Premier Foods warns increase in cost of ingredients will mean price rises across board with cake impacted more than most

The cost of cake will soon be on the rise, Premier Foods, the maker of Mr Kipling and Cadbury cakes, has warned as it said the price of ingredients had shot up dramatically in the past few months.

Gavin Darby, chief executive of the British company which owns a range of well-known brands, from Bisto gravy to Angel Delight, said the company was already talking to retailers about price rises in specific categories as the price of butter had soared 80%, while wheat and edible oils were up 40% from a combination of commodity price rises and currency exchange rate pressures. The price of sugar has also risen by between 20% and 30%.

“That affects cake more than grocery products,” Darby said. “We will have to look at it category by category ... A number of retailers have referred to justifiable and unjustifiable approaches from their suppliers. We feel by being very category-focused we will be much more justified.”

He said Premier would be looking at a number of strategies to mitigate cost rises including changing pack sizes, making its manufacturing and distribution systems more efficient, talking to its own suppliers, and reducing promotions.

Richard Johnson, corporate affairs director, said: “We can’t say there won’t be any price increases, there probably will be next year, but we are very much in the camp of limited increases.” He said passing on price rises to shoppers would be “the last resort”.

The price pressure on cake emerged as Premier revealed a 4% fall in underlying profits to £26.3m in the six months to 1 October. Last month, Premier Foods said sales and profits were lower than expected in the last three months of that period after the exceptionally hot weather in September dampened customers’ appetites for gravy and desserts.

However, Darby said that he believed Premier was on track to meet sales targets for the year and had a competitive advantage because 89% of its expenditure was with UK suppliers and it manufactured 95% of its goods in the UK. It is therefore largely doing business in pounds and is less exposed to currency fluctuations. The company is also growing its export business and said that the drop in the value of the pound would help boost that.



All major manufacturers supplying British retailers are facing significant increases in their costs after the 15% fall in the value of the pound since the Brexit vote has made it more expensive to source ingredients abroad.

“This challenge [from the fall in sterling] is a bigger challenge for some of our competitors than Premier,” said Darby. “Many competitors produce in continental Europe and have to import finished goods, which is a much bigger issue. But we won’t underestimate the challenge,” he said.

He added that Premier hoped to increase sales with a strong pipeline of new products including the launch of large Cadbury cakes and a ready-to-eat version of Batchelors Super Noodles, created with new partner Nissin, that could take on Pot Noodle.