Warburtons slices prices to maintain market share
The family-owned grocery company, which employs around over 4,800 staff across the UK, revealed pre-tax profits of £28.8m (£33.9m) for the 12 months to September 25 2010, in its annual report and accounts filed this week, with sales down 3.6% to £492m.
Within the pre-packaged sliced bread market, Warburtons corners around 32.5% by value, with Hovis on 24.5% and Kingsmill 19.8%, while own-label has a 12% share.
In their report, the company directors also noted a July 2010 fire at its Bolton bakery that hit performance and was subject to an insurance claim worth more than £3m.
But the report stressed that (as of September 2010) the firm had suffered no major service impact and that reinstatement of the plant was underway.
Warburton’s successfully reduced raw material and consumable costs (£149.6m) by 5% during 2009/10 to £149.6m, but highlighted volatile commodity markets, principally for wheat (which now costs around £160/t) and energy.
Falling profits
The squeeze on UK consumers made cost recovery on higher input prices difficult, said Warburtons, a view echoed by research firm Plimsoll in a report last month.
That company concluded that almost half of UK bakery firms are loss-making, with sales declines averaging 13% amongst firms that made losses last year, while 64% of companies reported a fall in pre-tax profit margins last year.
Lead analyst David Pattison said that many firms were reluctant to pass on price rises, given the risk of losing customers. “But falling profit margins across the industry are the first warning sign that this strategy has become unsustainable."
However, Warburtons said it remained focused on growing its UK market share, and added that it continued to upgrade and review manufacturing capabilities following the opening of its Bristol bakery last year.
Despite a “turbulent economic environment” and a fall in profits, the firm increased its remuneration for directors – who include chair Jonathan Warburton, Brett and Ross Warburton and md Robert Higginson – to £4.3m for the year (£4.09m in 2009).
