THE national financial press has reported overnight that South Australian based Thomas Foods International is in an expansionary mood, suggesting it has a ‘war chest’ of $100 million for further acquisitions in the food industry to bolster its business.
When its sheepmeat and beef processing operations are combined, TFI is now the nation’s third largest red meat processor, behind JBS and Teys Australia, with annual turnover approaching $1.6 billion.
The company is a major supplier to Woolworths and also supplies Coles, Aldi, Costco and Metcash's IGA supermarkets, and is also trying to shift further up the value chain by expanding into branded products with its premium Thomas Farms label for higher-end meat products.
Chief executive officer Darren Thomas told the Australian Financial Review this week that there would be further rationalisation in the meat processing industry in Australia in a low-margin, high-volume sector where size was becoming increasingly important to extract economies of scale.
"We can look at transactions in excess of $100 million,'' he told AFJ.
Thomas Foods diversified late last year with the acquisition of potato producer Mondello Farms which went into receivership early in 2013. Mondello, which has been re-badged under the Thomas Farms brand, is one of Australia's biggest growers and packers of potatoes.
As Australia’s biggest exporter of lamb and mutton, TFI processes 120,000 sheep and lambs each week from four facilities, the largest at Murray Bridge, south-east of Adelaide.
The company also processes about 5000 cattle a week for supermarket chains, butchers and overseas markets, exporting to 80 countries. It also has processing plants at Tamworth in NSW, Wallangarra in Queensland and Lobethal in the Adelaide Hills.
The US is a major growth platform, where TFI already has a 50pc stake in wholesaler/distributor, FoodComm International generating revenue of $300 million from the sale of Australian chilled beef and lamb.
That business is currently investing $20 million in a new processing and distribution facility near the Port of Philadelphia which will be finished next month. Mr Thomas told AFR the US business was growing faster than the Australian business, but was “off a lower base.”
Across the broader TFI operations, he said the company was anticipating sales growth of above 10pc in 2014-15. The Australian operations currently generate annual revenues of $1.3 billion.
In March last year TFI changed its name from T&R Pastoral (click here to view earlier report) and bought a 50pc stake in large domestic wholesaler and distributor Holco Meat (click here to view earlier Beef Central report).
Mr Thomas said there were gaps in the geographic network in Holco's business in Victoria and Western Australia and that was a prime focus for acquisitions.
TFI had started small with its Thomas Farms branding for meat products, in a segment where customers were used to buying generic trays of meat from the supermarket meat section.
The Thomas Food move comes as Woolworths and Coles put a major focus on building their own private label brands across a range of grocery categories, making it harder for food suppliers across the industry to maintain their own brand presence on supermarket shelves.
HAVE YOUR SAY