Finsbury Food Group, the UK cake maker, has thrived despite soaring commodity costs and growing concern among consumers over following a more balanced diet. Chief executive Dave Brooks told Dean Best about the reasons behind the success of the business and why he believes Finsbury is well-placed to grow despite an ever-more turbulent operating environment.
Go deeper with GlobalData
just-food: What is the extent of Finsbury’s business?
Brooks: Finsbury Food Group is an AIM-listed plc, supplying cake and bread into the UK multiple grocers. We’ve got three cake bakeries and two bread and morning-goods bakeries with annualised sales in excess of GBP180m. We deal with all the seven major multiples, Tesco and Asda being our larger customers.
j-f: 2007 has been the year of soaring commodity costs. You have called the last six months an “extremely challenging period” for Finsbury but the business is still thriving. How did Finsbury deal with that cost challenge?
Brooks: Our core skill is we give people products they want to buy – whether that’s consumers or our customers as the multiple grocers. If you’ve got a strong demand for your products, when you are faced with having to push prices forward to recover the increasing cost base that you’ve got, customers are less resistant. It sounds a rather simple response but that has been our mantra over the last three to four years – to give people products they want to buy again and again and again; then you are in a less price-sensitive arena.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataj-f: Has Finsbury had a greater room for manoeuvre given that the company sells into the more premium end of the cake and bread business?
Brooks: That helps, we do loads of celebration cakes and little Johnny still has his birthday cake even if it has gone up 20p. The premium end does tend to be weekend treats and you are in the mode of wanting something that is more of a fantastic eating experience and price is further down the list. Our health range, be they gluten-free products or low-fat cakes, price isn’t the first thing on your mind. It’s either a functional product that you are able to eat or a permissible treat.
j-f: In the confectionery sphere, companies like Glisten and Zetar have prospered by selling “healthier” chocolates and candy. How far has Finsbury moved down that road?
Brooks: We’ve always been health-conscious. We can never claim that cake is healthy but they can all be developed in a health-conscious manner. We don’t use things like hydrogenated fats, we don’t use artificial flavours or colours unless absolute necessary, which it is in one or two of our celebration cakes to get the appropriate look. Over the last couple of years, we have acquired a number of health-based businesses that have given us a stronger penetration to that market, in particular low-fat cake and gluten-free morning goods. Anthony Alan was a second low-fat-business; we bought California Cakes in November 2005, which was primarily a low-fat, cake slice business.
 |
j-f: What’s your take on the nutritional labelling debate in the UK?
Brooks: My personal preference is to educate consumers and therefore use GDA profiling so that people can understand what that means. Traffic lights are a rather blunt instrument and there is some evidence that traffic lights help consumers pick indulgent products. If they are in treat mode, they know they want to go and pick a product with a red traffic light. One has to wonder if that is even serving its purpose.
j-f: Will Finsbury be looking to further build its presence in the healthier end of the market?
Brooks: We’re in a position where we have 90% of the premium cake market, so there is little we can do to grow our market share. We can just grow the market. In celebration, we’ve 60% of the UK market, we need to grow that market. The market we can grow significantly is the healthier bread market and that’s an area that we will be focusing on over the next couple of years – hence our GBP2m investment up in one of our Scottish businesses. Cake is still about 85% of our turnover, we are the second-largest cake maker in the UK and we are very pleased with the positions we have in our three core sectors.
j-f: The City seems pretty pleased with Finsbury’s recent performance. How do you see the next six months?
Brooks: Pretty much more of the same, I would have thought. We have got some period of stability in the short term on input costs but I do expect the next 12 to 15 months to be volatile and turbulent still. However, we’ve dealt with those conditions over the last eight months; we’ve seen lots of sales growth in our businesses and we’ve been able to work with our customers to pass costs on. It’s going to be a very tough time for the food industry over the next 15 to 18 months, there’s going to be lots of uncertainty, lots of change, but in those conditions, the fittest, most flexible companies will prosper.
Is the right climate to make more acquisitions?
Brooks: Of a certain nature, perhaps. We would be interested in looking at bolt-on acquisitions, particularly if they had a health element to them. By bolt-on, I mean something relatively small; it’s not a particularly pleasant environment to go and raise equity given the subdued nature of the stock market. Having said that, we have half a dozen very strong businesses, all seeing very strong internal growth, so we are in no great rush or mad desire to make acquisitions.
j-f: The Lightbody acquisition gave Finsbury a European sales office. What are the company’s ambitions outside the UK?
 |
Brooks: We have a joint venture in France that covers western Europe. We did have a small sales office in the Czech Republic trying to cover central Europe but we’ve taken the decision to terminate that activity. We weren’t getting enough critical mass to make that work. We’re a UK-based manufacturer supplying the UK multiple grocers. We understand the UK consumer and our core market remains developing in the UK. The bread and cake markets are worth GBP5bn here alone. If we do get an opportunity to sell abroad, we may consider that, but we believe the appropriate way of doing it is they way we have built up our French operation where we own 50% and the French own the other 50%. The local experts control the business.
j-f: What’s the scale of the French venture?
Brooks: It’s a sales and marketing operation; they buy around 75% of their products from us here in the UK. They buy one or two other products which we can’t manufacture. The core markets for that are France and the Benelux, although we do have some sales in Spain, Italy and Sweden as well. The core product range is celebration cakes and caramel short cake, which had never been heard of on the continent until we introduced it over there two years ago. It’s working very well, and it’s a low-risk way of testing out the European market without distracting us from our core UK market.
j-f: Finsbury is thriving and it has got positions in the growth segments of the categories it is in – the company could be quite an attractive acquisition target, couldn’t it?
Brooks: Whether you are a plc or a private company, you never know who is going to come knocking on the door. No-one has done so far. We are very happy with our independence, we have got a fantastic growth opportunity and we’ll continue to drive that agenda forward.
