Food businesses are facing a slew of “relentless” inflationary costs in 2025, made significantly worse by the Labour government’s economic policies, Wyke Farms MD Rich Clothier has warned.
Clothier said the West Country cheesemaker’s “tough year” just gone could be overshadowed by a “seismic” and irreversible “tsunami of extra costs” over the next 12 months. He spoke to The Grocer in the wake of a near 40% fall in operating profits in its 2023/24 accounts, driven by inflation.
Clothier now estimates Wyke Farms will face an additional £500,000 bill for National Insurance from April due to the government’s budget increases outlined in the Budget. That is set to come alongside a similar level of wage inflation this year as it becomes “tougher and tougher” to attract staff to work in manufacturing, particularly at unsociable hours.
This represented a “major step change in the cost of employing people”, he added.
These challenges – described as a “final nail in the coffin” for profitability, come on top of the high production costs seen in recent years, plus a big drop in farmgate milk prices since 2023.
The combination means Wyke’s aged cheese – produced two years ago at the height of the market – is now being sold into a weaker market at significantly reduced margins.
Government energy policy was also problematic, with a lack of focus on food businesses producing their own energy via small anaerobic digestion plants – as Wyke had been doing successfully for many years – described as an oversight.
Slurry could be easily converted into power on farms, he said. “dairy farmers have a massive opportunity to contribute gas and electricity from AD plants,” he added, as they had a ready supply of inputs into the systems.
“If we want to make farmers more sustainable, they need to get more AD plants on farms.”
Given these challenges, Wyke was in constant discussions with its customers about passing on extra costs, Clothier said, and had begun simplifying its ranges – particularly for export customers – to concentrate on core lines. “We, like many other food businesses, are having to be less flexible,” he said.
“It’s about doubling down on quality and relevance and making sure we streamline the ranges because complication is something people are not prepared to pay for.”
Latest accounts filed at Companies House revealed Wyke’s operating profits fell by 39%, from £10.9m to £6.7m, in the year to 31 March 2024, primarily due to the fall in value of aged cheese stocks, coupled with an increase in borrowing costs – now one of the biggest outlays in producing cheddar.
However, sales grew by 7.2% to £160.3m, helped by strong support by its retail partners in the UK and overseas, Clothier said, which included a new nationwide listing in Wholefoods in the US for its butter.
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