Investment in renewable energy has helped Mackie’s of Scotland offset some cost inflation

Profits have slumped at Scottish ice cream maker Mackie’s despite the brand boosting market share to its highest-ever level as surging costs squeezed margins.

Overall costs jumped 11% at the business in the 12 months ended 31 May 2022 despite revenues dropping back 4% to £17.7m from the previous year’s record highs.

Mackie’s highlighted the doubling of cream prices, alongside rises in other ingredients and packaging and freight costs, as it reported that pre-tax profits had tumbled 59% to £1.7m.

The business warned in its Companies House accounts that profits were expected to fall further in the current financial year as costs continued to climb.

Mackie’s called the outlook for the business “challenging and unpredictable” but added revenues had since rebounded to rival previous record levels and its investment in renewable energy also helped mitigate input cost inflation.

Newly appointed MD Stuart Common said: “Like all businesses we’re facing major challenges resulting from rising costs throughout our operations, which has led to careful negotiations with our trade customers while we do our best to manage and absorb increases that may otherwise be passed on to the wider public.

“We’ve committed to unprecedented levels of investment into our operations to make us a more efficient and sustainable business, as well as being better insulated from some rising costs and position us for further future growth.”

Mac Mackie, executive chairman and one of three family owners, added the group was putting in place the foundations to be a bigger business and for growth in the years ahead.

“It’s been a pivotal year in our history,” he said. “We witnessed this encouraging step change in our sales and cut-through south of the border, predominantly as a result of us winning and building on second-line listings for our honeycomb ice cream with a number of supermarkets, including Sainsbury’s.”

Mackie’s added almost half-a-million customers across England, Wales and Northern Ireland in 2021/22 to achieve its highest-ever UK market share.

It comes as the overall ice cream category contracted in 2022 as demand for ice cream tubs softened from pandemic highs, with The Grocer’s Top Products survey revealing a 6.6% drop in total value to £470.3m.

“For a long time, it’s been the case that our Scottish customers have been able to choose from a wide range of our ice cream flavours, but those in the rest of the UK could typically only reliably get their hands on our best-selling traditional flavoured real dairy ice cream,” Mackie added. “We’re thrilled to be reaching new customers and determined to build on the success of these new listings.

“It’s also been a very difficult year due to the scale of the cost increases we have been subject to. While this looks set to continue and worsen, we have robust plans in place to ensure the family business rides out the storm and is here to be successful for generations to come.”

Domestic sales were flat year on year in 2021/22, but exports declined 24% to £2m as a result of lockdowns and other Covid restrictions in the foreign markets the business operates in.

Common highlighted an increase in US sales as providing “an exciting opportunity for growth”.