Unigate PLC History

Address:

Unigate House
Wood Lane
London W12 7RP
United Kingdom

Telephone: (0181) 749 8888
Fax: (0181) 576 6071

Public Company
Incorporated: 1959 as Unigate Limited
Employees: 28,243
Sales:£2.31 billion (US$3.86 billion) (1998)
Stock Exchanges: London
NAIC: 311611 Animal Slaughtering; 311613 Rendering & Meat Byproduct Processing; 311512 Creamery Butter Manufacturing; 311513 Cheese Manufacturing; 311514 Dry, Condensed & Evaporated Dairy Product Manufacturing; 31152 Ice Cream & Frozen Dessert Manufacturing; 311511 Fluid Milk Manufacturing; 311999 All Other Miscellaneous Food Manufacturing; 49311 General Warehousing & Storage; 48851 Freight Transportation Arrangement

Company Perspectives:

Unigate is a European food and distribution group. It has over 28,000 employees and an annual turnover of £2.3 billion. Building on its strong financial position, the Group is pursuing expansion within Europe, both organically and by acquiring quality food and distribution businesses where it can add value. As it expands, Unigate is committed to consistent profitable growth as the means by which it can provide attractive returns to its shareholders, be a responsible employer and support the communities in which it operates.

Company History:

Unigate PLC is a leading European fresh foods, dairy, and distribution company. Its largest business is that of fresh foods, which accounts for about 53 percent of operating profits and which manufactures value-added pork, bacon, and cooked meat products; as well as spreads, yogurt, desserts, cheese, and fruit juices. Unigate Dairies, responsible for about 29 percent of operating profits, is one of the largest milk processors in the United Kingdom, delivering milk to 1.3 million homes in addition to distributing fresh milk and cream to retailers and other channels. The dairy division also has butter and powdered milk operations. Wincanton Logistics, which generates about 18 percent of operating profits, is a leading supplier of logistics services to the U.K. distribution market. Unigate's evolution to its late 20th-century incarnation has been rather remarkable. The company, in its various forms, went from selling liquor in the mid-19th century to selling milk and baby food in the early 20th century, to becoming by 1991 a conglomerate that marketed goods and services ranging from turkeys to transportation to Mexican food. Through a host of divestments and acquisitions from 1992 through the remainder of the decade, Unigate shed its conglomerate status, emerging as a focused food and distribution group.

From Liquor to Milk

The history of Unigate goes back to 1882, when Charles Gates died and left his Guildford, Surrey grocer's shop to two of his sons, Charles Arthur and Leonard. The store primarily sold liquor; it was the local agent for Gilbey's wines and spirits and also sold beer. The Gates brothers added tea and coffee to their father's shelves. Then in 1885, according to a story that has become a part of company legend, they were seized by a violent fit of pro-temperance sentiment, vowed never to make money off the liquor trade again, and poured their entire stock of alcoholic beverages into the gutters of High Street, Guildford.

This left them without a source of livelihood, but it occurred to them that the cellars underneath the shop, as well as the yards and stables in back, could be converted into a dairy. They bought a milk separator and started West Surrey Dairy, purchasing milk from local farmers, selling the skim back to them for feeding pigs, and selling the cream to the prosperous citizens of Guildford. In 1888 the company changed its name to West Surrey Central Dairy Company Limited. Three more Gates brothers--Walter, William, and Alfred--and three of their sons joined the family business about this time.

It did not take long for the business to become successful enough to justify expansion. West Surrey Central Dairy bought creameries in Somerset, Dorset, and even Ireland. Its brown jugs of cream soon became famous throughout England, though the level of artistry on the label left something to be desired. According to one historian of the British dairy industry, they showed "a cow looking uncomfortably through a somewhat untypical four-barred gate, rather as if its neck had got stuck between the bars."

West Surrey Central Dairy entered the baby food business in 1904 when Dr. Killick Millard, medical officer of health for Leicester, asked it to supply powdered milk to help feed children of poor families. Four years later, its "Cow & Gate Pure English Dried Milk" was first marketed on a large scale. The dried milk became widely popular despite the prevailing belief that breastfeeding was essential to a baby's health. In 1924 the company developed a special export version of its powdered milk, for feeding babies in tropical climates, which became very popular. In fact, an Indian nobleman once placed a rush order for two cases. It turned out, however, that he wanted to feed the milk to his racehorses.

