It’s no surprise that firms like Bradford-based supermarket chain Morrisons have decided to establish extensive food-producing facilities in the region.
Morrisons, for example, employs around 1,380 people at its operations in Greenside, near Bradford, which is responsible for the pies, ready meals and quiches that have become firm family favourites.
The region’s innate strength in this sector was also reflected in 2 Sisters Food Group’s decision to invest £55m in its Meal Solutions Division, which mainly produces ready meals, soups and sauces for Marks & Spencer. Most of the investment is being used to safeguard around 800 job by rebuilding Pennine Foods in Sheffield.
Simon Wookey, the divisional managing director at 2 Sisters, says the company continues to see opportunities to increase its market share, with Pennine Foods’ new state-of-the-art factory helping to sharpen the company’s competitive edge.
The region has always had a healthy stockpile of food companies. Few can claim to have a stronger heritage than Symington’s, which dates back to 1827, and has a portfolio of brands including Mugshot, Ragù, Chicken Tonight, and Aunt Bessie’s, which is produced under licence. Symington’s employs around 1,000 people, and its operations include sites in Leeds, Bradford, and Goldthorpe. But why has such a cluster emerged?
Mark Jones, a solicitor who specialises in food and drink at law firm Gordons, says: “There are 15,000 companies in the Yorkshire food and drink sector employing 200,000 people across agriculture, manufacturing, wholesaling and retail, according to Yorkshire Graduates. That makes it the highest concentration in the UK – and the second-biggest sector in the county.
“Much of this can be attributed to the region’s infrastructure and the cost of trading in the region.
“Low salaries, energy and building costs are among the reasons why Yorkshire is one of the most cost-effective places in the UK to manufacture and deliver products nationally and worldwide.”
The region is lucky to have pockets of expertise.
Mr Jones adds: “West Yorkshire, for example, has a long history of brewing, and the sector has grown as skills have been passed down generations.
“In fact, CAMRA (Campaign for Real Ale) reported last year that there were more breweries in West Yorkshire than in Greater London. That heritage can also be seen with businesses like Morrisons, Asda and Marks & Spencer all starting in Yorkshire.”
In recent years, we’ve also seen the emergence of centres of excellence, such as the Food Chain Centre of Industrial Collaboration at University of Leeds and the Centre for Food Innovation at Sheffield Hallam University. They have helped to position Yorkshire as an attractive region for food manufacturing investment.
“A number of high-profile factory upgrades either completed or announced in Yorkshire recently have highlighted the sheer scale of investment that the sector delivers,’’ says Mr Jones.
“In Barnsley, Premier Foods recently opened a new £20m production line at its Mr Kipling factory, creating 80 jobs. The combined investment and employment opportunities of Yorkshire’s big food manufacturers and producers is vast.
“It is also important not to forget the positive impact that smaller food and drink producers and processors can have on the region. High levels of investment encourages entrepreneurial spirit and the more young people that seek innovative ways to produce their own food and drink products, the more the cycle will continue.”
More than 85 per cent of the UK’s food and drink manufacturing and processing companies are classed as ‘small’ with fewer than 50 employees. These smaller, entrepreneurial producers contribute a huge amount to the local economy through the supply chain, export sales and employment opportunities.
As a sector, food and drink manufacturing and processing is on the rise. Research & Markets estimates it will grow by between three and four per cent in the short to medium term. Yorkshire, with the largest concentration of food and drink companies in the UK, is well placed to benefit.
Mr Jones adds: “However, the big challenge comes from the changing landscape of the food grocery market. You can’t help but notice the way in which discount retailers have grown their share of the food retail market in recent years. The likes of Aldi and Lidl have appealed to cost-conscious consumers, stealing share from the traditional ‘big four’ of Tesco, Sainsbury’s, Asda and Morrisons.
“Value is currently the fastest growing and most disruptive force within grocery; for producers, this inevitably means a squeeze on margins and potentially less investment in innovation. It is inevitable that the big four will fight back to reclaim lost market share. The continued rise of online shopping, which is growing faster than the discount market, and the greater choice the big four offer means they will make up lost ground. The race to the bottom on price to become more competitive with Aldi and Lidl may also mean consumers continue to benefit from food deflation in the near term.
“For manufacturers and producers, of course, this will put extra pressure on margins, which in many cases are already at critical levels.”
Alarmingly, Begbies Traynor reported that the number of food suppliers in financial distress saw a 120 per cent increase in the 12 months to April 2015.
Mr Jones concludes: “Manufacturers and producers in the region must look at ways to adapt to the financial challenges caused by the grocery price war, or look to the other end of the market – the ‘Waitrose shoppers’ if you like – and produce high-quality, alternative foods which is also a growing market.”
Iain Clacher, an associate professor at Leeds University Business School, believes that the concentration of food producers in the region is a consequence of long-term trends.
He added: “Aunt Bessie’s was started in Hull in the mid-1850s; Morrisons started as a stall in Bradford in 1899 and by 1958 had grocery stores across the region and it has kept expanding to become the national food giant it is today.
“For the local economy, these companies and this concentration is likely to remain. They are hugely successful, and they are geographically well placed to sell products to the whole country.
“That is not to say there are no threats to the business, as low-cost competitors such as Aldi and Lidl make the current environment much more challenging. However, given the longevity of these businesses, they have managed to survive through many different economic cycles and so they should remain significant contributors to the regional economy over the coming years.”