FDBusiness.com

UK food manufacturers saw their sales revenue grow by nearly a fifth over the past year, although their performance was tempered by growing pressure on margins. New figures show that average sales revenue rose to almost £2.1 million in 2024 – a 17% uplift on the previous year, driven by a spike in sales in Q3. Drinks companies recorded impressive results, with average sales up 76%, from £708,212 to £1.246 million.

The figures were published by inventory management software provider Unleashed as part of its report on the performance of the UK’s food and drinks industry. Unleashed also found that smaller manufacturers, wholesalers and retailers are still feeling the squeeze on margins, even after the high inflation of 2022/23 subsided.

They generated an average of £2.07 for every pound spent on inventory last year, compared to £2.61 in 2023.

Category performance

Of the seven grocery categories analysed, all but three recorded positive sales performance across 2023/24. The Sauces, Condiments & Seasonings category led the way, with an increase of more than 42%, followed by Mixed Goods at just over 30%, and Snacks at 17%.

Average annual sales per category 

While profitability on inventory was down in 2024 compared to the previous year, there were some notable exceptions in the Sauces, Condiment & Seasonings, and Sport Supplements categories.

They saw the biggest rises in Gross Margin Return On Inventory investment (GMROI), which measures a firm’s ability to efficiently turn money spent on raw materials into profit, at 118% and 100% respectively. The Mixed Goods category was also up by almost a fifth.

Average annual return on inventory (GMROI)

Gavin Cox is founder and director of Nottingham-based Lovely Fodder, the home of specialty food and drink brands including Benefit Juice, Happi Chocolate and Cox’s Original. He said the firm was pushing hard to generate volume sales, while keeping its costs down, and proactively responding to any challenges: “We’ve been very focused on our cost base and margins to ensure we keep all our brands affordable and profitable. We review every part of our supply chain and push for new business to drive sales.

“Innovation has also been key to keep our products new and interesting, while attending to our customers’ demands. Some of our products, like prune juice, are bought according to customers’ health needs – so they might not buy it as frequently. To keep our prices attractive when they return, we try to control costs elsewhere in the business, from packaging to supply chain.

“Given factors that are out of our control, such as market fluctuations, environment and economic challenges, further challenges are inevitable. We are always vigilant to any upcoming issues and, whereas previously we may have ignored them for as long as we could, we now act quickly and proactively to meet them as they arise.”

His comments were echoed by Joe Llewellyn, GM of ERP Small Business at The Access Group, the parent company of Unleashed, who said: “The strong sales performance seen last year is a sign that the UK’s small food  manufacturers are adept at tapping into the public’s appetite for new food experiences. This year margins will be front of mind for many, and our analysis showed that lead times have crept up, which supply chain managers will no doubt be eyeing carefully.

“In this environment tight inventory control will be a big help in ensuring small firms have the cash flow to stimulate demand through marketing and sales activity.”

Meanwhile, Dan Pope, host of Hungry, a podcast for challenger food and drink founders, highlighted challenges facing the sector. “It’s the tension between cost-of-living and brand survival,” he said. “Consumers have less to spend and will switch to own-label for some items. Brands are becoming more expensive as they’re having to put through price increases to stay in the green and retailers aren’t wanting to accept cost price increases. It’s the perfect storm.”

View the full UK Food & Beverage Small Business Performance report here.