Source: BizCommunity

The Competition Commission has recommended that the Competition Tribunal approve Woolworths’ proposed acquisition of in2food, bringing a more than 30-year supplier relationship closer to an ownership one.

Longstanding role

The deal offers an interesting look at what sits behind the Woolworths Food brand, with in2food having played a longstanding role in producing many of the premium private-label products sold under the Woolworths name.

Woolworths announced in March that it had entered into an agreement to acquire 100% of in2food Holdings from its founders, Old Mutual Private Equity and other shareholders.

The South African food manufacturer generates more than R5bn in annual revenue and produces more than 3.2 million packs a week across eight manufacturing facilities. Its range spans freshly prepared convenience food, fresh produce, long-life, ambient and bakery products, with Woolworths its largest customer.

That makes the relationship relevant beyond the supply chain. For a retailer whose food business is built around its own brand rather than a portfolio dominated by third-party food brands, the businesses producing those products are part of how the brand experience reaches consumers.

Woolworths says its relationship with in2food has been characterised by close collaboration around high-quality and innovative food products aligned with its premium positioning. It says the proposed acquisition will further support product quality, innovation and availability.

The retailer also expects the transaction to strengthen supply chain resilience, improve speed-to-market and create greater agility and efficiencies. It says the deal will also create opportunities to grow in2food’s existing food service and export businesses.

Standalone business

If successfully acquired, in2food will continue to operate as a standalone business within Woolworths, with its existing senior leadership team remaining in place. This is intended to retain continuity of operations and in2food’s entrepreneurial culture.

The Commission’s recommendation comes with conditions. Woolworths will be required to continue procuring from competing suppliers for a specified period following implementation of the merger. The parties will also be subject to a moratorium on retrenchments resulting from the transaction.

For Woolworths, the proposed deal would therefore bring a business that has been closely connected to its food proposition for three decades into the same group — adding another layer to the story behind one of South Africa’s most recognisable private-label food brands

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