Food manufacturing - a double whammy of rising costs and falling consumer income
Thursday, July 21, 2011 | Posted by: Barbara Watson
Categories:
Food & Drinks Manufacturing
Pressures on household budgets are expected to increase in the second half of 2011 as disposable income declines due to rising tax, inflation, lower employment as a result of public sector cuts and an accelerated repayment of personal debt.
The maintenance of sustainable debt levels and a continuing focus on delivering value will be essential as producers try to deal with rising input prices and supermarket reluctance to pass on price rises to hard-pressed consumers.
Food producers unable to adapt to changing market dynamics face significant challenges. Key warning signs in the sector include:
Over leveraged balance sheet - making the company vulnerable to market volatility
Products are not sufficiently aligned to consumer trends - value, health, green and ethically sourced
Insufficient investment in brands - brand differentiation, New Product Development and being able to deliver a value-added proposition is critical
Overreliance on a small number of customers/products - de-listing of product lines could have a terminal consequence
Reliance on volume growth to return to profit - market growth is not expected to be significant in 2011 and 2012
Own/private label offering - increasing focus on own/private label by supermarkets. Producers may suffer if they are not willing to deliver on this strategy
This presentation covers market trends that are impacting on the sector, lessons learned from the downturn and key considerations for the future.
Download ‘Food manufacturing - sector insights’
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