More than a quarter of British fruit and vegetable suppliers have plunged into the red, hit by recession, rising costs and pressure from supermarkets to cut prices.
Plimsoll, the market research company, found that of 1,000 companies selling fresh fruit, salads and prepared vegetables, 288 made a loss in their most recent reported results. For more than half of these companies, 2008-09 was the first year in which they made an annual loss, and 131 reported a loss for the second or third year in a row. Robert Balicki, the chief executive of World Wide Fruit, the apple specialist, which saw a 5 per cent decline in sales last year, said: “Pricing is keen. The number of promotions have definitely increased and there is more competition. “The £1 deal is taking quite a big portion of the market. It’s affecting English growers as many can’t get the returns they need to invest in new orchards for the future.” Those who supply fruit and vegetables to retailers such as Tesco and Asda have come under increasing pressure from buyers to lower prices to sell their goods on promotion. Although about an eighth of companies that buy fresh food from farmers and sell them to retailers and caterers regularly make an annual loss, the number has more than doubled as the recession affects business, according to Plimsoll. Government plans for Britain to become more self-sufficient in food production could be threatened. The UK imports 37 per cent of its food, and the Government has set a target of increasing UK fruit and vegetable production by about 20 per cent. Mr Balicki believes that the focus on cheap fruit and vegetables in shops could affect the UK’s supplies from abroad in the long term. Imported fruit accounts for about 60 per cent of World Wide’s sales in the UK. “Five or ten years ago, everyone wanted to sell their fruit in the UK,” he said. “Now that has changed as we have a reputation for low prices. Suppliers are getting better prices in the US and on the Continent. “This doesn’t really matter as long as there’s enough supply, but if there’s a global shortage we will have to review our pricing structure.” David Pattison, a senior analyst with Plimsoll, said: “A lot of companies have been severely affected by the last 18 months to two years. Increasingly, we are seeing companies making a loss for the first time in their history, and I think they can rightly claim they are victims of difficult trading conditions. Buyers are becoming more shrewd and sharp to make sure they get the most out of their suppliers.” As well as price pressures, the industry has been hit by rising commodity prices, including oil and the materials used in packaging. The fresh-produce market was thought to be relatively immune to the recession because of the growing focus on healthy eating, and because its products are usually out of date within three days. Yesterday Fyffes, the Irish tropical fruit company, reported a 20 per cent rise in costs during the first half of the year. David McCann, the chairman, said: “Fyffes continues to pursue increases in selling prices in all markets in the context of the higher industry costs.” Smaller companies appear to have been most severely affected, but even large suppliers, such as Bakkavör, of Iceland, the UK’s biggest fresh produce supplier, have been affected. Bakkavör returned to profit in the three months to June 30 after more than a year of quarterly losses, following a restructuring programme. The company said that trading conditions in Europe remained “tough” in the short term, although it added that demand for fresh prepared foods continued to grow over the long term. Other well-known companies, such as Del Monte, the fruit distributor, have also suffered, with sales down by 9.2 per cent to £148.2 million at the group’s UK division. Going off? • One in three companies in the analysis by Plimsoll recorded an average fall in sales of 15 per cent • The average gross profit margin of smaller fresh produce companies is 19.6 per cent, almost double the 10 per cent of larger companies • Only few companies have improved their pre-tax profit margin in the past decade. Most have made a loss for at least one year or recorded declining profit for a few years -- Posted By anjos to Business Blog at 9/04/2009 10:54:00 PM [Non-text portions of this message have been removed]
