• 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. WEAKNESSES
• 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 a lower limit on price reductions, preventing some of the tactics already in use in the market.) • The trend among supermarkets to reduce their supplier numbers and concentrate on their core suppliers is reducing the number of specialist suppliers and wholesalers and increasing barriers to entry for new food suppliers/producers. • Overcapacity in some sectors of the food-processing industry is serving to increase overhead costs per unit of output, raise prices and make them less competitive or, where prices remain the same, reduce profit margins. • Some sectors, such as frozen foods, bread and bacon, have suffered from poor merchandising and category management in supermarkets, which has done little to maintain consumer interest in them. • Food health scares are regularly exaggerated by the media. This can cause a knee-jerk reaction by consumers who do not have accurate, representative information on the matter in question, and lead to reduced consumer spending. • The strong pound makes UK food exports less competitive by making them more expensive to foreign buyers. This is particularly harmful to sectors of the UK industry where exports have traditionally accounted for a high proportion of sales, such as beef. OPPORTUNITIES
• The continued trend towards snacking and the further decline in formal meal occasions will encourage growth in sales of snacks and light meals across the food industry. • As the number of working women and single-person households continue to increase, the demand for a broader range of convenience foods will grow. • There remains potential for growth in organic produce, although the rate at which consumer demand for organic foods is growing is declining. • The UK's ageing population presents increasing opportunities for sales of health foods, vitamin-enriched foods, and other 'nutraceuticals', although price competition in these sectors is likely to increase as more new products are launched. • The convenience-store format will continue to grow to...