December 18th 2012
As the world’s sixth largest economy by purchasing power parity and nominal Gross Domestic Product, the U.K remains a great power with strong cultural, economic, scientific, military and political influence. In the wake of the recent recession, the U.K’s economy remains fragile. Additionally, there is a threat of renewed weakening of the economy as financial stimulus fades and pressures grow. U.K consumers for the time being seem to be playing it safe and this has been evident in the growing significance of private label products and fast rising sales in discount stores. For business in the food and beverage sector, since 2008, price of food and beverages soared driving the inflation of food price sharply upwards, impacting consumers and businesses alike. Factory gate prices escalated, the cost of drinks and food in foodservice outlets and stores followed suit, and people started to financially feel it. For several years, demand has outstripped supply driven by the increasing affluence in the developing world and global population growth. The removal of price intervention in the European Union also had a significant contribution to waning inventories of major commodities. The past few years have witnessed a tipping point; price of food commodities peaked and since then have been declining. In the food and beverage industry, consumers are becoming more demanding, competition is getting tougher, pressure on margin and process continues, and distribution as well as other input costs is on the rise. This paper will provide a critical analysis of the role of purchasing and supply chain management in food and beverage operations in the U.K while considering how this and a proactive approach to cost control can provide these businesses with a competitive advantage in a difficult trading environment. Discussion
U.K Food and beverage industry performance
In the U.K economy, food and beverage is an essential industry since it represents the biggest manufacturing sector. This industry employs more than half a billion people, thus, making a significant contribution to the economy. Even in the wake of the economic downturn, food and beverage exports continue to substantially grow. While consumers in the U.K are becoming more focused on value and price, food and beverage companies rank it low on their list of crucial consumer trends. Various factors such as unemployment, household budgets, and banking crisis have affected the food and beverage industry in the U.K in recent years. In spite of the economic downturn, the country has continued to record positive volume sales in this industry; but value sales went downhill as British consumers traded down to items, which offered the best value for their money. In general, economic indicators continue to reveal weak consumer confidence; but the food and beverage market is somewhat resilient and growth opportunities remain at the premium and value ends of this sector.
Just as the inflation of food and beverage prices started to ease, however, by then the economic meltdown, which resulted from many years of irresponsible lending hit the fiscal markets and spread to the whole U.K economy. This presented businesses in the food and beverage sector with new challenges. The credit crunch rendered the cost of borrowing virtually unavailable. Adding to the sense of financial woes, house prices started to fall and it all amounted to an ideal storm where the cost of food and beverage, among other things was on the increase, and consumer spending power and confidence were sharp in decline (Deloitte, 2012). Consumer spending is declining and disposable incomes are being squeezed. Additionally, consumer confidence is low and even individuals, who are better off, are spending carefully....