The UK potato industry has been hit heavily by the recession with one in three companies making a loss, many of them for the first time, according to new analysis.
Market analyst Plimsoll reported that 83 companies in the UK industry, after an assessment of 270, are loss-making.
Some 38 of these companies are making a loss for the second or third year running and Plimsoll suggests they are “burying their heads in the sand” and using market conditions as an excuse.
Recent wider research on the whole fresh produce industry found 288 companies made a loss in their most recent analysis of 1,000 companies, with 131 reporting a loss for the second or third year in a row.
One in three companies in the Plimsoll analysis recorded an average fall in sales of 15 per cent.
David Pattison, author of the new report named Plimsoll Industry Analysis - Potatoes, said: “Increasingly we are seeing companies making a loss for the first time in their history and I think they can rightly claim they are victims of difficult trading conditions. A quick refocus on profitability would ensure this an isolated occurrence…
“[Repeatedly loss-making] companies are either blatantly undercutting the rest of the market to enhance or maintain market share or, more likely, have delayed making the painful decisions more prudent companies have made recently. No one wants to trim costs, lay off staff, cancel dividend payments and the like but continuing on regardless is fast becoming unviable. They can’t bury their heads in the sand any longer.
“I congratulate the management teams that have made the often difficult and unpopular decisions. They have cut their cloth according to the market conditions and as a result are more stable for it. Those failing to do so are running out of time and cash.
"Without a big increase in demand they cannot support their pricing strategy for much longer. Watch out for a number of failures in the coming months among the companies we have identified.”
The study also revealed the average gross profit margin of smaller fresh produce companies is 19.6 per cent, almost double that of larger companies at around 10 per cent.
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