Northern Foods PLC - Company Profile, Information, Business Description, History, Background Information on Northern Foods PLC

Beverley House
St. Stephen's Square
Hull HU1 3XG
North Humberside
United Kingdom

History of Northern Foods PLC

Northern Foods is one of the United Kingdom's leading manufacturers of high-quality fresh foods, supplying the country's preeminent retail outlets. It has the reputation of being one of the most adventurous, idiosyncratic, and successful companies in the United Kingdom. Its oddball reputation is perhaps due more to the high-profile personalities of the company's leaders--whose left-leaning politics and cheerful candor are deemed eccentric in the United Kingdom's conservative business climate--than to Northern Foods' track record of steady, respectable growth.

In 1932 Alec Horsley joined his father's condensed milk business, Pape and Co., Ltd., a small Hull-based concern importing Dutch condensed milk for wholesale. From the beginning, however, Horsley was convinced that strength lay in size; he was eager to expand and saw his opportunity in 1936. Amid the growing threat of war and rumors that new import duties might affect their business, Horsley, with his father's support, determined to change the focus of the business to production of their own supply. To that end he convened a meeting with six other small dairy firms in Hull, suggesting that they should merge for their mutual benefit. Only one of the six proved interested: Southwick's Dairies, a wholesale and manufacturing concern. The two entered into a partnership with the object of building their own condensery. Foreshadowing the energy and determination which were to characterize the growth of Northern Foods, Horsley and his partner managed to choose the site, prepare the plant, and build the factory in only four and a half months. By October of 1937 the new factory at Holme-on-Spalding-Moor was up and running.

The onset of the war radically altered the face of the dairy trade in Britain. The need to change to meet wartime conditions proved fatal to many small dairies, but Horsley, a reformer at heart and quick to see opportunity in adversity, eagerly adapted to and profited from the altered circumstances. Due to wartime shortages, the Ministry of Food discouraged the use of cans and sugar--necessary in the making of condensed milk--and supported the sale of liquid milk. Horsley therefore saw the need to move into retail, a shift he had long wanted to make but which had been resisted by his partner George Southwick.

The prewar system of doorstep delivery had been haphazard and circuitous. A dozen small dairies might service different addresses on the same street, then each travel separately to another neighborhood to make more deliveries. The wartime shortages of labor and material, particularly gasoline, made this complicated network of delivery routes unacceptable. The government suspended free competition and insisted upon "rationalization" of dairy delivery. Established routes were disrupted, sometimes drastically altered; in many cases small dairies were forced to completely swap their customers with other businesses.

Recognizing that the time of the small dairyman was over, Horsley embarked upon an energetic and ambitious campaign of expansion, acquiring other dairies one by one. The larger the business grew, the more attractive it became to small firms beset by the bombing (Hull was very hard hit during the war), the chronic shortages, and the difficulties of adapting to rationalization. As the firm expanded it actually became more efficient with each new addition, as Horsley chose the best dairies and plants when consolidating operations. By 1942 Horsley controlled a considerable network of retail and wholesale businesses scattered throughout Humberside and Yorkshire, and the retail end of the company was renamed Northern Dairies to reflect this (although the wholesale operations continued to be known by their individual names).

As the war progressed, Northern Dairies found itself in the enviable position of having to decline to take over several businesses due to the sheer volume of the requests for amalgamation. Horsley and his associates decreed that three of four conditions must be met before they could consider acquiring a business: (1) the town in which it was situated must be flat for ease of delivery; (2) the proposed firm had to be near enough to another of Northern Dairies' depots to allow for convenient exchange of plant or vehicles, or to act as a shadow dairy in areas where bombing was a problem; (3) there was to be no other sizable dairy in the area with the exception of the Co-operative; and (4) there had to be the possibility of future expansion in the area.

The wartime strategies which had proved so advantageous to Northern Dairies were equally successful after the war. Indeed, to a considerable extent the exigencies of wartime business provided the bedrock of the company's future corporate philosophy, particularly the importance of acquisition as well as organic growth and the significance of the concept of rationalization. Horsley established principles of rationalization with other large dairy concerns--in 1950 alone, for example, Northern Dairies sold its Sutherland trade to Craven Dairies in part exchange for its Middlesborough trade, struck a deal to avoid overlapping trade in County Durham, and exchanged Huddersfield and Barnsley for Mansfield in an agreement with Express Dairies. Northern Dairies' amalgamation with the Hull- and Bridlington-based Riley/Granger dairy group also happened in 1950.

