Crisp wars bite United Biscuits

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The crisp wars and rising raw material prices bit a chunk out of United Biscuits figures last year, sending profits before exceptional items down 2 per cent to £178m.

Skirmishes with Nabisco and Pepsico, which owns Walkers crisps as well as the supermarket own-labels, squeezed margins in the KP snacks business, where UK profits slumped 16 per cent to £29.7m.

The 1994 results were further affected by exceptional charges of £49m, including £21m relating to the closure of the Grimsby crisps factory.

The crisp sector has become a battle of the walking wounded in recent months, with Bensons crisps announcing the closure of its Welsh factory and Golden Wonder put up for sale by Dalgety. In supermarkets, prices of six-pack bags of crisps fell to less than 30p last year.

United Biscuits chief executive Eric Nicoli said: "We are experiencing the most hostile conditions in history and everyone in the kitchen is feeling the heat. Much depends on our ability to raise prices."

Mr Nicoli said the mind-set of the industry was changing and that prices were already on the move. United Biscuits had introduced price rises of 5 per cent in some areas, he said. However Pepsico, whose Duritos brand stole valuable market share from United Biscuits, is thought to be resisting price increases.

United Biscuits is planning to increase its marketing spend by 5 per cent and to continue cost-cutting. New ranges such as mini Jaffa Cakes and Masterpieces have been launched and Penguin revitalised.

Margins at KP fell from 9 per cent in 1993 to 7.4 per cent. At McVitie's, which includes biscuit brands such as Hob Nob, margins also fell from 13.5 per cent to 11 per cent, though market share increased marginally.

Profits at Keebler, the US business, increased by 6 per cent to £18.3m, with a strong performance from the Bakeline brand acquired in 1993. The company said new computer and distribution systems would begin to yield results. Ross Young's, the frozen foods business, performed well with sales of the Linda McCartney vegetarian range reaching £30m.

Group sales were flat at £3.4bn. Analysts, disappointed by the margin pressure and cash outflow, downgraded their profits forecasts for next year from £185m to £165m. The dividend was held at 15.3p. The shares slipped 1p to 339p.