Who has never heard about Primark, Twining tea or bought a specific sugar or bakery brand? All these make Associated British Food plc
Diversification. This is the first an most successful rule for the Associated British Food plc (ABF) company. From its inception in 1935 until nowadays, ABF has grow broad-based food manufacturing and retail organization through market and product development strategies.
Its business splits into five segments that it makes them to be present in everyday life for many different people. But, what exactly does the company do? This differentiated conglomerate include products from cheap clothes, sugar and cozy brands that it has been always attractive to shareholders. ABF plc works as a global manufacture in 46 countries and the group operates in the UK, Europe, U.S. and Asia. It is headquartered in London, the UK and employs about 96,915 people. Modernization and expansion has always been the core of its business.
Nowadays, the largest part of the Associated British Food profit is generated by sugar. And it is specially successful also in its retail market. “AB Sugar delivered a first-class result, exceeding last year's record profit following the investment made in recent years”, explains Charles Sinclair, ABF plc Chairman. He also emphasizes the Primark's rate of growth that it “increased this year with sales of £3.5bn, more than double those of five years ago”. Primark retail segment was encourage by the weakening of the euro having a 15% increase in revenue and operating margin profit in 2012 compared with last year results.
However, demand has slowed and commodity prices continue to rise. Grocery and Ingredients business sector are the ones that face more challenges due to strong competition, a continued strain on consumer spending and high costs for a number of commodities that it has led to lower profitability in both of these segments. The market developing that faces the major problems is Australia. The high cost supplier and the management teams in George Weston Foods, along with difficulties in Allied Bakeries in UK, are the biggest challenges nowadays because competitive pressures persist.
The weakness in the economies of ABF developed markets will be the most difficult challenge to overcome. ABF exposure to sales in the eurozone is about 20% what it is been affected by uncertainty and the government austerity measures. However, ABF strategy of market and product development make the businesses operating more successfully and the innovation of technology in the ingredients sector, for example, will make ABF to obtain better results in a near future. Specially important is the combination of high costs and competition environment in this sector, something that the group is counteracting with more differentiated bakery ingredients proposition.
ABF plc main strategy is continuing to review of longer term growth opportunities. The company´s success can be also seen in its decentralized approach, where developing its own corporate responsibility model (risk management) is one of the ABF plc greatest strengths. All their principles are part of the company´s long-term corporate strategy.
