Confectionery sector to be “most affected” by Brexit

Confectionery will be the most affected packaged food sector in the UK following the country’s decision to leave the European Union (EU), new research suggests.

With 51.9% or 17.4 million of the public voting to leave the EU, attention will increasingly focus on the direct impact on business and the practicalities surrounding exit negotiations.

According to Euromonitor’s Industry Forecast Model, which looks at forecast volume growth in a Brexit scenario, confectionery, ready meals and sweet and savoury snacks would be the most affected packaged food sectors in the UK.

Within this, volume sales of chilled lunch kits, gum and chocolate are most influenced. The staples of rice, pasta and noodles show the least impact with Euromonitor’s forecast barely altered. These results, Euromonitor says, are consistent with what it would expect – those that are more discretionary and reliant on income will see the strongest impact.

However, there are some exceptions, with sugar confectionery and dinner mixes expected to show more resilience to economic trends.

Commenting on the implications for the consumer goods industry as a whole, Sarah Boumphrey, global lead for economies and consumers at Euromonitor, says, “The uncertainty that will overshadow the UK for at least the next two years is one of the major challenges for business. This will undoubtedly damage business sentiment, put downwards pressure on investment and affect consumer confidence.

“There will be a direct impact on sterling, and this could push up inflation. So depending on the cost base of the business this could also have a negative impact – although for UK exporters a weak currency is a boon.

“Strategic and operational decisions will need to be made about where businesses locate their operations. I doubt we will see a wholesale removal of operations, but a rebalancing of where (geographically) business invests is likely.”

She adds that much depends on the location of the cost base versus the location of the consumer base. While Euromonitor’s industry forecast models are not showing a huge impact on consumer spending, she says discretionary items such as confectionery will be most affected.

“Staples are not driven by changes in income to the same extent,” she notes. “Overall we are not expecting a cataclysmic impact on consumer spending.”

Companies, including snack conglomerate Mondelēz International, have also reacted to the outcome of the referendum. In a statement sent to Confectionery Production, a spokesperson for Mondelēz International says, “We have prepared our business appropriately for the outcome of the referendum in the UK and we are confident that we are well positioned as a business to navigate the consequences of the vote.

“As a business that sells products across the EU, we are closely monitoring the situation in terms of next steps. Our brands are much loved by UK consumers and we remain committed to manufacturing here in Great Britain.”

Meanwhile, Mars notes, “Now that UK has made clear its intention to leave the EU, in the forthcoming negotiations what will be important for businesses like Mars is maintaining as many benefits of a common European market as possible and ensuring the UK remains as a great place for businesses to invest in.

“We are very proud of our strong heritage in Britain and have been manufacturing here since 1927. Across Britain and the European continent, our core ambition remains unchanged: to manufacture quality products and serve our customers and the millions of consumers who love our brands.” 

And food giant Nestlé adds, “The practical consequences of this decision will become clearer in the coming months. Nestlé will continue to operate in the normal course and will follow developments closely.”