Difficult year to come for UK food and drink production

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28th October 2014 16:34 - FMCG

Research by OC&C Strategy Consultants has revealed a tough year ahead for UK’s 150 largest food and drink producers, due to rising pressure from supermarkets, opposing discounters.

The revenues of OC&C’S Food & Drink 150 have revealed that results have increased from 5.6% in 2012 to 5.8% in 2013, which is an incremental improvement.

Profit margins have remained unchanged since 2012 at a near all-time low of 5.2%, which is lower than the supermarket wars of the 1990s.

The pressure from the large supermarket chains are creating difficult conditions for food and drink producers. As a result of this, the performance of the grocery retail market has plummeted to historic lows this year, as year-on-year, growth has decreased to 2.8% in 2013 from 3.7% in 2012.

Companies that have reacted promptly to the changes within the grocery retail landscape and the changing shopping habits of consumers, have been amongst the best performers of 2013, in the Food & Drink 150. It can be seen that the smaller food and drinks producers were the companies who adapted the best to changes. This resulted in a 0.2% increase in profit margins from 8.3% in 2012 to 8.5% in 2013.

On the other hand, larger companies with turnovers greater than £500m have faced declining margins continually. Margins of the bigger companies fell by 0.1% from 7.4% in 2012, to 7.3 in 2013. Unbranded producers saw a 0.5% decline from 3.4% in 2012 to 2.9% in 2013.

 

Amongst the best performers of 2013 were:

· Innocent – Now owned by Coca-Cola, Innocent has broadened its portfolio to include products such as juices and ready meals. This expansion has seen a 25% revenue growth and profit margins of 13.7%. Now owning a 9.6% share of the UK’s fruit juice category, Innocent have been able to increase their ranking, in the Food & Drink 150, by 9 places from 84 to 75.

· Haribo – Showcasing seasonal ranges and adjusting already prominent products has allowed Haribo to increase their profit margins by 0.5% and resulted in a 13.2% year-on-year growth. In the rankings Haribo have climbed from 99 to 97, in the Food & Drink 150.

· Quorn – In the wake of the horse meat scandal, Quorn firmly consolidated its position as the market leader of meat substitutes as a result of increased advertising spends and sprucing up its product range. Since 2011, the UK revenues have increased to 18.6% since 2011. Innocent now rank at 102 in the Food & Drink 150.

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