Three quarters of fresh produce companies look well placed to survive the rocky economic conditions set to befall the UK in 2008, according to market analyst Plimsoll Publishing.
Despite the forecast doom and gloom, Plimsoll’s latest report shows the industry will not suffer terminal fallout this year.
Senior analyst David Pattison said: “In fact, it could turn out to be a very exciting year.”
Plimsoll has identified four key groups among the 1,000 companies in its new analysis: 182 firms chasing extra market share at any cost; 304 successful companies poised to go on the offensive; 219 being squeezed out of the market; and 295 sitting the whole thing out. Each group has its advantages and disadvantages.
“The 182 market chasers spent 2007 gearing up for growth - to such an extent that some of them are completely reliant on outside finance,” said Pattison. “Despite the prospect of even tighter credit, they look surprisingly confident to continue with their aggressive expansion plans. With their expected growth rates likely to be in the 25-31 per cent range, they could cause chaos in the market as their undercutting pricing policies cripple the competition. Capturing sales from other players is a key part of their strategy.
“The biggest threat to these companies is any interruption of cash flow, which could be fatal. They need to hope that the financiers and the banks don’t become any more nervous as the year develops.”
The 304 predators have the most to gain in 2008, according to Pattison, and have their own cash to invest. “They have enjoyed average profit margins of 3.2 per cent in the last two years, and the economy will play into their hands in 2008, as competitors go under and cheap acquisitions appear on the market. The biggest danger in this sector is missing opportunities because of a lack of clear strategy,” he said.
Of the 219 firms Pattison identifies as “prey”, 47 are losing money, are in debt and are slow to respond. “If they act quickly, cut costs and bring their bad news out now, they may still turn things around. The biggest threat they face is leaving it too late in 2008 to act,” said Pattison.
The 295 fence sitters have been slowing capital expenditure, controlling costs and sticking to profitable areas of their business. They have been staggeringly profitable - but Pattison warns that “doing nothing is perhaps more dangerous than you think. All it takes is for a more aggressive player to target their sector of the market, and their position could be jeopardised".
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