Previously we’ve discussed some of the issues facing all manufacturers – but as it’s summer – the season of ice creams, barbecues and fish and chips – we’ll do a deeper dive and concentrate on how the outlook facing food and beverage manufacturers looks for the rest of the year and beyond.
Food & Beverage manufacturing insolvency statistics
|No. of Insolvencies
Figures from The Insolvency Service – *to the end of June
We can see that food and beverage manufacturing insolvencies saw a drop in 2021 from 2020 by around 67%. Whereas in 2022 the number of insolvencies nearly triples from 2021.
This is mainly due to the suspension of creditor actions such as winding up petitions but it more than trebled once these were unrestricted. The figures for 2023 to May are already 50% higher over the same period so on the same trajectory we can expect 2023 as a whole to be the worst for these industries.
If we look at the past 12 months alone, the number of UK food and drink manufacturing companies entering insolvency has more than doubled.
Insolvencies in the sector rose by 108% to 287 in the 12 months to the end of June, compared to 138 in the previous period.
Drink manufacturers saw a 123% rise in insolvencies, from 39 in the previous year to 87 in the past 12 months while food manufacturing companies also saw a 102% increase in insolvencies, from 99 in the previous year to 200 in the year just gone.
What are food and beverage manufacturers up against?
As well as high inflation, rising interest rates and a cost of living crisis impacting the spending power of customers, there are also some industry specific factors that are exacerbating issues for the food and drink producers.
The UK’s decision to leave the EU trading area has introduced additional complexities surrounding trade, customs and regulations. This includes changes in food labelling, safety standards, import/export requirements which as well as being time consuming are also proving to be more expensive too.
- Labour Shortages
The Food & Drink Federation (FDF) recently released its State of Industry report which revealed that 6 out of 10 (57%) food and drink manufacturers have staff vacancy rates of up to 5%. It also reported that mid-sized businesses are experiencing the brunt of these shortages, with half of them reporting vacancies of up to 10%, which is almost three times the national average.
- Supply chain disruptions
The coronavirus pandemic, subsequent lockdowns and the Russian invasion of Ukraine has caused huge disruption to global supply chains making it more difficult to source essential raw materials and ingredients. This has combined with further challenges related to transportation and logistics which continue to have a massive impact.
- Consumer Preferences
Customer behaviour is being influenced by several additional competing factors which are changing their choices accordingly. These include healthy eating concerns, ethical considerations, sustainability, convenience and cultural trends. If the food and beverages they purchase don’t adapt to meet these preferences they wont stay competitive and may begin to lose customers.
Chris Horner, insolvency director with BusinessRescueExpert, said: “Food and drink are essential to customers and manufacturers are essential to the wider economy so we should all keep a closer eye on how the sector is faring in these unprecedented economic times.
“Sadly, it appears they are facing more difficulties than others in an already squeezed industry for several reasons we’ve outlined.
“What we would say is that if you’re a food and beverage manufacturer and are concerned about not being able to keep up with competitors in these uncertain times, don’t hesitate to seek help. There are many resources available to help you turn things around.”
One of which is some professional impartial advice.
We offer a free, initial consultation for any director or business owner who wants to discuss their realistic options with one of our advisors.
The earlier in a process they get in touch, the more choices they will generally have and the earlier they can implement solutions that will provide the best chance of providing a positive outcome.
But only if they take that first step and get in touch first.