Primark, the high street mystery

I’ve been reflecting on a surprising quirk of the market recently. Often the brands we know best as consumers are owned by the companies we know the least.

Case in point, Primark - they’re everywhere. Who owns them?

Well, to borrow a line from every clickbait ad in 2014, the answer will shock you.

Enter ABF :uk:

It may sound like the restaurant Nigel Farage would open, but Associated British Foods (ABF) is a huge conglomerate which owns a lot of the UK’s favourite foods: Twinings, Dorset Cereals, Silver Spoon sugar.

For them, breakfast really is the most important meal of the day.

ABF is really a big web of different interests and verticals. Remember that huge German parent company that owned Pollos Hermanos from Breaking Bad?

Like that but, y’know, without the meth conspiracy.

ABF’s business is divided between:

  • Grocery brands
  • Sugar
  • Ingredients manufacturing
  • Agricultural services
  • Retail

ABF is one of the biggest producers of sugar in the world.

Now, if you’ve been on planet Earth in the last 15 years, you may have heard a few bad things about sugar. As it turns out, it’s not too healthy as a business right now, either.

A glut of production and sinking demand mean that sugar has recently been one of the least profitable commodities.

ABF have been hit by this as their sugar business has declined year-on-year. But despite their lagging sugary assets, they do have one ace up their sleeve in retail.

Weirdly, defying all name-based logic, ABF are also the sole owners of the discount clothes giant Primark .

So how did a huge industrial food company end up owning the fastest of fast fashion chains?

The rise of a giant :bread:

The company was started by W. Garfield Weston, a Canadian bakery heir who transformed his family business into a global behemoth.

Sidenote, there must be something in that maple syrup! A lot of successful companies are founded by Canadian entrepreneurs: Slack and Shopify come to mind. And Freetrade. :wink:

Weston was a pretty marvellous character. Despite a gilded background, he defied his father to join up as a Canadian army sapper in WW1. When he returned after the war to work in the family business, he convinced his dad to hire some of the UK’s leading biscuit experts.

That alone is awesome.

When Weston took the reigns of the business in 1924, the scale of his ambition was remarkable. He embarked on a 30-year march of acquisitions and new markets. It’s kinda like if Rupert Murdoch had decided to conquer the world of baking, instead of newspapers.

He started off snapping up and modernising competing businesses across Canada. When the Canadian wheat price collapsed during the Great Depression, he planned to expand the market by acquiring new overseas businesses to buy Canadian wheat. His first target was Britain.

Banks refused to back his UK venture, so he partnered with New York private investors to raise money for a huge conquest of the British food industry, eventually becoming Britain’s biggest baker.

With the onset of the Second World War, Weston became an MP and was acclaimed for heavy donations to the British Army and the public. During the Blitz he ran free public canteens.

After the war, he continued growing his businesses and the scale of their holdings became immense. As well as bakeries, he bought ingredients mills, processing plants and factories.

A Canadian parliamentary enquiry revealed that Weston’s companies were collectively the second most profitable retail group in the world… However, Associated British Foods just held the bulk of the British and European assets.

As well as factories and mills, Weston also had an appetite for impressive brands and bought the famed London food hall, Fortnum & Mason, which is still 100% owned by his family holding company (but not by ABF).

By the 1960s, Weston was probably the most powerful single individual in the food industry. However, Weston’s most unusual gambit had nothing to do with food.

In 1969, ABF recruited a draper called Arthur Ryan to found the future Primark in Ireland as Penneys, a low price fashion store.

This was a fairly weird move - ABF had no other big non-food retail interests or fashion exposure - but it proved a smart one. Within a year, four more stores had opened.

When the chain started to expand to England in 1973, they changed their name to Primark to avoid clashing with the American chain JC Penney.

However, their real heyday began in the 1990s and early 2000s when they capitalised on the globalising labour market to radically push down costs and prices. Using the classic Weston playbook, they snapped up and consolidated competing businesses to grow quickly: Woolworths, C&A and Littlewoods.

In 2005, they first went to Europe, opening in Madrid. They now have over 100 stores on the continent

Arthur Ryan led Primark for four decades, overseeing its growth to hundreds of stores across the UK and Europe.

Including the genuinely terrifying Birmingham megastore

The jewel in the crown :crown:

While grocery brands and agriculture have performed OK, Primark is currently by far the most profitable and dynamic part of ABF, responsible for around 60% of the group’s profits.

Their retail model is simple and aggressive: incredibly low prices for stylish clothes, leading to a huge number of items bought per customer and lots of return visits. At Primark, fast fashion has been sped up to fast food levels.

Ironically ABF’s sugar woes have been staunched by something almost as addictive!

Despite dodging online sales completely, Primark have bucked the general high street decline and kept growing sales and profits.

Primark bags: ruining Londoners’ tube journeys since 2005

They’ve even embarked on a British invasion. Since launching in the US, they’ve become the fastest growing fashion brand in American history, albeit from a relatively low base.

All this means Primark has been described as the saviour and “the jewel in the crown” of ABF, the bulwark against their sluggish sugar business. Some commentators have even predicted a spin-off of Primark into its own public company.

Whether ABF are OK with losing their crown jewel remains to be seen.

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Another ace weekend read this week @Toby :raised_hands: Keep 'em coming


Fascinating, thank you!

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Never bought Primark but Penneys is great in Ireland! :joy:

If they move to online I think they’ll obliterate ASOS, BOOHOO et al

Edit: I believe there is a very similar story with Bulmers and Magners. Bulmers in Ireland and Magners the world over.

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And Boohoo looks to be moving in on some famous High St names:

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Despite driving the majority of revenues and profits at ABF, if I search for “Primark” in discover - the list turns up empty. I requested searchable descriptions previously - but as a stop gap, please just add “Primark” in the one liner description.