Despite the tough UK economic climate, 2 Sisters Food Group, one of the country’s largest poultry processors, stands out as being fit to ride the storm. A report this year by Rabobank highlighting the inefficiency of the UK poultry industry singled out 2 Sisters Food Group for getting things right.
It’s not surprising then that since its humble beginnings as a small-scale frozen retail cutting operation in 1993, the company has grown to become the UK’s fourth largest food company with total sales topping £2.1 billion (US$3.4 billion). Last year alone it acquired Northern Foods for £342 million and announced a £30 million investment in a new facility in Thetford with the aim of “revolutionizing” the production of coated foods available in the UK.
2 Sisters now employs 18,000 people across 42 sites in the UK, Ireland, the Netherlands and Poland. Eleven of the sites are in the UK, with seven in the Netherlands and one in Poland.
2 Sisters processes over 6 million birds per week with 3.3 million birds coming from the UK—around 20 percent of UK–reared chicken—and 2.7 million birds from its European network. In total, it has over 30 million birds on the ground. The UK birds are sourced mainly via a 50-50 joint venture with PD Hook—the UK’s largest broiler chicken supplier.
From primary processing to prepared food
The company operates in three areas with three separate divisions. In the UK, there are four primary processing and slaughter facilities for chicken. A further four secondary processing facilities take meat from these sites for portioning, deboning and filleting. Several more facilities produce processed products such as breaded and roasted chicken, ready meals, savory stocks, sauces, gravies, soups and ready-to-cook BBQ meats.
It is a major supplier of raw and prepared chicken products to the big UK supermarkets, including Tesco, Sainsbury’s and Marks and Spencer as well as quick-service restaurants. In addition, it produces several of its own branded products, including Buxted and Devonshire Red, which represent 5 percent of the business.
The expansion of the prepared food part of the business has helped to cement what 2 Sisters refers to as its “virtuous circle,” which has been fundamental in helping the company respond to an increasingly challenging and competitive market. “By working to our virtuous circle, i.e. driving volumes to increase efficiency in our factories, we are differentiating ourselves from our peers,” says a company spokesperson.
Northwestern European network
The northwestern European network is also proving invaluable in driving efficiency in a saturated UK market with high feed costs. “It’s about achieving maximum efficiency and flexibility for sourcing fresh meat,” according to Rabobank.
The European business currently exports large volumes back into the UK, representing about 50 percent of its turnover. “But we are also working to develop more of a footprint to supply into the retail market on the continent,” says 2 Sisters. The company hopes to achieve this by transferring skills from the UK supply retail chains, leveraging its strong UK relationships.
These strong customer relationships set 2 Sisters apart, and “delighting” customers is a core strategy and at the heart of everything the company does. This strategy has been fundamental in helping to anchor the company in the stormy UK waters of fierce competition and oversupply.
2 Sisters says that this means spending more time with customers—about 20 percent of its time—and really understanding and responding to specific requirements. This approach requires “relentlessly innovating to please customers,” which counts for a lot in the high value UK market.
For example, last year it worked with Tesco to develop a chicken product with two days’ additional shelf life. This year it is working with one customer to develop a range of themed chicken products ahead of the Queen’s Jubilee, which will be a key event in the UK calendar.
One of the best examples of this desire to innovate occurred around 10 years ago when 2 Sisters became the first company to develop a system that not only addressed welfare concerns, but was also affordable, bridging the gap between indoor reared chickens and the outdoor systems. It had listened to a key supermarket, Marks and Spencer, and the result was Oakham chicken—the only fresh chicken sold by Marks and Spencer and exclusive to the retailer.
Birds are reared in controlled environment barns and housed on straw or wood shavings with constant access to food and water. The temperature and lighting levels in the house are controlled by the farmers, but birds do receive natural daylight. The chickens are housed at a maximum stocking density of 30kg/m2. Oakham free-range birds are reared in similar houses to standard chickens, but have constant access to the range. The internal stocking density is 27kg/m2 and the area of the range is determined on the basis of 1m2.
Ethical model factory
Marks and Spencer’s commitment to sustainable retailing—known as Plan A—is driving a more systematic change across the 2 Sisters’ business and again exemplifies the company’s responsiveness to its customers’ requirements.
Oakham chicken is produced at 2 Sisters’ primary processing factory in Flixton. In 2007, Marks and Spencer, like its rival supermarkets, came under fire for labor conditions at its poultry processing plant. Its own ethical audits had revealed some worrying problems. Its response was to pilot the idea of "ethical model factories," as part of its Plan A program. This has required 2 Sisters to cut energy and water use and waste and to confront the working culture. The numbers of agency staff, which had reached 55 percent at times, have been cut, with many migrants offered permanent jobs and training and more promoted to supervisory roles. Bullying managers have been disciplined or asked to leave. The result has been a significant fall in staff turnover and increased productivity.
At the moment Flixton is the only “ethical model,” but 2 Sisters has a broader commitment to reducing energy costs, which is part of a multimillion pound investment.
“We are looking at a couple of other broader eco initiatives, one around reducing our waste at each site and the other where we’re investing in renewable projects to become more energy efficient, for example our joint venture with PD Hook with wind turbines,” explains a 2 Sisters’ spokesperson.
Not only is this good for relationships with all customers, who are all increasingly focusing on the environmental and ethical credentials of their supply chain, but it is paying dividends in driving efficiencies in a more challenging market. It is one of the ways in which the company is able to offer “highest quality for lowest cost”—one of the key trademarks of the business.
“By focusing hard on our operations, our waste and our costs, we can still maintain the highest quality products but at the lowest possible cost,” says the company.
And now, as a much broader food company following the acquisition of Northern Foods, what about the future of the poultry business?
“The poultry business remains significantly important to 2 Sisters,” says the spokesperson. “It is 50 percent of group turnover and serves a core category for consumers—the poultry business can share its strengths, and also learn from other parts of the group.
The company is confident that it is well placed to meet the challenges of the highly competitive market place head on. “We are now in more meal occasions, we are now serving a wider range of customers and we have real scale and talented people to help us grow towards our goal of £3 billion sales by 2015.