Weet-Bix maker Sanitarium is taking on Weetabix, the largest player in the £1.2 billion UK cereal market, by targeting British consumers who skip breakfast.
In its first move outside Australia and New Zealand, Sanitarium has set up a joint venture with Melbourne-based finance and investment company Wingate to launch its market-leading liquid breakfast product, Up&Go, in UK supermarkets.
Sanitarium's international food general manager, Bennie Hendricks, says the UK liquid breakfast category is underdeveloped but could be worth £300 million in five years, based on Australian trends.
"Sanitarium hopes to have at least a 60 per cent share of the market," said Mr Hendricks, who is overseeing the Up&Go rollout, which starts next month in Tesco supermarkets after a "soft" launch on Australia Day.
Sanitarium claims that 38 million Britons skip breakfast at least once a week and demand for eat-on-the go products such as breakfast biscuits and bars has been booming.
Up&Go, developed by Sanitarium 16 years ago, has more than 90 per cent of the $300 million liquid breakfast market in Australia, will compete with Weetabix's On the Go breakfast drink, which was launched last January.
Sanitarium has no qualms taking on Weetabix Ltd, which makes leading brands such as Weetabix, an almost identical product to Weet-Bix, Alpen muesli and Weetos.
Weetabix is controlled by China's Bright Foods, which is taking Weetabix's products into Asia and considering listing the 83-year old company on the Hong Kong or London stock exchange after buying a 60 per cent stake in 2012.
"We believe in this specific category we've had a lot of years of experience and we have developed strong new product development expertise over the years," said Mr Hendricks. "I'm not sure what the level of expertise that Weetabix has got in that category."
Sanitarium and Wingate have no plans to export Up&Go to the UK. The product, which has been growing 25 per cent a year over the past five years, is made at Sanitarium's factories on the NSW Central Coast.
Their joint venture company, Life Health Foods UK, will outsource production and distribution of Up&Go to contract manufacturers and third-party distributors.
In the UK, the product's formulation and packaging has been tweaked to better suit British tastes, but marketing will play up the brand's Australian origins.
""We'd like to first make a success of our launch of Up&Go and ... we'll look at other opportunities as well," said Mr Hendricks. "The UK market is very similar to that of Australia but has not developed in some areas – there is a gap in the market here for nutritional cereal."
Sanitarium, which is owned by the Seventh Day Adventist Church, has set up a 50/50 joint venture with Wingate rather than tap the UK church for financial assistance.
"We like to partner with people who are aligned to our values and our culture and we believe Wingate is a good fit and they can help us to expedite the process of growing our brands on a global platform," said Mr Hendricks.
Wingate group managing director Farrel Meltzer said the investment company, which has close ties to the Smorgon family, had made a "substantial" investment in the joint venture but declined to disclose the value of its interest for competitive reasons.
"There's no one else in the world with a product like this – many have tried but they are the world leader in this particular product and no-one has had this level of success in a breakfast product," Mr Meltzer said.
"(The investment) ticks the business opportunity box and the quality of partner box and the risk box," he said.
Much to the chagrin of rivals such as Kellogg's and Nestle, Sanitarium pays no corporate tax in Australia or New Zealand because of its charity status. However, the UK joint venture will be a taxable entity and will be obliged to pay corporate tax once it starts generating profits.
