Closure of Findus fish plant in UK raises questions about frozen market.

Closure of Findus Fish Plant in UK Raises Questions About Frozen Market

There were not many raised eyebrows in England at the recent news of the pending shutdown of the Findus fish factory in Grimsby. The decision will end the company's production of fish fingers and other frozen coated fish in Britain. The bottom line is that even with 10% of a 160 million [pounds] market, it's hard to make money when margins get squeezed too tight.

What might be questioned is the interpretation put upon this event by the principal players. Findus blamed weaker demand for coated products, pointing out that total sales of fish fingers had fallen by 20% over the past four years, as consumers switched to other convenience foods such as pasta, pizza and Indian dishes.

Changing tastes, fiercer competition and a 50% rise in raw cod prices since 1987 had eroded profits, making the 30-year-old plant uneconomic. Findus - which like Stouffer in the USA, is a subsidiary of the Nestle Group, and the originator of Lean Cuisine - had invested 12 million [pounds] since 1986 to modernize the Grimsby factory so that it could make other types of convenience foods as well. But it has recently operated at between only 50% to 60% of capacity.

"One has to accept that this is no longer a profitable business for us," Richard Webb, general manager, told the editor of Quick Frozen Foods International during an interview at company headquarters in Croydon. He lamented lost exports to Germany: "Our client was quoted prices from a supplier in the Far East that were equal to what we were paying for raw materials and packaging."

The general manager said there has been an industry-wide trend of scaling back redundant plant operations over the past five years, as companies are challenged to remain competitive. He noted that while Findus has reduced its number of factories from three to two and trimmed the workforce from 2,280 to 2,100, Bird Eye's production facilities have been halved from eight to four, with its workforce falling from 12,665 to 6,675. And UB/Ross, based on published reports, has reduced employees from 9,300 to 6,500. Five plants were shut down in the process, leaving 13 operational.

Findus plans to consolidate production at its newer facility in Longbenton, Newcastle-on-Tyne, which was purpose-built for packing frozen pizza, pancakes and prepared dishes. There a planned 8 million [pounds] investment is expected to create 100 jobs over the next two years. Some 900 positions will be lost at the Humberside plant over the same period.

The news will hurt the town of Grimsby, once the center of Britain's quick frozen foods industry. To help cushion the impact, Findus has announced that it is setting up a joint task force with employees, unions and the local government. "Our intention is to provide every opportunity for our staff and the community to work with us to find ways of creating long term jobs in Grimsby for our people," said Webb.

Meanwhile parent company Nestle, the world's largest food group, said it expected net earnings to turn out higher than the SFr. 2.27 billion ($1.48 billion) recorded last year. The forecast came as the company posted an increase in first-half sales of more than 2% to SFr. 23.2 billion, a trend that is expected to continue.

Excluding acquisitions, group sales climbed by 4.5% in volume during the first half, and Helmut Maucher, Nestles managing director, expects to achieve a 4% growth rate this year.

Comments on the market made by the other major frozen fish producers in Britain were predictable. A spokesman for the Ross Young's marketing department said that fish finger prices had more than doubled over the past 10 years, reflecting an increase in the cost of cod blocks. The average price for a packet of 10 had gone up from 70p to 1.50 [pounds]. Findus, moreover, was heavily dependent on private label which meant further pressure on margins.

Birds Eye (Unilever), which claims 38% of the UK coated fish business, has no plans to abandon the market. "It is not the case that the fish finger is on the way out," said a spokesman. Indeed, it is estimated that British public eats some one-million fish fingers per day.

One should point out that several other "fish in the sea" are nibbling away at the market. There were some interviewed by QFFI in August who pointed to the substitution of other breaded fish lines as a reason for the decline of sticks. For example: Blue Crest's Sea Shapes or Bernard Matthews' Fishies. Scotland's breaded scampi is another "shape" (though hardly a substitution) that has made a lot of progress in the British market.

Figures from an independent source, the Edinburgh-based Sea Fish Industries' Authority (once the White Fish Authority), tend to support the Findus claim and the Ross interpretation. SFIA's marketing director, Robert Kennedy, told this reporter that there has been a steady decline in UK consumption. Tonnage in 1984 was 29,728. It fell to 20,891 by 1987, before further eroding to 19,348 tons last year.

SFIA figures for 12-week periods ended 17th/18th March showed a fall from 6,469 tons to 5,690 tons, but values had risen slightly during the same periods (to 8,315,000 [pounds] from 18,009,000 [pounds]), conforming a Ross observation that while volume has fallen, sales values have risen due to inflation.

So what used to be a market of rather more significance, dominated by Birds Eye, Ross, Findus and other brands, has now diminished into a market shared by Birds Eye and Ross, with a number of private labels contending for the balance.

But one would be wise not to count Findus out altogether. "Our exports and own label business will go," Richard Webb told QFFI. "As for branded, we'll buy from elsewhere. We won't get out of the fish business - but we will get out of the production of fish."

Charts on this page depict how, in the final weeks of 1988, '89 and '90, household purchases of frozen fish in Britain were sold, by outlet. It is noticeable that the share taken by the five major multiples has increased steadily since 1988, confirming again the comment from Ross that because Findus was heavily dependent on private label it has become vulnerable to margin pressure.

PHOTO : UK Total Coated Fish Market

PHOTO : Cold Block Prices vs. Consumer Prices

PHOTO : UK Frozen Fish Market