TURMOIL in global food markets has created unprecedented consolidation pressure in the UK food production industry that will create a spike in food industry mergers and acquisitions over the next two years, according to a new report.
The research found raw material cost increases, retailer pressures, tighter availability of finance, cross border acquisitions and major portfolio adjustments were the key factors creating this pressure.
In the Grant Thornton/Barclays Commercial B
ank 2008 Food Consolidation Index, the entire UK food and drink production sector has been assessed on the many factors that influence mergers, acquisitions and failures.
Ian Marwood, head of Grant Thornton's corporate finance team in Yorkshire, said the research offered a clear indication of which food and non-alcoholic drink producers would feel these pressures most acutely in the coming 24 months.
Meat, fish and poultry is seen as being one of the worst affected by skyrocketing commodity prices resulting in a large number of takeovers and a rapid rise in company failures. Combined with the large numbers of undifferentiated suppliers competing on price, the conclusion is that these pressures are only set to increase in the short to medium term.
Mr Marwood said: "Under current conditions, meat producers, particularly small to medium-sized firms, should be seriously looking at the viability of merging with rival firms or even seeking a buyer, if only to create greater economies of scale, as it is only going to get more difficult in the coming two years."
