Commenting on the uncertainty surrounding Brexit, Mondelēz chief executive Dirk Van de Put said the company was preparing for the worst while hoping for the best – with the worst being a hard Brexit.
To mitigate the disruption caused in the short- and medium-term, Mondelēz had invested in additional resources in logistics operations, said Van de Put. That included renting more trucks and warehousing space to facilitate the stockpiling of additional raw and packaging materials in the UK and in Europe.
“Brexit could come with other effects like devaluations or tariffs and may be a loss of consumer confidence in the first part,” Van de Put added. “Those types of things we have not included in our current guidance, but we are preparing for it in case it would happen.”
Extensive contingency plan
“Over the long-term, we believe that it will stabilise itself and we will come back to where we are today. Obviously, there’s a huge difference between a hard Brexit and a softer Brexit so, as it relates to the hard Brexit, our contingency plan is quite extensive and it basically is focused on the disruption and the ease of the flow of the goods.”
Mondelēz’s comments were made public shortly before the latest HIS Markit/CIPS manufacturing Purchasing Managers’ Index (PMI) found a record number of businesses stockpiling in the UK. The data provides a single-figure tracker of the performance of the sector.
Commenting on the report, Barclays head of manufacturing Helena Sans said: “Stockpiling seems to have become order of the day and will no doubt continue over the coming months as uncertainty continues to bite down hard on the sector.
“When those stocks run down and given the ongoing reluctance amongst manufacturers to make much-needed investment decisions, the impact on growth in output is inevitable and looking increasingly under pressure for the first quarter of 2019.”
Lloyds Bank’s head of manufacturing Dave Atkinson echoed these concerns, warning it wasn’t indicative of long-term sustainable growth.
He added: “In the coming months, any certainty on the shape of the UK’s future trading relationship with the EU could prompt a wave of investment in the sector and consequently a boost in the PMI.”
Meanwhile, Dairy Crest confirmed it had begun stockpiling raw materials to counter the unpredictability of a disorderly exit for the EU.
In a statement, Dairy Crest said: “While our supply chain and customer base are primarily located in the UK, we are taking steps to reduce our exposure, including accelerating the purchase of ingredients and packaging materials.”