The gap between success and failure in the UK fresh produce industry has widened, with almost half of it struggling to barely break even, while many in the other half are delivering outstanding returns, according to new research.
A study of the top 1,500 fresh produce companies published by industry analyst Plimsoll Publishing Ltd this month found a worrying downward trend in profitability, with 18 per cent (272) of companies surveyed at risk of financial collapse.
The research found nearly half of the 1,500 companies averaged only a pre-tax profit margin of zero - down from last year’s average of 0.5 per cent.
And average returns on investment for these companies have fallen from six per cent to minus one per cent in the same time.
More than one in five companies reported a loss for the year - which marks the second year running for 21 per cent of companies.
At the same time, the other half of the industry’s leading companies are thriving on margins of 59 per cent on average and 24.5 per cent returns on their investment.
Commenting on the financial crisis threatening half of the industry David Pattison senior analyst said: “The simple message is change or risk failure. At these high-risk companies, the managers need to act quickly to get their firms back on a decent financial footing.”
Pattison said further consolidation would be inevitable and he advised struggling companies to cut jobs and costs.
“Losing money might not be a complete disaster for your company, but it is likely to cause long term damage as your investment is constrained and your ability to retain staff becomes compromised.
“Personally, I would not rule out a series of takeovers. Most of these companies are blissfully unaware of how exposed to acquisition they are.”
