The Top 150 UK Food & Drink Supplier Rankings & Report 2024

Coca-Cola has become a symbol of globalisation, US capitalism and the power of advertising. Now it’s symbolic of something else: the fortunes of the UK’s biggest food and drink companies.

Like many, Coca-Cola enjoyed new UK revenue highs last year and a rebound in profits, after an inflation-weighted drop the year before. But take a longer view, and the picture is less rosy. The drinks giant’s profits are still subdued compared with pre-pandemic levels, while prices remain stubbornly high on key ingredients such as sugar.

It’s a familiar tale for many of the country’s 150 biggest food manufacturers. Almost half grew revenues by more than 10% in 2023, while two in three boosted profits, according to analysis by OC&C. That’s a welcome change after average profit margins sunk to their lowest mark in 40 years in 2022.

As with Coca-Cola, though, the party hats aren’t out just yet. Average profit margins are still only 5.1% – well below the long-term average of 6.3% – while extensive cutbacks to capital investment are raising questions about the sector’s ability to deliver long-term growth.

It’s a dilemma summed up by Valeo Foods, owner of Rowse honey and Kettle crisps. “We are clearly out of the ‘recovery’ phase of our plan and well into our growth and enhancement phase,” says UK CEO Kevin Moore. At the same time, he reports “the external market continues to be tough with very sluggish growth”.

In this environment, OC&C’s analysis of the top 150 – ranked by revenue – shows a few companies are growing ahead of the pack. Twinings and Kingsmill owner ABF has returned to the top of the rankings. Meanwhile, Pilgrim’s Europe, owner of Moy Park and Richmond, has strengthened its position as the UK’s second-biggest supplier after consolidating all its European operations under one roof.

Lower down the list, Premier Foods (22) has bolstered revenues by 13% after expanding into new categories. And Huel (118) has moved from an exclusively online business into retail to boost sales by nearly 30%. Finally, new entrants have appeared on the list in the form of world food specialist Surya Foods (116), specialist baker St Pierre Groupe (148), and Veetee (147), all backed by strong sales growth.

Perhaps most notably, several companies have also ridden the wave of disruption to boost profitability. KP Snacks has doubled profits in the past three years and grown margins from 7.2% in 2019 to 15.2% in 2023. Similarly Birds Eye boosted margins from 2.5% in 2019 to 14.3% last year.

Suppliers say the rise in profits can largely be chalked up to good management decisions, cost savings and a shift towards more profitable products.

However, there’s a risk. “Some people are making really attractive, maybe even too good, margins at the moment,” says Tom Lindsay, a founding partner at M&A advisors Spayne Lindsay & Co. “They are above what they might be from a historic sustainability level.”

It’s a pertinent point amid accusations about profiteering throughout 2023, whether from supermarket buyers, politicians, the media or the public. So much so that branded suppliers were a focus of the Competition & Markets Authority’s investigation into food prices last year.

Even if the CMA didn’t find any wrongdoing, supermarkets will be keeping a close eye on profit levels. Supermarket-supplier relationships have grown “more complex” of late, and some suppliers are now facing stonewall rejections to pricing requests, according to a report commissioned by the Groceries Code Adjudicator last month.

Several retailers are using “avoidance tactics or flat-out refusing to engage”, says the report’s author, Gavin Ellison, research director at YouGov. In this context, supermarkets are likely to take a dim view of manufacturers registering record profits, particularly in cases where volumes are little to shout about.

“As a business that’s growing and successful, it was very easy for us to raise some money and invest 10 million quid”

James McMaster, Huel CEO

That is frustrating for some manufacturers, who feel they’ve borne the greatest burden in recent years. They’ve historically had higher profit margins than the supermarkets, to offset the fact they have more capital tied up in assets like ingredients and machinery. Supermarkets own less physical infrastructure – and typically sell food before even paying for it.

This margin gap has narrowed in recent years as manufacturers have absorbed a greater proportion of costs. In 2022, the profit margin of an average food manufacturer hit 3.9%, compared with 3.0% at the British supermarkets. That compares with 5.9% versus 2.6% just two years earlier, according to OC&C.

