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Overseas-owned companies make up almost half of UK food and drink sales, according to study by law firm EMW.
The overseas share of the UK’s biggest food companies rose to 47%, up from 44% last year. In total, overseas companies represent £14.9bn of the £31.5bn turnover of the UK’s Top 30 food companies.
EMW said the figures can be partly attributed to a rush of M&A deals targeting UK food manufacturers over the last decade.
It noted that overseas companies often view UK food companies as undervalued compared to the valuations that they can achieve on the stock market..
Along with the current weak value of sterling, these factors have made UK food companies an attractive target for overseas companies looking to enter the UK’s food market.
Six of the UK’s Top 30 “Big Food” companies have US owners such as Kellogg, MARS and Mondelez. Three foreign-owned companies have owners from the Republic of Ireland, namely Greencore, Glanbia and Kerry Foods.
Previous research from EMW found that M&A deals involving UK food companies increased fivefold to £5.8bn in 2017/18, up from just £645m the previous year.
Sebastian Calnan, Head of EMW’s Food Group, comments: “Overseas-owned companies are now responsible for a very major and growing percentage portion of the UK food sector’s turnover.”
“UK food companies are renowned for their internationally recognisable brands – it is no surprise that overseas companies have a strong interest in them. The UK food market in itself is also one of the most attractive markets, with consumers more willing than in other EU countries to pay for premium products.”
“We expect that, barring a shock failure in the Brexit negotiations, the shift towards overseas ownership will continue.”
Morning update
UK food and drink manufacturers are looking to mitigate the potential threat Brexit by investing to boost productivity, automation and new product development, according to new research published today by accountancy and advisory firm BDO.
BDO’s Food and Drink Report 2018, published today, found that 60% of manufacturers surveyed are generally positive about the future of the industry, with three quarters (76%) expecting revenue growth and 67% believing order levels will increase in the next year.
However, looking back over the last three years, confidence among UK food and drink manufacturers has fallen 20% and it is Brexit uncertainty which is posing the biggest threat to businesses for the year ahead.
According to the BDO report, concerns over skills gaps and labour are still a major concern to the industry and the UK’s relationship with the EU is only adding to the worry for business leaders.
Less than a quarter (24%) of respondents believe the Government can negotiate a favourable post-Brexit environment for the industry and only 2% think Brexit will have a positive impact on their business in the next year.
Paul Davies, head of food and drink at BDO, commented: “Food and drink businesses are heavily reliant on overseas labour, with one in three workers being from the EU. The majority of firms we’ve spoken to believe that Brexit is likely to have a negative impact on attracting labour and skills in the future, and naturally that’s becoming a growing concern for them.
“It is crucial the government provides some clarity over our EU exit quickly and further supports an industry that is a huge driving force for our economy.”
Despite the challenges, firms still see a future worth investing in. For almost 90% of food and drink manufacturers, productivity is a major focus area. Two thirds (63%) are looking to make better use of staffing resources and half (54%) are aiming to improve materials utilisation and reduce waste.
This is also driving investment in automation. According to BDO’s report, the objective for almost 50% of all automation projects currently underway by manufacturers is to boost productivity.
On the markets this morning, Marks & Spencer (MKS) has announced the appointments of Katie Bickerstaffe and Pip McCrostie to its board as a non-executive directors.
Former Dixons chief Bickerstaffe has extensive experience of retail transformation from a career in a variety of functions in leading UK retailers and consumer companies.
McCrostie brings extensive experience of finance and transactions from a career at Ernst & Young where she led its global corporate finance business.
Commenting on the appointments, Archie Norman, Chairman of Marks & Spencer said: “We are delighted to welcome Katie Bickerstaffe and Pip McCrostie to the board of M&S. As we embark on the first phase of our transformation programme we are building a cohesive and engaged board with deep and relevant skills in retail and business change.”
Elsewhere, vending machine operator Uvenco has updated the market that the potential deal to sell its vending machine and Snack in the Box franchise operations has collapsed.
The deal for the companies as going concerns would have included a “substantial proportion” of the company’s debt obligations, but any sum received by the company would have been “minimal”.
However, the potential buyer has indicated it is willing to acquire the assets of Uvenco Limited, Snack in the Box Limited and the group’s other trading subsidiary, Drinkmaster Limited.
It has also received another offer for Drinkmaster.
The FTSE 100 has opened the week up 0.6% to 7,823.3pts, setting another all-time high in the process, following a cooling of the moutning trade war between the US and China.
Early risers include SSP Group (SSPG), up 1.6% to 646.7p, Premier Foods (PFD), up 1.3% to 38.4p, Just Eat (JE), up 1.3% to 843.4p and Applegreen (APGN), up 1.2% to 580p.
Fallers include Stock Spirits (STCK), down 1.6% to 252.5p, Hilton Food Group (HFG), down 0.9% to 902.4p and Greggs (GRG), down 0.6% to 1,081p.
This week in the City
A busy week ahead is headlined by the full-year results of Marks & Spencer (MKS) on Wednesday morning, which is facing ejection from the FTSE 100 as its shares have been hit by continued underperformance in general merchandise and increasing difficulties in growing its previously strong grocery business.
The week kicks off tomorrow with full-year earnings from meat supplier Cranswick (CWK), while Greencore Group (GNC) issues its half year results following a profits warning related to its US business. Pets at Home will also release its full-year results.
As well as M&S on Wednesday, Dairy Crest (DCG) will issue its full year results, while Britvic (BVIC) will release its interim earnings and Hilton Food Group (HFG) will issue a trading update.
Thursday brings full years results from B&M Bargains owner B&M European Vale Retail (BME) along with PayPoint (PAY) and TATE & Lyle (TATE). Young’s Brewery will also issue its full year results on Thursday morning.
In wider economoic news Wednesday brings the UK’s official monthly inflation figures as well as the CBI’s Industrial Trends Surveys.
The ONS retail sales for the month are released on Thursday, while the prelimary measure of first quarter GDP is announced on Friday.
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