The arrival of the administrators at Golden Wonder, the former leading crisp manufacturer and household brand name in the UK, last week provided the coup de grace for an iconic but struggling brand that has been left behind by market and competitor growth.
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Since the heyday of Golden Wonder in the 1960s, the UK crisp market has experienced massive expansion and is now worth over GBP2bn (US$3.54bn) a year. But the market has latterly been hit by concerns over unhealthy eating, notably fat and salt intake, and total crisp and snack consumption dropped by 12% between 2002 and 2005.
Golden Wonder appears to have suffered more acutely than many of its competitors who have arguably proved more adept at innovation in the face of changing consumer trends. In 2004, the company recorded losses of GBP10.8m and was forced to close its factory in Skelmersdale, Lancashire. Although Golden Wonder has not yet released figures for 2005, losses have been described as “significant”. So, how did this iconic brand fall from its lofty market-leading position?
In this contracting marketplace, manufacturers have found themselves squeezed between consumer demands for high quality products at low prices and retailers’ demands for high profit margins.
“The solution to this dilemma,” John Band of market analysts Datamonitor told just-food, “is either to produce value goods at low prices or to come out with new products that consumers will pay a premium for. Although Golden Wonder brands are well known, they have not been innovative.
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By GlobalData“The company was unable to produce products that command a price premium. Therefore, they were stuck in the budget arena – which is not a good place to be if you are a relatively small company, operating in only one country, and you are up against the likes of Walkers.”
Indeed, many view Walkers as the snack food giant that crushed Golden Wonder. Owned by the world’s biggest snack food company, PepsiCo, and controlling a 50% UK market share, Walkers’ dominance appears unassailable. According to Marketing magazine’s 2004 survey, Walkers owned five of the top ten bagged snack brands.
In a ferociously competitive market, PepsiCo was able to throw big bucks behind Walkers’ development of new ranges and advertising campaigns. PepsiCo tackled the post-millennium challenges prompted by new healthy eating trends by promoting its reduced-fat ranges and linking regular flavours with famous sporting heroes. Interestingly, the ‘healthier’ Golden Lights range was one of the few Golden Wonder products to perform well last year.
Walkers has also pushed its premium quality ranges to compete with upmarket brands like Kettle Chips. Walkers Sensations now flood UK supermarket shelves with flavours such as Thai Sweet Chilly, Sea Salt and Balsamic Vinegar and Lamb and Mint. Arguably, Golden Wonder failed to respond, and in the face of such innovation, the UK consumer no longer found its Nik-Naks and Wheat Crunchies interesting.
But Golden Wonder’s demise has not been as instantaneous as it may first appear. Rather it has been a protracted process, as the company deferred the inevitable and drummed up much-needed capital by selling itself off one factory and one brand at a time.
Although the sale of Pot Noodle to CPC and Wotsits to PepsiCo kept the creditors at bay in the short term, in the long term such decisions may have proven fatal. According to research by Mintel, following the sale of Wotsits in 2002, Golden Wonder sales declined by 26.5%, “a large part of that decline being due to the divestment of its Wotsits brand”.
Kroll, Golden Wonder’s administrator, is now engaged in talks with third parties to sell what remains of the Golden Wonder businesses. “Although Golden Wonder failed to differentiate itself and the brand name is not what it was ten or 15 years ago, it is not worthless,” Band observed. “If a company could combine low manufacturing costs and the well-known brand name, it could well be an advantageous acquisition.”
Tayto, Northern Ireland’s number one crisp manufacturer, certainly seems to agree. The company announced the purchase of the Corby factory and Golden Wonder’s contract to manufacture Pringles Minis for Procter & Gamble on Friday (13 January).
Tayto managing director Stephen Hutchinson told just-food that the company had been involved in negotiations for the brands but Kroll had decided not to sell, possibly to maintain value in what’s left of the business. “We are interested in obtaining the Golden Wonder brand,” said Hutchinson. “We are still involved in active negotiations with the administrator.”
The deal struck between Tayto and Kroll, just-food understands, also includes a non-competition clause. Apparently, Tayto has agreed not to bid for own-label contracts currently held by Golden Wonder in the UK for a period of six months – a rumour that Hutchinson declined either to confirm or deny.
Industry observers believe Kroll has negotiated this deal to maintain Golden Wonder’s competitive position in the own-label marketplace while it looks for a bidder for the remaining assets.
Meanwhile, were Tayto to acquire the Golden Wonder brand, it would occupy a similar position to Golden Wonder in the marketplace. It is a relatively small company in a highly competitive sector, the clear underdog, David to PepsiCo’s Goliath. However, commentators seem confident that Tayto would be capable of capitalising on the Golden Wonder brand names.
“Tayto has managed to get a better grip on the business,” Band suggested. “They combine a clearer understanding of what consumers want and lower production costs, meaning that they are well placed to take advantage of the Golden Wonder name.”
If the dominance of Walkers partially caused the downfall of Golden Wonder, then Tayto has a simple answer: not to compete but to distinguish itself from the corporate juggernaut.
“Compared to PepsiCo we are a tremendously small company,” Hutchinson told just-food. “We aren’t trying to compete with them – rather we want to differentiate ourselves from Walkers… We are very much focused on brand and premium quality products, as that’s where the profits are to be found. Even when we produce supermarkets own-label we tend to concentrate on premium and added-value products.”
If Tayto does not acquire Golden Wonder, there are still a number of possible candidates. It has been suggested that United Biscuits may be interested, while a number of venture capital groups look to be in the running, most interestingly one consortium headed by Clive Sharpe, the snack food veteran and ex-Golden Wonder CEO. Otherwise, market analysts have speculated that a company from continental Europe may view this as an opportunity to enter the lucrative but highly competitive UK market, or perhaps one of the supermarkets may want to convert Golden Wonder into a private label brand.
Although the future of Golden Wonder may look a little shaky, the chances are we won’t be waving good-bye to Nik-Naks, Wheat Crunchies or green Cheese and Onion crisps just yet.
