Revealing its preliminary results for the year ending April 30 2011, the firm (which operates seven factories and employs 1,300 staff) said its revenues had increased by 2% to £135m for the year, with profits up 6% to £6.7m.
Operational highlights included increased brand sales (33%), better margins in natural snacks (4.5% as against 2.6% in 2010) and record performance in its confectionery division, with yearly sales up 3% to £85.9m.
‘Dramatic rise’ in commodities
Detailing the “key focus” on increasing premium private label and branded sales, ceo Ian Blackburn said in the trading statement: “We have made good progress in the past year on extending our portfolio of innovative snack products sold under renowned brands, including Branston and Ambrosia.
“This trend has continued into the current year with Sharwoods and the recent signing of the Tango licence for orange-flavoured chocolate products."
Blackburn told FoodManufacture.co.uk that Zetar hoped to grow branded sales to 40% by 2012, but emphasised that own-label sales “remain a core opportunity as retailers devote more shelf-space to premium, added-value products”.
He said: "Premium private label competes with branded products, and tends to be more innovative. Retailers aren’t seeing as high increases of volume growth now, and are pushing profits instead via higher prices for ranges such as Taste the Difference, Finest, etc.”
Blackburn added that Zetar was well-placed to capitalise upon this move: “Within confectionery and snacks in this sphere we're one of the largest players, and branded businesses tend not to manufacture private label products.”
Zetar quoted Kantar Worldpanel figures showing that shoppers bought 11% more premium private-label products in the 2010 calendar year.
Blackburn said in the statement that margins in natural snacks “improved significantly in the second half as price increases were implemented following a dramatic rise in commodity prices, and more branded products were sold”.
Within snacks Zetar posted sales of £49.1m (£48.7m in 2010), with operating profits down 32% to £2.6m, with profit margins down from 5.4% to 3.6%.
The company noted escalating raw material costs throughout 2010, with nuts and fruits reaching record highs around Christmas.
Zetar said that this was due to increased demand from developing nations such as China and India for commodities, poor harvests and financial speculation in agricultural commodities.
Despite a marginal turnover increase, declining sales volumes and cost inflation hit product prices in the division, said Zetar, particularly in own label.
But the company said its branded products out-performed the market, with Fruit Factory (children's fruit snack) sales up by over 50%, and similar growth in licensed nuts under Marmite, Reggae Reggae and Sunpat brands.
Retailer brands represent 70% of snacking nut sales, but Zetar said the emergence of new brands and added-value products “has gained momentum and these are leading the path to recovery as they re-excite the imagination of consumers”.
Zetar said it aimed to become less reliant on “commodity-type products”, and was expanding its licensing portfolio within snacks accordingly, via relationships with branded player Unilever, Premier Foods and Ocean Spray.
Blackburn attributed Zetar's success in confectionery to increased year-round confectionery sales: "Two years ago we made a decision to focus on everyday lines. Seasonal (Xmas and Easter) remains hugely important, but there are 363 other days in the year, and we have extra capacity at other times,” he said.