• Some expenditure on food is essential for everyone and is considered an established part of the household budget.
• Many food products are deemed necessities and are unlikely to be harshly affected by any economic downturn. It is discretionary spending that is usually badly hit in a recession, which is, therefore, more likely to harm sales of 'luxury' foods.
• The UK has a well-established supply structure, in terms of both its production base — for meat, dairy products, fresh and processed vegetables, bakery products and fish, in particular — and its network of retail outlets — mainly in the form of major multiples.
• Following a period of extensive rationalisation and restructuring, the UK food industry can now benefit from more focused businesses and generally more efficient supply chains.
• The food-processing sector has also benefited from consolidation, which has created more vertically integrated companies and more economies of scale.
• Consumer demands for convenience have served to increase the opportunities for foodretailing, which are no longer confined to the traditional food outlets or to daylight hours. As well as minimising missed opportunities, it also enables the industry to capitalise on impulse purchasing.
• In such a mature industry, the competitive pressure on suppliers ensures a high degree of product innovation.
• Few brands enjoy high levels of consumer loyalty and in certain sectors, such as cereals, bread and yoghurt, it is particularly limited. As a result, product switching and the growth of own labels are harming sales of some brands.
• The buying power of the large supermarket chains, and their demand for lower-priced supplies, has put further pressures on food-industry margins —especially on producers operating in commodity sectors, such as milk. (It is possible that future EU legislation will prevent the sale of goods below cost price and will set... [continues]
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