Positive future predicted for Hilton Food Group

The Hilton Food Group has overcome its poor performance in the second half of 2014, according to a report by investment group Shore Capital. 

Following a visit to the group’s UK meat packing processing facility in Huntington, Shore Capital said the “challenges and delays that had adversely impacted the group in H2 2014 (leading to downgrades to estimates) have been fully resolved”.

Huntingdon, which is Hilton’s only UK plant, is also reported to be ready to step up volumes following a £24 million redevelopment.

It is hoped the investment, which funded the addition of a skin packing operation, enhanced logistics facility and a centre of excellence, will help the site improve volumes by 40% following new business wins in the beef and lamb industry. Beef is expected to make up 75% of new volumes with lamb making up the remaining 25%. Hilton’s supply operation to Tesco is based at its Huntingdon site.

According to the report, the Hilton Food Group has “undoubtedly benefited from the in-store changes made by Tesco CEO Dave Lewis and his new team, which instead of running the business to a margin target now has a renewed focus on services levels and on-shelf availability (now measured through the day) set within a sharper price environment”.

The multiple’s range reviews and focusing on different pricing mechanics have also resulted in success for Hilton. “The protein category has also benefited from a review of ranges, which has resulted in a c25% reduction in the SKUs supplied by Hilton, with less focus on promotions and more emphasis on EDLP (every day low prices), which Hilton believes has started rebuilding shoppers’ trust and resulted in more customers shopping the aisles rather than just the promotionally driven gondola ends.”

The report goes on to state that this change in tactics by Tesco has benefitted Hilton.

“Such changes, we believe, have resulted in a material improvement in Tesco’s fortunes and, after under performing the broad red meat market over the past year, it has comfortably outperformed in recent trading, with beef, the core of Hilton’s UK activities, materially ahead of the improving trend.”

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