Despite the best efforts of many of us to eat our own weight in meat and other seasonal heavy food during December, two venerable names in British butchery have fallen into administration so far in January.
Award-winning Price & Fretwell, based in Derbyshire, said its situation was “partially due to the ongoing knock-on effects of Covid.” The message was echoed by 115-year-old artisan pork pie maker George Adams, which appointed administrators after cutting nearly 50 jobs.
Britons are eating the lowest quantities of meat since records began in 1974. Government figures from 2023 showed that meat consumption fell by 14% against a decade earlier. It continues to fall, with red meat in particular less popular. But the long term trend and disruption from the 2020 pandemic are only part of a wider troubled landscape facing many businesses in UK food manufacturing.
Food price inflation, which reached 19% in 2023 as supply chain issues caused by the Ukraine war hiked commodity and ingredient prices, is down but not dead by any means. Analysts suggest it could rise from 2.6% in December to around 4% this year, as supermarkets react to cost pressures arising from the new government’s first budget in October. Previously a function of external factors such as commodity prices, competition, crude oil, and currencies, food industry experts are now blaming UK government policy as the prime source of grocery price appreciation.
Research published last month by the Food & Drink Federation revealed that more than half (53%) of food manufacturers said they were likely to limit investment over the next 12 months and pointed to contributory factors such as recent National Insurance employer contribution (NIC) changes and minimum wage increases.
The food industry is the largest manufacturer in the UK, employing more than four million people. Workforce processes are expected to come under review, with greater use of automation; many businesses close to the edge – from growers to processers and even some retailers – will throw in the towel this year, while the decision is still theirs. Those remaining in the game may well struggle to keep employee wage demands under control, risking strikes along the way.
Greater regulation in respect of ‘unhealthy’ food, including restrictions on advertising products high in fat, sugar and salt (HFSS), will kick in later this year, possibly forcing manufacturers to reformulate products or develop new ones, all incurring additional cost. Regulators are only accelerating what is already underway: one of the “ongoing” effects of Covid, as referenced by this month’s stricken butchers, is the growing desire generally of UK consumers to eat more healthily. The pandemic spooked many people about their vulnerability resulting from dietary habits, and the wider health risks of being overweight.
Trade issues may prove the final nail in the coffin for UK food and drink companies. Their exports slid 10% to £16.bn in the first nine months of 2024. A tenth of those were to the US and President Trump has shown every indication of implementing his oft-threatened import tariffs. Elsewhere, while a closer relationship is being sought with the EU, trade negotiations will remain tough.
Small and Medium Enterprises with a point of difference may be best placed to buck the trend in UK food: independent brands based on sustainably farmed products, non-ultra-processed foods and wellness are already finding favour with supermarket chains while they remain early in their life cycles. Established businesses, however, will find life much tougher, and pivoting to new operating models and product ranges will be hard without costly new investment.
If you are a food manufacturing business in need of help reviewing options for long term survival, please don’t hesitate to get in touch for a free initial consultation.
Written by Guy Poulter, analyst at Buchler Phillips, a UK based independent boutique firm with an impeccable Mayfair heritage, specialising in corporate recovery, turnaround, restructuring and insolvency.