Finsbury Food Group is banking on a return to growth for premium cakes as it tries to bounce back from a tough financial year in which sales fell for the first time in the company’s history.
The group’s cake operation, which accounts for 74% of revenue and includes Memory Lane and Lightbody, saw sales plummet by 9.7% in the 52 weeks to 3 July, due to an overall decline in the cake market and a decision to exit low-margin business.
The £1.5bn cake market declined by 2.6% over the period, but Finsbury was hit much harder because of its focus on premium and healthy cakes segments that suffered disproportionately as retailers launched value ranges and heavy discounting during the recession. However, CEO John Duffy told British Baker that he was optimistic sales of premium cakes would pick up. "At some point in this financial year, we will see a step-change in the availability of premium ranges in the grocers. We’re out of recession and they [the supermarkets] have to respond to that."
Total group revenue at Finsbury for the 52 weeks to 3 July 2010 was £168.3m, down 5.9% year-on-year, although the firm increased profits before tax by 7% to £5.4m and reduced net bank debt by 11% to £36.5m. The company was helped by internal efficiencies, including restructuring of distribution and shift patterns, and the strong performance of its bread and gluten-free arm, which posted sales growth of 14% to £43.7m.
Duffy added: "Success for this business depends on trading through the present period, paying off a proportion of our debt, building a financial position that is less leveraged and returning to growth in an expan-ding marketplace."