Baxters Food Group, a global business with manufacturing operations on three continents, marked its 150th anniversary this year, still thriving in the hands of the Baxter family.
From a grocery shop in Moray, Baxters has grown to incorporate bases in Poland, Australia and the US, as well as across the UK, and include brands such as Fray Bentos, Garner Foods and Jack Daniel’s BBQ Sauce. The company’s turnover exceeded £338 million in the year to March. Following a £650,000 loss in the previous year, largely due to exceptional costs as part of a transformation plan, the group recorded a net profit of £8.8m in 2018, with revenues up 14 per cent year-on-year.
Baxters has enjoyed particular success in the US, where it acquired military rations provider Wornick Foods in 2014, that has led to around 60 per cent of total group revenues coming from its American arm. Speaking as the group unveiled its annual results, executive chairman Audrey Baxter attributes this to a combination of a “buoyant” US economy and the growing market for own brand goods.
She says: “It’s definitely been a transitional period and it’s had a significant change in the dynamic of the company but it was very much a deliberate move. I’d been looking for an American business for four years before I secured Wornick Foods and – I’ll be honest – I’d been getting nervous that I was going to miss the growth cycle. Fortunately, I think, at the end of the Obama years there was a slight contraction, so when we then bought Wornicks, we’ve ridden the economic uplift that has happened.”
The performance was bolstered by one of President Donald Trump’s first initiatives, a $56 billion (£44bn) uplift in defence spending, and an increase in emergency relief work following US hurricanes in 2017, which saw the division provide almost nine million units of emergency meals over a three-month period. The group also established a core market through its customer own brand portfolio.
Baxter says: “We went into America because we saw many years ago that store brand, what we call customer own brand, was a market in its infancy and the CPG [consumer packaged goods] players were reluctant to look at that market, because it’s very competitive to the CPG brand. Whereas I never wanted to take our brands into America but I definitely wanted to be a food player.
“We’ve had to ride the storm of where the dollar has gone. Over the four years, we’ve had difficulty with repatriating our business but, right now, with the weak pound we’re benefitting from that. Also we saw our Canadian business perform extremely well, a lot of uplift, so the whole of the North American business moved forward strongly.”
The group’s presence in a variety of markets makes it resilient to changes in individual ones, says chief financial officer Mike McGill. “Diversity is a huge benefit for us just now because you’ve got different markets that will all behave in different ways,” he says. “You’ve got significant uncertainty in the UK, while you’ve got that strong economy in the US, so it actually gives more balance to your overall group.”
Baxters currently employs more than 1,500 people, with about 450 staff at its base in Fochabers, where 25-year-old George Baxter established his shop in 1868. A gardener on the Gordon Castle Estate, Baxter borrowed £100 from his family to launch the grocery store, while his wife used the back room and local produce to create jams and jellies, which were reportedly “an instant hit” with the nearby Duke of Richmond and Gordon. Over the next one-and-a-half centuries, each generation of the Baxter family enhanced the company’s offering, including the brand’s expansion into soups, followed by a number of acquisitions, starting with Garner in 2001.
In January, the group moved its headquarters to Edinburgh’s Charlotte Square but Baxter says Fochabers remains its “spiritual home”, where the firm has its flagship retail shop and restaurant at Baxters Highland Village. Baxters also holds a Royal Warrant from the Queen, which marks the business as a purveyor of Scottish specialities.
To mark its 150th anniversary, Baxters issued special editions of its soups and teamed up with Macmillan Cancer Support, donating a proportion of sales from its “Favourites” and “Vegetarian” ranges to the charity. It also commissioned a tartan to mark the occasion and a painting by Dundee-based Francis Boag, which depicts the River Spey at Fochabers, interspersed with images from the company’s journey. Baxter says she was keen to highlight a Scottish artist that “meant something to us as a business”.
Baxters is preparing for all outcomes of the Brexit process, with the chairman stressing that a lack of clarity would leave firms with no choice but to start stockpiling. She says: “For us, it totally boils down to uncertainty. A good business has to be planned. To make a robust plan you have to be quite clear on the impacts of all factors that affect the capability of the business. With Brexit we really do not have that clarity.”
She adds that, unless a swift resolution is found, there will likely be a “massive burden of cost to the economy” which it cannot afford, and likens the situation to Donald Rumsfeld’s “known unknowns” speech, with the sector facing some challenges for which it can prepare, while other, potentially unforeseen issues may emerge from the shadows.
McGill added: “Even in simple terms, we are 12 weeks away from an exit. In our supply chain, we would be ordering product now for goods that we might be manufacturing come March/April time. Right now, we don’t know what rules we will be playing under come 30 March and that’s the big issue for us.”
Nevertheless, Baxters is looking to expand through a combination of organic growth and strategic investment in its international divisions. The sale of its Canadian operation in May, a division which had provided “significant profitable growth” following a recent transformation plan, has allowed the company to “shore up its balance sheet”, while Baxter says the group is “feeling very positive” about its Polish business, which supplies the UK market. It is looking at a “gentle strategy” for Europe, while it aims to use a foothold in Australia to extend its reach into other countries.
Baxter says: “We’re always looking at new markets. It’s important to address where you’re producing, where you can sell to. We believe there’s about another 18 months of work that we need to put in to get [the Australian] business really stable and shaped correctly. It’s been tough, but we believe in Australia and we really see it’s a fantastic food market. They’ve got such a great culture towards taste and innovation. My guys go down there and come back with lots of ideas.
“We’ve just had our executive chef there for two weeks, he’s come back and I think he’s going to put wasabi in everything! It’s one of these unusual markets that, if you can bounce out of Australia, you get access to quite a lot of markets more easily than you can from either America or Europe.”
Audrey Baxter, great-granddaughter of founder George, has headed the business since 1992, and continues to place the same focus on innovation as leaders before her. This winter sees the brand return to TV for the first time since 2012 with a new advertising campaign and the group recently enhanced its “Hearty” and “Super Good” ranges to cater for a shift in consumer perceptions towards healthier products.
Baxter says: “We’re constantly innovating – it’s at the heart of the company. Not just food, but packaging, machinery and making sure that we’re investing in the right things to make the cooks shorter so the food is better.
“I never stop thinking about food and ideas – sometimes I need to go into a dark room and stop thinking about all the food ideas!”