Malt firm aims to be ‘agile and creative’ as Brexit looms
A prominent Suffolk-based malt firm believes it may have to work on lower margins in order to keep open its trade with Europe.
Stowmarket-based Muntons took a strong corporate stance in the referendum debate in favour of staying in the European Union. It warned at the time that leaving could be harmful to its business.
But the multi-award-winning company, which found in an internal poll that its directors and managers were unanimously in favour of remaining in the EU, says it is well equipped to cope in a post-Brexit Britain - despite the drawbacks.
“Given the choice we would rather we stayed in Europe,” said Alan Ridealgh, managing director of the firm, which employs 275 staff.
“It’s not our choice to be outside of Europe but because we will be outside of Europe, we will have to live with the consequences of that.”
More than 30% of the firm’s ingredients customers are located in the EU, making up £11m of its total £91.5m turnover.
The business already trades in most regions of the world, and its relationships with overseas customers have been steadily built up over 30 years.
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With 15% of the firm’s trade in Europe, the lack of clarity over the future is a concern, but as it is not a malting ‘giant’, the company should be swifter and more agile in adapting to the changing trade climate, he said. However, in the short term, the future for UK business in general was unclear.
“It’s almost as if a fog has descended and you just can’t see where you are going,” he explained.
“Clearly our customers are quite concerned as well. They want to know what’s going on. The effect on currency as an exporter looks OK, but it’s short term. It doesn’t make any difference to us as, as a proper company should, we had already hedged our currency on current sales.
“The first question we get asked when there’s big swing in currency is: ‘when are we going to get a discount?’”
Although the plummeting pound had some advantages in terms of returns from exports, this had to be balanced against the effects on raw material and energy prices, he pointed out.
The firm has set a course for future investment and business improvements which it will continue - but possibly more slowly until the uncertainty lifts.
“I think you’ll see that across most industry. It will slow down for a period,” said Mr Ridealgh.
“I think it’s going to be a situation where you have got to be pretty agile and creative. I think some businesses will struggle because they find it difficult to change quickly. The key focus is to work with our customer base.
I think everybody had the initial shock of that morning when the result came out. I know personally early that morning I sent a message round my colleagues saying: ‘Let’s get on with it’.”
In a message to staff, he set out some of the challenges the firm was likely to face and said he firm would “go ahead with caution”, and some growth plans might need to be put on ice.
“Trade barriers will appear as we leave the protection of the EU including to the USA and the world’s fastest-growing beer market, Vietnam. Overall, however, we have confidence that our range of products and global coverage will be advantageous.”
Grain and energy prices were likely to rise, he warned, as energy was prices in dollars and the effect of the weak pound was likely to be felt. Grain prices tended to follow the dollar but could have regional trends, he said.
The firm has invested in modern £1.6m grain drying and storage facilities at Stowmarket, which are due to open in October and should help cushion it against these pressures, he said.
But he warned staff against complacency, as “all over the world our competitor will be looking to see if there are opportunities for them created by the current chaos”.
“We still know where we are going but we are going but we just need to be a little bit more conscious,” he said.
“Now we have made a decision let’s get on with it. We are going to have very little control of what happens.
“We would want to make sure the ability to trade freely was still there for us without having to renegotiate trade deals.”
If in the future the UK decides to move away from the Common Agricultural Policy model for farm subsidy, cropping patterns could change radically, effecting how much barley - Muntons’ key ingredient - is grown.
Two areas of focus for the firm will be raw materials and the way it respects the environment. Muntons has already done a lot of work around becoming more energy efficient and it now at the costing stage of a project to install a biomass plant.
“The timescale depends on what happens in the Brexit. That’s the fog problem,” said Mr Ridealgh.
The firm would need to understand the incentives in order to make the project, which could cost anything from £3m to £8, to work. Last year it launched its own anaerobic digestion plant at a cost of £5.6m which provides a quarter of its electricity requirements. However, the firm also uses a “huge amount” of gas and is looking at biomass to replace this.
“I don’t think there’s a single project we are planning to do we won’t do because they are based on sound principles.
It just slows everything down. The worry is lots of companies will do that and we’ll dip into recession,” he said.
“I don’t think government will ever help anybody. In the end business will help itself. We have to do it ourselves. If we wait for government we’ll never got anywhere. I think that’s always been the case.”
Muntons was named Business of the Year at the 2015 EADT Business Awards and supplies 73 countries with is malt and malted ingredients products.