Dean Best

Best bits: UK food makers need support for success in 2012

By Dean Best | 19 December 2011

Research out this morning emphasised just how tough 2011 has been. The forecasts for 2012 do not look much brighter but the UK food industry is hoping next year will be the start of a fresh push for growth overseas - and it needs government to support it.

Those looking for festive cheer just six days before Christmas should avoid today's business headlines in the UK. The Bank of England this morning published its survey into household finances in the UK in 2011 and, although the broad conclusions of the report would chime with what many of you in the industry are seeing, they hardly made for happy reading.

"Most households experienced an income squeeze and credit conditions remained tight," the report noted. The rise in VAT, higher energy prices and food inflation hit household income in 2011, leading, tellingly, to lower food sales volumes in the UK during much of the year. Disposable incomes, the report said, fell by GBP46 (US$71) - the fifth year in a row that incomes have fallen.

Looking ahead, the Bank said households were "uncertain" about their future income and expected to "continue to be influenced" by the UK government's moves to reduce the public deficit.

This morning also saw Deloitte launch a "consumer tracker" to monitor confidence and spending habits. The accounting giant said the "consumer sector" was pushed back into recession in 2011 due to the squeeze on disposable income and "high levels of macroeconomic volatility". It said some pressure on consumer spending would ease in 2012 as inflation falls but warned that household expenditure will only increase "modestly" in 2012 amid high unemployment and with credit remaining in short supply.

In short, the consensus appears to be that if you thought 2011 was tough, 2012 may be a bit better - but only just.

Amid the gloom, however, came some bold ambition last week in the form of UK food manufacturers, who believe that, as a sector, they can grow by 20% by 2020. A report published by the Food and Drink Federation, the country's industry association, set out the target and, although the industry sees some opportunity for growth in the UK (growing demand for healthier products from an ageing population, for example), the sector appears to be renewing its focus on export markets.

UK food and soft drink manufacturers are performing well internationally - exports were up 13% in the first half of 2011 - but, as the FDF admits, they are signs that international competitors are gaining market share.

Markets like Latin America and the Middle East will be targeted as manufacturers look to faster-growing economies to drive sales and help shoulder the challenge of eking out growth at home and in much of Europe.

However, some would argue that the UK government needs to do more to support the sector's growth ambitions. Since promotional body Food From Britain was wound up in 2009 following the end of government funding, there have been concerns that UK food manufacturers have not had adequate support to expand overseas in comparison to competitors in other countries. Lending conditions also remain tough, meaning SMEs can find it difficult to find the cash to expand both at home and overseas.

Food and farming secretary Caroline Spelman last week pledged the Government's support for the industry's growth target and, in the new year, a joint government and industry forum will launch an "export action plan" to promote growth.

However, it is clear, just by walking around trade shows in Europe this autumn, that other countries enjoy greater support from their governments and more should be done to help UK manufacturers grow internationally. Brands like Dorset Cereals show there is demand for British food and drink in newer, faster-growing markets; perhaps 2012, an Olympic year, can be 12 months in which more food manufacturers, as well as the country's athletes, can achieve international success.

On that more upbeat note, just-food would like to wish you all a Merry Christmas and a happy 2012. We appreciate the support you have given us this year and look forward to providing you with another year of breaking news and insight across the industry.

Sectors: Emerging markets

Companies: Food and Drink Federation

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