The number of food and drink manufacturing companies entering insolvency has increased by 108% to 287 in a year to the end of June 2023, compared to 138 the previous year.
According to supply chain management consultancy Inverto, drink manufacturing companies saw a 123% surge in insolvencies, from 39 in the previous year to 87 in the past 12 months.
Similarly, food manufacturing companies saw a 102% increase in insolvencies, from 99 in the previous year, to 200 in the year just gone.
These companies have faced significant inflation of supply costs, which have eaten into their profit margins, and many businesses struggled to service debts as interest rates rose.
Mohamad Kaivan, managing director at Inverto, said that food and drink manufacturing companies should be renegotiating prices with suppliers as inflation starts to fall.
He also urged food manufacturers to ask suppliers for greater transparency over their costs, to allow procurement teams to negotiate fairer prices and accept pain sharing if necessary.
Kaivan said: “The year has seen a sharp rise in food and drinks manufacturers suffering from financial distress caused almost exclusively by their suppliers demanding price rises. Some of those price rises have been justified but a lot of those price rises haven’t.
“While businesses should look to take advantage of decreasing prices, they also need to be preparing for future risks that could potentially impact their businesses. This often requires a rethink of their strategies and ways of working with their suppliers to ensure they can improve their future resilience to potential supply shocks.”
