BBF CEO Jonathan Lill: “Cake is definitely still going in the shopping basket”

BBF CEO Jonathan Lill is strikingly open about the challenges the cake and dessert manufacturer has faced in recent years. More so of late due to near constant supply chain issues and inflation.

It started around a year ago with difficulty in sourcing board for the cartons, he explains, followed by oils as a result of the war in Ukraine. Energy inflation hit next followed by an outbreak of salmonella at a chocolate factory, then egg availability issues.

“There have been some really dark moments when you think the factory might not run tomorrow because something’s not available,” he recalls from his office at BBF’s largest site in Hull. “[It put] so much stress and disruption on day-to-day production. You think you’ve got a production plan one minute for the following day and then it all changes because something doesn’t get delivered.”

We’ve had numerous rounds of inflation discussions and recovery with the retailers

Couple this with inflation which has massively impacted core ingredients such as flour, sugar, and dairy, and you’ve got a recipe for some rather awkward conversations with the supermarkets.

“We’ve had numerous rounds of inflation discussions and recovery with the retailers,” he notes, highlighting that prices have risen by more than 20% across the wider bakery category. “I think they are exhausted by those conversations, but there’s still more to come.”

As the UK’s largest own label cake manufacturer, BBF supplies sweet treats to all the major UK supermarkets. Thankfully, Lill explains, most of the retailers have been receptive to the challenges. ”There has been a lot of collaboration. I look back now and think of how well we’ve worked together to ensure availability over the last 12 months.”

The good news for consumers is although prices are rising, celebration cakes aren’t getting any smaller. “We’ve been very open about what the mitigation options to take cost out are and they [the retailers] have rejected the vast majority of ‘shrinkflation’,” the CEO adds.

Of course, some shoppers may be trading from celebration cakes to cupcakes or other smaller formats but “cake is definitely still going in the shopping basket”. The likelihood of that cake being own label is increasing due to “a growing price differential between own label and brand” which is driving some consumers to switch, Lill notes. Combine that with the HFSS regulations (there’s not much promotional activity on own label cake), and the market is in a strong position.

Acquiring growth

BBF, likewise, is in a strong position with annual revenue around £220m – more than four times what it was in 2015 when it was bought by Endless. Back then, Lill notes, BBF was “on its knees” but has since undertaken a “significant growth journey”, partly fuelled by acquisitions.

Notable among them was the 2018 acquisition of the Greencore cake and desserts business in Hull which doubled the size of the firm overnight. At 25,000m² it is now the crown jewel in BBF’s portfolio which also includes smaller sites in Blackburn, Bradford, and Poland.

Doncaster-based Sargents Bakeries, which specialised in tarts and pies, also joined the fold in 2021. However, the site was closed at the end of 2022. “When we bought it, it was a business in distress,” Lill explains. “We couldn’t foresee the level of inflation that we have seen since then, and with the year-round products being fairly commoditised, we weren’t able to recover [the costs].

“Whilst it’s been a very difficult decision to go through the rationalisation, I think overall the business is stronger for it,” he adds.

BBF has retained the profitable elements of Sargents and transferred it to its existing footprint, and it worked with staff to find positions for them at other businesses.

Nevertheless, acquisitions remain on the agenda for BBF. 

“We’ve got a very supportive private equity backer in Endless who are very keen to see us expand not only in in UK, but potentially internationally,” Lill explains. “In the current climate, we’ve been at the forefront of consolidating in the cake market, and we’ll probably see further opportunities come down the track and we want to be heavily involved in that.”

Investment in manufacturing

BBF is fuelled for growth thanks to a £40m funding facility at its fingertips. Some of this is reserved for working capital to help ease the mismatch between manufacturing Christmas bakery items in May, June, and July before their sale in the colder months.

Cost mitigation and automation projects to help manage the level of inflation are also required.

One example of automation in BBF’s portfolio is its mini roll production. In 2015 every mini roll was rolled by hand. A £1.5m investment in new equipment means this is now done by machine which help to create 120m mini rolls a year.

Similarly, BBF has invested in its cake jar capability as the concept took off rapidly. “We went from sub 10,000 units a week to well over 100,000 a week,” Lill explains.

Not everything can be solved by automation as a peek inside the Hull factory demonstrates. Here, staff on the seven celebration cake decorating lines are working efficiently to create the end products, each taking control of one step of the process.

Take a chocolate ‘happy birthday’ cake complete with chocolate curls around the outside. One worker is responsible for the filling, another for sandwiching the cakes together. As it continues down the line, a machine helps apply the frosting, but it is smoothed by another employee before being hand rolled in a vat of chocolate curls, hand-iced with ‘happy birthday’ and packed for sale.

“The amount of innovation that happens in celebration cakes each year means there is little opportunity to invest in automation,” Lill says. Coupled with the variation and relatively small quantities seen in celebration cakes, this means workers won’t be replaced by robots any time soon.

Opportunities on the horizon

Despite the challenges of the past few years, Lill remains optimistic about the future with plenty of opportunities on the horizon.

“We are the largest producer in ambient cake and a specialist supplier in chilled desserts,” he says, highlighting that cheesecakes, sponge puddings and fruit pies are BBF’s only chilled dessert categories. “We’re very focused on those areas but we’ve got growth ambitions as well.

“We have got one of the most modern footprints in bakery in the UK as most of our sites were 2001 onwards built. Therefore [we want to] use that as a platform to further consolidate the market.”