Resurgent McVitie's bites into Northern Foods' sales

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The Independent Online

Biscuit sales at Northern Foods dropped by 9 per cent in the first half of the year, as a result of the hot weather and the resurgence of its rival McVitie's.

The group, which owns the 150-year-old Fox's brand, was also hit by delayed orders from retailers, who were choosing to buy their tins of biscuits for the Christmas market later this year.

In a trading update for the half-year to the end of September, Northern Foods warned that "the trading environment has been very competitive". The company's shares closed down 2 per cent at 87.5p.

Northern Foods said that, during the hot summer, consumers were not keen on buying chocolate biscuits in particular. The other difficulty was comparison with a strong period last year, when Northern Foods had benefited from disruption at McVitie's, which had a flood at its Carlisle factory. This year, McVitie's, which is owned by United Biscuits, has bounced back.

Jez Maiden, the finance director at Northern Foods, said that his company's market share in biscuits had dropped to a low position in January, but since then it was "well up".

"We are three quarters of the way back. This week, we relaunched the [Fox's] brand," Mr Maiden said.

He said that, of the 9 per cent decline, 3 per cent was down to the phasing of biscuit-buying by retailers, who were tightening up their supply chains. Sales that Northern Foods would normally have seen in September - within its first half - had been pushed into October, he said.

Northern Foods' group sales were down 1.1 per cent in the first half. But that performance was dragged down by businesses that the company announced in May it was selling , which were hit by product and site rationalisation and a fire in the speciality bread unit. Counting the divisions that will be retained only, sales grew by 3.5 per cent. In May, the firm said it was putting through a wide-ranging restructuring that would see it focus on few food categories.

Pat O'Driscoll, the chief executive, said: "The sales performance in those businesses which form the core of the group going forward has been good across the chilled and frozen divisions, and our disposal programme is progressing to plan. Although achieving a step change in business performance will take time, our key improvement programmes are progressing well."

In the first half, the chilled foods division saw sales riseby 10 per cent, partly as a result of winning new contracts and good sales of sandwiches and salads over the summer. In frozen foods, sales gained 4 per cent and the group saw continued market share gain in pizzas, consolidating the leading position of its Goodfella's brand, whichhas 29 per cent of the frozen pizzas' market.