‘Relentless’ price increases threaten Finsbury margins

By Ben Bouckley

- Last updated on GMT

Related tags Price increases Cake

‘Relentless’ price increases threaten Finsbury margins
Finsbury Food Group ceo John Duffy says that “relentless commodity price inflation” on basic ingredients such as butter, sugar and flour have eroded the firm’s profit margins.

Singling out inflation for basic ingredients such as butter, sugar and flour, Duffy said in Finsbury’s trading update for the year ending July 2 that the business had performed “robustly”.

“The heavy investment of recent years in innovation, sales promotions and competitiveness has delivered sales growth of great tasting premium product ranges,” ​Duffy said.

But given further commodity increases, he warned that Finsbury faced an ongoing challenge to recover costs “by reformulation and price increases whilst continuing the growth”.

Total group revenues for 2010/11 were up 12.8% to £189.9m in line with expectations, reversing Finsbury’s 6% sales decline over the last full year.

Cake sales were up 12% to £139.9m year-on-year, with around half the growth coming from UK cakes and half from joint venture export business Lightbody Europe (LBE).

Increased promotional activity

The firm attributed growth to increased promotional activity and new product launches on both own-label and licensed brand platforms.

LBE growth was a result of new sales contracts and distribution gains for third- party ranges sold in France, said Finsbury.

Bread and Free From sales increased 14.2% on a yearly basis to £50m, driven by strong growth from the Genius gluten-free brand, own-label gluten-free products and Vogel speciality breads.

Finsbury said its joint venture established last December with Genius Foods to expand its Free From portfolio “continues to offer excellent growth potential”​.

Duffy said he was pleased that Finsbury had returned to “strong organic growth”​, but said that higher sales volumes and savings from internal efficiency projects “only partially offset these costs … and operating margins have reduced as a consequence”.

Therefore, Duffy hinted that Finsbury might try to pass on price increases to clients. “Further actions to improve efficiencies and recover these and additional commodity costs with the help of our customers are already underway,”​ he said.

Related topics Ambient foods Bakery

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