Disney cake maker Finsbury Food’s bottom line deflated by rising butter and egg prices

Higher prices for bakery staples such as butter, eggs and cocoa and the introduction of the national living wage, combined with the Brexit-induced depreciation of the pound, have squeezed the AIM-listed company's profit margins.

Last year, thanks in part to the tripling in the price of butter,​​ Finsbury was forced to close its Grain d'Or bread bakery in London, resulting in a loss of 250 jobs.​​

However, according to Finsbury’s CEO John Duffy, the company’s efforts to offset these higher costs have paid off.

While revenue for its UK bakery division for the year ended June 20 fell by 3.4% to £303.6m ($402.3), if excluding the revenues from the bakery closures last year, like-for-like revenues rose 2.4% to £290.2m ($384.5m).

Revenue for its overseas division sunk 0.7%.

Unprecedented inflation

“In what has been a very challenging environment with unprecedented commodity and labour inflation, the group has done well to recover those cost pressures through a combination of operational efficiency and price recovery and at the same time, accelerating the reshaping of its asset footprint to drive further efficiency,”​ said the company in a statement.

To lower costs, Finsbury reduced the amount of sugar in its cakes and replaced buttercream with fondant. It also invested £40m ($53m) over the past two years to improve productivity with more automation and a new IT platform.

“We are pleased with the resilient performance of the group in what has once again been a period of market-wide inflationary pressure, illustrating that the work and investment undertaken in prior periods has continued to bear fruit,” ​said Duffy.

“I can’t see any let up here and we are assuming inflationary pressure will be like this for the next 12 months. The national living wage is affecting more the factory workers than the office workers and pushing up from the bottom so we are still seeing increases here,”​ he added.