Food & Drink: Workers, Costs and Quality
The UK food and drink industry is fighting battles on many fronts, more than one of them bound up with the challenges of Brexit. Paul Gander reports.
“In food and drink manufacturing, 30 percent of the permanent workforce is made up of EU nationals, while around 19percent of those working in higher-skilled manufacturing jobs are from the EU,” said Selga Speakman-Havard, policy manager for industrial strategy, skills and employment at the Food & Drink Federation (FDF).
Essential EU nationals
“The Brexit lens brings into sharper focus the challenges around the industry’s looming skills gap,” Speakman-Havard observed. Around 140,000 new workers will have to be found by 2024 if, as projected, a third of the industry’s workforce retires over the next decade.
Foreign-fuelled merger and acquisition (M&A) activity remained important through 2017. Carolyn Viney, director, Oghma Partners corporate nance advisors, highlighted a sharp contrast between overseas and domestic investment.
“In the first eight months of the year, we saw a marked slowdown in deals overall,” she says. “This suggests that Brexit may be starting to impact. Over the first two-thirds of the year, 42 percent of deals originated overseas, which is the highest level since 2010.”
Currency exchange rates have certainly made UK-based M&A targets a more tempting proposition for overseas investors. During 2017, Oghma advised Icelandic Group on the sale of its Seachill business to UK-headquartered meat specialist Hilton Food Group. Seachill is focused on chilled and frozen white fish and salmon and owns The Saucy Fish Co, the highly successful consumer brand.
In February, America’s Kraft Heinz launched a surprise, hostile £115bn takeover bid for Unilever, which firmly rejected it. The bid was subsequently labelled a ‘misunderstanding’. What would have been the biggest M&A deal in UK corporate history is highly unlikely to be revived any time soon.
Expansion and rationalisation
South African soft drinks manufacturer Kingsley Beverage, for example, has been developing a (reported) £36m green field site in Peterborough, featuring Krones equipment.
Expansion and rationalisation go hand-in-hand. Earlier in the year, McCain’s announced a £100m expansion of its Scarborough plant while, at the same time, outsourcing its cold-store unit on the same site. In April, Tyrrells commissioned £2m of automation on its veg crisps line.
“The aim was to create significant quality differentiation between us and the competition,” Baxter explains. The company claims that eliminating manual handling has reduced damage to crisps and increased their packaged size by up to 50 percent.
For other brand-owners, capital investment was all about bringing in-house operations that had previously been contracted out. At the beginning of the year, Thatchers Cider commissioned an £8.3m KHS canning line at its Myrtle Farm facility in Somerset; it already has bottling and kegging on the same site.
The British Automation and Robot Association (BARA) says that the 160 robots installed in UK food, drink and tobacco in 2016 were around one-third the number installed in Germany. The 57 robots sold into UK food and drink in the first half of 2017 compared with 75 in the first half of 2016.
“What is probably more frightening is ‘operational stock’,” says Mike Wilson, BARA president and business development manager for ABB Robotics. The UK has just over one-fifth the robots already operating in Germany – although France, Italy and Spain also have considerably more than the UK. “Brexit and the recruitment crisis are having an impact but it’s not yet fed through into sales or installations.”
He maintains that investing in robotics is more about motivation than company size. During 2017, for instance, confectionery start-up Candy Mechanics invested in an ABB robot for the production of personalised chocolate bars. In a further indication that attitudes to robotics in food and drink may be changing OAL, creator of the APRIL (Automated Processing Robotic Ingredient Loading) system, announced it would be opening a new factory for producing this equipment early in 2018.
Jake Norman, OAL’s head of innovation, said that, while Brexit is a factor, cross-contamination and accuracy are also drivers of automation in food production.
Poor poultry practice
By the end of October, 2SFG owner Ranjit Boparan appeared before a parliamentary committee, apologising for what went wrong. The plant reopened in November only after implementing “significant changes”, and with full-time policing from the Food Standards Agency (FSA). Sterling Crew, VP of the Institute of Food Science and Technology (IFST), noted that, even before this case came to light, the industry was already attaching much more importance to culture, as opposed to training. “Training can give you a false sense of security,” he says. “The culture is what happens when there are no supervisors around.”
The blockchain solution
IBM has announced its own block- chain ‘solution as a service’, working with the likes of Unilever and Nestlé in the US. UK certification organisation Happerley maintains that the value of blockchains is in reassuring concerned consumers about provenance.
The Soft Drinks Industry Levy (or ‘sugar tax’), scheduled for April 2018, continues to focus industry minds. Public Health England claims that the levy is driving a broader, health-led reformulation in the industry.
Currency ups and downs
“But this currency weakness has also led to an increase in the cost of many essential imported ingredients and raw materials,” he adds. “This resulted in the UK’s food and drink trade de cit increasing by 16 percent to -£12.4bn in the first half of 2017.”
This situation also helped to give a possibly misleading impression of the rising value of food sales in the UK; most of this is accounted for by brand- owners and retailers passing on at least some of their import-driven cost increases to the consumer.
Paul Gander is a journalist and editor, specialising in food and ingredient-related publications and websites. He has written for titles including the FT and Independent, as well as for magazines across a range of industries, including travel, design and marketing.