When a Turkish multinational buys the company behind some of the best-known brands in the biscuit market, one might expect big changes. But in the acquisition of United Biscuits by Yildiz, the accent is on autonomy as well as synergy. Jim Banks speak to United Biscuits CFO Robin Brown about the platform his company has to expand into, new markets and how the finance function fits into the group structure.
In the UK, the mention of the name McVitie's immediately brings to mind many consumer favourites - Digestives, Jaffa Cakes and Hobnobs to name a few. In fact, McVitie's Chocolate Digestives is the country's leading brand of sweet biscuits.
The brand began in 1830, when an apprentice baker named Robert McVitie and his father, William, first established their bakery business, but it has grown to become a global brand available in over 100 countries.
The company behind McVitie's, as well as other popular brands such as Jacob's and go ahead!, is United Biscuits (UB), which is now part of Yildiz Holding - headquartered in Turkey. As well as providing the opportunity to further boost the presence in Europe of UB's brands, the change of ownership opens up a much broader global opportunity.
"It is a great fit. Yildiz is one of the largest and longest-established conglomerates in Turkey - it has been a name in the market since the 1940s - and it has a real focus on food," says Robin Brown, chief financial officer of UB. "Its owner is a baker at heart. Its Ülker brand has more than 50% of the market share in Turkey and it has its own premium chocolates brand in Godiva, which goes well with our own Delacre brand of chocolate biscuits.
"The synergy between this company and its new owners are already bearing fruit. We have a big UK product launch planned for next year and that will include products made in the factory in Turkey; we will push the McVitie's brand in Turkey and we will support the Godiva brand, too. Both companies have a strong presence in the Middle East and we may look to exploit our scale by, for instance, buying machinery from common suppliers; for example, we can get a better deal on capital equipment. We are truly looking across the group to exploit our potential on the world stage," he adds.
Like the McVitie's brand, Yildiz has a long and rich heritage. In a little more than 70 years, it has grown from being a local biscuit-maker in Istanbul to become a truly global food group. One of its key brands is Ülker, which itself has a history dating back to the 1940s, and, as well as being one of the most popular biscuit brands in Turkey, it has a presence in more than 80 countries around the world.
"At one point, we contemplated changing the name of our company to McVitie's, but it is a positive sign that Yildiz feels United Biscuits is a name that fits well with its global strategy. Our product range fits very well with the Godiva and Ülker brands," says Brown.
Big change but business remains as usual
When Brown came into the role of CFO, the company was already in the process of developing a strategy to extend its international reach. Its sale to Yildiz not only provides it with the platform for growth that it sought, but also creates many synergies that promise new opportunities.
"I was promoted to CFO when Martin Glenn joined UB. He re-energised the company, and the leadership team created a clear strategy that included not only remaining the leader in the UK through the McVitie's, Jacob's and go ahead! brands, but also extending our brands in Europe and expanding further abroad. It was a very intense time for the company and the business performed well. We had a great year in 2014 and the clear direction was to look for a change in ownership," he explains.
"The company had been owned by private equity firms Blackstone and PAI since 2006 and, with the new strategy for growth in place, we underwent an intensive process of garnering interest from buyers in the market or going down the IPO road. In fact, we went a long way down that road and investors were very interested, but Yildiz knew the business very well and we are delighted to be owned by them."
Glenn left UB earlier this year and UB is now headed by Jeff van der Eems, who as the previous CFO has been a valued FDE editorial contributor and keynote speaker. Most recently at UB, van der Eems has been responsible for driving UB's successful expansion in international markets. These initiatives helped make the company more attractive to potential buyers, with Yildiz emerging as the best fit.
"When Yildiz bought Godiva it said clearly that the acquisition was more about partnership than integration. It is similar with UB. We have a relationship with head office, and processes such as financial reporting and auditing are in place, so we can work with the rest of the group on identifying opportunities for synergies," notes Brown.
