'We will survive scarcity and recession'

By Rod Addy

- Last updated on GMT

Related tags: Food

'We will survive scarcity and recession'
Despite facing huge challenges – from plummeting consumer confidence to food security – delegates at Food Manufacture's 2012 Business Leaders' Summit were more optimistic about the industry's prospects than they were at last year's event in January 2011.

"What we haven't anticipated is how bad the euro crisis is going to be," ​said Ian Dobbie, md of Delifrance UK, one of many bosses at last month's event. "The current climate will mean a consumer recession. Unemployment is going to affect consumer confidence and it's going to get worse."

Many believed input costs would remain an issue. Philip Wilkinson, director of 2 Sisters, said he feared a predicted embargo on Iranian oil would push oil prices up and make biofuel more attractive, leading to even more crops being diverted to biofuels. This would push animal feed costs up, driving food prices higher. The EU approved an embargo from July 1 on January 24, which took crude oil prices above $110 a barrel.

Neil Court-Johnson, md of Peter's Food Service, said beef prices in particular concerned him, while Peter Pickthall, HR director at R&R Ice Cream was worried about sugar price hikes. Jeremy Woods, md of Stiletto Foods, said: "I also endorse the comments that commodity prices are a growing issue."

However, Dobbie said he believed food ingredient deflation would start to kick in sooner than expected. Sion Roberts, senior partner at European Food and Farming Partnerships, predicted the industry could see raw material prices falling by the autumn, although low consumer confidence would partly offset this.

Delegates also saw availability as an issue. "We have seen the first signs of scarcity of resources,"​ said Roman Manthey, group operations director at Coca-Cola Enterprises, who cited sugar shortages as an example. Consequently, security of supply was crucial. "The worst case scenario is we can't deliver products to customers."

Other financial fears included pension problems. Geoff Eaton, former chief executive of chilled foods firm Uniq, said: "The industry will be divided between those that have pension problems and those that don't. Those that don't will be in a much stronger position."

Unilever workers went on strike last month over proposals to cut pensions for up to a third of its staff and Premier Foods is grappling with a large pensions liability. Uniq handed over 90% of its shares to its pensions scheme in March in return for the eradication of the £430M scheme's deficit, before being bought by Greencore.

On the subject of mergers and acquisitions, Mark Lynch, director of Windyridge Cheese, said: "A lot of the food industry is at overcapacity and UK corporates will continue to drive consolidation in 2012."

The event was held in London and sponsored by Eversheds, Chep, Lauras International and Goldteam Recruitment.

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