Associated British Foods chief to place greater emphasis on food business

Associated British Foods, owner of Twinings, Ovaltine hot drinks, Patak’s and Primark, has not done a good enough job of explaining to investors the strategic logic, growth potential and value of its food businesses and must do better, its chief executive told Reuters.

Associated British Foods is one of Britain’s biggest owners of grocery brands and also runs major sugar, ingredients and agriculture businesses. It operates in 55 countries, employing 133,000. While over half of the group’s annual sales of 20 billion pounds are generated by the food businesses, they receive disproportionately little attention from investors and the media whose focus is trained on Primark.

George Weston, CEO since 2005, said going forward he would place a greater emphasis on communicating the importance of the food businesses as investors lacked a good understanding of the portfolio, and he plans to say more this year. He is also looking to make more acquisitions.

“It’s seen as being a rag-tag collection of unrelated food businesses. It’s not. There’s a lot more method to it than I think parts of the outside world would understand,” he said in an interview. “We have to start explaining it with a bit more purpose.”

“If you’ve been trying to value ABF as a stock since COVID started (in 2020), so much of it has been about Primark’s prospects, from being shut down to not having online capability to supply chains to inflation,” he said. “The big delta (risk metric) in peoples’ valuation model is what you thought about Primark.”

Weston said the food portfolio was made up of varied but connected businesses which all tapped into common themes.

AB Foods owns what Weston calls “long duration growth businesses”, such as Twinings and Ovaltine hot drinks, Mazzetti balsamic vinegar, Patak’s and Blue Dragon cooking products, as well as enzymes, yeast extracts and pharmaceutical ingredients.

These were complemented by “cash generators” such as its Mazola consumer oils business and its retail bakery ingredients business in the United States.

All of the food businesses, Weston said, tapped into the big global consumer trends of increased demand for wellness products, alternative sources of flavour and so called “premiumisation”.

Better engagement may require management to be more transparent, but there are limits, he added.