Ironically, Riley/Granger, then two separate entities, had attended Horsley's meeting in 1936, when they had both declined to merge with Pape and Co. Riley's had at that time been the market leader in Hull. When it finally joined Northern Dairies in 1950 it was half the size of the company it had once rejected. This amalgamation, significant to Northern Dairies because of the size of the parties involved, was also important in that it brought the center of the company's operations, grown rather dispersed, back to its origins in Hull.

Expansion of product line was a natural corollary of Northern Dairies' growth; in 1946 it had entered the ice cream market through the acquisition of Kingston Ices and Harmers Ices, and soon expanded into cheese, curd, whey, and chocolate crumb. Nevertheless, the firm's original product of condensed milk was not neglected. As soon as the government allowed it after the war, Northern Dairies moved back into milk processing, expanding its condensing operations at Holme-on-Spalding-Moor, and in 1950 established another, more modern plant, able to condense 20,000 gallons per day as compared with the original plant's 8,000.

Northern Dairies became a public company in 1956. Its expansion continued, making its name a misnomer as the company moved into the Midlands and Northern Ireland. Northern Dairies expanded throughout the dairy trade, and its profits surpassed the one million mark by 1970. In that year Alec Horsley retired as chairman and was succeeded by his son Nicholas. Under second-generation leadership, Northern Dairies began its rapid expansion into new and lucrative fields of business. Cream cakes, yogurts, desserts, sandwiches, recipe dishes, pizza, pasta, meat, fish, soups, hors d'oeuvres, cheeses, fresh produce: throughout the 1970s and 1980s the product line continually expanded.

The year 1970 was a watershed for Northern Dairies in another highly significant way: a chance meeting sent the company onto a new and phenomenally successful path. Christopher Haskins--Alec Horsley's son-in-law, later to become chairman of Northern Foods after Nicholas Horsley stepped down--found himself sitting next to an executive from Marks and Spencer (the ubiquitous and well-respected department store with a high-quality, upmarket grocery division) on a plane: from their chat was built a successful and mutually rewarding business relationship.

Throughout the 1970s the relationship with Marks and Spencer was a major focus for the company, which was renamed Northern Foods in 1972 to reflect the expanding nature of its business. From its relatively humble beginnings as manufacturer of the St. Michael (Marks and Spencer's own brand) trifle, Northern Foods grew to become Marks and Spencer's biggest supplier, employing its typical enthusiastic blend of acquisition and innovation. As part of this two-pronged approach, Northern Foods set out on a policy of acquiring existing suppliers to Marks and Spencer wherever it could (witness, for example, its purchase of Park Cakes in 1972 and Fox's Biscuits in 1977); equally, the company concentrated on creating new products for its favored customer: by 1988 Northern Foods was producing a range of 250 products for Marks and Spencer.

Northern Foods' unique business relationship with Marks and Spencer is best illustrated in the construction of the sophisticated Fenland Foods factory in 1986. As a gesture of its goodwill and enthusiasm, Northern Foods built this Marks and Spencer dedicated plant--at a cost of £8 million--before it had yet been established what products were to be made there. Echoing Alec Horsley's 1937 achievement with his first milk processing plant, Fenland Foods, which has been hailed as Europe's most advanced food factory, was built in 40 weeks--and was selling to Marks and Spencer three weeks later.

Northern Foods continued its dual policy of aggressive acquisition and organic growth into the 1990s, concentrating on its four main areas: dairy, convenience foods, meat products, and groceries. In a clear sign that it meant to stay true to its roots, the company acquired the dairy companies Express and Eden Vale in 1992, consolidating its position as the United Kingdom's leading liquid milk company, and holding 24 percent of the market in England and Wales. Doorstep delivery, although an anachronism in the modern world, remains a staple with Northern Foods, which serves some three million households throughout the country. Hedging its bets, the company is also the leading supplier of milk to U.K. supermarkets. Although the effects of the government's proposed abolition of the Milk Marketing Board in 1994 are far from clear, the company's move to supplying supermarkets will leave Northern Foods free to buy milk direct from purchasers. To that end, the company helped to establish the Northern Milk Partnership in 1993 as a means of negotiating collectively with dairy producers.

