Food group Baxters has warned that the UK’s cut-throat grocery market poses a significant challenge for the business, which is seeking to boost its presence in North America.
The Highlands firm, which has seen its annual profits dented by the cost of store closures, has paid an undisclosed sum for Wornick, an Ohio-based catering business that counts the US military among its customers.
Executive chairman Audrey Baxter said: “This acquisition is a milestone for Baxters and will significantly enhance our presence within one of the largest markets in the world. This addition to the Baxters family deepens our position in the North American market, already served by Baxters Canada, and allows us to drive growth in the convenience grocery foods arena.”
Wornick, headquartered in Cincinnati, was founded in 1979 and employs more than 500 people, producing field rations for the US department of defence and convenience foods for retail chains.
The purchase of the company was confirmed as WA Baxter & Sons, owner of Fochabers-based Baxters, reported a pre-tax profit of £7.7 million for the year to 31 May, down from £7.8m the previous year, despite turnover rising 2.6 per cent to £161m.
The group took £7.6m in exceptional charges relating to store closures and the transfer of operations from Norwich to Moray of the Fray Bentos pie business, acquired in 2011.
At the end of 2013, Baxters announced the closure of stores in Selkirk and the Ocean Terminal shopping centre in Edinburgh after the owner of its main distribution centre in Blackford decided to sell up.
Despite the “tough decision” to scale back its retail presence, which sparked a one-off cost of £3.4m, the firm saw its headcount rise to 1,154 by the end of May, up from 994 a year earlier.
While earnings were also affected by the strength of the pound, Baxter said the group was concerned by fierce competition in the supermarket sector, which has led to a prolonged fall in the value of food sales.
She said: “The biggest challenge facing our group is the volatile UK food retailing market, the continuation of food deflation and strong consumer price promotions.
“Like many others in the food sector we continue to absorb rises in the cost of goods. It is anticipated that these factors are unlikely to chance in the foreseeable future.”
Recent figures from the Scottish Retail Consortium and KPMG showed that food sales north of the Border fell 1.4 per cent in January, although this was an improvement on the previous month’s 1.9 per cent slide and marked the best performance since June 2014.
With the big supermarkets pushing down their prices in response to the rise of discount chains Aldi and Lidl, researcher Kantar Worldpanel said the overall market grew by 1.1 per cent in the past three months as lower fuel and food bills spurred consumers to increase their grocery spending.
Baxter added: “The year ahead will have all the usual challenges but we have the confidence in our robust management team and their plans.”