McVitie’s owner warns of more price rises for biscuit lovers

The owner of McVitie’s has warned of more pain for biscuit lovers as the combination of a volatile wheat market and wider inflationary pressures look set to push up prices further next year.

Salman Amin, chief executive of Pladis, the London-based snacks maker whose brands also include Digestives, Hobnobs and Jaffa Cakes, said he expected prices for the group’s products to rise at least half as much again in 2023 as they have this year.

Pladis, which is owned by Turkey’s Yıldız Holding, is also home to brands outside the UK such as Ülker, Godiva Chocolatier and DeMet’s Candy Company.

The upward pressure on prices was partly a result of contracts signed when the wheat market hit highs following Russia’s invasion of Ukraine, Amin said in an interview.

“Wheat prices are back to pre-pandemic levels but we have contracts that extend well into 2023. We needed to make certain decisions three or four months ago. It was too risky not to.”

Amin declined to disclose the price increases Pladis has made, but food groups such as Unilever and Kraft Heinz have this year reported double-digit year-on-year rises in the prices of their products.

But the challenge facing the snack maker also relates to the wider backdrop of supply chain hurdles, cost increases and inflationary pressures. “While wheat prices have normalised, other challenges — including in the supply chain — remain,” said Amin.

“I believe we will see this [economic environment] for another 12 to 18 months. I’m quite bearish, or realistic, about what 2023 is likely to bring,” he added.

Pladis was formed in 2016 after Yıldız Holding bought United Biscuits, owner of McVitie’s, from its private equity owners two years earlier. Amin took the helm in 2019.

Partly as a result of these conditions, Pladis is putting increasing emphasis on smaller “on the go” versions of its products sold at lower prices than full packs, as it steps up development of new product lines.

In the UK, these smaller packs, which also cater for impulse snacking, include Jaffa Jonuts, a variant of Jaffa Cakes sold at about £1.50 for a pack of four, along with small packs of Iced Gems, Mini Cheddars Crunchlets, Mini Gingerbread and Blissfuls.

Digestives and Hobnobs are sold in “on the go” sizes in Nigeria, while in the US consumers can buy small packs of Flipz Clusterz and Turtles.

“Smaller packaging sizes put us in the same space [in stores] as chewing gum and others,” Amin said

“The smaller product size is sometimes constrained by our ability to pack smaller sizes, by the packaging machines, but we are rolling them out across most sites and by the end of 2024 will have that capacity in almost every [country].”

In the UK, food prices had been stagnant for a decade, Amin said, presenting a hurdle for companies that need to alter consumer expectations in an inflationary environment.

“The last 10 years of pricing have been absolutely flat in the UK. There have been no real price increases over this period of time and the consumer is used to a certain set of price points — how do you now reset the definition of value?” he said.

But he said there had not been a “mass shift” from Pladis’s products into cheaper alternatives.

Like its rivals, Pladis is also trying to move into healthier snacks as governments and consumers seek to combat obesity. This year, it reformulated Jacob’s Twiglets to contain 60 per cent less salt and has launched a lower-sugar version of Rich Tea biscuits.

Amin said that “innovating for lower sugar and lower fat without trading off the taste is an awfully difficult trade-off at the end of the day”.

“These are multiyear projects,” he said. About 5 per cent of Pladis’s portfolio at present boasted “reduced” levels of particular ingredients, but that was expected to rise to 15 to 20 per cent in three to four years, he said.

“Our savoury portfolio, brands like Jacob’s Cream Crackers and Mini Cheddars Nibblies, is growing very nicely — at double-digit levels — because there is no sugar, and fat levels are quite low,” he added.