The commercial potential of offshoring manufacturing to low-wage economies in central and eastern Europe was highlighted last month as the latest in a long line of UK food companies announced their possible transfer of operations there.
Following in the footsteps of Terry's and Masterfoods, Leaf UK plans to close its Chewits facility in Southport, Merseyside and move to eastern Europe. Also, chocolate manufacturer Elizabeth Shaw is to close its Bristol factory and switch production to third-party sites, some of which could be in central or eastern Europe.
Leaf UK's operations and technical director Sean O'Keeffe, said: "Utilisation at our plant is less than 40% and despite recent improvements, it's not viable to continue production there. It's also over four floors, which isn't ideal. We're looking at sites all over eastern Europe."
Meanwhile, cake maker Inter Link Foods revealed turnover at its Polish subsidiary had more than doubled since its acquisition 14 months ago.
Polish cake and cookie firm Cukiernia Mistrza Jana (CMJ), which was turning over £5m when Inter Link acquired it in December 2004, is forecast to make £12m this financial year following a £563,000 investment.
CMJ's growth is primarily from extra business with existing UK retail customers.
However, it could potentially turn over £20m if another £1m were invested into the plant and further deals were struck with continental retailers, according to analysts at Numis Securities. "We believe there are substantial opportunities to increase the customer base," said Numis.
The second largest cake supplier in the UK behind Manor Bakeries, Inter Link is seeking further acquisitions in Hungary and the Czech Republic, said executive chairman Alwin Thompson.
Service to UK customers from the Polish site was as good as from UK plants, said Thompson. "We have been able to develop the logistics chain to the extent that it takes only 24 hours from production to the products arriving in the UK.
"We have also found the quality and dedication of our new colleagues in Poland to be of the highest order and we now intend to develop our operation in central Europe."
The company posted a 26.2% rise in pre-tax profit to £2.62m on sales up 51.8% year-on-year to £67.2m in the six months to November 5, 2005. Excluding the impact of acquisitions, like-for-like sales were up 9% compared with 4.8% growth in the overall retail cake market over the period, said the company.