Insolvencies among food and drink manufacturers more than trebled in the past 12 months, from 39 to 143, according to new research by Mazars.
In the past year, food manufacturers such as Orchard House Foods, who supplied fruit and juice to the likes of Pret a Manger and Tesco, were forced to close their doors.
Long-standing family businesses, such as Preston-based Singleton’s, which supplied its dairy products to the likes of Sainsbury’s and Morrisons, also entered insolvency.
Some food and drink manufacturers are struggling to stay afloat as they face soaring energy costs, supply chain disruptions and reduced consumer spending.
Prices for essential ingredients such as sugar and cocoa have also been hit by price surges, as supply is weakened by poor weather in grower countries and the war in Ukraine. In the past six months to March, sugar prices surged 29.4%.
To cover the rising costs of production, some manufacturers are being forced to raise prices to already struggling consumers, hitting sales further.
The rising prices of products also means manufacturers have increasingly come into conflict with the supermarkets they supply to. Supermarkets have pressured manufacturers for a reduction in prices in a bid to keep costs down for them and consumers and rising prices is putting some manufacturers at risk of being “delisted” by supermarkets.
Rebecca Dacre, partner at Mazars, says: “There has been a sharp rise in food and drink manufacturers coming to the edge of the financial cliff as their costs continue to rise. A downturn in inflation couldn’t come too soon for the industry.”
“Consumers have traded down and even cut overall consumption of food and drink.”
Insolvencies among food manufacturers increased 255% from 20 to 71 in the past year, whilst insolvencies of drinks manufacturers increased 279% from 19 to 72 over the same period.
