The boss of north-east baker JG Ross has revealed the business is facing a near £800,000 rise in costs due to energy and employment law changes.
The increase in National Insurance contributions by employers (NICs) and a jump in the minimum wage has been described as “additional financial strain”.
JG Ross commercial director Graeme Ross believes the changes will “increase the administrative burden to many businesses especially those in food and drink”.
He was speaking as newly filed accounts for the year ending March 30 2024 show pre-tax profit dropped to £1 million in 2024 from £1.3m recorded in 2023 for the Inverurie-headquartered baker.
Turnover, for the financial year to March 30 2024, has risen to £16.4m from £15.4m in 2023.
‘Significant pressure’ on JG Ross operations
Graeme said a “conscious decision” was taken by the business to keep customer price increases to a minimum during “challenging times” which they knew would impact profit.
He said: “Like many businesses, 2023 presented us with a range of challenges, particularly from external factors.
“Rising costs across key ingredients, energy, and transportation put significant pressure on our operations.
“In addition, recruitment and retention of staff in a competitive labour market remained a priority.
“Economic uncertainty also affected consumer spending patterns, requiring us to remain agile in meeting changing customer needs.”
JG Ross has shops in locations including Aberdeen, Inverurie, Alford, Oldmeldrum, Stonehaven and Insch.
Prices on the rise across the company
Cost of raw materials impacted trade and the end of a long-term gas contract is expected to see the renewal price increase by £65,000 per year.
Graeme said: “We have benefited from a long-term gas contract that provided some stability. However, this contract is set to expire early next year, and renewal costs are anticipated to be 78% higher, which will significantly impact our overheads.
“Additionally, the cost of key ingredients such as dairy and dried fruits continues to rise.
“Wheat yields and quality in the UK were lower this year, which is likely to drive up global prices further.
“Managing these rising costs while maintaining product quality and affordability remains a key challenge for us.
“The changes in employment law will also increase the administrative burden to many businesses especially those in food and drink.”
Wage bill on the up
The increase in National Insurance contributions (NICS) and minimum wage is predicted to cost JG Ross an extra £700,000 per year.
The average monthly number of employees, including directors, during the year was 311, up from 294 in 2023.
The wage bill increased to £5.7m for the year from £5.2m.
Graeme said: “The increase in national insurance contributions is a significant concern for the business, with costs expected to rise by approximately 56% next year.
“This substantial increase places additional financial strain on our operations, particularly in relation to employing part-time staff, which is a critical part of our workforce.
“The increase in the minimum wage, alongside the rise in national insurance contributions, is expected to add 12%–14% to our annual wage bill.
“As a business that prides itself on handcrafting high-quality products, labour costs are a significant part of our operations.
“These increases naturally have a notable impact on our overall costs, particularly in relation to employing part-time staff, who are essential to maintaining our flexibility and service levels.
“While we fully support fair wages and investing in our workforce, managing these changes will require continued focus on efficiency to ensure we uphold our commitment to quality and affordability for our customers.”
Butteries still a top seller
Graeme said turnover is up in most of the shops and the business has recently launched a new click-and-collect app from customers.
Some of the JG Ross top sellers includes butteries, steak and macaroni pies, yum yums and stovies.
Graeme said: “A particular highlight is our iconic butteries, which are a true testament to our commitment to craftsmanship.
“Our skilled craft bakers’ hand-make over 180,000 butteries every week, ensuring each one meets the high standards our customers expect and love.”
Looking towards the future of the business Graeme hasn’t ruled out opening more JG Ross bakeries across the north-east.
He said: “The retail environment remains challenging, and the increased costs associated with the National Minimum Wage and National Insurance contributions will only make things tougher in the short term.
“While we’re not actively seeking new sites, we remain open to opportunities and would give any potential expansion serious consideration if it aligns with our long-term strategy.
“Our primary focus, however, will be on strengthening and growing our existing business.”
Conversation