Cranswick to invest £10m in pastry factory

The upmarket sausage maker has started building the site in Malton, North Yorkshire, which will employ about 150 staff when it opens by early April next year.

The Hull-based group revealed the investment as it reported like-for-like (LFL) sales growth of five per cent in the six months to September 30.

However, that was a slowdown on the 7.4 per cent underlying growth seen in its first quarter, and its shares fell 46.50p to 745.00p. The company warned the rising price of pig meat – now at a three-year high – is squeezing the supply chain. Cranswick said it is talking to supermarkets in a bid to pass on higher costs.

“One of the things that’s absolutely essential is that all parts of the supply chain must remain responsible,” said new chief executive Adam Couch, who took over from Bernard Hoggarth in August. “Everybody has a part to play, from producer to processor to retailer.

“It’s not something that would be eye-watering for the end customer – you’re talking 5-6p on a pack of pork products.

“In order for us to guarantee a sustainable industry, everybody in the industry has to act responsibly.”

The talks are likely to take four to eight weeks to complete, and analysts at Numis Securities said they have “not been welcomed by the retailers concerned”.

Soaring feed costs – caused by drought in the United States, floods in Ukraine and a poor soya crop in South America – have forced up costs for pig farmers. Industry body the British Pig Executive has called it a “crisis”.

Cranswick was formed by farmers in the early 1970s to produce pig feed. Feed comprises around 70 per cent of pig farmers’ costs, said Mr Couch.

Tough new rules on pig farming in the European Union, which will ban sow stalls, are also shrinking pig herds, said Cranswick, squeezing supply.

“We’ve seen pig prices rise and we think they will probably continue to rise in the short term,” said Mr Couch. But he said pig farmers are “used to going through difficult times”.

The ban on narrow stalls for sows comes into force in January 2013, and will bring European pig farmers into line with UK standards.

“We do not see that volume of cheap, imported material continuing,” he said.

Numis analyst Charles Pick said pig prices have risen by 4p in the past three weeks to about 155p per kilo – a 2.6 per cent increase.

He said rising feed prices coupled with a shrinking European pig herd – forecast to fall by five to 10 per cent – means “supply of pig meat will thus tighten”.

Numis cut its forecast for underlying revenue growth to four per cent for the year from seven per cent and reduced its margin forecast to 5.8 per cent from 6.1 per cent.

“A number of cautions apply for the second half,” said Mr Pick.

However, Cranswick said it continues to invest in its operations, including buying the freehold to about 2.5 acres at an industrial estate in Malton. Work has already started on building a “state-of-the-art premium pastry facility”, which will supply a “broad range of premium savoury pastry products”.

Mr Couch said the site will be a tie-up with The Yorkshire Baker, a pasty and pie-maker based at the industrial estate, headed by Gill Ridgard.

“We’ve tended to tie ourselves with food heroes,” he said.