Strong margin growth for SME manufacturers, thanks to craft and artisan trends

By Rachel Arthur contact

- Last updated on GMT

Consumers are willing to pay more for craft and artisan food and drink. Pic: iStock/rez-art
Consumers are willing to pay more for craft and artisan food and drink. Pic: iStock/rez-art

Related tags: United kingdom, Brewery, Uk

The artisan food boom continues to fuel profitability of SME (small and medium size enterprise) food and drink manufacturers, evidenced by the success of craft brewers and gin distillers, says commercial law firm EMW. 

In the UK, craft brewers such as Meantime, Camden Town and BrewDog have all become ‘significant players in their markets’. The same is true for gin distillers such as Warner Edwards, Sipsmith and Portobello Road, says EMW.

SME food and drink manufacturers' profit margins have grown to 6.8% in the UK over the past year. This is up from 6.1% in 2014/15 and 3.1% in 2013/14, thanks to a growing willingness from consumers to pay premium prices for products that they consider to be higher in quality, according to EMW.

Ian Morris, chairman of EMW, said: “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.

“The average British consumer has much more sophisticated tastes than even ten years ago, and the UK’s smaller, ‘artisan’ food and drink manufacturers have seen their profit margins grow strongly as a result.”

Meanwhile, small producers are well positioned to make the most of consumers’ interest in locally sourced produce.

EMW notes that while some SME manufacturers will face a currency challenge following Brexit, this will be less significant for those who do not import large volumes of raw material from overseas. However, multinational manufacturers could struggle with the Brexit exchange rate fallout.

“The growth and profitability in the SME sector in turn makes these producers attractive as takeover targets for larger rivals,”​ continued Morris.

Meantime Brewing was acquired by SABMiller in 2015,​ and then by Japanese brewer Asahi in 2016.​ Camden Town Brewery was bought by AB InBev in 2015.

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