In 1929 the company renamed itself after its popular Cow & Gate product line, becoming Cow & Gate Limited. During the 1930s it worked with scientists to develop specialized formulas to cater to infants with special needs. It came out with Frailac, a milk food for premature infants; Allergiac for babies sensitive to certain constituents of cow's milk; and a cereal food designed to start babies on mixed feeding at an earlier age.

On the corporate side, the company had gone public in 1918 under the chairmanship of Bramwell Gates, the son of Walter Gates. In the 1920s and 1930s, Cow & Gate expanded by acquiring dairies and creameries. Economic conditions were by no means easy in post-World War I Britain, and many of these acquisitions may have been salvages of struggling businesses. Cow & Gate began by purchasing Wallens Dairy Company of Kilburn in 1924 and added companies in Wales, Yorkshire, Lancashire, Cornwall, Devon, and Somerset over the next 15 years. In 1925 the company decided that its operations were large enough to justify setting up its own transportation subsidiary, and over the next seven decades that part of the company's operations (now known as the Wincanton Logistics) would become one of the nation's largest transport concerns.

Political uncertainty in Europe in the early 1930s convinced the Gates family to seek an overseas source of powdered milk as a way of safeguarding its export business. In 1933 Cow & Gate purchased a controlling interest in General Milk Products of Canada Limited. When World War II broke out in 1939, the British government banned all exports of food products, but Cow & Gate was able to keep its overseas markets supplied for the duration through its Canadian facilities.

Merged with United Dairies in 1959 to Create Unigate

Bramwell Gates retired in 1958 at the age of 83; he was replaced as chairman by Ernest Taylor. One of Taylor's first acts in office was to begin negotiating a merger with United Dairies, the nation's largest producer of dairy products. United was formed in 1917 when Wiltshire United Dairies, Metropolitan and Great Western Dairies, and Dairy Supply Company merged in an attempt to cope with distribution problems caused in the London market by the loss of men, vehicles, and horses to the war effort. In the late 1920s, United Dairies helped pioneer the sale of pasteurized milk in Britain. During the 1930s and into World War II it expanded into Scotland through the acquisition of dairies, and after the war it spread its presence to Wales, Liverpool, Cheshire, Birmingham, and Sherbourne.

The merger between Cow & Gate and United Dairies was consummated in 1959. The new company was reincorporated as Unigate Limited. Integration was not easy, however, and internal politics and rivalry between factions adhering to old-company loyalties continued to plague Unigate for years. In 1963 Unigate acquired Midland Counties Dairies and began buying up small grocery stores and restaurants soon thereafter, but otherwise the company moved slowly in the early 1960s as it tried to digest the merger.

Transformed into Conglomerate in the 1970s and 1980s

As milk consumption leveled off in the 1960s and began to decline as the decade ended, Unigate responded by increasing its nondairy businesses and its nonmilk product lines. In 1970 it announced plans to expand its retail activities, which included Kibby's supermarkets, Quids-In clothing shops, Uni-Wash laundrettes, and even some Kentucky Fried Chicken franchises. In 1973 it acquired Scot Bowyers, a meat-processing company. In 1975 it purchased Frigo, an American maker of Italian cheeses, and it acquired another U.S. specialty cheesemaker, Gardenia, in 1978.

Even so, Unigate's financial performance was sluggish through the early and mid-1970s and it continued to be bothered by political infighting, a sign that the merger was still not fully digested. So when John Clement became chief executive and chairman in 1977, he immediately set about knocking heads in the name of company unity. Over the next five years, Unigate lost a number of senior executives and Clement, a career dairyman, gained a reputation for autocratic rule. But he also put the company on solid financial footing and accelerated the process of diversifying its business.

One of Clement's first major acts as chairman was important in this regard. In 1979 Unigate parted with three-quarters of its manufacturing capacity when it sold 16 of its creameries to the Milk Marketing Board for £87 million. The sale lessened its presence in its traditional mainstay, but raised cash for acquisitions and paying off debt. In 1981 Unigate acquired Giltspur, a moving company; Turners Turkeys; and Casa Bonita, an American restaurant chain specializing in Mexican food. In 1984 it added another poultry processor, J.P. Wood. In 1985 it acquired Arlington Motor Holdings, followed by Colchester Car Auctions the next year, and added them both to the Wincanton Group. Also in 1986, it added the U.S. restaurant company Prufrock, which specialized in southern-style food through the Black-Eyed Pea chain.

