Baked goods buoy ABF amidst price turmoil

By Neil Merrett

- Last updated on GMT

Related tags: Baking, Bakery, Baker

Bakery products have underlined the overall resilience of UK-based processor and retailer Associated British Foods (ABF) despite what the company calls ‘steadily worsening economic conditions’ during the 2008 fiscal year.

ABF said that for the twelve-month period ending 13 September 2008, revenues were up by 21 per cent to £8.2bn, even with surging input costs, as the company drove up the pricing of key brands such as its Kingsmill and Ryvita products.

With the company claiming that its grocery operations such as its UK and Australian baked goods remain a ‘major strength’, the fiscal performance could make encouraging reading for an industry concerned over losing cash-strapped consumers.

Commodity concerns

Earlier this year, the bakery industry, particularly in the US, stressed concern over consumer willingness to accept higher pricing for products to offset record energy and raw materials costs. The American Bakers Association (ABA) said that it even feared a potential backlash from consumers that could see declining demand for their products.

Trade groups such as the UK-based the Bakers Federation told BakeryandSnacks.com back in June that even with the introduction of new support measures for the industry, short–term falls in grain and ingredients costs were unlikely.

However, ABF says that the group’s ability to recoup spiralling costs over the period through revised pricing played a major role in boosting revenues for the fiscal year.

Grocery growth

Sales in the company’s grocery segment were up by 25 per cent over the same period last year to £3.2bn, according to ABF.

Operating profit also rose in the sector, up by 27 per cent to £194m. The growth was attributed, amongst other factors, to stronger earnings from its Allied Bakeries units – aided by a stable UK bread market - and the merger of the Ryvita brand and Jordans cereals.

Ingredients

Beyond demand for finished products, ABF said that a need for bakery products was also strongly felt in the company’s ingredients operations as well.

Revenues were up by 21 per cent to £842m, while operating profit reached £75m for the period, a rise of six per cent.

Sales growth, on an organic basis, in the company’s yeast business and the acquisition of the Gilde Bakery Ingredients in Italy were sign as the key drivers for the growth over the twelve months.

“We continued to grow our bakery ingredients businesses, both through craft bakery and industrial channels,” ​stated the group. “In particular, we have been able to exploit our proprietary enzyme technology and continue to build strong partnerships with the world’s largest bakeries."

Related topics: Markets

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