Woolworths CEO Roy Bagattini. Picture: SUPPLIED (Supplied)
The acquisition, which brings in2food’s operations closer to Woolworths’ business, is expected to enhance supply chain efficiency and product innovation
Woolworths plans to double down on expanding in2food locally and offshore after acquiring its long-standing food supplier.
The food and fashion retailer said on Tuesday that it had bought privately-owned prepared foods manufacturer in2food from the founders, Old Mutual Private Equity (part of Old Mutual Alternative Investments), and other shareholders.
In2Food, bought by Old Mutual Private Equity in 2016, supplies “high-quality convenience foods” with a diversified range of premium private-label products across freshly prepared convenience food, fresh produce and long-life categories as well as several ambient and bakery products.
It has eight manufacturing facilities across the country and about 8,000 employees. Woolworths is in2food’s largest customer, with the relationship spanning three decades. The balance of its customers comprises other local and international companies across the food service and wholesale channels.
“There’s an opportunity to grow it beyond the Woolies component of it, the non-Woolies revenue in in2food, both locally and offshore. Woolies accounts for about 80% of its (in2food) business. But there is a component which is very interesting, which is growing, and which we want to help double down on and expand both locally, but also offshore through offering other big food retailers globally, a sort of a white-label type product. We do that already,” Woolworths Group CEO Roy Bagattini said in an interview.
He said UK retailer Marks and Spencer is one of the biggest offshore customers of in2food.
And what’s very important about that is we can take the efficiency and invest that back into price, which is really good for our customers, but all of these things around the customer offer really ultimately flow through into big market share gains, which ultimately flow through to a better business and our shareholders benefit at the end of the day
— Roy Bagattini, Woolworths Group CEO
“There are a number of other big retailers in the US, some in Europe, and we’re opening up some channels into the Middle East here as well,” he said.
The acquisition gives Woolworths such a significant competitive advantage in this food space that no one else has and can replicate. We see significant future opportunities to come out of the transaction.”
Bagattini said the food retail landscape is getting a lot more competitive, “and we also know that we have a differentiated position within that”.
“Our food business is a sort of standout performer here. And we continually think about how we protect that. How do we grow the moat? How do we strengthen the moat around this business in a way that we continue to lead as we do? And we do, and you can do that defensively. You can do that offensively. Defensively, it gives us security or assuredness around supply … with all of the IP, the innovation. So it’s our single biggest supplier, and we now own that, which is very important.”
Offensively, it will drive speed to market much more aggressively and help drive agility.
“And what’s very important about that is we can take the efficiency and invest that back into price, which is really good for our customers, but all of these things around the customer offer really ultimately flow through into big market share gains, which ultimately flow through to a better business and our shareholders benefit at the end of the day,” said Bagattini.
In2Food’s management team will continue to lead it as a standalone operating business within Woolworths.
Richard Cooper, CEO of in2food, said the transaction “further enhances Woolworths Foods’ ability to protect product quality, innovation and availability, which are core to its differentiated customer proposition.
“We look forward to further deepening our decades-long connection with Woolworths.”
Bagattini said: “Woolworths and in2food share a more than three-decade history of partnership in creating products of outstanding quality and innovation to meet the evolving needs of our customers. This acquisition represents a compelling opportunity to bring a key strategic capability closer to the Woolworths Foods business, strengthening one of the core points of differentiation in our premium food offering.”
Woolworths plans to grow its food services business into new areas including school spaza shops and events. It already has WCafes and NowNow for fast food, which are housed under Woolworths Ventures.
Last week, Woolworths announced that Bagattini will retire at the end of September, after more than six years at the helm. He will be replaced by Sam Ngumeni, who has been with Woolworths for almost 30 years and is CEO of the food division.