Trends in the U.K. and Ireland Food & Beverage Industry Going into 2010

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Researched by Protel Associates Limited in alliance with Industrial Info Europe (Galway, Ireland)--In the U.K. and Irish Food & Beverage Industry, confidence remains fragile, but there are signs of slow recovery as the pre-Christmas production period looms. Site closures and rationalisation seem set to continue, with further site closures expected during the coming years as the industry consolidates. Examples of such closures include Northern Foods plc's (LSE:NFDS) (Leeds) pending closure of Cavaghan & Gray (Carlisle, England), the scheduled closure of Kwoks' ready-meals plant in Grimsby, the closure of East End Bakery in Glasgow, and the recent announcement of the intended closure of Scottish & Newcastle's (S&N) (Edinburgh) Dunston brewery near Newcastle.

Following the collapse of the Dairy Farmers of Britain cooperative (Nantwich, England), Robert Wiseman Dairies (Glasgow) and Milk Link (Bristol) are in the process of restructuring their businesses. Robert Wiseman has picked up additional business, which has led to the company's relocating distribution to a new £15 million ($24.5 million) facility in Almesbury, Wiltshire. Milk Link is to absorb its Llandyrynog pre-packaging operations into a dedicated packaging facility at Oswestry. First Milk has secured £130 million ($212 million) of funding to support capex investment in cheddar brands, upgrade packaging, and construct a new creamery in Campbeltown, Scotland.

Supermarkets, farmers and producers have seen the recession lead to a big drop in customer demand for organic produce, and despite claiming to support the recovery of the organic segments, supermarkets such as Tesco plc (OTC:TSCDY) (Cheshunt, England) and ASDA Group (Leeds), owned by Wal-Mart Stores Incorporated (NYSE:WMT) (Bentonville, Arkansas), have reduced the range of organic products on their shelves by one-third.

Although large players in the chilled ready-meals sector, including Northern Foods, reported a lower level of sales this summer, the market is recovering. Northern Foods is planning to invest in factories with scope for expansion and increased automation.

The U.K. market for frozen foods is currently worth £10.9 billion ($17.8 billion), but as consumers switch from chilled to frozen foods in an attempt to save money, opportunities in the market are expected to increase during the next five years. The British Frozen Food Federation (Newark) has stated that potato products, vegetables, meat and poultry have all grown by more than 20% during the past three years. Grants issued by the Scottish government have led to expansion programmes at Pinneys, Essco, Thistle, and Macrae.

Major projects are still pending review, and it is likely to be some time before big investments are made by Greggs (LSE:GRG) (Newcastle), Allied Bakeries (Maidenhead), Fox's Biscuits (Batley, West Yorkshire), Warburtons Limited (Bolton), Diageo plc (NYSE:DEO) (London), Kerry Foods (County Kerry, Ireland) and Bernard Matthews (Norwich). Smaller refurbishment projects are continuing. Warburtons, for example, is only carrying out essential maintenance and repair works at a number of its sites, including those in Burnley, Wakefield and Bolton.

The pending deadline for Kraft Foods Incorporated (NYSE:KFT) (Northfield, Illinois) to make a formal bid for Cadbury plc (NYSE:CBY) (Uxbridge, Middlesex) is nearing, which if successful, would create a global powerhouse in food and confectionery. Cadbury has valued the group at £11.5 billion ($18.8 billion) and has given Kraft 40 days to either make a firm offer or walk away for six months. Kraft has said a deal could lead to the saving of Cadbury's factory in Somerdale, near Bristol, which is currently earmarked for closure, as well as investment in Cadbury's Bournville plant.

Contractors and engineering houses are continuing to struggle, and the number of conservative bids is rising as the number of bidders for jobs increases. Long-standing relationships and alliances seem to have diminished. Many equipment manufacturers have been focusing on servicing contracts and upgrades to fill the void through 2009, and this trend is likely to continue through 2010.

Beer consumption has slumped to its lowest level since the 1930s. Diageo has rejected alternative proposals for the redevelopment of the Kilmarnock site, whilst plans for the Leixlip brewery remain uncertain. S&N has announced plans to close the Dunston brewery and relocate production to Tadcaster, North Yorkshire. Universal Beverages was established as a joint venture to produce cider for S&N subsidiary Bulmer's under a 15-year contract, but has since built up a contract manufacturing operation, and product lines have been expanded from apple juice to soft drinks. Expansion of independent specialist microbreweries seems to be a growing trend. These breweries are backed by the progressive beer duty, which provides a tax-break for smaller brewers.

Banks seem to be starting to loosen their grip on project financing, following the Process and Packaging Machinery Association's optimistic PPMA Show 2009, which showcases the latest innovations in food packaging and processing technologies. Some are hopeful that things are looking up at last, although abounding optimism is perhaps a bit premature, as only a few signs of sustained recovery are starting to be noticed.

Protel Associates is the leading provider of sales intelligence for equipment and service suppliers to the U.K. & Ireland Process Industries with particular emphasis on the Pharmaceutical/Biotech, Chemical and Food & Beverage sectors. Protel's information is researched, validated and confirmed by a highly skilled and experienced team to provide intelligence that is not otherwise available in the public domain.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project opportunity databases, market forecasts, high resolution maps, and daily industry news.