its competition with an 80 percent share of the market. ABF hoped to parlay the brand's strength into increased sales with the late 1988 introduction of a crossover product. Ryvita High Fibre Corn Flakes coupled the original product's reputation as a health food with a marketing emphasis on environmentalism; the product came in recycled packaging. Demand for high-fiber foods and the availability of new extrusion technology resulted in the development of Allinson's branded products, Croustipain, as well as other extruded breakfast cereals and cereal products. In 1998, Ryvita entered the Russian market and also introduced Ryvita Currant Crunch. Rising popularity of organic products also led to new product launches, including the Organic Allinson crackerbread.
Allied Bakeries, the group of bakeries Weston purchased at the time of its incorporation, continued to function as part of ABF's largest subsidiary. Over the course of the company's history, this segment grew to include some 40 wholesale bakeries and close to 1,200 retail bakery shops and restaurants throughout the British Isles. When the addition of in-house bakeries in many supermarkets put a slight crimp in the wholesale baked-goods business, Allied Bakeries countered this trend with a line of partially baked goods and a line of frozen bakery products, both of which could be completed at an in-house bakery or by the retail consumer at home. But by mid-1994, a string of losses in the Baker's Oven retail chain led to that operation's divestment. The sale, which encompassed two bakeries and more than 400 retail locations, generated £8.95 million. Allied Bakeries restructured itself into four operating units in 1998. Its Kingsmill brand continued to be a leader in the late 1990s.
Other subsidiaries included Cereal Industries and Fishers Agricultural Holdings, which supplied animal feeds and livestock marketing services, and Fishers Seed and Grain, which produced agricultural seeds. The Allied Grain Group marketed seeds and fertilizers and was the United Kingdom's largest grain trader at the start of the new millennium. ABR Foods supplied wheat by-products to several types of industry: baking and brewing, food and pharmaceutical manufacturers, animal feed, and packaging products. Poor market conditions, however, led to its sale in September 2000 to Roquette Freres. Allied Mills produced more than one million tons of flour each year, making it one of the leading flour mills in the United Kingdom. British Sugar processed 1.55 million tons of sugar in 2000, the second largest crop in its history.
ABF's Burton's Gold Medal Biscuits long ranked as one of the largest biscuit manufacturers in the United Kingdom. As consolidation swept through the biscuit market in the late 1990s, Burton's stood as the second largest in the industry. The business unit faltered in the late 1990s, however, as competition increased and as the Russian economy experienced a severe decline. Famous for its Jammie Dodgers and Wagon Wheel products, the subsidiary was sold to Hicks, Muse, Tate & Furst in October 2000, as a result of continued poor performance.
The firm's Irish retail group operated as the largest supermarket chain in Ireland (Quinnsworth stores in the Irish Republic and Stewarts and Crazy Prices in Northern Ireland) throughout much of its history. This group also included retail clothing stores--Penneys in Ireland and Primark in the United Kingdom--focusing on fashions for young people. Many of these stores opened in the 1960s; although they continued to do a thriving business through the 1980s, they were battered by cutthroat price wars in the early 1990s. ABF sold its retail food business to Tesco in 1997, which included Quinssworth, Crazy Prices, and Stewarts, in order to focus on its other retail ventures.
AB Ingredients, formed in 1982, and AB Technology, formed in 1987, constituted new directions for ABF. AB Ingredients developed and manufactured new ingredients and additives for Allied Bakeries and for other independent companies. It also developed improved bakery processes. AB Technology specialized in high-tech improvements for several types of industry, including food production. The company continued to focus on research and development through its Ingredients and Oils business segment.
Lagging Profits and Expansion: Early to Mid-1990s
It took a strong central management, an efficient reporting system, and vigilant personnel and investment programs to hold together so many relatively independent companies of disparate size and design, in widely separated geographic locations. ABF's continual expansion testified to its strength, but its structure, marked by an intricate system of holding companies and representation, was difficult to penetrate and analyze.
