Cranswick laid bare the tests posed by a “relentlessly challenging operating environment” in the UK, marked by soaring inflation and tightened consumer budgets, as it unveiled higher revenues but an easing in profits.

The houmous-to-gammon food group, which runs substantial pig and poultry farming operations, said that “widespread inflation”, which in October reached a 41-year high of 11.1% in the UK, had become more “pronounced” in its core retail meat market too.

The price of fresh of poultry, as measured in the half year to late October, had soared by 14.6% year on year, with that of lamb up risen by a “significant” 11.0%, ahead of beef on 8.9% and pork on 8.0%, data from analysis group Kantar showed.

Against that backdrop, total UK retail protein sales had shrunk by 7.0% in the half year to 910,000 tonnes, falling back below levels seen in the same period of 2019, pre-Covid.

Discount supermarket chains Aldi and Lidl had – with sales value in fresh and chilled foods up 27% and 38% respectively in the half year, according to Kantar – outperformed traditional rivals such as Sainsbury’s, on 14.9%, and Morrisons, with 0.2% shrinkage, as consumers had become more price conscious.

‘Cost of living pressure’

Meanwhile, the out-of-home channel, which includes hotels, restaurants and sandwich bars, slowed its revival from a pandemic in which the sector suffered particularly badly.

A rate of recovery reported at 32% for 2021 had halved to 15.6% this year, leaving sales, at £58.5bn, still well short of the £73.9bn reported for 2019, according to IGD analysis.

In 2023, growth was forecast slowing further, to 4.6%, Cranswick reported, saying that “cost of living pressure will continue to constrain performance”.

‘Relentlessly challenging’

Adam Couch, the Cranswick chief executive, said that the group was negotiating “what continues to be a relentlessly challenging operating environment”, with the group noting “inflationary pressure across the cost base”, as well price rises of its products.

The group had in the half year to September 24 achieved 10.7% growth in like-for-like sales.

However, this reflected in the main price rises, with Cranswick’s overall volumes “static on a like-for-like basis” as growth in convenience and gourmet foods offset a 2.8% shrinkage in fresh pork.

Mr Couch added that the group had “made further commercial and strategic progress” despite the market conditions, extending investment in capacity expansion as well as an efficiency drive.

In pig farming, this included the purchase of an additional herd to take Cranswick’s production to 24,000 head per week, lifting above 40% the group’s self-sufficiency in pork.

Margins eroded

The group reported overall sales, including contributions from acquisitions, up 12.4% year on year to £1.12bn.

However, underlying operating profits eased by 1.7% to £68.4m, as rising costs of raw materials and energy more than offset the sales gains, reducing the operating margin by 0.9 points year on year to 6.1%.

Adjusted pre-tax profits fell by 3.4% to £66.0m.

Market reaction

The results were well received in the City, where Cranswick shares rose by 3.7% to 3201p in lunchtime deals.

House broker Shore Capital said that the group’s “modest” stockmarket rating, which it estimated at 14.8 times in terms of share price to forecast 2023 earnings, “represents an opportunity for investors to access a very high quality business.

“Like so many companies in the British food system, Cranswick has faced an obstacle course,” including hurdles such as a labour shortage in the pig sector as well as Brexit, Covid and the cost-of-living crisis.

“Amongst all this, Cranswick has remained focused on what has positioned it so well over many years.”