There are few other sectors as competitive as the UK food and drink industry. While the battle for shelf-space is intense and the manufacturers behind the brands face the unforgiving challenge to maintain margins, there are plentiful opportunities to grow in the current market.
Spending in the food services sector, notably the buoyant casual dining scene, is growing and suggests that consumers have cash to spend and are happy to do so. However, grocery has not had the same success as enjoyed by the wider economy.
It is well-documented that the way we shop and consume is changing at an astonishing rate. The transition to online shopping, disruption to consumer spending patterns, the growth of discounters and preference for convenience have presented mixed fortunes for major supermarket chains.
For manufacturers, the price pressures seen on the high street have partially found their way onto the profit and loss accounts of suppliers. As such, the agenda for management teams is now heavily influenced by the need to manage margins through intelligent cost reduction and driving efficiencies from end-to-end in the manufacturing process to minimise waste.
However, the future of the food and drink sector is not all about keeping costs down. The determination to grow top-line sales is as ardent as ever. When looking for the next big opportunity, and while international ambitions should not be abandoned, businesses must look closer to home first.
It never ceases to amaze me how many companies overlook their own domestic markets. Many either get carried away with the allure of exporting abroad, while others simply haven’t done their research to identify the gap and miss out on revenue opportunity.
For a brand like Seabrook Crisps, we have a strong presence in the North of England, but there is still considerable room for us to grow further in our regional heartland. Alongside LDC, we are investing to expand our operations that will help us get onto the shelves of as many supermarkets and convenience stores as possible.
But, expansion of distribution is a complex process. Like most successful food companies, we have great relationships with the major retailers, which offer scale on both a national and regional level.
That said, companies should not forget other less trodden routes to market, such as Britain’s 33,500 convenience outlets. With individual units sold at premium prices, these retailers can offer a lucrative sales channel and healthy margins and a strategy that many companies would benefit from.
It is understandable that pursuing these markets is not as straightforward as it sounds. While major supermarkets will have centralised buying functions and a single decision making point, convenience stores require a concerted and direct effort for each individual store. This is demanding on resources and so a disciplined approach is essential.
Pragmatism should also be taken when considering product development. Bringing something new to market is notoriously risky, with most launches failing within the first 12 months. Therefore, when the cashflow is tight, businesses should look first to incremental development of their products, rather than step-change products, which don’t come by very often.
The growth opportunities and lessons for those in the food and drink industry are also apparent for businesses from all reaches of the economy. Sometimes the best opportunities can be right under our noses and it takes some helpful guidance to realise the potential.
For me, the most successful companies are those that do their research, know their market and position, and acknowledge their strengths and weaknesses. With that focus, any business has the potential to forge its own path to success in 2016.
ABOUT THE AUTHOR
Paul Monk has over 40 years’ experience working within the consumer goods industry. He has held a number of senior management positions in some of the sector’s biggest names, including Mars, M&S, Golden Wonder, Finsbury Foods, Quorn and Burtons Biscuits.
Paul also established a management consultancy; InVentaBrand 14 years ago to help UK grocery businesses implement transformational change in their performance. The business has over 20 clients and eight consultants.
Elsewhere, Paul leads The Monkey Business Foundation, a charity designed to raise funds on behalf of GroceryAid and WorKing Options. Paul established WorKing Options in 2011, which aims to help sixth-form students in state education realise their full potential.
In July 2015, LDC backed the management buyout of iconic Yorkshire crisp brand Seabrook.
Established in 1945, Seabrook produces a range of crinkle cut, straight cut and premium hand-cooked lattice crisps, as well as low-calorie stick snacks, at its headquarters in Bradford, Yorkshire. The company supplies over 20 million bags of crisps each month and employs nearly 150 staff.
The deal, which has seen LDC take a majority equity stake in the business, will support Seabrook as it looks to invest in its manufacturing infrastructure, new product development and progress domestic and international sales opportunities.