Northern Foods struggles after bakery slump

By Catherine Boal

- Last updated on GMT

Related tags: Northern foods, Biscuit

UK food group Northern Foods is struggling in the competitive
domestic bakery market - adding heat to rumours it may be forced to
sell off its core Fox's biscuit brand.

Following the company's lagging bakery results announced yesterday, market analysts have been speculating over whether the company is destined to withdraw from the biscuit sector altogether. Northern Foods, who own the Rocky and Fox's Classic brands, have denied that a sale is imminent but did admit it was struggling to hold onto its 11 per cent share of the UK biscuit sector, blaming a "sustained increase in input costs"​ and the cumulative effects of year on year declines for the business. In order to encourage greater profitability, the group intend to focus on three core areas - 'everyday' biscuits, seasonal and retailer own brands. The UK biscuit market is worth £1.87 billion (€2.7bn) annually. Northern Foods' full year figures showed a 26.4 per cent drop in continuing profit from operations to £17m (€24.9m) and a fall in operation margin from 11.1 per cent to 8.6 per cent. Last year, the company sold off its cakes division to concentrate on stabilising the biscuit business. According to the group, the second half of the year saw improved performances despite high temperatures and increased commodity costs. Greater investment in the Fox's brand - including TV advertising, new product innovation in the form of the Naturally Fox's line and packaging changes - is also thought to have benefited the range and gone some way towards offsetting the cost of raw materials such as flour, cocoa and dairy ingredients. In addition, the company acquired a new £5 million (€7.3m) high speed automated production line at its bakery facility and rolled out processing improvements at a number of its sites. Northern Foods remains optimistic in the face of its recent downturn. The company said in a statement: "After a recent profit decline, we do believe that we have stabilised the business and that there is good value to be created through focusing on product innovation and selected investment. "Our initiatives focus on simplification, automation and innovation-driven top line growth."

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