Strategic Report
The Group will continue to invest in production capability and people, there will be an element of organic expansion but growth will primarily be realised through acquisition and mergers which will in turn help us respond to consumer needs through diversification of products and customer bases. Working with retailers to meet changing consumer needs is key, in addition to this the focus will be on growth, improving shareholder perception of value and investing in employees.
Our Markets
Te total annual UK ambient cake market (including pre-packed cake and in-store bakery) is valued at £924 million (source: Symphony IRI w/e 21 Juner 2014). Te past 12 months has seen value sales decline by -2.4% and unit sales decline by -4.9%. We continue to be the second largest supplier of ambient cake to the UK’s multiple grocers and have maintained our leading position in the niche areas on which we focus.
We are working with retailers to meet changing consumer needs, and responding by diversifying our products and customer bases.
Annual bread and morning goods sales are in excess of £3.5 billion (source: Kantar Worldpanel), although the market remains flat. We are a niche player in this market, focusing on speciality breads and rolls. Te retail environment remains challenging as consumers struggle to stretch household budgets, but Nicholas & Harris are trading with key customers that are outperforming the market and so are well placed when the economic climate improves for UK shoppers.
Our Business Te Group consists broadly of the following businesses:
UK Bakery Lightbody of Hamilton Ltd (‘Lightbody’), based in Hamilton, employs over 1,100 people and is the UK’s largest supplier of Celebration cakes with Disney, Nestlé, WeightWatchers and Torntons product within its Licenced Portfolio as well as Own Label Cake. It also produces a wide range of sweet snacking products, slices and in store bakery (ISB) bites, a number of which are under our licensed brands including Nestlé, Torntons, and WeightWatchers.
Memory Lane Cakes Ltd (‘Memory Lane’) is based in Cardiff and employs around 800 permanent staff as well as agency at high promotional and seasonal peak times. It is the leading manufacturer of the UK retailers premium own label cake ranges. It also produces under a number of brands including Nestlé, Tornton’s, WeightWatchers and its own Memory Lane brand.
Nicholas & Harris Ltd. (N&H), based in Salisbury, employs around 280 people and produces a range of speciality breads to UK retailers. Its focus is on ‘clean label’ breads, rolls and buns. Within its brand portfolio, N&H has Vogel’s seeded bread, Cranks Organic and Village Bakery Rye bread, all of which have outperformed the bread market. Te past year has been one of significant change in the bakery, with a 60% increase in its footprint to allow more efficient distribution and space for future growth. Baking capacity has also been increased by 25%. Te business is now in a strong position to benefit from improvements in trading conditions in the UK.
Brands and Licences Te Group remains primarily a retailer branded business with sales of retailer own label products accounting for around 60% of our total revenue. Te balance represents the strength of the licensed brands under our control.
WeightWatchers WeightWatchers remains one of the largest food brands in the UK and we hold the licence to manufacture and distribute low fat cake to the UK and Ireland’s grocers under this brand. Te Low Fat cake category continues to struggle in the face of recessionary pressures on household budgets. However, this year WeightWatchers has again successfully grown its share of this category. Since the summer of 2013 we have undertaken a number of significant innovation projects under the WeightWatcher brand. Initially moving the slices into a new individually wrapped snack pack format to broaden the appeal of the offering and open new usage occasions, then incorporating a new pack design onto the slices range in June 2014. Tis new pack design will be rolled out across the remaining products in the WeightWatchers Cake range later in 2014.
Torntons Te Group continues to develop its branded offering via its licensing arrangement with the Torntons confectionery business. Torntons is the 4th largest brand in the market place and continues to grow its unit sales, in so doing outperforming the market and all key competitors over the last 52 weeks (Source: Symphony IRI). Torntons remains the dominant player within the Bites market holding a market share in excess of 40%, and 2014 has seen the introduction of two new products which will further enhance our position within this key segment.
Nestlé Confectionery We continue to manufacture and distribute Cake Products under the Nestlé Confectionary Brands. In 2014 the brand outperformed the market and has returned to growth driven by products under the Smarties, Yorkie, Aero and Funtastic Brands.
Disney Our successful range of Disney Celebration cakes continues to evolve and has grown by over 20% in the last 52 weeks. Properties within the portfolio include Disney Princess, Cars, Fairies, Avengers and Spiderman. Te Disney portfolio is a core part of our overall Celebration cake business and plays an important role in retaining our position as the largest supplier of Celebration cake to the UK’s multiple grocers.
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