Premier Foods’ agreed takeover of RHM is claimed to create the biggest food group in Britain, with sales of £2.6 billion and, after a bout of bid euphoria, a similar market value. Eyebrows may be raised at Cadbury Schweppes, which is valued at £10.8 billion, Associated British Foods (£6.7 billion) or even Tate & Lyle (£3.9 billion), but we are talking here about the whole range of grocery brands that consumers can rely on.

The Holy Grail of building a British food brands multinational to rival the £40 billion Anglo-Dutch Unilever, or Nestlé, Kraft or BSN, the French yoghurt champion, has been sought for decades.

The best opportunity came 21 years ago this week, when Imperial Group made an agreed share-based takeover bid for United Biscuits. It was scuppered by a blend of City short-termism and regulatory insularity.

Although Imperial took the lead, the vision behind the merger was that of Hector Laing, later Lord Laing of Dunphail, boss of UB. Lord Laing was a member of the McVitie family who had built up a dominant position in the UK biscuit market by investment and acquisition. Seeing no further scope for expansion in that market, Lord Laing was beginning to turn UB into a global company, but great leaps forward are risky.

Merging with Imperial would have created a much broader group, including Imperial’s own extensive, quality food and drink interests. It would also have the strength of Imperial’s cashflow from the Player’s and Wills cigarette business to slug it out against the giants.

Three days after the offer for UB, however, Hanson, the most-feared takeover machine of the day, bid for Imperial. Competition authorities spent three nit-picking months deciding that UB or Imperial would have to sell its snacks business if the merger was to be allowed; a fatuous intervention in view of Pepsico’s domination today. By then, Imperial’s immediate share price was crucial, forcing the merger to be reversed, with UB bidding for Imperial. It ultimately lacked the City clout to beat Hanson.

By selling each business to whoever would pay a top price, Hanson dismantled Imperial so effectively that it was left with the guts of today’s £12.6 billion Imperial Tobacco for £200 million net. This experience dogged any future attempts to bring together a whole series of medium-sized companies such as UB (then worth £2 billion), RHM, Hillsdown, Unigate (later Uniq) and Dalgety, each of which combined a big commodity business such as bread, poultry or milk with higher-value brands.

Stripping them down for a great two or three-year return always looked, and may have been, a better proposition than painstaking creation for the future. The successful history of ABF, which escaped takeover by being family controlled, suggests otherwise. Once the stripping was done, however, only the low-growth, cost-led business was left.

RHM was tossed around between financial groups. Hanson eventually bid in 1992, but was outdone, perhaps as a matter of pride, by a £925 million bid from Tomkins, a smaller, hungrier conglomerate.

It says a lot that 14 years later, the enterprise called RHM is valued at just £1.3 billion. A little later, City fund managers preferred a board break-up plan at Hillsdown to a merger approach from Unigate.

After some unhelpful accounting reforms, conglomerates were replaced by private equity, which has still more firepower, even less accountability and a yet greater yen for food manufacturers.

RHM and Premier, whose origin lay in Cadbury Schweppes and Hillsdown, have both been ground through the private equity mill before being plopped back on to the public markets. UB is back in the maw of private equity, along with Weetabix and many others.

The process is the same. So is the problem. Once costs are cut, edges smoothed, brands exchanged and the value extracted, how can the food company be repackaged as something with a dynamic long-term future? With difficulty.

The management cliché in most industries is to stick to markets where you can be No 1 or No 2. In British supermarkets, however, the own brand usually fills one of these slots, making the brand game more perilous. The second proprietary brand may not get on the shelves. That is why Unilever and Heinz have sold famous brand names.

Cadbury, in sweets and soft drinks, ABF, in UK bread and sugar, and Tate & Lyle, in sweeteners worldwide, have succeeded mainly by specialising. They have developed mature product sectors and invested in new ways of adding value and cutting costs.

Even in commodity items, dominated by supermarkets, the top producer with the lowest costs will normally do well.

The best of luck to Premier/RHM and anyone else who seeks the Grail. But do not bet on them finding it.

graham.searjeant@thetimes.co.uk

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