A supermarket price war is putting margins under pressure at Walkers Shortbread, one of the iconic food firm’s bosses said yesterday.
Joint managing director Jim Walker told the Press and Journal “roller-coaster” prices for raw ingredients were also holding back profits at the Aberlour company.
He was speaking after Walkers reported a small drop in pre-tax profits to £14.47million, from £14.63million a year earlier, during 2013.
But turnover grew to £137.14million, from £123.7million previously, as the firm continued to grow overseas exports to more than 90 countries.
Mr Walker, who runs the family shortbread empire with older brother Joseph, said the price slashing between supermarkets amid intense competition in the retail industry was hitting food producers’ margins.
Market share growth for discount food retailers such as Lidl and Aldi were also squeezing the supply chain, he added.
Mr Walker said: “Sales in 2014 are broadly in line with expectations.
“However, the fight for market share by the major UK retailers is placing a downward pressure on prices and the lack of economic growth in continental Europe gives cause for concern.
“While there are signs of an easing in the price of certain key ingredients, many remain at levels significantly higher than they were in 2012.
“Over the past few years, the underlying weakness of sterling has mitigated some of the worst effect of commodity price increases.
“However, appreciation seen over the past year – notwithstanding the recent dip in spot prices against a majority of the currencies in which we trade – is now having an appreciable effect on our operating margins. This will affect the business over the coming year.”
Mr Walker was speaking as the firm’s manufacturing operation steps up a gear in the hectic pre-Christmas period.
Extra staff were taken on to cope with a flood of festive season orders, giving the company more than 1,700 full-time and seasonal workers for the first time in its 116-year history.
Overseas exports during 2013 accounted for more than 42% of total sales, a full percentage point increase higher than the year before.
The firm said operating margins before exceptional items fell to 9.7%, from 11.8% previously, amid rising raw material costs.
Mr Walker added: “Limiting the effects of food and raw material inflation, while maintaining the quality of the ingredients we source, remains at the top of our agenda.
“This presented the business with a significant challenge in 2013 as pressures in the dairy sector mounted, and the price of other key ingredients increased as we moved through the year.”
But the business was still making steady progress overall, he said. adding: “We recently announced the launch of a range of gluten-free shortbreads.
“We are confident that, in time, this will become an important product segment, giving consumers with wheat intolerance the ability to enjoy the taste of our shortbread.”