Analysis: 2 Sisters turnaround plan starts to take shape

2 Sisters Food Group is planning to close its processing plant in Essex. But will it help stabilise the company’s balance sheet?

By Rachael Porter

Mid May saw the announcement of the latest element of the turnaround plan for 2 Sisters Food Group, which also came with the news that it could close its poultry processing plant at Witham, in Essex, threatening more than 600 jobs at the site.

It’s no secret that the company has been struggling financially. The parent company of 2 Sisters Food Group, Boparan Holdings, said its new management team was ‘halting the decline of the business’ and was ‘addressing inefficiencies’ when its latest financial results were announced. They showed profit margins had narrowed from 1% to 0.1% and profits had fallen from £5.5 million to £0.9 million for the first quarter of 2018. 

The business said a ‘root and branch’ turnaround plan was being executed and the new management team, led by former Muller executive Ronald Kers, was ‘driving through substantive, lasting change’. The report also said that the poultry business was stabilising, despite significant inflation in feed costs.

The latest announcement outlines this ‘promised’ plan and says that there will be ‘major investments in UK poultry’ and ‘further proposed UK poultry footprint changes’, as well as ‘continuing commitment to increase performance of businesses and strengthen its financial position’

These are just some of a series of actions, which also include other non-poultry areas of the business, that the company says are part of its ‘accelerating transformational strategy to turnaround the business’.

2 Sisters is proposing to reduce the number of its UK poultry sites in order to produce shorter, more efficient supply chains delivering quality products and high service levels and become more competitive against its peer group. And that means, potentially, closing the company’s Witham-based site.  

Unite the Union regional officer Michelle Cook said that the closure could mean the loss of 600 jobs at the Witham-based site. “The announcement is grim news for the plant’s workforce and, more generally, for the Essex economy,” she said, adding that the 45-day consultation process had only just begun and that Unite was seeking an urgent meeting with the management to clarify the implications of what is proposed.

“Our first priority will be our members at this worrying time – for them and their families. We will be seeking to avoid compulsory redundancies and explore opportunities for redeployment to other 2 Sisters’ sites across the region during the consultation period.”

The company closed a processing plant at Haughley, in Suffolk, six years ago, with the loss of 700 jobs. But it also has plants at Flixton, in Suffolk, and Thetford, in Norfolk and it’s thought that some of Witham’s 600-strong workforce could be deployed to these other plants.

As for producers supplying birds to the company’s plant, NFU Chief Poultry Adviser Gary Ford said that, as he currently understood the situation, they had nothing to be concerned about.

“Bird numbers supplied by our members to the 2 Sisters operation, as a whole, will remain the same whatever the outcome of the consultation.

“As I understand it, instead of being transported off site for further processing they would be cut up at the site where they were processed. This will mean less traffic movements and will be good for the environment.”  

A spokesperson for 2 Sisters also told Poultry Business: “Demand for UK chicken continues to grow. We will still take supply from producers as normal and processing at our other UK facilities.

“Our continuing UK poultry strategic footprint review has concluded we need shorter and leaner supply chains in order to remain competitive in an extremely challenging sector,” added chief executive Ronald Kers.

“One regrettable outcome of this is that our ageing processing site at Witham does not fit our vision of an effective and integrated site, when our products can be made more efficiently elsewhere within our network.

“As a consequence, we are proposing to cease operations at Witham and, therefore, close the factory. This proposed closure means all colleagues at the site are now at risk of redundancy.

“Our key priority now is to hold meaningful consultations with all affected employees and their representatives in order to explore the full range of options available to us if our proposals come to fruition.

He adds that the company’s stated strategy is to become the number-one poultry plus business in Europe – again, positive news for producers. “And for several months now we have been engaged in a strategic review to facilitate our delivery on this, focussed on improving execution, reducing cost and building a better organisational culture.

“But there is now a pressing need to accelerate our turnaround so we can further increase the performance of our business. That’s why we’re keen to invest where we see potential growth: our UK poultry business will benefit from this further investment. 

As part of an on-going review of the company’s loss-making sites, the company is proposing the potential closure of its UK poultry business’ Witham-based processing site in Essex. Consultation has started and will explore all possibilities including redeploying Witham colleagues to other sites in the wider group.

He added: “We’re all acutely aware that some of our plans, such as reducing our UK poultry footprint, brings uncertainty for colleagues, and it is with regret that we have to make such proposals. But the alternative of doing nothing and hoping for an upturn is not an option.”

 

 

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