Retailers’ restructuring to impact food manufacturers

By Dan Colombini

- Last updated on GMT

Related tags: Firm, Retailing, Industry

The impact that restructuing plans at retailers such as Tesco will have on manufacturers has divided expert opinion
The impact that restructuing plans at retailers such as Tesco will have on manufacturers has divided expert opinion
The impact of retailers’ restructuring plans on their food manufacturer suppliers has divided city analysts.

The news comes after Morrisons last week announced plans to modernise its core business in a bid to keep up with rivals Asda and market leader Tesco.

But Clive Black, an analyst at Shore Capital, told FoodManufacture.co.uk he did not expect firms to be squeezed by the multiples despite tough industry conditions.

He said: “In terms of manufacturers, it will be a continuation of process and more of the same I’d imagine.

“The industry conditions are tough but I don’t see the retailers beating the manufacturers up. I expect an orderly market and I don’t foresee price wars.​”

Own-label

Black also said that he expected some firms to benefit from the changes but stressed that any activity would vary between sectors.

I expect own-label to be an area of considerable activity​,” he added.

However, Julian Wild, food group director at law firm Rollits, warned that the industry was “a battle field​” and predicted further tough times ahead for many suppliers.

He said: “I think we can expect more consolidation and they [manufacturers] will certainly be divesting more businesses. There will be a key emphasis on focus and consolidation to give them a better position than they’ve had in the last few years.”

“I don’t think things will have changed for many firms. It will remain tough for all of them as it’s a battlefield out there. It will be the same, manufacturers always get squeezed and life doesn’t get any easier.​”

Morrisons revealed its plans on Friday following the release of its financial results for the period ending January 29.

Online sales

The UK’s fourth largest retailer announced plans to modernise its business through a diversification into convenience stores, online sales and non-food.

The firm is expected to roll out a number of smaller convenience stores this year, following the successful opening of three similar stores last year.

Tesco also revealed plans to increase focus on online sales and home delivery following disappointing results over the all-important Christmas period.

The largest retailer was then left reeling in January after a shock profit warning wiped £5bn off the firm’s stock market value.

Earlier this month the firm responded by confirming that it would create 20,000 new jobs in the UK, a move that was backed by Prime Minister David Cameron.

He said: “This is a massive confidence boost for the UK economy. Tesco is one of the world’s leading companies and the biggest private sector employer in this country​.

Its commitment to creating jobs and opportunities for young people at what is a difficult time for the economy is fantastic news for the UK as a whole and for those people they will help into work.”

 

Related topics: Chilled foods

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