More than 100 well-known fresh produce businesses are “wounded animals ripe for the picking”, offering buy-out opportunities at the risk of thousands of jobs, according to a new report by Plimsoll Publishing.
The business analyst has produced a study, based on the UK’s leading 1,000 fresh produce companies, which reveals that there are 465 companies with the means to buy out 110 ailing businesses, which have been identified as “wounded animals”.
These businesses are all privately owned but are showing a serious deterioration in financial performance and without the support of banks are facing closure, according to the report.
The effects of this could see a severe depletion in the number of businesses within the industry and see as many as 3,000 jobs cut over the next two years.
David Pattison, senior analyst at Plimsoll, told freshinfo: “The opportunities out there lie with the medium-sized businesses that do not have as much on the line.
“There are a lot of these ‘wounded businesses’ that have enjoyed a period of success and are in the £5 million to £20m region, but are suffering now.
“Corporate finance companies are looking to drum up business and they believe it is not a bad time to sell your business. If you have had a slight dip, it is only going to get worse. Selling offers an easy exit before the competition intensifies, even more as people look to innovate and poach other businesses’ contracts.
“Fresh produce businesses operate on such tight margins, sometimes as low as just 1.5 per cent, that something like [the recession] can hit very hard, where larger businesses are sitting it out, absorbing the losses and eyeing other large businesses carefully.”
In recent years, there has been an increase in companies showing severe slowdowns, with some taking up to 40 per cent losses in sales growth in their stride.
But at the other end of the scale, the top 30 businesses studied in the report recorded upwards of 31 per cent sales growth with an average, removing exceptional circumstances, of around 60 per cent.
Sales growth in the industry as a whole has seen a slump from an average of 12 per cent three years ago to five per cent, eating into margins described as “respectable”.
Pattison said: “Many will need rapid and deep cost-cutting to get them back on a firm financial footing. We could see as many as 3,000 jobs go over the next 12 to 24 months as these companies shrink to ensure their survival.
“Businesses should not be too pessimistic. This does not have to be a bad thing - there are strong players who can survive but they need to move now. It can be a win-win for businesses as it represents an injection of capital and new management,” he added.
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