Finsbury hit by rising commodity and labour costs

By Noli Dinkovski

- Last updated on GMT

More automation could offset rising labour costs, says Finsbury boss
More automation could offset rising labour costs, says Finsbury boss

Related tags Finsbury food group Cake Butter

A combination of high commodity prices and labour costs are a “constant attrition”, hindering growth at one of the UK’s biggest bakery firms, its group finance director has claimed.

Significant hikes in the price of butter, cocoa and sugar, together with the costs of the National Living Wage, had significantly impacted Finsbury Food Group’s financial performance in the past year, Steve Boyd told Food Manufacture​.

While suggesting there was little sign of any respite in the near future in either area, Boyd said Finsbury was well-placed to weather the storm, thanks to it being a highly diversified business.

Last month, Finsbury posted flat sales of £314.3M for the year ending July 1 2017. Profits rose by 4.2% (to £17.4M) on a like-for-like basis.

Grain D’Or, Finsbury’s north London operation earmarked for closure with the loss of 250 jobs, had been particularly affected by commodity price increases, Boyd said. Earlier this month, after a consultation with its workforce, Finsbury confirmed its plan to close the Grain D’Or site​.

‘So much dairy taken out of EU markets’

“Two years ago, butter was £2,000/t. Today, it is £5,500/t. With so much dairy taken out of EU markets in recent years, we can’t see anything happening that will change that price for at least another six months,”​ Boyd said.

“The trick is to re-engineer products to take the butter out. When it comes to something like a chocolate cake, you would be hard pressed to notice a change in taste – but for some pastries, this just isn’t possible. The north London site has been particularly affected by this.”

Boyd explained that the “natural implication”​ of high labour costs would be investment in more automation and, therefore, labour reduction.

“It’s not a deliberate strategy – it’s more about maintaining our cost competitiveness. Apart from the north London factory, there are no big plans to take out cost,”​ he added.

‘Maintaining our cost competitiveness’

Recent projects included the installation of a £12.5M cake line at its Cardiff site, which is now operational, and an update of the group’s IT systems. “Cardiff is a huge automation project, and all the spend for that was in the last financial year,”​ Boyd explained.

“Updating the IT systems is hugely important for us as well. When you acquire eight different businesses, you end up with eight different IT systems – converting them into one system drives efficiency and enables you to manufacture more leanly.”

In the past year, Finsbury has won a licensing contract with Mars, and launched a Mary Berry-branded cake range.

Boyd said the company now had a broad range of licences, and would continue to build on them in the year ahead. He also anticipated further growth in Europe, on the back of significant growth in licensed celebration cakes in France and the Benelux region.

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