2013 UK Food Drink 150

September 15, 2013 | REPORT

2013 set to be a rebound year for British food and drink producers after four-year profit decline

  • Smaller brands are outperforming bigger businesses as advantages of scale are getting eroded
  • Success stories of 2012 include Wrigley, Walkers Shortbread and Bettys and Taylors
  • The number of British food and drink brands sold to foreign firms continues to increase. The number under British ownership has declined by 18% in the past 10 years.
Britain’s biggest 150 food and drink manufacturers are looking forward to a reversal of fortunes in 2013 after profit margins slumped to a 20-year low in 2012, according to research unveiled today by OC&C Strategy Consultants, in collaboration with The Grocer.

OC&C’s Food & Drink 150, the only analysis of the financial statements of the top-150 food and drink producers in the UK, reveals that companies expect to see flat margins in 2013 and margin increase in 2014 and 2015, after dropping by 0.5% in 2012. Improving performance is set to be driven by an increase in consumer spend, greater disposable income and a more favourable commodity inflation environment.

Smaller branded companies have been leading the charge in the food and drink sector, enjoying 1.5% faster revenue growth compared to larger brands, which have seen no growth. For example, Symingtons which has grown 31% through NPD and acquisitions of brands and Yeo Valley which grew by 13% as demand for its dairy products was aided by new marketing. In addition smaller companies were the only ones to see an improvement on return of capital of 0.4%.

Will Hayllar, Partner at OC&C, said: “The best performing companies in this year’s rankings are smaller brands rather than established players, showing that in a fiercely competitive sector, the advantages of scale which bigger companies traditionally benefit from are eroding. In an increasingly digital marketing environment, where smaller budgets can go a long way if the product and messages are distinctive, small brands are doing a better job of targeting and engaging their core customers.”

The Food & Drink 150 has revealed that the best performers of 2012 have been companies that have focused on driving innovation or internationalised successfully. Some of 2012 biggest movers include:
  • Wrigley: has gone up from 69 to 61 in the rankings. The chewing gum producers adapted well to the drive towards healthier foods with a successful new product launch, Extra Ice - leading to 18% revenue growth and an improvement in profitability
  • Bettys & Taylors: has gone up from 110 to 101 in the rankings, successfully turning Yorkshire Tea into a major international brand. The company retained double digit growth (13%) over the course of the recession and has remained profitable during tough times
  • William Jackson & Sons: now in 80th place, up from 83 last year. The success of the Aunt Bessie’s brand, with products such as frozen gravy and duck fat roasted potatoes, has propelled the company up, leading to strong revenue growth (9%) and improved margins.
  • Walkers Shortbread: ranked 111 has grown by 9%, aided by strong exports. 40% of its sales now come from overseas, thanks to successfully marketing its Scottish heritage
  • Hilton Food Group: number 20 in the rankings. Tesco’s meat packer’s revenues from overseas now make up 70% of total revenues thanks to expanding its operations in Europe and, in the near future, Asia.
Will Hayllar continued: “Although 2012 was a tough year for British food and drink manufacturers, many have continued to perform strongly. Businesses that have successfully launched and marketed new and unique products, or companies that have been successfully establishing themselves internationally and tapping into new pockets of demand, have seen the biggest gains.”

The trend towards internationalisation continues in the sector, with the number of top-150 food and drink businesses under British ownership cut by 18% over the last 10 years – from 102 in 2003 to 84 in 2013. Ownership of British firms has increased primarily in Europe (from 28 in 2003 to 37) and Asia (from 2 to 7).

Will Hayllar said: “This week’s acquisition of Lucozade and Ribena by Japanese group Suntory shows that there continues to be strong appetite for leading British food and drink firms from overseas.”

OC&C and The Grocer’s Food & Drink 150 is available upon request

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Methodology
OC&C and The Grocer’s Food and Drink Top 150 analyses the latest available public company accounts of the 150 largest food and soft drinks companies in the UK to provide a unique insight into the overall performance of the sector. The Top 150 aims to include businesses whose primary function is manufacture of food and soft drinks and analyses performance of the statutory accounts of the entity that is most relevant to the UK operations (e.g. the UK subsidiaries of multinational businesses and overall accounts of smaller UK focused businesses). A consistent methodology is applied to define Operating Profits and Return on Capital Employed of all businesses, hence the figures shown may be adjusted from the headline published Operating Profits and Return on Capital Employed. Firms are classified as ‘branded’ or ‘unbranded’ based on whether the majority of their sales are generated by branded or unbranded / own label products.