Just over half of food manufacturers polled (55%) agreed that customers were taking longer to pay bills this year than last year, while almost a third said access to credit insurance had been an issue.
One chilled food md noted: “Credit insurance has not been withdrawn for us, but is impossible to get, so is a potential problem for future growth.”
Meanwhile, not only were customers taking longer to pay their bills, they were also adopting “new approaches to deductions, which are sometimes out of line with the Competition Commission findings and guidelines”, he claimed.
Value engineering
Pricing pressure from retailers remained the biggest concern, with a whopping 81% agreeing that pricing pressure from retailers was threatening the quality of own-label products through excessive value engineering and 73% arguing that retailers’ obsession with price was also threatening to cut into resources devoted to NPD and innovation.
A significant majority (78%) agreed that excessive promotional activity was threatening to commoditise branded products.
Things had become so bad for some firms that “this series of answers should have retail buyers, and their senior managers, questioning how far they can go down this route before they emasculate the UK food industry”, said one md of an ambient products manufacturer.
But these results should not come as any great surprise, said one factory manager: “It’s been this way for years. I don't see this changing any time soon, the retailers are just too powerful.”
One respondent said relentless pricing pressure from retailers was particularly damaging for own-label suppliers.
“Believe me, we live it. There is no comparison; if consumers want better quality, they should trust the brands, especially the smaller brands.”
Another added: “We need to cut more as there is little value or security in private label. Big brands are OK but private label arrangements actively discourage investment, because price is all.”
The fact that more manufacturers that had traditionally focused on retail were exploring opportunities in the catering sector came as no surprise, he added: “No surprises there as it gives the producing company a chance of some improved margins.”
Survey results: TRADING RELATIONSHIPS
1. (A) Pricing pressure from retailers is threatening the quality of own-label products through excessive value engineering.
• Agree 81%
• Disagree 13%
• Don’t know 6%
(B) Pricing pressure from retailers is threatening to cut into resources devoted to new product development and innovation.
• Agree 73%
• Disagree 19%
• Don’t know 8%
(C) Pricing pressure from retailers is threatening to commoditise branded products through excessive promotional activity.
• Agree 78%
• Disagree 10%
• Don’t know 12%
2. My company aims to do more business with the discounters this year.
• Agree 25%
• Disagree 47%
• Don’t know 28%
3. My customers are taking longer to pay bills this year than last year.
• Agree 55%
• Disagree 26%
• Don’t know 19%
4. My company will invest more into improving the quality of product data shared with customers this year.
• Agree 58%
• Disagree 23%
• Don’t know 19%
5. The withdrawal of credit insurance is still causing problems for my company.
• Agree 29%
• Disagree 42%
• Don’t know 29%
6. I expect my company to do more business with caterers this year.
• Agree 50%
• Disagree 31%
• Don’t know 19%
7. My business has been able to pass on cost increases to customers this year.
• Agree 38%
• Disagree 46%
• Don’t know 16%
For the full survey results, click here.