Heatwave crumbles profits

Related tags Cost Financial times Marketing

High commodity prices, fierce price discounting and the hot weather
all took their toll on profits at United Biscuits in the first

United Biscuits​, the UK-based producer of Hob Nobs, Penguin and Hula Hoops, has reported a dip in earnings before interest, tax, depreciation and amortisation for the first half of 2003, despite strong growth for a number of its brands.

The company, which makes some of the most popular biscuit brands in the UK, said that sales of McVities, Jaffa Cakes and Hula Hoops all improved during the half-year, but that profits were impacted by the hot summer weather and by fierce price competition at a time of rising ingredient costs.

According to a report in the Financial Times​ newspaper, the company saw its EBITDA drop from £76.3 million to £73 million as a result of these various factors, but remains bullish about its long term prospects after promising results from a number of new products.

Among these is McV a:m - a cereal bar designed to tap into the growth in the on-the-move snacking market - which has been well received in the UK market. The launch of new products such as the cereal bar meant that the group increased its marketing expenditure by 6.6 per cent during the half, the paper reported.

The hot summer weather - which broke all UK records in early August - had a major impact on sales of biscuits, which, like chocolate, tend to fall as the temperature rises.

This decline was further impacted by price discounting among the major food retail chains in the UK, in particular for their own brand products, which inevitably led to a fall in revenues for the more expensive branded products and forced UB to follow suit and cut prices on a number of its brands.

High commodity prices - which have also affected results at Northern Foods' Fox's Biscuits division in the UK - had a major impact on margins during the half, with the Ivory Coast conflict increasing cocoa prices and the hot weather reducing the wheat crop.

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