Growth drivers

From the Grant Thornton surveys and interviews, companies were prompted to identify key growth drivers for UK food and soft drink manufacturing industry (FDM) with reference to the types of products that will help drive growth during the next 5-10 years.

Companies believe that value products are more likely to drive the growth of the UK food and drink market than premium products, as the disposable income of UK consumers is increasingly squeezed and consequently consumers will continue to look for better value products.

However, the segment that is expected to suffer the most is the mid-range products category as consumers combine better value at lower prices with innovative, premium priced products.

In terms of brand vs. private label products, the views are split, with corporates believing that private label is more likely to drive growth, while SMEs expect branded products to drive growth. Desktop research (Mintel) indicates that during the recession, branded food products outperformed private label. Therefore, it is reasonable to suggest that this trend may continue despite the increasingly trusted or premium image that private label brands such as Tesco Finest or Sainsbury's Taste the Difference may be enjoying with consumers.

The ageing population (both in the UK and worldwide), as well as the health agendas increasingly promoted in the Western world, are expected to impact the demand for Health & Wellness (H&W) products and, therefore, be one of the main categories to drive the industry's growth.

Both in the UK and globally, the forecasted population growth will result in a larger consumer base, which should drive demand within the food and soft drinks market. The UK is amongst the European countries with the fastest population growth, forecast to reach 71.3 million in 2030 (15% growth from 62.3 million in 2010). France is forecast to grow at 11% reaching 73.5 million in 2030.

This contrasts with the 1% population decline in Germany and the stagnation in Poland (at 39.7 million people in 2030 vs. 39.5 million in 2010). However, in the UK, the shape and pace of economic recovery may impact consumer expenditure which in turn may affect consumer purchasing patterns and the degree of real growth of the food and drink industry.

Therefore, the positive effect from the forecast population growth figures showing a 2.5 million increase between 2010 and 2015 may be moderated due to the latest negative consumer and business confidence indicators as well as the Bank of England's 1% GDP growth forecast for 2012.

Case study: Growing business and local opportunities - Nestlé UK & Ireland

In November 2011, Nestlé UK & Ireland announced the investment of £110 million in its Tutbury site in Derbyshire creating a world class coffee manufacturing facility. The extension to the existing NESCAFÉ Dolce Gusto plant enables Nestlé to treble its production capacity and create 300 new jobs.

PM David CameronThis move follows an additional investment of over £100m in Tutbury over the past five years, which has strengthened its position as a leading NESCAFÉ production plant and introduced the NESCAFÉ Dolce Gusto brand. Tutbury is one of only two production centres for NESCAFÉ Dolce Gusto in the world and since its launch in 2006 demand for the 'coffee shop at home system' has been phenomenal with current growth of around 50%.

As demand for NESCAFÉ Dolce Gusto continues to grow Nestlé identified the need to increase production to keep pace with demand.

Already a major employer in the local area, the workforce at the factory has grown from 160 to 500 employees since 2006 and will expand to 800 people by 2013. Of the 300 new employees some will become part of the first intake into the Nestlé Academy, a new initiative under which Nestlé UK & Ireland has committed to double its number of graduates, apprentices and internships, supporting the economy through the training of skilled workers.

Paul Grimwood, Chairman and CEO, Nestlé UK & Ireland said:
“Over the past five years we have undertaken a multi-million pound investment programme in the UK, establishing our next generation of world class competitive manufacturing facilities. This investment in Tutbury will extend our best in class facility, trebling our production capacity for export to over 38 countries across the globe. In order to grow we need to innovate and we are committed to the continued modernisation of our UK manufacturing capability.”

PM David Cameron at Nestle Tutbury factory


More Information

A Grant Thornton report commissioned by Food and Drink Federation. Note that the case studies in the executive summary were written by the Food and Drink Federation.

Last reviewed: 07 Dec 2011