While there have been no drastic changes to the UK’s packaged food industry
following the referendum result so far, there is no denying that some game-changing developments are bound to take place once the UK has finally left the EU. A case study by Euromonitor
forecasts ready meals
, biscuits, snack bars, sweet and savoury snacks, breakfast cereals
and baby food will be among the most affected products because they are the most income elastic
; meaning the lower consumer income and higher retail prices following the Brexit scenario will cause a decline in demand for these specific products.
Brexit vs. the packaged food industry
How the Brexit scenario is going to pan out is anyone’s guess. It is very likely, however, that consumer incomes in the UK will take a significant blow. To be more specific, Euromonitor forecasts a 2 percent decline in consumer income over the next five years, causing quite the slowdown in real GDP growth
. Combined with a weakened Pound
, the decline in GDP will prove detrimental for retail prices.
Absorbing additional costs
In order to maintain consumption, the UK’s packaged food industry may need to step up
, slowing down their premiumization efforts and absorbing some of the additional costs Brexit is projected to bring about for the UK consumer.
Industry Forecast Model for packaged foods
Euromonitor’s Industry Forecast Model for packaged foods forecasts the volume of sweet and savoury snacks
in particular will dip by 5,000 tonnes, leading to a loss of approximately 88.5 million EUR by 2020. Euromonitor also expects confectionary sales
will decline 0.2 percent in volume, which would translate into a loss of nearly 179 million EUR by 2020.
Kellogg among most affected companies
Companies most prone to take a blow following Brexit are companies who solely or mainly rely on the UK as their sales market. Unilever
, for instance, relies on sales in the UK for two thirds of its sweet and savoury snacks. In the same category, Kellogg
depends almost entirely on the UK market. And then there’s Mondelez
, who arguably made a mistake focusing mainly on the UK with its Dairylea Lunchables ready meals (which were worth more than 30 million EUR in 2015 alone).
Global presence will prove crucial
While much remains uncertain, one thing’s for sure: if packaged food manufacturers want to remain resilient
in a world where Brexit is a fact, developing and maintaining a global presence is key.
Inspired by Euromonitor