Ice cream 
giant sets sights on 
Italy for 
expansion

The North Yorkshire company bought Italy’s leading own-label ice cream manufacturer, Eskigel, for around E77m.

Eskigel operates from a factory at Terni, north of Rome, and last year had sales of E81m. Products include ice cream sticks, ice lollies, cones, mini-cups, tubs and ice cream sandwiches.

James Lambert, chief executive, told the Yorkshire Post that the acquisition was “absolutely in line” with his strategy to be the lead consolidator of ice cream businesses in Europe.

“It started in England. Now it’s gone into Europe,” he said.

R&R’s main competitor is the food giant Unilever, which is growing across Europe and putting other manufacturers under pressure, said Mr Lambert.

Northallerton-based R&R signed a deal with US firm Kraft last year to develop its brands across 10 European countries.

“To do that, we need to have a good manufacturing set-up where we are lowest cost and most innovative,” said Mr Lambert.

He added that the Italian family behind Eskigel will remain as shareholders and continue to grow the business, which has 70-80 per cent of the country’s own-label market.

The retail market is less developed than other parts of Europe, presenting an obvious growth opportunity for R&R.

“Eskigel has also got a modern, extremely efficient and very innovative factory,” said Mr Lambert. “We are really pleased.”

He said the acquisition would lead to more consolidation in the ice cream market.

He added: “There are a lot of European ice cream manufacturers that are not profitable and require a lot of capital.”

Increasing consolidation in the European retail sector is also likely to drive changes in the ice cream market.

R&R is now Europe’s largest own-label ice cream manufacturer and second largest overall behind Unilever. Mr Lambert said: “Aldi is getting stronger. Lidl is getting stronger. Tesco is getting stronger in Eastern Europe.

“Whereas there are 40 big retailers in Europe, in 10 years’ time there will be half as many.

“It will mean it puts pressure on our competitors. You have to keep investing and you keep growing.”

German supermarket group Aldi is R&R’s biggest customer, according to last year’s accounts.

R&R funded the deal to buy Eskigel through the remainder of a loan note issued in November 2010, which raised E350m.

The fundraising effort was five times oversubscribed, said Mr Lambert.

“We took a little more than we were originally going to, knowing that when you want to buy, things are not always for sale and you want the best ones not the worst ones,” he added. Oaktree Capital bought R&R in 2005 and owns 82.1 per cent of the company with management and other shareholders owning the rest.

The Yorkshire Post reported earlier this year that the US private equity firm is “very likely” to sell its stake in the next two years.

Mr Lambert said yesterday that the options are to float the business or look for another private equity buyer.

“I like private equity because it means the management of the business and investors are absolutely aligned together,” he said.

“The only way to make returns is to invest and grow the business. You don’t have to spend a lot of time running around the City.

“Management really focuses on growing the business.”

R&R has increased its turnover from E150m to E650m since going private.

Alongside the arrangement with Kraft, R&R also holds licensing agreements with Nestlé, Disney and GlaxoSmithKline and a distribution deal with Mars.

The company also invested in a 25 per cent stake in YooMoo International, the UK frozen yoghurt brand.

R&R invested nearly £6.7m at its site in Northallerton last year and expects to invest a similar amount this year.

The company employs around 800 people in Yorkshire in a total workforce of around 3,500.

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