Findus - Strategy That Lacks Beef
Living in the UK I have always ridiculed my North American relatives for living in countries with a perceived "less than stringent" food supply chain. I guess now the "chickens have come home to roost" more aptly put "the horses have bolted out of the stable".
It's no laughing matter for Findus a company that in 2012 was rescued by a £60m purchase of its junior debt by its shareholder Lion Capital as well as later debt restructuring of £220m that injected £20m in cash on the balance sheet and provided a cushion of a £70m overdraft facility. Analysts speculate that Findus is a victim of the markets with high raw material prices, demands buy its customers for lower prices and evil Eastern European criminal gangs trading in Romanian horse meat all conspiring against its success.
The facts reveal a different story - Findus was purchased by Lion Capital a private equity firm in 2008 for £1.1bn from its rival CapVest with the long term goal to divest at a premium after expanding the business which is currently second in Europe to Birds Eye Iglo. In 2011 under the watch of CEO Chris Britton a former Diageo Group Marketing Director the firm and its shareholder Lion Capital requested that the restrictive covenants preventing the firm's ability to raise capital be relaxed. The financial markets acquiesced, this enabled Findus to raise 1.1bn from lenders which was used to go on an acquisition spree acquiring continental food brands such as Frudesa and Salto a from the french firm Bonduelle. Yet Chris Britton also aimed to focus the company on its core competencies.
Quality is a competency that has been overlooked in the company's pursuit of growth. In documents disclosed to their supermarket customers the firm admits since August 2012 horse meat may have been used in the production of its frozen Beef Lasagne product. Eagerly blaming suppliers like Comigel for product non conformance, Findus failed to accept its responsibility as a corporate entity to build mutually beneficial supplier arrangements within its supply chain. Also by its own admission the company had not been conducting inspection and testing of incoming products which is indicative of overall poor process management. As a result customer confidence is lost and with it potential market share, saddled by a burden of debt Findus may yet face the lash of fines from UK regulators which will be less severe than the backlash of angry consumers.
This scenario was avoidable if Findus had pursued a strategy of quality and continuous improvement as own its corporate website states "you’ll find the most consistent Findus ingredient is quality. A strong commitment to quality has long underpinned the continuing success of the Group and its brands in both the retail and foodservice sectors".
It's time for Findus and the Food Sector to find the virtue of quality a key ingredient for strategic success.
Lowellyne James is a Lecturer at the Aberdeen Business School with over 15 years experience ranging from Quality and Safety Management in the Manufacturing Sector to Advertising in a consulting firm. He is the Chair of the Chartered Quality Institute North of Scotland, an Ambassador of the Chartered Management Institute, a Member of the Institute of Chartered Accountants Scotland Advisory ...
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