British bakers make confident start to 2005

- Last updated on GMT

Related tags: Baking

British cake maker Inter Link Foods has again taken advantage of
the country's piecemeal cake sector by making its biggest
acquisition to date. Meanwhile, UK bakery retailer Greggs, buoyed
by a recent sales rise, is to celebrate by building a new factory
in the north east of England, reports Chris Mercer.

Greggs will spend £13 million on its second factory in the north east and plans to have it producing its trademark savoury pastries, such as sausage rolls and pasties, by 2006. The company was given a £250,000 Selective Finance Investment grant from the One NorthEast regional development group and the new factory is expected to create more than 50 new jobs.

Nigel Oldham, group production director, said: "The additional capacity will enable the company to meet the continuously growing demand for our freshly baked savouries in all Greggs and Bakers Oven shops across the country."

In the 29 weeks to 1 January, Greggs posted a 6 per cent increase in like-for-like sales, holding up well over the five-week Christmas period when many other UK retailers found themselves suffering. "Performance in the final 11 weeks following the issue of our October trading update was ahead of our budget, showing a like-for-like increase of 5.7 per cent,"​ said managing director Sir Michael Darrington.

Inter Link strives forward

Meanwhile, Inter Link Foods, now Britain's third biggest cake maker, has announced its biggest acquisition to date. The company will buy Yorkshire Cottage Bakeries for a maximum of £12.25 million, using a placing announced last November and a bank loan worth £6.2 million.

Cottage Bakeries, which had a turnover of almost £20 million in 2004 compared to £16.6 million in 2003, is expected to announce a two million profit for the last year. It has bakeries in West Yorkshire and Manchester which make products similar to Inter Link's portfolio, such as buns, mini rolls and slab cakes.

The existing success of the business will be essential for Inter Link which has already stretched its finances to make two acquisitions - Hoppers Farmhouse Bakery and Cukiernia Mistrza Jana in Poland - and install a new production line in the last 12 months.

Inter Link has built its empire by taking advantage of Britain's fragmented cake market over the last decade. The company has bought more than 10 cake makers since 1994, including Soreen with its Maltloaf brand, and has strengthened its relationship with private label retailers who prefer to deal with one supplier for specific products on a nationwide basis.

But Britain's cake sector starlet will have to be careful in a UK market increasingly moving towards premium, higher-priced goods. The latest figures from market analysts Mintel​ reveal that although the market has risen in value by 3.8 per cent since 2003, this is mainly a reflection of higher prices and not increased sales.

It is important that Inter Link, which recently announced an unaudited 16 per cent rise in pre-tax profit for the six months up to 30 October last year, also presses ahead with more brand-oriented products that will sell for more; like the Disney branded cakes it acquired the licence for last January. Company net debt is £25 million.

Related topics: Markets

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