Woolworths buys one of its key suppliers

Woolworths announced today that it has entered into an agreement to buy one of its key suppliers, in2food, from its founders, Old Mutual Private Equity, and other shareholders.

in2food has been one of Woolworths’ key suppliers for over 30 years, and the retailer is currently its largest customer.

In informing shareholders of the deal, Woolworths explained that this represents a continuation of its Food business’s long-standing strategy of strengthening key elements of its differentiated food value chain for the benefit of its end-customers.

The retailer explained that in2food is one of Woolworths Foods’ key suppliers, generating revenue of over R5 billion per year.

The supplier produces a diversified range of premium private label products across freshly prepared convenience food, fresh produce, and long-life categories, as well as several ambient and bakery products. 

“Woolworths is in2food’s largest customer, with the balance of its customers comprising other local and international companies across the food service and wholesale channels,” the retailer said.

“in2food has eight world-class manufacturing facilities of significant scale producing over 3.2 million packs weekly.” 

“These manufacturing facilities are supported by best-in-class procurement and sourcing capabilities, ensuring strong security of supply for in2food.”

Woolworths said it plans to keep in2food’s existing senior leadership team post-acquisition, with the business set to operate as a standalone operating business within the group.

“The transaction will further enhance Woolworths Foods’ ability to maintain product quality, innovation and availability, which are core to its differentiated customer proposition,” the company said.

It added that this deal will also provide new opportunities for accelerated growth in non-competing revenue streams through in2food’s existing exposure to food services and export markets.

“Woolworths and in2food share a more than three-decade history of partnership in creating products of outstanding quality and innovation to meet the evolving needs of our customers,” Woolworths CEO Roy Bagattini said. 

“This acquisition represents a compelling opportunity to bring a key strategic capability closer to the Woolworths Foods business, strengthening one of the core points of differentiation in our premium food offering.”

“The transaction further enhances Woolworths Foods’ ability to protect product quality, innovation and availability, which are core to its differentiated customer proposition,” in2food CEO Richard Cooper said. 

“We look forward to further deepening our decades-long connection with Woolworths, and to continue to put innovation, value and quality at the centre of the Woolies Food journey.”

“This transaction brings to a conclusion the more than three-decade-long partnership with Old Mutual Private Equity and the other exiting shareholders.” 

“We would like to thank the outgoing shareholders for being very supportive partners, contributing meaningfully to the commercial rigour applied to key decisions along in2food’s growth journey since 2015.”

Woolworths did not declare the acquisition amount payable, but noted that it falls below the threshold for categorisation in terms of the JSE’s Listings Requirements. 

According to the JSE’s rules, a transaction is only categorised if it constitutes 5% or more of a company’s value.