Rising input costs and the credit crunch are taking their toll on the nation's food manufacturers, with just 46% of respondents to this year's Food Manufacture survey expecting their profit margins to improve over the next 12 months compared to 66% last year.
Only a third of those surveyed said they had successfully managed to pass on price increases to customers, while a whopping 89% claimed cost increases in raw materials represented a major threat to profitability. And the pressure was only likely to increase as the supermarkets launched an all-out price war this summer in a bid to woo punters with cut-price deals.
One respondent said: "The key issue for us is that the major retailers are flatly denying any price increases and do not believe the commodities markets should have any effects on our prices to them. They are also demanding contract prices for one year when they will only guarantee business for us for three months."
As the credit crunch restricted access to finance and rising costs ate into margins, less than half of respondents said they were planning more capital investment this year than last, while some had also been forced to put the brakes on recruitment and training.
The results follow a report produced by Axis Management (see left) predicting an "unprecedented level of consolidation" in the sector over the next two to three years.
l See 'Life on the Edge', p26.