The recently published BDO 2017 Food and Drink Report paints a mixed picture of the industry. While 73% of companies are positive or very positive about the future there is ongoing concern about the effect Brexit will have on prices and access to labour.
Based on its Food and Drink Survey, the BDO report analyses the challenges for companies in the UK food and drink sector.
The impact of Brexit
Worries about Brexit were chief among the findings with 81% concerned about raw material price volatility, as well as foreign exchange worries and price pressures. Just under half see access to imported raw materials as another negative impact.
With 100,000 non-UK EU nationals working in food and drink companies, it’s understandable that 57% are concerned about access to labour and skills. Companies say this uncertainty and volatility is starting to affect future investment decisions. Only the opportunity to export was ranked as a ‘very positive’ effect of Brexit by 31% of respondents due to the weak sterling.
More investment in automation
While the food and drink industry has one of the lowest robot densities of all UK manufacturers (66%), the growth in adoption is marked. Up from 51% in 2016, many food businesses plan to invest in manufacturing automation.
Labour shortages and uncertainty around post-Brexit access to EU labour may have contributed to this increase, as well as a desire to increase efficiency and productivity overall.
Healthy foods continue to rise
The survey revealed that 82% of respondents believe the healthy eating push will have a positive impact on their business. Certainly, we’re seeing an increasing number of brands offering low-calorie, low-sugar, low-fat and free-from options.
Research from Mintel reports that the consumer’s desire for a healthier and cleaner lifestyle has led to increased purchases of fruits, vegetables, nuts, seeds, grains and botanicals. Manufacturers are responding in kind with “formulations that centre on plants in the flavours, fortifications and functionalities they can add to food and drink products.”
Protein also gets a mention with dairy giant Arla Foods in the process of developing protein-rich products, snack pots and cottage cheese in response to the increased demand.
New product development (NPD) is considered the biggest opportunity
92% of respondents said new product development was their biggest opportunity over the next 12 months. Consumer trends are shaping product development including free-from, health foods and plant-based foods, and also vegan, snacks and craft beers.
Respondents said new markets are likely to be among the biggest source of future sales growth and offer great potential. 49% expect growth from expansion into new UK markets and 46% expect growth through expansion into new export markets. Other opportunities driving NPD included cost efficiencies (84%) and higher sales prices (68%).
Getting a winning team together
According to the Food and Drink Federation, the food industry will need 140,000 new recruits by 2024. The report shows a shortage of unskilled and skilled labour remains an ongoing challenge, despite improving on last year’s figures.
