United Biscuits Case Study

Case Study 1-:

United Biscuits has a long history of successful products, perhaps the most famous being McVities digestive biscuit which was the market leader for many years after its introduction in the 1920s. But now the snack market is dominated by names such as Doritos and Pringles, while the market itself has grown as eating habits have changed. For example, it has been estimated that almost half of all families eat their main meals in front of the television rather than at the table.

About twenty years ago United Biscuits identified this trend and started to move out of the traditional biscuit market into ready meals, pizzas and snacks. But by late 1999 United Biscuits was up for sale, having seen its share price fall by half in less than six years. During the same period profits have fallen from over £200 million per year to about £100 million.

The company had been operating successfully for over half a century in a demanding market which requires ongoing innovation in terms of products. But lately it seemed to have lost its way. An example is in the crisp market which had grown significantly in the UK during the 1980s and 1990s; while the market shares of Walkers and Procter and Gamble grew dramatically United Biscuits lost 6% market share.

United Biscuits was formed by the merger of the Scottish family biscuit maker McVitie and Price with Macfarlane Lang in 1948. Then it acquired smaller rivals such as Crawfords, Carr's and Kemp's and ended up with over half the UK biscuit market by volume. United Biscuits could not increase its UK market share by much more without attracting the attention of the Monopolies Commission, so attention was turned to the US. In the early 1970s the number two US manufacturer Keebler (second to Nabisco) was making losses partly due to the Carter price controls. Soon after the acquisition price controls were lifted and Keebler was back in profit. Attention was then turned to Europe, which turned out to be more difficult to enter than the US market. Finding expansion on the international front increasingly difficult attention then turned to diversification.

This involved acquisitions of burger bars, chocolate makers and frozen fish suppliers. Some of the brands involved were already famous, including Terry's of York, Callard and Bowser, Wimpy, Pizzaland and Ross Young. At the time United Biscuits' approach to financing these acquisitions by equity issue was quite innovative. By 1985 United Biscuits entered into a bidding war with Lord Hanson for the ownership of Imperial Group, which at the time was much larger than UB. However, UB lost out to Hanson, although this may have been a good thing because Imperial Group at that time was a highly diversified conglomerate operating in many areas where UB had no experience.

By 1995 Keebler was sold because it had been performing