UB and Ülker combined represent the world's third-largest group in the global biscuit market, and the potential for international growth from the heartlands of the UK and Turkey is substantial. Brown has already seen his company expand into key emerging markets from which it can target larger regional plays. This is a vital part of the company's long-term strategy, given that international sales have tripled since 2006 and two thirds of this growth has come from developing markets in Africa, the Middle East, India and China.
The purchase of all assets of the Rana Confectionery Products business in Saudi Arabia, made in conjunction with long-standing partner Ali Zaid Al-Quraishi & Brothers Company, marks an important step forward and builds on McVitie's presence as a leading brand in the Middle East. Similarly, the purchase of a majority stake in A&P Foods, one of the leading biscuit manufacturers in Africa's most populous country, Nigeria, provides a solid foothold in West Africa.
"The US market is important for the combined group, and we also have a presence in Romania and Pakistan, as well as the Middle East and Africa now. We are making small steps in China, too. McVitie's products are sold in over 100 countries, but now we want to manufacture more in market to make our products more affordable for a mass market, so we need local partners to understand the retail set up, regulations and consumer behaviour," says Brown.
"Now we have a combination of flexibility and autonomy as part of the Yildiz group, so we can grow United Biscuits and contribute to the wider group strategy. Also, Yildiz has not ruled out the possibility of an IPO in the future - Ülker is publicly listed - so we could go to the equity market in the future," he adds.
A finance function that is fit for purpose
Often, when a change of ownership occurs, there is a great deal of internal restructuring that follows, but with the acquisition of UB there is a different approach. The goal is to keep intact the organisational elements that have served the company so well, while making just enough change to ensure that it functions in harmony with the other parts of the Yildiz Group. As a result, the finance function largely retains its structure.
"Not much has changed in terms of how we organise and run the finance team, although I now have a dotted line to the Yildiz CFO. There is one specific change, however, in that we used to have an outsourced audit operation and that has now been transitioned to the insourced Yildiz internal audit function. The next step is to continue developing our ability to manage the finance function in different geographies," Brown explains.
"We are stretching our muscles in different ways in new markets. The culture of finance at UB stays relatively independent and we don't have a direct view of how the finance team works at Godiva or Ülker. Our approach has had some good successes and we want that to continue. Finance is always at the table to drive the strategic agenda and we want to sharpen our skills in that area."
The change that will occur to UB's finance function will be driven by the company's strategy for growth rather than by demands from its new owner. It must adapt to the requirements of an ambitious strategy of international expansion and it will do so by looking to get things right at a local level within the broad culture of finance that UB has created.
"Finance people operate across a broad front, especially as we move into emerging markets. We must understand the local aspects as well as our overall priorities. We have a clear framework - 'UB in a box' - that comprises the core control requirements we must have no matter where in the world we are operating. They are the 'must-do' elements, such as forward forecasts and updated annual plans, and they provide a clear framework in which local management teams can operate," Brown says.
"They are clear to comprehend and we need regional businesses to comply with the framework while being sensitive to local needs. We can't be arrogant and decide from a distance what is right for new markets, though that can happen with some companies as they expand. We have to ensure we protect value and drive profitable growth. We must continue to develop how UB finance evolves. I drove a lot of the change that has happened already but we must continue to raise the bar. The world is increasingly fast-paced and finance has to keep up," he adds.
The company's ability to keep pace with change will be determined, at least in part, by the effectiveness of its finance function and, by implication, the qualities of the leader of the team. Brown has a clear understanding of what it takes to make a good CFO.
"I love the role I have. I sometimes get asked if I want the CEO's job but I think I am suited to the CFO one. You need to have a good understanding of your business and its strategy, and you have to be a business partner for the CEO. You need to build that relationship - and with other senior executives - so you need a broad set of skills including leadership and the ability to motivate a team," Brown believes.
"You need to understand all aspects of finance and you need to be smart so that you can pick up new things quickly because the world is changing so fast. You need intellectual curiosity and the ability to know when to take the broad view and when to drill into the details. Most importantly, however, you need to have an eye on the horizon to see what is coming."