Revenue For UK Food and Drink Producers in Decline For First Time in 15 Years

 Breaking News
  • HKScan Strengthens its Meals Offering With Investment in Estonia HKScan, the leading Nordic food company, plans to invest in its Rakvere unit in Estonia. The €8 million investment will go towards modernising the unit’s frying department, including the expansion of the building and the installation of new cooking and packaging lines enabling implementation of new technologies and packaging solutions. Construction is to commence in [...]...
  • Food and Drink is at the Heart of the UK’s Largest Packaging Show Packaging Innovations, Empack and Label&Print returns to Birmingham’s NEC on 28 February-1 March 2018, and is set to be the most innovative show to date. With over 290 exhibitors already signed up, the UK’s largest annual event for the entire packaging supply chain will feature the latest industry innovations and technologies, alongside a major free-to-attend [...]...
  • AGRO Merchants Group Acquires Grocontinental AGRO Merchants Group, a global leader in cold storage and logistics solutions, announced today the acquisition of UK-based Grocontinental Limited. This transaction reinforces AGRO’s position as the leading cold storage and logistics provider in the United Kingdom and Ireland, deepens its commodity expertise, and substantially enhances its value-added service offerings for customers. David Grocott and Linda Grocott, third generation owners of [...]...
  • Trade Fair and More – The Event and Congress Programme For Anuga FoodTec 2018 Resource efficiency will be the primary focus of Anuga FoodTec 2018, the leading international supplier fair for the food and beverage industry, which will be held in Cologne, Germany from 20 to 23 March 2018. Around 1,700 suppliers from more than 50 countries will be presenting their new products for the production and packing of [...]...
  • TINE to Invest €77 Million in New Jarlsberg Plant in Ireland TINE, Norway’s largest farmer-owned dairy co-operative, is to invest €77 million in a dairy with the capacity to produce 20,000 tonnes of Jarlsberg cheese a year. The goal is to secure and strengthen Jarlsberg sales outside of Norway as export supports are phased out in 2020. This will make export of Jarlsberg from Norway unprofitable. “Jarlsberg [...]...

Revenue For UK Food and Drink Producers in Decline For First Time in 15 Years

Revenue For UK Food and Drink Producers in Decline For First Time in 15 Years
September 28
09:28 2016

Revenue growth for the top 150 food and drink producers in the UK slowed significantly in 2015, hindered by deflation and investor uncertainty, and turned negative for the first time since 2004, posting a historic 0.1% decline. This is according to OC&C Strategy Consultant’s 28th annual Food and Drink 150 report, produced in collaboration with The Grocer. It is the only sector-wide analysis of the financial statements of the top food and soft drink firms in the UK, and ranks companies by revenue.

Profit margins for the Top 150 also stagnated at 5.3% in 2015, sitting far below their 20-year average levels of 6.4%. As a result, return on capital employed has been pushed to 12.4%, its lowest level in 30 years.

Slowdown in M&A Activity

The damaging impact of deflation has been compounded by a distinct slowdown in merger and acquisition activity in a typically deal-rich industry. M&A totals reached £3.9 billion in 2015 but investor confidence dropped significantly in light of Brexit uncertainty, and big businesses in the UK failed to make a compelling case for industry consolidation. As a result, it has chalked up a paltry £0.8 billion across just five deals in 2016 (year-to-date) – less than a quarter of levels seen in the previous year.

OC&CLogoWhile big producers struggle to grapple with the changing face of the industry, small brands and large own-label producers are the only groups to post continued revenue growth in 2015, reporting 1.2% and 0.4% revenue growth year on year respectively. The growth of small brands is possible because of the unique environment created in the UK for enterprises to flourish. London is a well-known incubator for start-ups, and British consumers are particularly receptive to exciting and engaging new brands, which marries well with the disruptive, digital tactics they are employing. This, along with sterling’s Brexit-driven devaluation, makes them even more attractive to foreign investors.

Will Hayllar, Partner at OC&C Strategy Consultants and author of the report, comments: “For years, the top 150 food and grocery companies in the UK have enjoyed revenue growth that has far out-paced overall grocery spending, driven by M&A activity and a focus on leading brands. That has now been turned on its head, and we’re facing the dawn of a new era for the industry. Small branded businesses are coming to the fore, boosted by the appetite for niche food and drink brands in the UK, and are presenting the biggest source of revenue growth for the sector. A devalued currency makes these small and innovative new businesses an attractive prospect for overseas investors, whilst big producers must redouble their efforts to restore growth or acquire it.”


Will Hayllar, Partner at OC&C Strategy Consultants.

Will Hayllar, Partner at OC&C Strategy Consultants.

While it certainly presents new challenges, Brexit could have the potential to be the saving grace for big producers. The currency devaluation of sterling alone is likely to have a significant impact on the current landscape by reversing deflation, which has been a major feature of the food industry for years. OC&C Strategy Consultants has identified four key implications of this for UK suppliers. First, they will need to rapidly change from having deflationary conversations with retailers to talking seriously about cost pass-through, particularly as inflation is now expected across the sector. Second, exporters must recognise they will be at an increased advantage and move swiftly to capitalise on this, particularly in places where UK-origin brand values are strong. Third, across the board, reduced-cost UK produce means there will be a real opportunity to dislodge overseas suppliers, particularly in categories that receive a high volume of produce from overseas such as the pork and chicken industries. Finally, producers must invest to drive productivity in the face of increasing labour costs fuelled by the National Living Wage and a likely reduction in the supply of migrant labour.

Currency devaluation is also likely to boost M&A activity out of its recent lull. Cheaper UK assets, combined with continued innovation from UK producers and a predicted slow process for Brexit negotiations, means that M&A activity cannot be on hold indefinitely and is likely to rebound.

Will Hayllar continues: “Brexit uncertainty can be turned into opportunity, but producers must be proactive if they are to do this. With sterling at historic lows, there’s no longer such a price premium for buying British and this opens up a market that had previously been facing stiff competition from cheaper overseas suppliers. Along with aggressively pursuing these growth opportunities, the time has come to kick-start M&A strategies to capture growth. Recent sector performance cannot continue, and the time has come for food and drink companies to reverse their recent fortunes.”

OC&C and The Grocer’s Food & Drink Top 10 2016

  1. Associated British Foods (up one from number 2)
  2. Boparan Holdings (down one from number 1)
  3. Arla Foods (holds position at number 3)
  4. Unilever UK (holds position at number 4)
  5. Mondelez UK (holds position at number 5)
  6. Coca-Cola Enterprises (holds position at number 6)
  7. Nestle UK (holds position at number 7)
  8. Bakkavor (holds position at number 8)
  9. Princes (holds position at number 9)
  10. Moy Park (up five from number 15)

About Author



Related Articles

Food & Drink Business Conference & Exhibition 2016

Upcoming Events

  • January 8, 2018RAI Exhibition
  • January 16, 2018Sival Plant Production Trade Show
  • January 17, 2018Dutch Organic Trade Fair
  • January 17, 2018Anfas Food Product
AEC v1.0.4

find food jobs

The Magazine

F&D Business Preferred Suppliers

New Subscriber

Subscribe Here