Global Economics

IAWS Fills Up on Bread


First a farming supply business, the Irish company now gets 80% of profits from lifestyle foods, including artisan bread by a U.S. division

From fertilizers to freshly baked bread, Dublin-based IAWS Group is a master of reinvention. Founded more than a century ago as the Irish Agricultural Wholesale Society to help farming cooperatives pool their buying power, IAWS has morphed from an Irish co-op focused on fertilizer and animal feed into a publicly traded company that is fast becoming a leader in the niche market of specialty baked goods in Europe and North America.

The key to its success has been a steady stream of deal making, with 20 acquisitions since it floated on the Irish Stock Exchange in 1988. Initially, the deals centered on bulking up the agribusiness. But in the last decade, IAWS has used the cash generated from its animal feed and fertilizer business to fund acquisitions of so-called lifestyle food companies that offer partially baked products to convenience stores, caterers, and restaurants. Today, more than 80% of 2006 profits come from lifestyle foods, an area the company wasn't even in a decade ago. For the year ending July 31, IAWS posted sales of €1.6 billion ($2.02 billion) up 10.6% from the previous year's sales of €1.45 billion ($1.83 million). Operating profits of €112 million ($141.5 million) were up 13.5% in 2006.

IAWS' transformational deal was the 1998 acquisition of Cuisine de France. Founded by two Irish entrepreneurs, the company supplied convenience stores with bread that is 80% baked before being frozen, as well as the ovens needed to bake it. "Instead of looking at market stats to see where the opportunity was, we saw a company that was creating its own market," says IAWS CEO Owen Killian. "Prior to Cuisine de France, what growth IAWS had came from buying businesses and integrating them, but here was a company with inbuilt organic growth."

ARTISAN INCLINED

It's an acquisition formula IAWS has followed ever since, investing more than €800 million ($1 billion) in snapping up other entrepreneurial baked goods companies. Although IAWS had been selling in the U.S. since 1999, it was only with the acquisition of La Brea Bakery five years ago that business began to take off. Credited with pioneering the recent interest in artisan bread in the U.S., the company started as a small bake shop and café in Los Angeles. Today, its partially baked breads are sold to stores and restaurants across the U.S., where sales are expected to grow by 24% this year. La Brea supplies Wendy's with the bread used in its popular new Frescata sandwiches. After recently expanding its manufacturing in Ireland, IAWS aims to bring La Brea's artisan bread to Ireland and Britain.

Under Killian, IAWS is even selling its baked goods in France, the home of countless boulangeries. Two years ago, it acquired Groupe Hubert, the leading French distributor of products to bakeries and food services firms. Sales at Hubert rose 10% last year, and analysts reckon that the increasing popularity of partially baked goods is likely to sustain at least 7% annual sales growth in the year ahead. "France is the most sophisticated baked goods market in the world," Killian says. "And if we can create a product that works with French boulangeries, then we think we can take it anywhere."

Capell is a senior writer in BusinessWeek's London bureau.

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