Premium Bakery is a growing sector with volume in commodity bakery in decline alongside growth in value as consumers migrate to higher value premium offerings both in home and increasingly out-of-home.
Premium Bakery profile 2017/2018
It is difficult to over-emphasise the disruptive effect of the extensive investment programme at Haydens during the year. As a result of the capital investment, however, the factory in Devizes now has significant extra capacity (one of the important features that made the business attractive to its recent acquirer) and is delivering enviable service levels. This has already allowed the business to attract Tesco and Sainsburys to join the growing customer list, utilising the equipment installed as part of the investment.
Commodity prices were also very unhelpful over the year, with the cost of butter remaining at historically high levels and our commercial agreements at that time not tailored to recover any of the added cost. Projects are underway to improve the levels of waste and overall efficiency, seeking to extract maximum return from the new investment.
Recruitment of high-calibre staff across the industry remains a key differentiator and with a project that also invested in staff and facilities, we have increased the attractiveness of the business for the future. In the event, the planned move of the Chantilly Patisserie business to new premises was shelved, since, while it was of course intuitively right to expand and grow, given the relative scarcity of cash last year, the investment case for doing so simply could not be made; the business remains based in premises where growth will potentially be capacity-constrained, although this is not currently an issue.
The challenging trading conditions resulted in an impairment of fixed assets of £6.0 million for Haydens Bakeries (note 18), and an impairment charge to goodwill of £1.0 million for Chantilly Patisserie (note 16).
On September 6, 2018, Real Good Food announced the disposal of Haydens Bakery to Bakkavor Group plc and on February 1, 2019, the disposal of the Chantilly business to management; the Group has therefore now exited the Premium Bakery sector.