UK food manufacturers suffer challenging trading period over the crucial ‘Golden’ Christmas quarter

Food manufacturers have seen profits freeze, the the latest Manufacturers’ Health Index shows.

New analysis has found that UK food manufacturers have suffered a challenging trading period over the crucial ‘Golden’ Christmas Quarter.

Food was the only manufacturing category to see profitability on inventory stall in the latest Manufacturers’ Health Index – a report of mid-sized manufacturers’ performance, compiled quarterly by inventory management software brand Unleashed. Most other categories saw an uplift, while only three saw a decline.

The report reveals data on GMROI (gross margin return on inventory) – a measure of the profits made on inventory costs – across 16 manufacturing categories. Manufacturers were also surveyed to gain first-hand insights into the specific challenges and opportunities they face.

Food manufacturers made an average of £1.44 for every pound invested in inventory – the same as the previous quarter and lower than Q4 2022 when it stood at £1.48.

The food sector lagged behind drinks manufacturers, who made £1.51 for every pound invested in inventory in Q4 2023, up from £1.40 the previous quarter.

Jarrod Adam, head of product, at Unleashed, said: “Food manufacturers were treading water towards the end of 2023, with no uplift in inventory profitability over the Christmas and New Year period.

“This stands in contrast to most other areas of manufacturing which have seen growth. Overall, the businesses we surveyed across different manufacturing categories were optimistic about 2024, with almost three-quarters saying they expect demand to grow this year.”

The report suggests that food manufacturers are still contending with high costs, as Daniel Wang, of Oriental Food Express, said: “Continuously increasing raw material costs, labour costs and energy costs all reduce the company’s profits.”

Overall, the report showed that the UK’s manufacturing sector has made a dramatic recovery – recording its best performance in more than two and a half years during the final quarter of 2023.

Firms made an average of £2.33 for every pound invested in inventory, up from £1.98 the previous quarter and £2.05 in the same period of 2022.

All but four of the manufacturing categories analysed saw an uplift in profitability during Q4, with clothing manufacturers and the energy chemicals sector storming ahead with £4.53 and £3.30 respectively.

At the other end of the scale, the most dramatic fall was in plastics and rubber, which saw its profits on inventory drop to £1.16 from £2.65. Health and medical manufacturers, and cosmetics and personal care were both down by 16p and 8p.

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