Food and drink manufacturers show 'resilience'

By Mike Stones

- Last updated on GMT

Food and drink exports totalled £8.8bn during the first three quarters of this year; up 12% on the same period of last year
Food and drink exports totalled £8.8bn during the first three quarters of this year; up 12% on the same period of last year

Related tags: New product launches, Investment

UK food and drink manufacturers have shown their resilience by launching more than 8,500 new products this year, despite the toughest economic trading conditions in decades, the latest Business Confidence Survey from the Food and Drink Federation (FDF) has revealed.

Its third-quarter survey showed that this year’s product launches had increased by about 500, signalling that the sector is on course to its growth target of 20% by 2020.

Angela Coleshill, FDF director of competitiveness, said: “Food and drink manufacturing is a strong growth area and we have just launched our vision to grow the sector by 20% by 2020. While members are cautious about the overall economic picture, their confidence in their growth strategies holds firm and they are pressing ahead with new product launches, research and development (R&D), capital investment and training.

Resilient industry

“We are fortunate to be part of a resilient industry that appears to be withstanding the storms faced by other manufacturing sectors.”

Food and drink export sales strengthened as firms moved into new markets where demand for western goods has increased, according to the survey. Exports totalled £8.8bn during the first three quarters of this year; up 12% on the same period of last year when they topped the £10bn mark for the first time.

Of those surveyed, 72% reported an increase or static export sales in the third quarter.

24% of respondents predicted a fall during the next three months.

On the domestic market, 80% of respondents reported that sales were up or static. Also, 96% expected them to either rise or remain the same during the fourth quarter of this year.

Although key food commodity prices have fallen slightly, that has rarely been reflected in manufacturers’ costs. Nearly 70% of respondents reported an increase in their average costs during the quarter, with further rises expected in the final quarter.

Rising commodity prices

Respondents identified both rising commodity prices and increases in materials and fuel costs.

“Despite the on-going economic uncertainty, food manufacturers are continuing to grow their businesses,” ​according to an FDF statement. More than one third (36%) of those surveyed reported increased spending on R&D while 8% reported a fall. Nearly a half (48%) of respondents expected to invest in the fourth quarter of this year.

Developing employees’ skills attracted growing priority with 84% of firms expecting to invest more or the same in training during the third and fourth quarters of this year.

But the survey also revealed an 11% fall in business optimism from the second quarter of the year. Only 12% of respondents expressed ‘more optimism’ with concerns about the economy and the continuing European financial crisis.

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1 comment

Not resilience but fight for every inch of customer spending

Posted by Simon Wierny,

The title of this article is not accurate. The launch of 8,500 new products is a sign of a stagnating consumer market where food and drink companies are required to seek new sales markets with diverse range of new products. The market is tight and very competitive; hence the fall in business optimism.

Food and drink companies are trying to spread their portfolio of products in order not to lose money. Yes the market is more resilient compared with other sectors but it mostly to do to the fact that customers will start saving on food and drink. Moreover, with the amount of discounting going on in major supermarkets, the pressure is on suppliers who on one end fight rises in commodity prices and on the other, fight the never ending margin squeeze from supermarkets.

It is also obvious that export is the key. It is easier for longer shelf-life products – in particular drinks – to get into that sector. But for other products with short shelf-life, export potential is limited. I would also like to see some research confirming the increase in people development. It is one thing for companies to say they will invest in people (as opposed to wishing to invest), it is another thing to actually invest. How many firms will actually spend more in real terms is debatable.

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