Food manufacturers “treading water” at the end of 2023

A new report has revealed that, at the end of 2023, UK food manufacturers suffered a “challenging trading period”.

According to research carried out by Unleashed, food manufacturers generated £1.44 for every pound invested in inventory in Q4 2023, which was the same as in Q3 2023. Back in Q$ of 2022, food manufacturers made an average of £1.48.

However  food was found to be 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.

Going further, the report also found that the food sector “lagged behind drinks manufacturers”, who generated £1.51 for every pound invested in inventory in Q4 2023. This is up by 11p, where it stood at £1.40 in the previous quarter.

Commenting on the findings of the report, 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.”

Grocery price inflation reaches two year low

Findings from the report have suggested that food manufacturers are continuing to navigate high costs, with Daniel Wang, of Oriental Food Express, sharing: “Continuously increasing raw material costs, labour costs and energy costs all reduce the company’s profits.”

In summary, the report suggests a notable improvement in the UK’s manufacturing sector, demonstrating its strongest performance in over two and a half years during the final quarter of 2023. In fact, firms were found to make an average of £2.33 for every pound invested in inventory. This is up from £1.98 in Q3 and £2.05 during the same period of 2022.

“The improvements in profitability show  how well mid-sized manufacturers in the UK have rallied following the seemingly endless economic and supply chain uncertainty of the past few years,” explained Adam.

“In navigating the supply chain and economic challenges they’ve faced, many firms have embraced technology to refine their inventory management processes, enabling them to achieve better  margins on their inventory spend.”