When you think of shortages in the raw materials market, you probably think of wood, steel or plastic rather than sugar, eggs and chocolate. Yet that is the reality for the Belgian Lotus Bakeries – even a biscuit manufacturer cannot escape shortages and price increases.
And that while Lotus Bakeries wants to make good progress. In January, the share price rose to a staggering 6,000 euros per share. Since the company was listed on the Brussels stock exchange in 1988, the share has not been that high. Lotus Bakeries achieved a turnover of 750 million euros last year, 13 percent more than the year before. The net profit amounted to more than 93 million.
The family business from Lembeke/Kaprijke, founded in 1932, has three divisions. The first is Lotus Biscoff, built around the classic speculoos biscuit, known in the Netherlands as ‘het Koffieleutje’. The second industry is Local Heroes, products made and sold in specific countries. Lotus Bakeries in the Netherlands, for example, owns the gingerbread brands Peijnenburg and Snelle Jelle. The latest launch, since 2015, is the Natural Food line, with fruit, nut and grain bars from, among others, the Näkd brand – vegan and gluten-free.
“Adding the Natural Food pillar has improved the company’s image,” says Kris Kippers, analyst at investment bank Degroof Petercam. He refers to the trend towards healthier and more sustainable food. Lotus Bakeries, originally a player with ‘a high sugar content’, has cleverly responded to this, according to Kippers.
The Natural Food branch was the biggest driver of sales growth last year, followed by the Biscoff line. “The 2021 results once again confirm that Lotus Bakeries’ strategy is working,” writes Guy Sips of investment bank KBC Securities in his analysis of Lotus Bakeries, and “reinforces belief in the company’s international growth ambitions with Biscoff and Natural food”.
Kippers agrees: “The growth is purely organic, which is very strong.” While Lotus Bakeries was initially mainly active in the Benelux and France, the United Kingdom and the US are now also major markets.
In the meantime, the company has set up a fund for investments in promising start-ups. This investment fund currently has 40 million euros in cash and has interests in five young companies. One of these is Oot Granola. This Amsterdam-based company makes fresh organic, sugar-free granola and delivers it to your home.
By early participation in such companies, Lotus Bakeries is in an excellent position if it wants to take over these start-ups. This will prevent you from having to compete with “the Nestlés of this world” in such a takeover, says Kippers. “This way you already have a foot in the door.”
The clearest bump in the road for Lotus Bakeries is, in the words of Sips, ‘unprecedented cost increases’ that will inevitably affect the company this year. In addition to the more expensive ingredients for biscuits and bars, Lotus Bakeries is also faced with rising costs for energy, transport and packaging materials. The company therefore announced price increases for its products in order to still meet its margin targets.
Kippers nevertheless expects a temporary dip in the margin, but he also points to developments that could compensate for this. There is, for example, the factory that Lotus Bakeries opened in 2019 in Mebane (North Carolina) in the United States. “In terms of production, it is not yet reaching the maximum volume, but the better it runs, the better the margins.”
A version of this article also appeared in NRC on the morning of 11 April 2022