Soaring costs are plunging the chilled food sector into crisis and threatening to damage processing standards, according to experts within the industry.
One insider said that margins have been progressively squeezed by costs in the past few years, with price rather than quality being the main criteria for competing over contracts. However, the current economic crisis has brought firms to breaking point.
“I think we have got a serious problem in our chilled food industry,” said the contact, who declined to be named. “Cheese, butter, milk, rice, meat and poultry - these are all high-cost ingredients that chilled food manufacturers are spending their money on.”The source said supermarkets were simply not raising chilled food prices to cover processing costs, with ready meal manufacturers in a particularly precarious position. “The majority of ready meal ingredients have gone up by at least a third.”
Retailers’ promotional tactics were making matters worse, she said. “I bought 12 ready meals in Sainsbury’s the other day for just over £20 on four-for-three deals. Even the full price would have been £26. That’s too cheap. That means you could live for a week on ready meals for under £25. That shocked me.” Even cheaper deals could be found at other supermarkets, the insider claimed.
Kaarin Goodburn, general secretary of the Chilled Food Association, said: “Morrisons is selling ready meals for £1. It doesn’t fathom. It’s not sustainable.” Processors in the sector faced a bleak future. “Chilled food manufacturers are not banks. They are making very little margin and people need to be paid for what they do.”
She said consolidation was rife in the sector, with firms selling out to overseas businesses with the financial clout to take them forward. In the past few weeks, the acquisition of Moy Park by Brazilian company Marfrig Group and the purchase of Vitacress by Portuguese outfit Grupo RAR have hit the headlines.
Goodburn said surviving UK chilled food companies were being driven towards increased commoditisation in the current economic climate. “If you start to commoditise, you would lose the premium and quality.” That would be a tragedy, because UK chilled food was among the best in the world. “Somebody somewhere needs to decide what they want. We don’t have these foods elsewhere - it requires the right people and investment.”
The comments followed news that chilled ready meals firm Oscar Mayer is consulting over a potential 250 redundancies at its Furnham Road factory in Chard, Somerset. The company attributed the situation directly to rising raw material costs and energy bills.