The announcement this week that ABP is taking over Scotbeef’s Bridge of Allen and Queenslie sites from the end of July didn’t come as a surprise to anyone in the trade or farming organisations in Scotland.

The deal will make ABP the dominant player in Scotland, with capacity to handle up to 200,000 cattle annually, while the total Scottish factory kill is under 400,000 head annually.

In the acquisition of Scotbeef’s modern abattoir and retail packing facilities, ABP has acquired a prestigious player in the Scottish meat processing industry.

It was owned by the Galloway family, whose history goes back to 1888 and was the exclusive supplier of beef to Marks & Spencers for many years before being joined by Linden Foods, also a relatively recent ABP acquisition.

For a parallel in the Irish context, Scotbeef could be compared with Slaney Foods in being a large, standalone family business that was well regarded with a strong customer portfolio that included what would be considered elite customers.

Still too small

Despite being a major player in Scotland, Scotbeef was still exposed in the modern world of retail supply contracts that are tendered every couple of months.

A contract to supply a major supermarket or burger chain will require a huge proportion of single factory sites throughput. This is fine, so long as the work is there, but if a tender is lost, then a huge hole is left and production has to be sold on the open spot market.

This can be fine in a rising market, but, equally, can be a disaster in a poor trade if cattle prices remain high.

The difference for large groups is that they will have a wider customer base and are better able to withstand the loss of a supply contract.

They are also in a stronger negotiating position with their supermarket and burger chain customers, given the volumes of product that they handle.

Farmer implications

Scottish farmers will judge the loss of an independent processor to a major factory group through the lens of beef price.

Scotland traditionally has the highest farmgate beef price in the UK and farmers will be watching if this premium continues in a new era when ABP has the largest share of the Scottish cattle kill.

The acquisition gives ABP the strongest presence in the Scottish market, with the Bridge of Allen factory located 50km southwest of the ABP Perth site.

That means that an entirely new catchment area is opened up for ABP, as farmers everywhere tend to default to their closest factory when killing cattle.

ABP is already a major player in the European beef processing industry, with an annual turnover in excess of €5bn. This acquisition strengthens that position further.

While ABP is a major player in European beef processing, it is still a way behind the South American giant JBS, which has the equivalent of €72bn across its different operations and regions and the other major global players, Marfrig and Tyson Foods in the US.

That means that while ABP is massive in an Irish, British and even European context, it is still relatively small compared with the global giants.

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