January 30, 2017 / 2:44 PM / 3 years ago

Weetabix expands manufacturing capacity, warns of price rises

LONDON (Reuters) - Weetabix, the iconic British cereal brand, is investing 30 million pounds ($37.51 million) to expand its manufacturing capacity, even as its Chinese owner, Bright Foods, explores a sale of the company.

FILE PHOTO: Packets of Weetabix cereal and other food goods are seen inside the Ocado Customer Fulfilment Centre in Hatfield on the outskirts of London, Britain, April 6, 2016. REUTERS/Dylan Martinez/File Photo

Weetabix said on Monday that the investment, across its manufacturing sites in Burton Latimer and Corby, would allow it to match rising demand for its products at home and overseas.

Weetabix, an 84-year-old brand that includes cereals and breakfast drinks, was taken over by China’s Bright Food in 2012, when the state-owned firm bought a controlling stake from private equity firm Lion Capital.

Weetabix said on Monday that the new investment would boost capacity by 2018 and add an unspecified number of jobs. The investment comes as all cereal makers face pressure from growing competition and changing consumer tastes.

“We’ve consistently bucked the market, through our innovation and focus on nutritionally strong products that taste great,” said Weetabix Chief Executive Giles Turrell.

The company said it now controls more than 16 percent of the UK market for cereal and drinks, gaining share over the past year.

Like other packaged food makers, it has been squeezed by last year’s drop in the British currency, which has raised the cost of imported goods or globally traded commodities priced in U.S. dollars. It said on Monday it was in discussions with retailers about price increases.

“We would always look to mitigate cost pressure, but unfortunately we are unable to cover all of the cost impacts we’ve been faced with recently,” it said in a statement.

Several food companies, including Unilever (ULVR.L), Premier Foods (PFD.L) and Mondelez International (MDLZ.O), have sought price increases in the United Kingdom to offset the weakness of the pound, which fell after Britons voted to leave the European Union.

Weetabix has repeatedly declined to comment on the sale process, first reported by Reuters in December.

Non-binding offers for the business are due this week, according to sources familiar with the matter, who told Reuters that Post Holdings (POST.N), Associated British Foods (ABF.L), Barilla and Cereal Partners Worldwide, a joint venture between Nestle (NESN.S) and General Mills (GIS.N) were lining up.

Reporting by Martinne Geller

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