Source: Heck

Heck is planning to focus on its core, profitable lines

Premium sausage maker Heck is shifting its focus from growth to strengthening its bottom line after falling to a loss last year.

The group has dialled back its category expansion ambitions to focus on core, profitable lines after founder Andrew Keeble admitted the brand was “trying to deal with too much” in pursuit of turnover growth.

He told The Grocer the group had cut a “huge amount” of SKUs to refocus on “doing a few things really well”.

As a result, it has scaled back its ambitions in the vegan space. Keeble admitted its plant-based range had become too large.

“I suppose we slightly believed what the press were telling us about everyone stopping eating meat, but that hasn’t really happened,” he said.

“We’re still the fourth largest brand in vegan, but that isn’t much to shout about because it’s a tiny market and you’re seeing a lot of products disappearing off shelves,” he added.

Heck had previously set out a target to become a £50m business by 2022, but it is now rethinking that goal after a “very tough” year, in which the group fell to a loss.

Newly filed accounts for the year to 31 July 2022 showed a pre-tax loss of £518k, down from a profit of £116k in the previous financial year. Sales also fell marginally, from £27.7m to £26.2m.

The group explained it had suffered from a sharp escalation in both direct and non-direct cost inputs, including increased labour costs due to post-Brexit and Covid shortages and high inflation of key commodities such as wheat.

Keeble said cost pressures remained intense despite an easing of wheat prices, which had led to hikes in the prices of chicken since war broke out in Ukraine. As the price of chicken has begun to ease, the pork market has “gone berserk” with prices doubling year-on-year year due to scarcity premiums related to the long-term impact of inflation on pig farmers.

As part of this drive, it has invested significantly in automation in its factory and consolidated production from other sites.It is also bolstering its premium credentials by investing £1m in switching the casings of its pork sausages back to collagen after four years to improve the products.

In this environment, Heck was now focusing on “core profitability and driving efficiency in the business”, Keeble said.

The founder said the brand had been successful in pushing through “three or four” rounds of necessary price increases with retail partners. Since year-end the business was seeing the benefits of its focus on efficiency and cost recovery.

He also stressed the brand had hit a record high of 65% of the branded premium market in meat. Heck remained in a “good place” despite the longer-term decline of the wider sausage market, he added.

The brand retains “lots of cash in the bank” and will continue to invest in the brand, NPD and its factory processes.Keeble said Heck had considered pursuing acquisition targets given its strong balance sheet, but was mindful of “taking our minds off the job in hand”.

Two years ago, Heck hired Spayne Lindsay to find a potential buyer or investment to maintain its rapid growth and fund further diversification into new product categories.

However, Keeble said the brand now was not looking for external investment and is instead set on a “straight, steady course for the next two years to focus on profitable growth while continuing to invest in the brand”.

It currently has a minority private equity partner in Panoramic, which holds a 25% stake in the company following a £1m investment in its early days in 2014.