The supermarket ‘stonewalling’ on price increases is a particular concern considering the prices of several ingredients remain high. Cocoa prices have hit record highs after doubling in the past year. Sunflower oil is up 50% since January. And sugar is on the rise once again following a brief dip in the summer.

“Supermarkets are always going to try and capture their share of the value, but it’s a bit of a zero-sum game that way,” says Will Hayllar, OC&C’s global managing partner. “When suppliers and grocers are below normal levels of profitability, the answer has to be about rebuilding overall profitability in the value chain.”

To rebuild profits sustainably, growing volumes will be crucial. But that’s no small ask when more than enough calories are already being consumed in the UK and branded suppliers are being squeezed by the own-label-heavy discounters, which now make up 18% of the British grocery market.

Read more:

• Top 150 food and drink brands fight off own-label challenge

• Branded growth outpaces cheaper own label - OC&C 150

It’s difficult to gauge the exact volumes of the top 150, as only some companies volunteer the information. But their total revenue growth exceeded Inflation, which suggests there was at least some volume gain in 2023.

“Although there is now volume growth in the market, this is still at a relatively low level,” says Nick Robinson, chief commercial officer at Pilgrim’s Europe. “But we expect this to continue to build during the remainder of 2024 and into 2025.”

Rebuilding volumes

A gradual turnaround in volumes is exemplified by Premier Foods, owner of Mr Kipling, Bisto and Ambrosia. Like many brand-heavy manufacturers, it suffered a fall in volumes during the cost of living crisis. It now appears to have turned a corner. Volumes returned to growth in 2024, thanks to a refocused strategy, promotional pricing and acquisitions.

Its turnaround may offer lessons for other brands looking to regain volumes. The Ambrosia brand, for example, has reached the £100m mark with its rice pudding and custard lines. “You might see that from afar and say: ‘Well, that’s surely going to be commoditised and people will switch to own label,’” says Richard Martin, Premier Foods’ chief customer officer.

Yet Premier has pushed in the opposite direction. In 2021, the company rebranded its Ambrosia Deluxe range to highlight its premium credentials. The tactic appears to have paid off. Last year, sales of the range doubled to make up 7% of the total Ambrosia brand.

“You might argue in a cost of living crisis that launching a premium proposition and having it be successful is a bit counterintuitive,” says Martin. “However, we created a brilliant product that’s worth paying more for and priced it at the right level. It’s not rocket science.”

It’s just one example of how brands are successfully fighting off the own-label threat – in revenue, at least. Indeed branded companies outpaced own-label players on revenue growth in 2023 for what was only the sixth time in 20 years, OC&C data shows.

That shift is illustrated by the brand-heavy ABF regaining its place as the UK’s biggest supplier, after briefly slipping into second place in 2022. It delivered a 12.4% rise in revenue. Former number one Hilton, the own-label meat supplier, is now in third place, having grown revenues by a more modest 5%.

One reason why brands are ahead in this respect is the timing of their price rises. “Own label went earlier with their price rises through this inflationary period so their growth massively outpaced branded in 2022. What we’re seeing here is a bit of a lag effect from when some brands put their prices through,” says Nilpesh Patel, a partner at OC&C.

“The thing that generally determines winners and losers is management teams”

Alex Masters, Lincoln International

As such, branded companies are widening their margin gap on own label. Branded products now earn about 9p profit on every £1 of sold product compared to 3p for their own-label equivalents. In 2021, that was 8p for branded versus 4p for own-label.

Mixed performances

It’s not all good news for big brands, however. Many of them, including Walkers, Coca-Cola, and Nescafé, all struggled to beat their category’s average growth in 2023, according to OC&C, while others are shedding sales rapidly. Alpro is the year’s biggest faller, down 51 places to 125th on this list. It suffered a 37.7% drop in revenue last year, attributed to a financial reorganisation within parent company Danone.

Meanwhile, Quorn has fallen 18 places due to the bubble bursting in plant-based. And Innocent is down 17 places amid soaring costs and production issues at its new £200m factory in Rotterdam.

