A large proportion of the top 1,000 UK fresh produce businesses have returned to rapid growth post-recession, with healthy profits attainable despite a tough trading environment.
A new report from industry analyst Plimsoll has revealed that 366 of the top 984 companies in the trade are in rude health, growing at a rate of more than 10 per cent a year.
But the research warned that while many of these companies are breaking new ground and leading a sustainable recovery in the market, there are 109 other companies whose headline-grabbing sales growth “masks something much more sinister”.
David Pattison, senior analyst and author of the Plimsoll analysis, said it made “a nice change to have some positive news to report - 366 growing, increasingly profitable companies have either tapped into new, fast-growing revenue streams or are just the best performers in the old ones”.
But Pattison said that companies struggling to make the most of the recovery should “look at these companies and ask themselves ‘what do these guys sell, make or do differently to me?’”
Pattison sounded a further note of caution: “Essentially, there are two types of growth in the market - good v bad. [A total of] 109 companies have achieved over 10 per cent sales growth, but in doing so have seen their profit margin collapse. They are simply overtrading. The accolades of growth are all well and good, but the bills need paying too.”
He added that there was a group of 155 companies for which “time is running out and only a takeover or a rapid turnaround is likely to redeem their situation”.
John Giles, divisional director of farm and agri-food business consultancy Promar International, told freshinfo: “I am pleasantly surprised to see an upturn in the produce industry. A lot of people we have been speaking to are still finding it tough as, while demand is still high, it is often for the value rather than the premium ranges and pressure on margins has not gone away.
“At a grower level, the difference between the best and the rest is far too large... in agriculture as a whole, and the difference in the technical and commercial abilities between the best and the worst performing is still too wide.
“For every company that fails, there will be someone who takes up the slack... Judging by the past, every 10 years the number of leading packers in the UK is halved and the recession has made it an even more consolidated sector. History shows it will probably continue to consolidate,” added Giles.
Recent IGD research revealed that manufacturers across the food and drink sector are using a number of tactics to emerge from the recession. Some 42 per cent of manufacturers have changed pack sizes to strengthen their value offer, while 28 per cent are using price reductions to compete in the current trading environment.
IGD ceo Joanne Denney-Finch said: “An extra emphasis on promotions, new pack sizes to suit different budgets and new advertising campaigns have all helped many manufacturers withstand the tough trading conditions.”
Fresh Produce Consortium ceo Nigel Jenney told freshinfo: “The latest Plimsoll report demonstrates the dynamic state of the industry. It’s good to see positive signs that innovation and good practice are rewarded in these difficult times. There are certainly definite commercial opportunities available to companies, with greater potential for the industry to encourage more consumers to enjoy eating 5 A DAY.”
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