Business Leaders’ Forum

Food Manufacture’s Business Leaders’ Forum tackles key topics

By Michael Stones

- Last updated on GMT

Horsemeat, Tesco and 2 Sisters all featured in Paul Wilkinson’s review of 2013 at the Business Leaders’ Forum
Horsemeat, Tesco and 2 Sisters all featured in Paul Wilkinson’s review of 2013 at the Business Leaders’ Forum

Related tags Food price inflation Business leaders Food

Horsemeat, the waning power of retail giant Tesco and 2 Sisters Food Group’s acquisitions featured in the review of 2013, at Food Manufacture’s Business Leaders’ Forum from its chair Paul Wilkinson.

The horsemeat scandal had sparked a new era, characterised by “trust and being consumer and supplier-friendly,”​ said Wilkinson, who is also chairman of Thorntons and the National Skills Academy.

The food industry took “a big knock”​ over consumers’ trust in the supply chain after the scandal, so the efforts of the grocers to do what they can to restore confidence have to be welcomed.

Wilkinson also highlighted fundamental changes in shoppers’ buying habits, which are likely to provide difficulties for supermarkets. “Big stores are out and frequent local trips are the new norm that will also challenge the grocers.”

Supermarkets will also be challenged by a significant fall in food price inflation, he predicted. The drop will be driven by high grain stocks, the US returning more land to food production from fuel crops, as fracking grows and improved growing conditions for cereals.

‘Terrifying the grocers’

“While this is potentially good news for the politicians and consumers, it must be terrifying the grocers​,” said Wilkinson. “Without any inflation, the stalling volumes will make sales growth pretty elusive for most. Anyone with a strong commodity driven price increase should be welcomed at Cheshunt ​[Tesco HQ] and other buying offices as the saviour.”

In fact, a key change over the past year was that Tesco “could no longer be seen as king of grocers; the crown must go now to one of the same name as Sainsbury for outperforming the market”.

Neither was Morrisons immune for the trials of most of the major supermarkets. “At Morrisons, the consultants who supported vertical integration, rather than diversifying the estate must now be destroying all relevant documentation,” ​he said. “Of course, they were correct, if the core assumption was that growth is guaranteed. But when sales are falling, the double whammy of lost retail margin and manufacturing overhead recovery really bites.”

‘Urged to do so by the Beeb’

Wilkinson went on to highlight all the free publicity that Aldi and Lidl have received – particularly from the BBC. “It must have done them a power of good and they won’t be able to believe their luck. Who could resist having a look when urged to do so by the Beeb?

The epitome of English media promoting the German food retailers ... whatever next!”

As regards food and drink manufacturers, Wilkinson said: “We need to remember that much of our success has been driven by the outrageous demands of our customers both in terms of value, thus requiring productivity improvements, and also innovation.”

The manufacturing sector had done well in retaining an enviable reputation as a whole, he added.

Describing 2 Sisters “the new kid on the block following its acquisition spree”, ​Wilkinson hoped the firm was as good at running things as it was at buying businesses “which is where many before have failed”. ​And he also highlighted what he termed “a few worrying signs here”​ from their latest bondholders’ report.

Wilkinson also noted acquisitions made by US firm Hain, which seemed to think: “Cash does not matter … worry about that later. Just do the deal. Equity is cheap.”

Adding a personal note, as chairman of Thorntons, Wilkinson said the British love affair with chocolate continues to grow stronger and was easily excused in the context of healthy eating. “When you have had your eighth salad in a row, a box of Continental must look like nirvana. Roll on healthy eating.”

The Business Leaders’ Forum, staged in association with law firm Stephenson Harwood, was sponsored by Agrantec, Intertek, Tata Consultancy, plus insurance firm Aon, Columbus IT and NSF International.

Watch out later this week for more news, including video interviews, from the event staged yesterday (January 21) in central London.

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