Hope springs eternal in the food supply business. Despite life being even tougher this year for manufacturers, they're a remarkably optimistic bunch, with an even higher proportion of respondents to this year's Food Manufacture survey (85% compared with 71% last year) predicting a good long-term future for the sector.
A slightly higher proportion (56%) are also more positive about their own futures than they were a year ago (53%).
Could this have something to do with emerging signs of the green shoots of recovery? Or does it have more to do with an underlying belief that the nation needs an indigenous food supply base if it is to meet the looming global challenges of population growth and higher food demand; climate change and food security concerns?
But, considering the responses to the questions (see table right) overall, there doesn't appear to be much to be joyous about yet. If anything, the concerns expressed last year as commodity prices soared and the nation's economy declined have got worse.
Comparing responses this year to last, market conditions appear worse, while trading relationships with retail customers have definitely gone south. Not only do suppliers feel squeezed on price, which is having a knock-on effect on their ability to innovate and invest, they appear to be putting some 'green' initiatives on to the back burner; unless they can be translated directly into bottom line improvements.
Obviously that's a generalisation, and manufacturers - like their customers and consumers generally - have not jettisoned their values completely. It's just that for many smaller firms the focus is more about survival than long-term strategic planning. "Retailers continue to make profits at the expense of their suppliers," said the technical manager of one small supplier, who added that as a result "the food industry will suffer"
Take specific environmental activities, such as reducing waste: while 60% of respondents last year claimed to be exploring alternatives to landfill for their waste products; just 34% this year expected to reduce to zero the amount of waste they send to landfill over the next two years. Okay, so these questions are not directly comparable, but they should be some cause for concern, given that one of the Food and Drink Federation's fivefold environmental ambitions is to reduce the amount of food and packaging waste sent to landfill to zero from 2015.
That isn't to say that, where it pays, firms are not active. Take packaging, for example: over half of those surveyed had plans to reduce the amount of packaging waste used on products over the next year. Given the government's packaging waste strategy announced by environment secretary Hilary Benn last month, the focus in this area can only intensify as the strategy promises to make it easier to take enforcement action against manufacturers of excess and unnecessary packaging.
And then there are utilities - electricity, gas, oil and water - where a whopping 77% of respondents claimed they had plans to monitor and target reductions in a bid to cut their operational costs as much as to reduce their environmental impact.
However, given the support shown for 'eco-labelling' of food and drink products last year (53%), it is perhaps a sign of the times that this year just 19% said their companies were considering doing something about eco-labelling over the next 12 months.
Investment suffers...
Jut it is in investment - in innovation, people and equipment - that the financial screw has been most noticeably turned. And it is arguably here that the most serious long-term damage is likely to done. As one md eloquently put it: "We have a strong order book, but access to credit is making it very difficult to grow our business." Problems with obtaining credit was a recurring theme, echoed by many other respondents.
Meanwhile, pressures to cut costs have translated into spending on new product development (NPD) being cut, with just 45% expecting to spend more this year, compared with 57% last year.
Similarly, 38% (45% last year) planned to spend more on capital equipment this year; and just 37% planned to spend more on training (49%).
A specialist in translating academic technological innovation into novel commercial processes said: "Our principal concern is that food manufacturers become too inwardly focused during the economic downturn and cease activities that could support future growth such as innovation, research and development and process improvement."
It comes as no surprise that recruitment has been badly hit by the downturn, with just 22% planning to take on more people compared with 33% last year. The fact that companies have fewer vacancies to fill 22% (39%) in key roles, is probably best explained by fewer people moving jobs in times of uncertainty; the availability of more qualified people given the closures that have occurred; and freezes on recruitment by some firms. And the fall in recruitment of overseas nationals is also unsurprising given the resurgent home-grown demand and the rising tide of calls for 'British jobs for British people'.
... and innovation is hi
What worries food developers most, however, is the continued trend away from true NPD to cost engineering. It's not new but, according to our survey, things are getting worse, with 71% of respondents claiming that their customers are more interested in price at the moment.
"Cost pressures from the retail sector will continue to dominate the scene, either in terms of recovering rising costs or retaining profitability," said a business manager at one food group. Another food auditor claimed: "Basically, customers are more focused on discounts and low prices and that is affecting the quality of work ... this is not a time for new experiments." And the md of an ingredients company claimed that price reduction pressure was "killing us off by taking away the oxygen of interest to make things"
However, this view was not universally held. Another, more optimistic, ingredients supplier remarked: "I feel UK food manufacturing is well placed as concerns grow over where and how our food is made; how it is transported to us; and how we manage waste."
So the future may be bright, but in the short term, many manufacturers may feel they have little room to move. FM