Northern Foods produces an extensive line of fresh convenience foods sold under the labels of the United Kingdom's most prominent retailers, including Marks and Spencer and supermarket giants Sainsbury's, Tesco, Safeway, and Gateway. The company's meat products range encompasses hot and cold meat pies, some sold as retailers' own labels and others under the well-known brand names Pork Farms, Bowyers, and Hollands. Northern Foods' grocery line is grandly named, considering it consisted in the mid-1990s primarily of biscuits, and would seem to signal plans for future expansion. The upmarket Fox's Biscuits are produced under their own brand name while the less expensive Elkes Biscuits generally produces for stores' private labels.

Rationalization remained a priority for Northern Foods in the 1990s, as the company sought to simplify and consolidate wherever possible, concentrating on the aggressive rationalization policies which made its fortune in the first place. The company has invested heavily in new facilities and technologies, and as a sideline of its main business Northern Foods operates its own chilled distribution services, for itself and for other food manufacturers, including a dedicated transport operation for Sainsbury's. Bread products are one new focus for the future, as the company began in the 1990s to expand into specialty bakeries and flour mills.

The company's rise has not been uniformly smooth; it has had its share of well-publicized (and ruefully admitted) fiascoes. Some of its forays into new lines of business have proved unwise. Its move into consumer finance with the purchase of British Credit Trust was initially profitable (at one point it accounted for 40 percent of the company's profits), but in the banking crisis of the mid-1970s it lost all its deposits and nearly went under, which came as "a bloody shock," according to chairman Chris Haskins. The company sold the British Credit Trust in 1978. A failed attempt to move into the brewing industry in 1972 strengthened the firm's subsequent resolve to stay within its bounds as a food company.

Particularly embarrassing, however, was Northern Foods' attempt to enter the American market with the acquisition of Bluebird Inc. and Keystone Foods Corporation in 1980 and 1982, respectively. Legal problems with the former and philosophical differences with the latter prompted Northern Foods to withdraw from the American market quickly. With characteristic forthrightness, Chris Haskins referred to the experience as Northern Foods' "American cock-up." A sortie into the chicken market with the 1986 acquisition of Mayhew Foods was equally unfortunate, preceding the first recorded falling-off of chicken consumption in the United Kingdom. The venture, Haskins admitted, "has been a disaster.... We will probably have to get rid of it."

Monumental though a few of its blunders have been, that there are so few in Northern Foods' astonishingly long list of acquisitions--more than 40 new businesses between the 1970s and the 1990s--is testimony to its generally sound business principles and good judgment. Ironically for a company whose own name is never seen on its products, Northern Foods is the largest fresh food manufacturer in the United Kingdom. The company's 1993 sales figures elevated it to the coveted status of membership in the "two billion club," proving that Northern Foods' emphasis on continual product development, strategic acquisition, consistently high quality, and solid personal links with its customers are successful policies for the future.

Principal Subsidiaries: Batchelors Ltd.; Bowyers (Wiltshire) Ltd.; Convenience Foods Ltd.; Dale Farm Dairy Group Ltd.; Edmonds Eccles Cakes Ltd.; Express Dairy Ltd.; Falconis Ltd.; Fleur de Lys Pies Ltd.; Fox's Biscuits Ltd.; NFT Distribution Ltd.; Northern Dairies Ltd.; Northern Foods Grocery Group Ltd.; Pork Farms Ltd.

Additional Details

Further Reference

Caulkin, Simon, "Northern Foods' Changing Recipe," Management Today, February 1988, pp. 48-52."Champion Who Bats Well for the North," Yorkshire Post, February 21, 1994.Hamilton, Sally, "Food's Clean Bill of Health," Business, March 1991, pp. 105-108.Horsley, Alec, The Story of Northern Dairies, Hull: Northern Dairies, 1953."Wicklow's Big Bite," Business & Finance, June 3, 1993.

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