The Real Good Food Company’s (RGFC’s) annual profits were hit by its dispute with British Sugar, part of Associated British Foods (ABF), over sugar supply, it has confirmed.
In a pre-close trading update on the year to March 31, The Real Good Food Company, owner of Garrett Ingredients and sugar distributor Napier Brown, stated: “The impact of the British Sugar dispute was felt by the Napier Brown and Garrett Ingredients businesses and masks good progress across the rest of the group …”
It said the feud had dampened significant pre-tax profit growth at its subsidiaries Renshaw, which makes bakery ingredients, and Haydens, which makes sweet pastries and desserts. Negative effects would continue to be felt until at least September, it said.
Napier Brown previously complained to the Office of Fair Trading (OFT) about British Sugar abusing its dominant position in the sugar market. The Competition and Markets Authority (CMA), which replaced the OFT on April 1 has taken up the complaint.
There are only two sugar suppliers active within the UK: UK beet supplier British Sugar and Tate & Lyle, which refines imported raw cane sugar. The RGFC said it was preparing to submit further information to the CMA shortly in response to its questions.
RGFC said it was unclear when the dispute would be resolved and until it is, it would not be negotiating with British Sugar. However, it said customers had so far been very supportive and that, in the longer term, it was working on new and competitive sustainable supply sources. Its sugar import hub at Immingham docks, commissioned in February, was also helping.
“It is a pity that our results will be dominated by the dispute with British Sugar, as we continue to make good progress on our strategic plans elsewhere within the group,” said RGFC executive chairman Pieter Totte.
‘CMA needs to act’
“We believe strongly that the CMA needs to act, in order to maintain a competitive structure in the UK sugar market, particularly with the impending ending of [EU] production quotas in 2017. Meanwhile, we will not be diverted from our long term plans, both in sugar and across the other business, all of which offer exciting growth opportunities.”
A spokeswoman for ABF said: “The recent commercial dispute between the two companies is not a matter upon which it is appropriate to comment.
“The matter was recently considered by the relevant regulator at that time, the OFT, who had undertaken a preliminary high level assessment, listened to the respective parties and in February 2014 took a decision not to open an investigation.
“Contrary to what was stated publicly by RGFC at the time there was no ‘referral’ (as that particular term is used in this field) to the CMA. We understand Napier has resubmitted the same complaint to the CMA and we have no reason to believe that the CMA will reach a different view to the OFT.”
In its pre-close statement, RGFC said it was investing in commercial resources, particularly at bakery ingredients subsidiary R&W Scott, while efforts to turn around Haydens were paying off. It reported its recently set up business in Brussels, Real Good Food Europe, was already delivering sales growth.
RGFC said it expected to report annual pre-tax profit of £3.3M and net debt to be £31.5M, lower than previous forecasts, reflecting an improvement in working capital control.