Bakkavor in coronavirus fight back as factories reopen

By Rod Addy contact

- Last updated on GMT

Sales of Bakkavor's meals, alongside pizza & bread and desserts, look increasingly promising
Sales of Bakkavor's meals, alongside pizza & bread and desserts, look increasingly promising

Related tags: Finance, Fresh produce, Supply chain

Bakkavor, the chilled prepared food producer, is reopening two factories temporarily closed in March to cope with the impact of coronavirus as it reports exports stabilising and sales of key domestic categories improving.

In a trading update issued today (12 June)​, Bakkavor stated it was "restarting production at the two factories we temporarily closed in March". A spokesman for the business confirmed that these were its Bridgeness factory at Bo’ness in Scotland, which is dedicated to Marks & Spencer, and its US bread plant at Charlotte.

The move follows a 2 April statement, in which Bakkavor said it would review capacity across its manufacturing base​ in response to the impact of the pandemic and subsequent international lockdowns on consumer shopping habits.

In its latest trading update, the manufacturer, which confirmed it was consulting staff on up to 500 potential job losses at its Spalding site​ earlier this week, said export volumes were stabilising, with China leading the way.

Reduction of circa 350 workers

A note issued by broker Peel Hunt on 12 June said it expected the consultation to lead to a reduction of circa 350 workers, resulting in an exceptional charge of about £3m.

"Although our colleagues, supply chain and infrastructure have responded exceptionally well to the crisis and ensured that we maintained excellent service levels for customers, our business in China was severely impacted towards the end of January and our UK and US
businesses, which started the year very well, experienced a sharp reduction in sales volumes in the last week of March and into April.

"Since that time, sales volumes in all three regions have stabilised and are showing early signs of recovery, with group like-for-like revenue for the five months to the end of May down around 5% compared to the same period last year."

Bakkavor had worked closely with customers in the US to adjust to lower demand. In China, consumer confidence was slowly returning and foodservice customers had reopened most of their restaurants and stores.

Meals, pizza & bread, desserts steadily improved

While UK revenues were down 19% in April and 13% in May, the business reported, there had been promising signs in some categories since the start of April: "Performance across our meals, pizza & bread, and desserts categories has steadily improved, however our salads category and 'food to go' products continue to be impacted, with significantly lower volumes year-on-year. ​Peel Hunt forecast UK sales declines lessening further, to less than a 10% fall in June.

Bakkavor stated: "Although there remains significant uncertainty around trading levels for the second half of the year, we are seeing overall demand for fresh, healthy and convenient food steadily increase, albeit from a lower base."

Bakkavor chief executive Agust Gudmundsson said: "I would once again like to express my thanks to all of my Bakkavor colleagues, who are working tirelessly to help keep supermarket shelves well stocked. I am hugely grateful for their support and extremely proud of their commitment and determination during these difficult times."

Earlier this year, comments made by the GMB union and the Guardian​ raised questions about Bakkavor's management of social distancing and lack of adequate personal protective equipment measures in some of its plants. The GMB had also urged the company to improve its sick pay scheme to encourage staff to take time off if genuinely sick. However, Bakkavor countered criticism on these topics at the time and in its latest statement, Gudmundsson said: "We continue to make their health, safety and wellbeing our foremost priority, and have been working in close cooperation with the various regulatory bodies, our colleague representatives and the unions to maintain a safe working environment for all our stakeholders."

Related topics: Supply Chain, Chilled foods, COVID-19

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