Black magic: charcoal pizza helps to boost Bakkavor

Strong sales of bread and pizza – including a charcoal base launched into Waitrose stores – have helped drive growth for Bakkavor.

Revenue from continuing operations for the fresh prepared foods business, which also supplies meals, salads and desserts, rose 4.6% from £1,735.4m to £1,814.8m in the 52 weeks to 30 December 2017.

Bakkavor said revenue growth had been partly driven by price rises agreed with customers in response to raw material cost increases. Growth slowed in the second half of the year as the higher retail prices hit volumes.

Two business categories – Meals and Pizza & Bread – performed particularly well, added the business, and were key contributors to overall UK performance.

Standout NPD for the company included a chocolate ‘dome’ rolled out for the Christmas market and the UK’s first charcoal-based pizza.

Launched last spring into Waitrose, the completely black base is made with a charcoal dough and topped with porchetta, Napoli salami, marinated artichokes, sun-soaked tomatoes and Leccino olives. It was rolled out to tap the trend for charcoal in food and drink.

Bakkavor said its experience in growing, planning and buying had been critical during a year of volatile input pricing.

Adjusted EBITDA increased by 4.2%, from £146.4m to £152.6m. In addition to pressure from raw material inflation, the company said margins were impacted by the weakness in sterling and rising labour costs following increases in the National Living Wage.

Capital investment in 2017 included new assembly lines and automation projects in Bakkavor’s pizza operations in Holbeach and its bread facility in Crewe to increase capacity and extend product ranges following business wins.

The company has also invested in gluten-free capabilities at a number of its sites to meet demand for “this small but fast-growing dietary need”.

Towards the end of the year, the company started work on a £35m expansion of its desserts facility in Newark.

Sales in Bakkavor’s international business, which accounts for about 10% of the group, rose from £173.7m to £178.5m.

“Our strong trading performance, in a highly inflationary environment, reflects both our market-leading expertise in great-tasting food and the strong strategic partnerships with our customers,” said Bakkavor CEO Agust Gudmundsson.

“The second half of 2017 saw volume growth impacted as UK consumers reacted to significant inflationary pressure. As expected, this trend has continued into 2018 and is likely to remain until inflation eases. Later in the year, we expect our volume growth to benefit from improved market conditions and new business.”

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