Losses almost tripled at the UK’s largest poultry producer last year, with 2 Sisters Food Group warning of mounting pressure from inflation and labour shortages.
2 Sisters, controlled by “chicken king” Ranjit Singh Boparan, reported £95.5mn of losses in the year to July 2021, up from £34.3mn a year earlier, according to accounts filed at Companies House. It warned of accelerating price rises for chicken feed and a “significantly restricted” pool of workers.
Chicken was among the UK’s cheapest protein sources but has been severely affected by rising prices. The retail price of a kilo of chicken rose by more than 20 per cent to 311p between January 2021 and May 2022, official data show.
Late last year, Boparan warned of a “different world where the shopper pays more”. But 2 Sisters, which processes more than 10mn birds a week in the UK and Europe, said in its accounts that the speed of cost rises had made it harder to pass them on to customers.
“The timing and speed of inflation has meant the opportunity to mitigate all the cost increases has not been achieved within the year,” it said, adding that the company was pushing to change its contracts with retailers to pass on price rises more quickly.
It said it had a “high level of confidence in [the] ability of the business to recover future inflations”.
However, 2 Sisters’ parent company, privately owned Boparan Holdings, warned of risks to its future if retailers did not agree to higher prices.
“In the event that . . . price increases are not agreed by the retailers on a timely basis, in combination with the adverse impact on the financial covenant test [for the group’s loans], this could represent a material uncertainty which may cast significant doubt upon the group and company’s ability to continue as a going concern,” it said.
The companies declined to comment, but a person briefed on the situation said that scenario had not so far materialised. “Clearly, there were no covenant issues in relation to going concern,” the person said.
2 Sisters, which employs 16,500 people making food including ready meals, pizzas and pies along with processing chicken, reported a 10.5 per cent increase in turnover to £1.4bn.
But its gross margin shrank from 8.8 per cent to 6.4 per cent because of “production inefficiencies” resulting from labour shortages and the rise in feed costs.
It was also affected by site closures during the pandemic, while poultry plants have been hard hit by post-Brexit immigration rules that stemmed the flow of low-paid labour from eastern Europe.
Ranjit Singh Boparan said last year that “the days when you could feed a family of four with a £3 chicken are coming to an end . . . Food is too cheap, there’s no point avoiding the issue.”
Boparan Holdings made a pre-tax profit of £52.6mn during the year, up from £1.8mn a year earlier, thanks to £137.8mn of gains from selling businesses including Fox’s Biscuits.
The company, chaired by former Co-Op chief executive Richard Pennycook, said it was “working hard to simplify our operations and our product offering” to deal with long-term changes in the labour market.