An early 1990s recession put ABF in what an anonymous analyst with Charles Stanley & Co., Ltd. called 'an unenviable situation.' Cautious consumers and ready-to-please retailers squeezed profit margins on virtually all of the company's products. Sales declined from £4.81 billion in 1991 to £3.95 billion in 1992, and pre-tax profits dropped from £332.3 million to £267 million during the same period. The company responded with a major reorganization encompassing the core bakery division as well as the British Sugar plc operations acquired in 1991, closing factories and eliminating a net of nearly 1,500 jobs from 1992 to 1994. Net results rebounded in 1993, when the company recorded £4.39 billion in revenues and £338 million in pre-tax profits. Financial performance continued to improve in 1994, as sales increased to £4.48 billion and pre-tax profits increased to £360 million.
As finances appeared to be back on track, ABF made two key acquisitions in 1995. United States-based Abitec Corporation and AC Humko Corporation, specialty oils and cheese analogs businesses, were purchased as part of the company's efforts to penetrate that market. The next year, the firm began a joint venture with the Lianhua Gourmet Powder Company of Henan Province, China, and with Henan Lianhua BSO Pharmaceutical Company Ltd. Both ventures were related to its glucose and dextrose operations. Profits increased nearly 15 percent in 1996, due to U.K. flour milling and baking operations as well as the company's expansion into the United States. Positive growth in ABF's animal feed subsidiaries, the Twining companies, Burton's Biscuit operations, and the retail grocery and textile units also had a positive effect on the year's earnings. ABF's stock ended the year at an all-time high, the only U.K. food manufacturer to do so.
Declining Market Conditions: Late 1990s
In 1997, ABF purchased the One-UP chain of stores as part of its effort to focus on its clothing retail operations. Having sold its retail food interests in Ireland, the firm's Penneys and Primark units continued to grow. The company's milling and baking operations, however, suffered in 1997, due to a poor harvest caused by bad weather and a surplus in the plant baking market. A drop in sugar prices also began to affect British Sugar's operations despite record production levels.
The following year was a tough one for the firm. Profits declined and market conditions continued to deteriorate due to the adverse effect the strengthening of the sterling had on sales. British Sugar also came under fire by the European Commission when it was fined for price fixing in the late 1980s--ABF appealed the fine. George Weston Foods also recorded a decline in profits.
In 1999, profits continued to fall while sales rose a modest 3 percent. Sugar prices plummeted and subsidiary ABR was negatively affected by a surplus in Europe in the wheat starch and glucose industry. Flour prices also fell, forcing Allied Mills to introduce new products such as organic flours. The firm's United Kingdom-based grocery units faced increased competition as well as George Weston Foods, and the glass packaging unit also experienced hardship as the U.K. market declined.
Some of ABF's subsidiaries did see positive growth, however. ABN and Fishers, animal feeds subsidiaries, acquired six mills from Dalgety Feed Ltd. and continued forging relationships in Asia. Allied Grain maintained profits as well as Germains seed coating operations. ABF's retail unit recorded a 23 percent increase in sales due in part to its expansion. The firm's United States interests, Abitec Corp. and AC Humko, also saw positive results in 1999. With the acquisition of German-based Rohm Enzymes, a leading enzyme producer catering to the food, industrial, and animal feed markets, ABF strengthened its food ingredients businesses. That division also acquired SPI, a U.S.-based ingredients company.
Restructuring in the New Millennium
The U.K. agriculture industry continued to decline into the new millennium. ABF also had to deal with flat and declining prices and margins in the food retailing and manufacturing industries. Despite these setbacks, the firm recorded a 4 percent increase in profits in 2000. To remain competitive in adverse market conditions, the company underwent a series of restructuring events in 2000, including the sale of its Allied Frozen Food and ABR Foods units. In addition, Burton's was sold due to increasing competition in the biscuit market and the firm's industrial fats business was divested.
