Job cuts have been announced by UK cake-decoration company Real Good Food today (30 September) as it struggles to combat a “perfect storm” of challenging market conditions.

Citing supply shortages, “erratic” deliveries of ingredients and cost inflation, the company said it is looking at a “radical reform” to claw back profitability.

In May, Real Good Food launched a voluntary redundancy programme that was taken up by 51 employees but said “further headcount reductions” were now necessary.

The Liverpool-based food manufacturing business is looking to save GBP3.2m (US$3.5m) in overhead costs and has begun talks with customers on price resets. It is in discussions with financial backers to secure an additional $2.7m of funding.

Its shares plummeted by 31% to 0.9p each in London this morning after the announcement, having sat at around 1.4p this month.

“Trading conditions have been challenging since the start of the calendar year,” the company said in an announcement to the London Stock Exchange. “These macro-headwinds, fuelled in part by the War in Ukraine, have continued through the summer and are expected to continue for the immediate future given the wider macro-economic outlook.”

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By GlobalData

Volumes were 29% down for the first five months of the financial year compared to the same period last year, and 16% lower than its pre-Covid benchmark.

The cost of ingredients has soared by about 30% overall, it said, and the cost of sugar – a key ingredient – has doubled.

The cake-decoration company added demand for its products has also fallen due to the cost-of-living crunch adding pressure on households’ disposable incomes.

Real Good Food, which now focuses on cake decorations, sold snack-bar business Brighter Foods to The Hut Group last year.

Executive chairman Mike Holt said: “Market conditions have remained extremely challenging due to a perfect storm of rising costs and lower revenues resulting in a reduction in management’s expectations for the current financial year.

“To mitigate this, we are putting into effect a more radical programme to reduce costs, protect revenues and preserve the inherent value of the group. We retain the support of our loan holders and major shareholders to undertake this for which we are grateful.”