Page 5: Synergy for success
The Dalgety organisation is one which believes in the importance of synergy. In simple terms, synergy arises when the sum of the individual parts of an organisation adds up to more than those parts when acting alone.
In this case the effectiveness of Spillers Petfoods and Quaker European Petfoods (EPF) working together is far greater than would have been the case with the two individual firms working separately. Sometimes this is written in the following way:
1 + 1 = More than 2
By acquiring Quaker (EPF) it has been possible to create numerous synergies:
- The acquisition provides considerable opportunity to reduce costs. For example, Quaker EPF had a number of inefficiencies in terms of its high overhead costs. By cutting out operations which were duplicated at Spillers it has been possible to make substantial cost reductions.
- Simplifying the manufacturing and distribution process. At the time of the acquisition, Spillers Foods’ average production cost per tonne of canned petfood was approximately 25% less than that of Quaker EFP. Greater efficiencies have been achieved by geographical reallocation of production, so that this takes place in the most efficient plants and as near as possible to actual markets.
- Maximising marketing opportunities. Spillers and Quaker (EPF) have highly complementary products, technical competencies and distribution channels. It has, therefore, been possible to gain major benefits by transferring existing production to new markets as well as introducing new product and packaging formats.
It is expected that by the third year of ownership these benefits will amount to approximately £40 million and that over the first three years of ownership they will amount to approximately £70 million in total.