Small and medium-sized food and drink manufacturers have seen their average sales jump in the third quarter of this year.
In a sign of recovery for the UK manufacturing sector, which has taken a hit in the past couple of years due to high energy prices and inflationary pressures, sales for SME food producers rose by 133% in Q3 from the previous quarter, according to new data by inventory management software provider Unleashed.
Its latest Manufacturers’ Health Index showed the number of purchase orders placed by suppliers was also up by 102% between July and September this year versus the previous three months.
Food manufacturers recorded the second-biggest jump in sales revenue out of all the 12 manufacturing categories analysed.
Meanwhile, the beverages sector also saw sales increase by 63% in Q3, and purchase orders too were up by 71% on the quarter.
Personal care saw the strongest quarterly growth with sales up by 137%.
The figures signal high confidence among suppliers, retailers and consumers alike, according to the Unleashed report.
“We’ve definitely seen more positivity in the last few months across many of the manufacturers we work with, driven by brands who are feeling (cautiously) optimistic and reflecting this in more confident purchasing strategies as they prepare for rising consumer demand,” said Phil Peters, head of supply chain services at consultancy YF, which works mainly with small and medium-sized companies.
“We are working closely with clients of ours to improve their strategic planning as they feel able to take a longer-term view and balance growth opportunities with cashflow challenges – this is especially relevant when it comes to inventory management.
“The rise of retailer accelerator schemes – and their explicit commitment to innovation in fmcg – has meant our brands are more confident in securing new retailer listings and expanding their product lines to capitalise on this momentum.”
The figures come as confidence and investment in the food and drink manufacturing industry is beginning to increase after several years of decline due to the pandemic and cost of living crisis.
The latest Food & Drink Federation ‘State of the Industry’ report showed 80% of manufacturers plan to maintain or increase investment over the coming year.
Unleashed’s survey also found food manufacturers are buying more inventory in anticipation of further orders.
Balwinder Dhoot, director of industry growth and sustainability at the FDF, said: “After a challenging few years, it’s encouraging to see positivity from UK food and drink manufacturers – particularly from the 12,000 SMEs that make up 97% of our sector.
“As the UK’s largest manufacturing industry, employing 500,000 people in communities across the nation, it’s vital that we continue this positive momentum. There’s currently an untapped £14bn growth opportunity for UK food and drink manufacturers which can be achieved through productivity gains and investing in technology.
”By working with businesses as it develops its Industrial Strategy and by doubling down on its growth agenda, government can help unlock this opportunity for our sector.”
However, uncertainty around upcoming regulation and the increase in the employer National Insurance contributions and business rates remain key worries for manufacturers.
Businesses now expect costs to rise by 2.9% over the year to September 2025, as inflationary pressures are gathering pace again, the FDF said.
“While the overall sentiment is positive, we’re still advising clients to remain cautious about overstocking, as investing too heavily in inventory will impact profitability and create vulnerabilities if market conditions shift again, as we have become accustomed,” Peters added.
Nevertheless, producers are expecting UK grocery sales this Christmas to contribute to higher-than-average sales in the final quarter of the year.
Joe Llewellyn, GM of Cloud ERP at The Access Group, said: “This uptick in sales revenue and purchasing bodes well for the manufacturing industry.
“Firms are buying more inventory – and while this might bring back bad memories of post-Covid disruption, when manufacturers were forced to adopt a ‘just in case’ strategy, it’s actually a positive sign in the current climate.
“Lead times remain low, so the orders we currently see flowing through the supply chain look like genuinely robust business confidence.”
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