Belfast Telegraph

Growing success that's never tasted so good

Food and drinks company SHS Group is going from strength to strength and is still on the hunt for acquisitions, as managing director Michael Howard tells Margaret Canning

Watching TV chef Delia Smith try out something new with her turkey is mildly diverting for most of us during the countdown to Christmas.

But the managing director of a food and drinks company in Belfast with a portfolio of 'fast moving consumer goods' businesses including British Pepper & Spice, will watch in trepidation.

For who knows to what dizzy heights a celebrity recommendation will propel a hitherto unloved and overlooked spice, creating a mad rush for SHS Group, which through British Pepper & Spice is the main own label supplier to the big supermarkets.

Michael Howard of SHS Group - which bears a name derived from the initials of the surnames of its three founders - said: "Our worst nightmare is that Delia does something on around December 3 because the supply chain is about 12 weeks for herbs and spices.

"They have to be treated, packaged and sent out to the retailer so if Delia decides pine nuts are the big thing on December 3 we've got a huge problem.

"Cloves you expect to be big at Christmas but it's the ones that you don't know are coming."

It was SHS's massive success with WKD in the early 2000s which prompted an acquisition trail snapping up British Pepper & Spice, Gordon's Fine Foods, Merrydown Cider, Bottlegreen and others.

Acquiring up Gordon's Fine Foods gave it an 'in' to the appetising-sounding 'wet condiments' market, which includes yet another seasonal favourite, cranberry sauce, as well as mint sauce, mustard and the delights which go into Marks and Spencers' 'Terribly Clever' range of groceries.

Mr Howard's been at the helm of SHS Group for 15 years. Through its subsidiaries the company owns brands like WKD, Shloer, Mars Drinks, Sunpride juice and Merrydown Cider.

That allows it the muscle of nurturing and promoting its own brands while it is also the sales and market agent for a litany of other brands.

Overall, SHS is around 50:50 own brand and agency. That's the "perfect balance," according to Mr Howard.

"We're happy with that sort of mix because the big difficulty about being in sales and marketing only is the risk of losing an agency through no fault of your own where there's maybe corporate activity.

"We represent [healthcare and household company] SSL, for example, and they were taken over by Reckitt Benckiser, though that was a lucky break because we also represent Reckitt Benckiser so we kept SSL.

"But if SSL had been taken over by Procter and Gamble, for example, we would have lost that agency as they will have their own agency or their own route to market."

He said SHS had successfully grown its business in household and healthcare in the last year, thanks to new relationships with Nivea-maker Biersdorf and Johnson and Johnson.

In total the group employs around 750 people, including 125 in its Belfast Airport Road West base, around 50 in a sales team and warehouse in Dublin, with the remainder - in drinks, herb and spice, wet condiments, bottling and Great Britain sales and marketing - spread across four sites in England and Scotland.

The phenomenal success of WKD - which Mr Howard calls a "premium packaged spirit" rather than the more down-at-heel "alcopop" - funded the acquisition of Merrydown, then British Pepper & Spice, plus Dublin companies Maguire and Paterson and Clayton Love, and ESA Market Research, a small company in St Albans, Hertfordshire.

Last year it announced the purchase of cordial business Bottlegreen.

After concentrating on the integration of those companies, it may be time to think about new additions to the family, according to Mr Howard.

"Now we're in a position where we're looking for acquisitions again. Something like Bottlegreen will have been in our mirror or under the radar for a while," he said.

"If it's been owned by venture capitalists, we know they will be in the game for a while and then will be looking to sell it on in four or five years, whether to another venture capitalist or a trade buyer.

"We would certainly be actively looking for an acquisition in 2012... but I suppose the difficulty at the minute is that with the general economy people are very cautious and that applies also to sellers because they think they're not getting fair value for their business."

But he added: "I think there'll be more opportunities. There is nothing on the radar at the minute but there certainly will be more acquisitions."

He said a new acquisition didn't have to fit the mould of its previous purchases and he doesn't rule out creating a new division to join the existing five of herbs and spices, beverages, wet condiments, Ireland sales and marketing and Great Britain sales and marketing.

And the company was "very pleased" with its 2010 trading figures, which included a £5m rise in pre-tax profit to £24m, though turnover slumped from £415m to £370m.

"We increased profit significantly in a difficult trading environment."

He pointed to the loss of a major agency with Big Bear Group - owners of Fox's Confectionery and Sugar Puffs - and a difficult Irish market for contributing to a fall in turnover.

Other challenges like commodity inflation can affect their herbs and spices division, while the rising cost of sugar can hit soft drinks. That means trying to cut costs, for example by supply chain efficiencies or, as they've done recently, using lighter glass to bottle WKD.

Mr Howard said the present environment was the toughest the company had faced.

"I think for our particular business we've been on a pretty solid growth curve so this downturn has been the one which has affected us most.

"What has been toughest has been restructuring our Irish business since the big retailers [Tesco] came in, just as when they came into Northern Ireland the route to market changed.

"When that happened in the south it was a very significant change and their economy is having it even tougher than we were.

"That's been a huge challenge and we're still grappling with trying to get the southern business right for the future."

Brands sold by SHS

Owned brands:

WKD, Shloer, Bottlegreen, Merrydown Cider, Cara Matches

Agency brands:

Nivea, Lemsip, Nurofen, Douwe Egberts, Ryvita