In the mid- and late 1980s, however, some of these diversification moves were junked after they proved less than successful. In 1984 Clipper Seafoods, a struggling fish-products business, was sold off. Scot Bowyers was sold to Northern Foods in 1985. In 1987 Unigate divested several small engineering businesses that had been acquired with Giltspur. To complicate matters further, Unigate also began reinvesting in its milk business in 1987, acquiring the Middlesex dairy H.A. Job for £26 million. As of that year, it was still the U.K.'s leading milk supplier, despite relying on milk for less than one-third of its business.

The diversification of Unigate paid off in the early years of the 1980s, as the company's financial performance improved dramatically during the decade, with pretax profits more than doubling between 1981 and 1986, and its debt load steadily declining. But profits stagnated from 1987 through the end of the decade and Unigate's situation worsened in 1990 when recession hit. Clement was replaced as chief executive in October 1990 by Ross Buckland, who had headed up European operations for the Kellogg Company, the U.S. cereal giant. In December 1991 Clement was replaced as chairman by Brian Kellett.

Focused on European Food and Distribution in the 1990s

With Clement out of the picture, Buckland proceeded to deconglomerize Unigate, returning to a focus on food and distribution in the United Kingdom and Europe. The company raised more than £700 million via divestments through 1997. Disposals in 1992 included poultry processor J.P. Wood, sold to Hillsdown Holdings plc in February for £29.6 million; Giltspur International, sold in August to P&O Exhibition Services; and the Frigo and Gardenia cheese brands, sold in September to Stella Foods. In 1993 Unigate sold Arlington Motors to Lex Services PLC for £49.5 million in July and in September sold two businesses to Dalgety PLC for £30.4 million: Morton Foods, a supplier of batter and crumb coatings to the food industry, and W.J. Oldacre, which managed eight animal feed mills. In August 1994 Turners Turkeys was sold to Bernard Matthews P.L.C. for £18 million. During 1995 Unigate exited from the baby food business with the sale of its 29 percent stake in Nutricia, which raised £332 million; from the auto sector, through the US$62 million management-led buyout of National Car Auctions; and from the exhibitions business with the sale of Giltspur Inc. to the Dial Corp. for £40 million. The following year Unigate disposed of its restaurant operations by selling Black-Eyed Pea to DenAmerica Corporation (the largest franchisee of Denny's restaurants) for £42 million (US$65 million) and Casa Bonita to CKE Restaurants, Inc. for £27.1 million (US$42 million).

During the same period Unigate spent more than £400 million beefing up its foods, dairy, and logistics businesses, the three core units that would remain with the company by the end of the decade. The company made its first move into the European food sector in 1995, when it purchased two French firms: Prodipal, a maker of yogurts and desserts, and Vedial, a maker of spreads. In September 1996 Unigate paid £77.3 million for the U.K. and Italian margarine and spreads business of Kraft Foods International. Meantime, in 1994 Kellett died; Buckland served as acting chairman until March 1995, when Ian Martin, a former executive with Grand Metropolitan PLC, took over as chairman.

Unigate's restructuring led to steady increases in pretax profits from fiscal years 1994 through 1998. It also left it in a strong position from which to make acquisitions. In May 1998 the company made a £1.59 billion bid to acquire Hillsdown Holdings--a holding company with interests in food, housebuilding, and furniture--but the proposal collapsed acrimoniously. In February 1999 Unigate acquired Fisher Quality Foods Limited, a leading U.K. supplier of sauces, dressings, and marinades, from the Albert Fisher Group PLC for £43 million. Meanwhile, Hillsdown had proceeded with a breakup plan, whereby it spun off its chilled convenience food subsidiary as Terranova. In March 1999 Unigate initiated a hostile £228.5 million takeover bid of Terranova, which was the part of Hillsdown it had wanted in the first place. After Unigate raised its bid to £274 million, Terranova's directors recommended that the bid be accepted. The pursuit of Terranova, as well as the purchase of Fisher Quality, made it clear that Unigate was ready to diversify again, but this time appeared to be much more selective, concentrating on building a wider base within its core food operations.

Principal Subsidiaries: Unigate (UK) Ltd.; Unigate Distribution Services Ltd.; Unigate Netherlands BV; Unigate Dairies Ltd.; St Ivel Westway Ltd.; St Ivel Ltd.; Malton Bacon Factory Ltd.; Stocks Lovell Ltd.; Fermanagh Creameries Ltd.; Wexford Creamery Ltd. (Ireland; 80%); Vedial S.A. (France); Société Laitière de la Vallée de l'Ourcq S.A. (France); Wincanton Ltd.

Principal Operating Units: Malton Foods; St Ivel UK; St Ivel Foods, Europe; Unigate Dairies; Wincanton Logistics.

Unigate PLC History

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