SME and locally produced food and drink see steady profit growth

Picture of Brewdog beer
Scottish-based Brewdog contributing to artisan boom

SME food and drink manufacturer profits grow 6.8%

SMALL Medium Enterprise (SME) food and drink manufacturers’ profit margins have grown to 6.8% in the past year thanks to a boom in consumer love for artisan produce.

Commercial law firm EMW said that profit margins of SME food and drink producers continue to show a steady increase. In 2014/2015 it stood at 6.1%, compared to just 3.1% in 2013/14.

This is down to consumers’ growing willingness to pay premium prices for products seen as being higher in quality.

The firm points to the success in recent years of craft brewers like Scottish Brewdog, Meantime, Camden Town, alongside gin distillers Warner Edwards, Sipsmith and Portobello Road as examples of artisan British brands that have become significant players in their markets.

British consumers are more willing to spend more on super-premium products as they focus more on quality than previous generations. This has allowed smaller manufacturers of these products to, in some cases, charge higher prices than their mass-market rivals.

Smaller manufacturers are also better-positioned to take advantage of the rising importance of locally-sourced produce, with more and more consumers viewing the reduction of ‘food miles’ and geographical designations as key considerations when buying premium products. This is good news for the hospitality industry, potentially making locally-sourced products easier to source.

EMW points out that while some SME manufacturers will encounter a currency challenge following Brexit, this will be less pronounced for those that do not import a significant amount of raw materials from overseas.

EMW chairman Ian Morris said: “The average British consumer has much more sophisticated tastes than even 10 years ago, and the UK’s smaller, ‘artisan’ food and drink manufacturers have seen their profit margins grow strongly as a result. Food is one of the fastest-growing areas of luxury spending.

Picture of SME profit growth chart“More customers than ever are willing to pay higher prices for products perceived as offering something more than a mass-market brand does. That means they are happy to seek out more niche products, and buy from small businesses.

“Having a ‘locally-sourced’ label also helps in attracting buyers [and diners] who are conscious of the carbon footprint of their food, which is a growing priority, especially for younger consumers.”

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