Blackfriar: How to hog sales as shocked shoppers shun cheap meat

The Hull-based company is tipped to be one of a number of Yorkshire food producers and retailers to have benefited from the recent horsemeat scandal as consumers ditch cheaper products and ready meals that are difficult to trace in favour of meat with a guaranteed provenance.

In addition Cranswick’s upmarket image gives it more credibility than some of its more downmarket food rivals.

Analyst Sahill Shan at N+1 Singer is anticipating a solid fourth quarter trading update, confirming that the pick-up in momentum seen during the third quarter has been sustained.

“We expect this to have been driven by a combination of market share gains, the lagged impact of price rises agreed in November and December and Cranswick benefiting from the meat contamination fall-out as consumers migrate towards fresh produce and away from cheap value offerings,” he said.

Surging sales of bacon and sausages plus a growing export business are expected to lift Cranswick’s underlying sales when it reports.

It is expected to report double digit sales growth in both sausages and bacon while its export of ribs to the United States and offal and trotters to the Far East are gathering pace.

It is shipping about 25 containers a week to the Far East, plus one a week to the US.

Exports now make up about five per cent of group sales and this is expected to grow.

The company has also invested about £120m over the past five years in increasing capacity, including at its gourmet bacon plant in Sherburn-in-Elmet, near Leeds, where sales are thought to have hit a record high.

It is also investing £12m in a new 5,000 square-metre pastry site in Malton, a tie-up with The Yorkshire Baker.

It has a contract to supply pork pastry products to Marks & Spencer from the site and it will also launch a range of gourmet pies later this year.

Cranswick hopes to do £4m-£5m of pastry sales this financial year.

Its purchase of cooked meat firm Kingston last June also gives it exposure to high street food-to-go chains Greggs and Pret a Manger – Kingston’s two biggest customers.

While surging pig and other raw ingredient prices continue, efficiency and “constructive pricing discussions” with customers have helped to mitigate the full impact on margins.

While Cranswick has benefited from the horsemeat scandal, brokers have downgraded a number of its rivals.

Analysts at Shore Capital believe that lower demand for prepared food will have a negative impact on Bakkavor, Boparan Holdings (which now owns Northern Foods and has just announced the acquisition of VION UK’s poultry & red meat activities), Greencore, Kerry Group and Samworth Bros.

However, they say that every cloud has a silver lining.

“We see a number of other companies potentially benefiting from a preference, short-term or otherwise, with respect to the UK consumer, for home produced fresh meat,” said Shore’s Clive Black.

“In particular, we highlight the regional butchers Crawshaw, Cranswick, which is focused on the pig meat segment, Hilton Food Group, a leading supplier for fresh meat products to Tesco and Moy Park, the leading UK poultry supplier.”

Crawshaw is an interesting choice as one of the beneficiaries.

The Rotherham-based butchery chain is far from being upmarket, but the fact it can prove where it gets its meat from appeals to customers.

Crawshaw, which runs 20 butchery shops across Yorkshire, Lincolnshire, Nottinghamshire and Derbyshire, has managed to hold its head above water during the recession by offering initiatives such as £5 packs of meat.

These include chicken breasts and chicken fillets weighing almost a kilo and are drawing in cash-strapped shoppers.

Chicken sales have also held up better than lamb and prime beef products, which are considerably more expensive.

Another beneficiary at the lower end of the market is Bradford-based Morrisons.

The horsemeat scandal has coincided with a new advertising campaign promoting its 100 per cent British beef credentials, striking a chord with angry consumers.

The supermarket’s new campaign features TV presenters Ant and Dec showing how Morrisons can track its meat from farm to plate.

It also can’t do any harm that the Geordie duo’s 1994 pop hit Let’s Get Ready to Rhumble has hit number one in the charts after they decided to sing the song on their Saturday Night Takeaway show last week.

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