Premiumisation opens doors
An increasing number of food and drink manufacturers are looking to distance themselves from a cost cutting market place by developing products with a unique selling point, finds a new report.
The Barclays and the Institution of Mechanical Engineers (IMechE) report reveals that, for many, success has been achieved through the creation of niche products, differentiation and taking their products up market through premium brands.
Niche areas such as health foods and free from items, as well as products with a proprietary recipe, have seen significant growth over recent years and now account for about 10% of the overall food market in the UK. Increasing fragmentation within the food retail sector, with the rise of smaller shops and specialist outlets, will give manufacturers greater opportunities to develop their specialist niche products further.
These foods can also give manufacturers the valuable position of being seen to support the major supermarkets with growth into new and developing markets. Additionally, some niche products can carry a unique formulation, which reduces the ability of retailers to seek readily alternative suppliers.
According to the report, over three quarters (76%) of food and drink manufacturers are optimistic about growth prospects for the coming year, 77% predict long term growth in the next five years and 63% expect to increase their profits this year.
Mike Rigby, head of manufacturing at Barclays, says, “The development of niche products and a move towards premiumisation offers manufacturers alternative routes to growth and profitability in both domestic and export markets.
“It is encouraging to see that changes within the structure of the UK food retail sector are contributing to strong levels of optimism among manufacturers.”
