On the surface, being sold to finance and make way for £440m of Quaker petfood in Europe would seem unflattering for most companies.
But closer scrutiny of Dalgety’s deal to cash in on its Golden Wonder and Homepride brands reveals that the move could breathe fresh life into the business.
The two are on offer for £300m, although Golden Wonder – with sales of £220m a year – is by far the more interesting prospect. The brand has seen growth in the hot snacks sector but suffered like all other manufacturers in the traditional crisp market, now dominated by PepsiCo.
“There is not much sadness at Golden Wonder. With a little bit of luck a new owner will believe in strategic marketing rather than financial engineering,” according to one source.
The implicit criticism of Dalgety’s investment strategy in the snacks business is echoed among city analysts.
“Golden Wonder has pulled itself up by the bootstraps in recent years through sharper management, and it now needs additional investment to keep it going. It was not going to get that investment from Dalgety. But if a deal is not done quickly it runs the risk of losing key people,” says a food retail specialist. Already there are rumours of dissatisfaction because of the disruption.
A likely candidate for a purchase is United Biscuits, understood to have made an approach even before the formal announcement of the sale was made. It would make a comfortable fit with its KP brands and give the joint business a 30 per cent stake in the crisp market.
The deal would inevitably lead to rationalisation, although this is not a problem in a market which suffers from chronic overcapacity.
For Golden Wonder chief executive Doug Clydesdale it would be like returning home. He quit as KP marketing director in 1993 to inject new vitality into Golden Wonder’s snacks business.
Since arriving, and then taking on the chief executive role in charge of both the crisps and snacks division, Clydesdale has brought in high-profile marketers such as Tony Hillyer from Bass to boost Golden Wonder’s marketing function. Hillyer has just been promoted as Golden Wonder’s first marketing director.
Golden Wonder’s total TV spend for 1994 was £5.5m – spread evenly across the four main brands, which includes the hot snacks leader Pot Noodle. Its crisps business, with sales of more than £150m, is the UK’s second largest bagged snacks brand after Walkers.
The business has been under pressure from cheaper own-label products and has been hit by Walkers in key markets such as Scotland.
Some observers suggest a cut-throat alternative strategy, which involves dropping out of the branded crisp market altogether, concentrating facilities on building own-label business and developing the hot snacks sector. “The crisp market has been destroyed by own label and there is no room for even a number two, let alone the four brands available,” says an industry source.
A deal will be done within the next six months. Only then will anyone be able to assess whether the future will indeed be Golden.