14 July, 2006
Inter Link Foods and Finsbury Food Group, both reveal they are on missions to improve efficiency in their business this week. The two companies are profitable, but say trading conditions are “challenging” in the cake market. They say they want to control costs – read “reduce prices”.
Inter Link may be the UK’s second biggest cake company, but chief executive, Paul Griffiths, talks about “toughing it out”. He is quite right, competition is cut-throat in the cake aisles of the supermarkets – particularly at the cheap end.For example, a kind-hearted colleague came back after lunch recently, loaded with two boxed chocolate cakes bought for 49p each. The manufacturer of said delicacies shall remain anonymous, but it was neither of the ones mentioned above.Needless to say, there was much tucking in, after which the general consensus was that the cakes tasted of sweetened cardboard, not such a bargain (thanks anyway!)But I am sure the supermarket buyer was thrilled by this taste of really cheap cake. And a new price precedent has been set.It’s traditional to blame the supermarkets for this sort of thing, but who exactly is offering the generous special offers in the first place? An individual supplier may strike a listing on the back of a cut–price bargain, but in the longer term everyone’s business is devalued, everyone is put under more pressure – particularly smaller suppliers. Is anyone going to back down on reducing prices, or has duffing each other up become too much of a habit for the cake suppliers? We have seen where that road leads on economy bread. Also in the news this week, Gb Ingredients has revealed (pg 5) that its business is to be split, confirming rumours which have been circulating since the Dutch investment house Gilde acquired it from DSM last July.It’s a move which will bring a large new entrant, Werhahn, into play as a bakery ingredients supplier in the UK - trading as GB Plange UK. It will be interesting to see how its arrival changes the status quo.And the yeast side of Gb is also set on growth across Europe, probably through acquisition. Exciting times for both sides, who said breaking up was hard to do?