The economic ‘disease is spreading’

The current economic situation is a “disease that is quickly spreading”, warned the commercial director of the Authentic Food Company.

The supplier of ethnic foods said that it had undergone a full strategic review to help it through the recent economic challenges - and has appointed Andy Underwood as commercial director and Piran Mitchell as finance director.“All food manufacturing companies are being forced to take a very serious look at their businesses,” Underwood said.

The board is looking at reducing waste, assessing every element of the supply chain and improving efficiency. It is also considering strategies to help it cope with significant currency fluctuations, as it buys ingredients from Thailand in US dollars.

Manufacturing giants such Greggs, Dairy Crest and Uniq have all felt the sting, having put out trading statements to warn shareholders that their financial results are due to take a battering.

Uniq, which supplies Marks & Spencer, is the latest victim. Its growth in sandwiches has slowed significantly from 13.1% in the first half to 2.1% in third quarter. Its share price fell from a 52-week high of 226p on November 7, 2007, to a low of 42p on October 9, 2008.

Bakery giant Greggs said last week that it had cut operating profit expectations by £3M for the full financial year and reduced investment in the business from £40M to £36M. Its share price fell from a 52-week high on October 29, 2007, of 5078p to a low of 3130p on September 30, 2008.

Dairy Crest also announced that it was considering the closure of the Nottingham dairy and had started a 90-day consultation process with employees and unions. The site employs 215 people. Its shares were worth 624p on October 12, 2007, down to 354p on October 9, 2008.

With the current stock market volatility, and raising commodity costs, many food manufacturers are seeing their shares prices fall dramatically.

Cadbury’s shares were worth 705p on May 27, down to 489p on October 9, 2008. Premier Foods’ shares were worth 231p on October 11, 2007, down to 58p on October 9, 2008. Northern Foods shares cost 107p on October 25, down to 49p on October 10. And Robert Wiseman Dairies shares were worth 588p on January 9, 2008, down to 305p on October 6, 2008.

However, on Monday October 13 shares rebounded by over 230 points in response to the government’s £37bn funding relief package for the country’s banks.