AN INCREASING number of Yorkshire’s food and drink manufacturers are being plunged into financial hardship as supermarket price wars intensify.
The number of suppliers in the region said to be in ‘significant’ financial distress at the end of last year was 38 per cent higher than the same stage of 2013, with 380 firms now struggling to survive.
The trend was reflected across the UK, and the food and drink sector is said to be the hardest hit in price wars fuelled by the tightening of consumers’ purse strings.
As rival brands fight to outdo each other, suppliers’ margins are being eroded with predictably damaging results for the manufacturing businesses which supply the major supermarkets, particularly small to medium enterprises (SMEs)
Experts from business rescue and recovery specialist Begbies Traynor today warn that if patterns continue at their current rate, 100 of Yorkshire’s food and beverage suppliers will be pushed into administration before the year is out.
Julian Pitts, managing partner for Begbies Traynor in Yorkshire, said: “The supermarket price war is intensifying and it looks like some of Yorkshire’s food suppliers are bearing the brunt.
“A perfect storm is brewing for SME food suppliers at the bottom of the food supply chain, with many suffering a double hit from larger suppliers demanding ‘loyalty’ payments as well as vanishing margins as a result of the inevitable aggressive supermarket price war.”
He said the supermarkets must start treating their suppliers more fairly and find longer-term solutions to their cost cutting exercise.
“Worryingly, with Yorkshire generating 12.5 per cent of the UK’s food and drink turnover, the economic risks associated with the current price war stand to take a particularly heavy toll on our region.”
The news follows repeated warnings over the impact of the bloodiest supermarket price war witnessed for two decades.
Last November, research from accountancy firm Moore Stephens revealed the rise in food producer insolvencies in Yorkshire was in stark contrast to the eight per cent fall in company liquidations in the economy as a whole over 12 months to September.
Partner Duncan Swift said: “Supermarkets have engaged in questionable buying practices for years, but it’s getting worse and clearly wreaking havoc on the UK food production sector.”
While many manufacturers are suffering, some have developed innovative ways of growing business.
Harrogate-based Serious Sweet Company, which makes sugar-boiled confectionery, including fudge, for retailers’ own brands including Asda, Tesco and Harrods, launched its own brand – Ultimate English – last April.
The firm now supplies Ultimate English fudge, toffee and honeycomb, coconut ice and nut brittles to 200 independent retailers.