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Food manufacturers take a battering as inflationary pressures bite

11 January 2024

Small and medium-sized food manufacturers scored just 30 points out of 100 in the latest Manufacturers’ Health Index, compiled quarterly by inventory software brand, Unleashed. Food ranked second from bottom in the table, ahead of office equipment and supplies.

The index is calculated from a number of key performance metrics including sales, purchasing, and internal efficiencies that impact stocking levels and lead times across 16 manufacturing categories. A score of 50 points or more indicates that a sector is performing well against these metrics. 

Food’s poor performance stands in sharp contrast to the beverage category, which scored more than double with 70 points. 

Commenting on the figures, Jarrod Adam, Head of Product at Unleashed, said: “Manufacturers in every industry category were hit by challenges from all directions in 2023 – including high inflation and rising borrowing costs. However, food producers have come under more pressure than most to keep their prices low to support struggling households – and that’s reflected in their performance and profitability. 

“Beverage producers, on the other hand, perhaps haven’t felt the same pressure. The UK is home to a wide variety of artisanal beer, wine, whisky and coffee producers, which are considered luxury items so they haven’t had to lower their prices. They may also have been able to spread the risk more successfully by selling products through a mix of restaurants and pubs, retailers and directly to consumers – unlike food producers supplying supermarkets.”

Looking ahead to the coming year, he added: “With inflation forecast to slow down in 2024, we all hope that the challenges facing food manufacturers will start to recede..”

Dan Pope, host of the food and drinks industry podcast Hungry, added: "Margins are being squeezed and strangled from literally every single angle for many independent food businesses due to the cost of living crisis, utilities and logistics costs soaring, and staff salaries falling in line with inflation. The problem is that retailers aren’t accepting cost price increases – yet they still require more trade to capture back their profits. So, supplier brands have tighter margins but they still need to spend to drive the rate of sale and retain their listings.”

For more information and for the full research, visit: www.unleashedsoftware.com/blog/manufacturing-health-index


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