Management also focused on strengthening its core operations by implementing an aggressive acquisition strategy. In an April 2000 Grocer article, CEO Peter Jackson stated, 'There is no bigger priority than looking for the right acquisition.' In keeping with the new strategy, ABF acquired four beet sugar plants in Poland, securing its position as the largest foreign investor in the Polish sugar industry. The firm also purchased the polyols business of Lonza Inc., a U.S. subsidiary of the Swiss Lonza Group. As management remained uncertain about future economic conditions in many of its core markets, it continued to restructure traditional business units. The company also sought international growth through acquisition and focused on the development of new technologies.
Principal Subsidiaries: AB Ingredients Limited (95%); Abitec Corporation; ABN Limited; AB Technology Limited; ACH Food Companies, Inc.; Allied Bakeries Limited; Allied Foods Co. Limited (78%); Allied Grain Limited; Allied Mills Limited; Barcroft Company; British Sugar plc; British Sugar (Overseas) Limited; Carl Lange AS; Cereal Industries Limited; Curkrownia Glinojeck SA (53%); Eastbow Securities Ltd; Eric Haugen SA; Fishers Agricultural Holdings Limited; Foods International S.A.; George Weston Foods Limited (78%); Germain's (U.K.) Limited; Germain's (Ireland) Limited; Germain's Sp zoo (65%); Gregg & Company (Knottingley) Limited; Grosvenor Marketing Limited; Guangxi Bo Hua Food Company (71%); Guangxi Bo Hua Food Co. Limited (60%); Henan Lianhua-BSO Pharmaceutical Co. Limited (57%); Jacksons of Piccadilly Limited; Jordan's (NI) Limited; Lax & Shaw Limited; Liaoning Liaohe Ai Min Feed Company Limited (55%); Liaoning Liaohe Yingpeng Feed Company Limited (55%); Nambarrie Tea Company Limited; Primark (Ireland); Primark Stores Limited; Rohm Enzyme GmbH; Rohm Enzyme OY; The Ryvita Company Limited; Seed Systems Inc.; Serpentine Securities Limited; Shanghai ABN (60%); SPCA Barcroft SA; SPI Polyols Inc.; Sugarpol (Poland); Trident Feeds; R Twining & Company Limited; R Twining & Co. Ltd (U.S.A.); Westmill Foods Limited; Weston Research Laboratories Ltd.
Principal Competitors: Hillsdown Holdings Ltd.; Tate & Lyle PLC; United Biscuits Holdings plc.
- 1882: George Weston begins his career in the bakery industry.
- 1924: Weston's son, Garfield, takes over the bakery business.
- 1935: Seven bakeries are acquired and operate under the name Allied Bakeries Limited.
- 1948: Garry Weston joins the firm.
- 1949: The firm enters the Australian market with the purchase of two companies.
- 1960: The firm changes its name to Associated British Foods.
- 1964: The company operates as one of the largest bakers in the world.
- 1970: ABF opens the largest bakery in Western Europe.
- 1978: The company expands into the frozen food industry.
- 1980: Subsidiary Twinings Tea opens a factory in North America.
- 1982: AB Ingredients is formed.
- 1987: AB Technology is created to develop new technology.
- 1991: British Sugar plc is acquired.
- 1992: The company begins a corporate restructuring due to falling profits.
- 1994: Financial performance improves.
- 1995: The company acquires two U.S. firms, Abitec Corp. and AC Humko Corp.
- 1996: The company begins a joint venture with China-based Lianua Gourmet Powder Company.
- 1997: The company sells its retail food businesses to Tesco.
- 1998: Profits fall again due to U.K. market conditions.
- 2000: ABF expands through several acquisitions; Garry Weston retires.
- August Storck Kg Business Information, Profile, and History
- Arla Foods Amba Business Information, Profile, and History
- Other Free Encyclopedias
This web site and associated pages are not associated with, endorsed by, or sponsored by Associated British Foods Plc and has no official or unofficial affiliation with Associated British Foods Plc.