Some may be victims of circumstance, but the teams at the top also have responsibility. “The thing that generally determines winners and losers is management teams,” says Alex Masters, co-head of consumer for Europe at M&A experts Lincoln International.

“Supermarkets are always going to try and capture their share of the value, but it’s a bit of a zero-sum game”

Will Hayllar, OC&C’

Several of these companies are now undergoing changes at the top. Last week, Quorn CEO Marco Bertacca announced his exit, while Innocent conducted an internal shake-up that resulted in the departure of COO James Davenport and UK MD Sam Akinluyi.

As for the performance of own label suppliers, the picture is slightly more complicated. They are often more dependent on certain retailers, leaving them vulnerable to poor performance from the likes of Asda or Morrisons, says Patel at OC&C. Indeed, this year’s biggest own-label faller is International Seafoods, a Morrisons subsidiary.

At the same time, own label has come under pricing pressures of its own. Aldi price match schemes are increasingly common in the supermarkets, and they’re almost entirely made up of own label lines. At Sainsbury’s, for example, own label lines currently account for more than 600 of 674 price-matched items, according to The Grocer’s analysis.

Investment slowdown

Investment – or lack thereof –has also been a key theme in this year’s report. Last year, 60% of the top 150 reduced capex by an average of 11% as margins were squeezed.

Granted, a one-year blip should not be overanalysed. As Moore at Valeo Foods says: “Capex reflects two things: the life stage of a business – aged assets and facilities – and an organisation’s attitude to efficiency, automation and transformation”. A full picture requires looking at spend over a longer period, he says.

But underinvestment is a bell industry experts have been ringing for some time. Before the pandemic, capex was consistently above 3% of revenue for the top 150 suppliers – a level it has only managed to hit once in the years since.

Last year, the average top 150 supplier spent 2.5% of revenue on capex, down from 3% in 2022 and the lowest mark in almost 10 years. That could pose a problem for future margins, suggests OC&C’s Hayllar.

“The key way suppliers can drive margins back up is to drive efficiency and productivity back into the industry,” he says. “It fits with all the talk of investing back in Britain, which I guess isn’t yet turning into reality in this sector.”

Some companies are now turning on the taps. Signature Flatbreads announced another £150m investment in September, just as its previous £100m programme ended. Premier Foods invested £33m last year on productivity gains at its factories, while Huel has just splashed out on a new factory.

The premises, which started production in the summer, were driven by the need for security of supply, better quality goods and innovation, says Huel CEO James McMaster. “It allows us to be masters of our own destiny. That’s exciting for us and quite a big change.”

The factory cost £10m, which is fairly palatable when compared with the level of investment required in other industries. At the UK’s investment summit last month, the government touted deals such as a £2bn data centre and a £1bn redevelopment of a paper mill – a far cry from even the most state-of-the-art food project such as Innocent’s £200m factory in Rotterdam.

“The amounts invested in general food factories aren’t crazy,” says McMaster. “As a business that’s growing and successful, it was very easy for us to raise some money and invest 10 million quid.”

Most companies, though, aren’t splashing on new factories – and are instead operating a “maintenance capex level of investment”, says Masters at Lincoln International. “It’s enough for a slight upgrade in productivity, maintaining your factories in good order and getting some incremental efficiency savings. But you’re not building new factories for this kind of money and you’re not adding lines that give you extra capacity.”

Even if the amounts were to grow, Masters is sceptical of the scale of payback it can give. “It’s not obvious where there are extra heads you could automate,” he says. “If you go to a food factory now, you’ll see that the mixing, processing, cooking is all pretty automated. If you have heads, it’s just at the packing end.”

As ever, what’s right for one company might not be right for another. As the sector emerges from the turmoil of the past few years, the strategy will differ category to category, business to business. Some will need radical transformation after the battering of the past few years, whereas others, conversely, will find themselves forced to defend their hard-earned gains.

It seems Britain’s biggest food suppliers are making a tentative recovery – but as the past few years have shown, never rule out further turmoil.