Crunch time as Golden Wonder goes it alone

Clive Sharpe liked working at Golden Wonder so much he bought the company. The former Golden Wonder director and most recently chief executive of Homepride Foods is leading the 68m buy-out of the bagged snack business from parent Dalgety.

Having persuaded the bankers to stump up the cash – the bulk coming from Legal & General Ventures and the Royal Bank of Scotland – Sharpe now faces the task of leading Golden Wonder into battle in a market plagued by overcapacity and chronically squeezed margins.

In doing so he has given Dalgety what it required: enough money when combined with previous sales over the summer of Golden Wonder Pot Noodles to CPC International for 180m and Homepride Sauces which went to Campbell’s for 58.6m to relieve its high level of borrowings after its 440m purchase of Quaker European Petfoods in February.

So Dalgety has reason to be pleased but Golden Wonder’s new backers may be less happy in a year’s time. Clearly they recognise the difficulties which lie ahead and the deal includes just under 14m to fund “seasonal working capital needs”, much of which is likely to go in new product development and reinforcing the marketing of established brands.

The company has much ground to make up: over the past year its market share of the branded crisp market has fallen to 8.5 per cent in value, down from just over 12 per cent in 1994. It is still in second place in front of United Biscuits but both have suffered against PepsiCo’s Walkers brand which has benefit from high levels of new product development and advertising – areas where Golden Wonder can be criticised.

“The crisps market is large enough to support two main brands plus own label,” claims Sharpe. “KP is effectively concentrating on specialist end of the market. We will differentiate and consolidate into a strong number two position.”

Paul Boothman will join Sharpe as marketing director having filled in as head of marketing since the departure of Tony Hillyer.

In the snacks market Golden Wonder is in third place overall behind PepsiCo, which has performed well with its Doritos brand launched last year, and UB. Some Golden Wonder brands are performing well, especially Wotsits and Nik-Naks but the company will have to increase their marketing support to maintain their performance.

Competition is so fierce in the snack food sector that advertising spend is expected to top 28m this year, up 15 per cent on 1994.

Prior to the purchase Dalgety said it would spend 3m on the relaunch of its Golden Wonder crisps, making a total marketing spend for the year of about 4m.

As well as branded rivals the new Golden Wonder company will have to take on perhaps the most powerful factor in the snacks market: the growth of own-label products from supermarkets which have contributed to the over-capacity and brought prices tumbling.