Dr. Oetker Buys McCain Pizza Business in North America

After the pending purchase of its North American frozen pizza operations by Dr. Oetker, McCain Foods is left with just a small slice of that business in Canada and the United States. On August 20 the Florenceville, New Brunswick, Canada-headquartered company announced the sale, which is subject to regulatory approval from Canadian government authorities.

The transaction, terms of which were not disclosed, includes the Ellio’s brand and its production facility in Lodi, New Jersey, USA, as well as the factory in Grand Falls, New Brunswick, Canada, which turns out a myriad of products ranging from rising crust and thin crust pizza to deep dish mini varieties. Additionally, the deal includes a two-year license for use of the McCain brand of pizza products sold in Canada, with the exclusion of Pizza Pockets snack items.

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For observers of the frozen pizza industry in general and McCain Foods in particular, the sale did not necessarily come a big surprise. For a number of years both leading and secondary pizza brand purveyors have been disappointed with returns generated in this highly competitive, promotion-driven and price-sensitive segment of the North American food market, where retail volume has been sliding. During the 52-week period that ended in May of 2014, according to Nielsen statistics, sales of frozen pizza fell by almost 3%.

McCainLogoOn the other hand, the acquisition of McCain’s pizza assets by Dr. Oetker makes a lot of sense, as the Bielefeld, Germany-headquartered company continues to expand such operations globally. Unlike the frozen pizza market as a whole in North America, its sales have been on the upswing. The company’s business in Canada has more than doubled over the last 10 years, as it has become the No. 2 brand in the nation’s frozen pizza meal market. An estimated one-third of all frozen pizzas sold in Canada are Dr. Oetker products.

“The McCain business is a perfect fit for us and furthers our strategic goal of establishing ourselves as a leader in the Canadian frozen pizza market and therewith strengthening our position in this market as well as expanding our position in the northeastern United States,” said Richard Oetker, chairman of the executive board of Dr. Oetker.

Dr. Oetker has been active in Canada since the early 1960s, initially doing business under the Condima Imports, Inc. banner. The manufacturer of frozen pizza and desserts, as well as dry baked goods ingredients for both retail and foodservice markets, officially opened a $100 million frozen pizza production facility in London, Ontario, on May 21, 2014.

McCain-UltraThin-pizza"Canada is an excellent market for us," said Dr. Christian von Twickel, executive vice president of Dr. Oetker Canada. "Canadians are particularly receptive to our type of innovative and high-quality products.”

The London facility focuses on production of Ristorante, a thin-crust gourmet pizza; Casa di Mama, an Italian homemade-style pizza; and Panebello, a bakery crust pizza.

Meanwhile, McCain Foods will continue to produce and market frozen pizza in markets outside of North America. The company, though best known for french fries and value-added frozen potato products, sells a wide range of pizza specialties around the world, as well as appetizers, ready meals, desserts and other products.

It is expected that the sale will not affect the status of workers at McCain pizza lines in Canada and the USA that will soon be under Oetker’s jurisdiction.

“McCain is committed to its employees, and Dr. Oetker’s commitment to their continued employment was an important factor in the decision [to sell],” said Dirk Van de Put, McCain Foods president and chief executive officer. “We believe the transaction is good for our employees, good for our customers, and good for McCain.”

McCain-Deluxe-221This is a big relief for wage earners at the factories, especially in the wake of McCain’s announcement earlier this month that on October 31 it will shut down a potato processing plant on Prince Edward Island that has been operating for 23 years, resulting in job losses for 121 people.

The Oetker Group, which is active in over 39 countries, employs more than 26,000 people. Established in 1891 with the launch of Germany's first commercial baking powder, the company rang up sales of $3 billion last year.

Global sales for McCain Foods, which provides jobs for approximately 20,000 people worldwide, topped $6 billion in 2013.