Shoppers are "becoming bored" with the cake fixtures in supermarkets, but rising input costs and weak retail pricing are making it difficult for firms to add excitement and value back into the category, according to the boss of Finsbury Food Group.
Speaking to FoodManufacture.co.uk after unveiling a 9.7% slump in sales in its cakes division in the first half, chief executive John Duffy (pictured) said the cake market was stuck in a bit of a rut.
“After 12 months of focusing on value lines and driving promotional volumes, we’re getting to the stage where there is a collective recognition that something has to change. Consumers are becoming bored and retailers and manufacturers need to see growth again.”
While Finsbury was “starting to have more conversations [with customers] about innovation, making the best cakes as opposed to the cheapest ones”, the trading environment was very tough, he said.
Between a rock and a hard place
“It has been a very difficult six-to-nine months on the input cost side as we have seen significant price increases in butter, which has gone from £2,000/t to £3,500/t. Cocoa and chocolate prices have also gone up a huge amount, and we’ve also seen some recent pricing pressure on packaging and board.”
But Finsbury was “not operating in the kind of environment in which you can easily push through price increases”, he said.
Unless conditions improved, however, further consolidation in the cake market was inevitable, he predicted.
“I don’t see how there won’t be more consolidation. Big sectors that are not exhibiting growth and facing significant input cost inflation generally have to consolidate.”
Genius gluten-free bread brand now worth £10m
Finsbury, which posted a 4.1% drop in group sales to £168.3m in the year to June 30, had however seen strong growth in free-from products, and was looking to extend the gluten-free Genius brand beyond fresh loaves into “a variety of other products”, said Duffy.
“Genius is performing very well and is now worth around £10m at the retail level and we’ve also got a Genius-co-branded gluten-free sandwiches in Starbucks now."
Click here to read more about Finsbury’s interim trading statement.