Bakkavör has cemented plans to close two UK factories under a consolidation exercise.
The facilities were earmarked for closure in November last year – the Bakkavör Salads factory in Sutton Bridge, Lincolnshire, and Bakkavör Desserts in Leicester, with 900 workers expected to be impacted.
In a trading update today (19 January) for the financial year to 31 December, recently-appointed CEO Mike Edwards reiterated the “significant headwinds” the private-label supplier to major UK supermarkets is facing.
Under a previously announced plan to “protect profits”, Bakkavör said today worker consultations at the two sites have been concluded, with the facilities “on track to close and transfer volume in H1 2023”.
Asked by Just Food how many of the workers are likely to be laid off or transferred to other factories, Bakkavör responded: “Clearly, a difficult time for those colleagues affected. We have offered all weekly paid colleagues an alternative role. We have also arranged job fairs and are working with the Job Centre and local businesses to support colleagues to find alternative roles.”
It declined to provide a more specific date for the closures nor would Bakkavor comment on whether other facilities were slated to be shut in the UK or overseas.
The company added in the trading update: “Our plan, which includes a leaner organisation structure, refreshed clear and focused regional priorities, and enhanced emphasis on managing cash, will deliver savings of GBP15m (US$18.5m) in fiscal year 2023 and GBP25m on an annualised basis.”
Bakkavör serves UK supermarket chains such as Tesco, Sainsbury and Marks and Spencer with products ranging from ready meals to desserts, pizza, bread and bagged salads.
Bakkavör is going ahead with the plant closures despite preliminary group annual revenue rising 14.3% on a reported basis to GBP2.14bn and climbing 10.6% in like-for-like terms (LFL).
In the UK, revenue rose 12% and 10% across those respective metrics to GBP1.78bn. Final results are due on 8 March.
Group revenue was “driven primarily by price in the UK, along with strong volume growth in the US, while Covid impacted volumes in China”, Bakkavör noted in the commentary.
Elsewhere, revenue increased 41.8% and 25.6% in respective metric terms in the US to GBP255.3m. Like-for-like sales in China were down 8.6% at GBP100.8m but were up 1.7% on a reported basis.
In November, Bakkavör outlined a three-pronged strategy: a “leaner organisation structure”; “clear and focused regional priorities”; and an “enhanced focus on managing cash”. The UK business was trimmed from four to two divisions – meals and bakery.
Bakkavör added in today’s statement: “In the US, we have a renewed focus on operational performance to improve margin sustainably and whilst near-term challenges remain in China, we are well-positioned to capitalise on the future growth opportunity when conditions normalise.”
The headwinds inferred to by CEO Edwards include inflation costs, supply-chain factors and labour, Bakkavör confirmed to Just Food.
It added: “The macro-backdrop remains challenging, with all of these factors contributing. Inflation is expected to remain elevated in 2023 and with the disruption and pressure that the supply chain has experienced, first with Brexit (which continues), Covid and the recovery, means supply chains remain under pressure, and fragile.
“Investment in our people, through pay increases and engagement activities, has had a positive impact” and we have seen “wider labour-market pressures ease through the year [2022]”, albeit off elevated levels.
