2010-11-02-OC_C-Trading_blows_11页_1mb

OC&C Top 150 Food & Drink Suppliers 2010: Trading Challenges and Winners

Overview

• Slowest Growth: UK's top 150 food and drink suppliers grew by 7.7% (2009), the slowest rate in five years.
• Margin Dip: Operating margins fell to 6.5%, the lowest in a decade.
• Casualties: Firms like Tate & Lyle (86% profit slump), Heinz (8% sales drop in cold foods), and Serious Food Company underwent restructuring or acquisition.

Winners & Strategies

Key Strategies for Success

• Cost Discipline: Firms attacking cost bases were key.
• Innovation: Brands investing in advertising and new product development (NPD) performed well.
• Efficiency: Restructuring streamlined operations, boosting margins in some cases.

Top Performers

1. Cadbury: Record 19% sales growth, driven by NPD and global restructuring (37% profit rise).
2. ABF (Associated British Foods): Strong turnover and profit growth (11.2% and 12.4%, respectively).
3. Unilever UK: Turnover up 5.6% despite challenging conditions.
4. Nestlé UK: Notable profit growth (28.8%), supported by effective marketing.

Small & Own-Label Success

• Boparan Foods: High ROCE (45.6%), resilient despite the recession.
• Own-Label Suppliers: Some, like Neerock and large integrated players, improved margins (e.g., Boparan margins improved from 2.2% to 3.7%).

Trends & Challenges

• Raw Material Costs: A primary driver of pressure, stabilizing in late 2009.
• Consolidation: Weak firm dynamics saw assets divested, but limited major M&A in 2009.
• Market Position: Mid-market players struggled; larger branded firms maintained power and margins.
• Inflation & Commodity Price Risks: Expected rise over medium term (July 2010 views); driven by global demand, biofuels, harvests, and energy costs.

Outlook

• Early 2010 Recovery: Short-term relief from 2009 downturn, with margins improving.
• Sustained Challenges: Flat supermarket growth, wage inflation, and tight consumer spending.

Key Takeaways

• Winners emphasized cost management, innovation, and lean structures.
• Multinationals (Danone, Red Bull) and strong own-label outfits demonstrated resilience.
• Future depends on navigating input cost volatility and consumer demand pressures.