Brexit trade crisis continues to impact UK confectionery sector

The UK confectionery market continues to grapple with the fallout from the coronavirus pandemic while dealing with price changes and labour shortages caused by post-Brexit trading issues. Daisy Phillipson reports

As outlined by market research firm Mintel, while the coronavirus outbreak boosted overall retail volume sales of the UK chocolate and confectionery market by driving up rates of at-home snacking, the loss of sales in the seasonal and chocolate assortment segments and the shift from higher-priced impulse buys to larger formats drove down average prices within the category.

Alongside the challenges posed by the pandemic, food and drink exports to the EU suffered a significant decline in the first half of 2021 due to Brexit trade barriers.

According to the Food and Drink Federation’s (FDF) latest analysis, UK chocolate confectionery exports, which were among the hardest hit, were down 18.5% in the first half of 2021 compared to the same period in 2019.

The British-based trade organisation’s insights did demonstrate some positive news for the UK food and drink sectors in the form of increased sales to non EU markets, which were up 13% in the same period (to £4.3 billion) including growth in China, Singapore, Australia and the Gulf region.

However, this didn’t make up for the overall loss of £2 billion in sales compared to pre-Covid levels, compounded by the sharp drop in sales to the EU. As said by Dominic Goudie, head of international trade, the FDF: “It clearly demonstrates the serious difficulties manufacturers in our industry continue to face and the urgent need for additional specialist support.”

The FDF went on to note how imports from the EU were similarly hit by the pandemic and Brexit difficulties, falling nearly 15% since 2019 with a loss of £2.4bn. The loss of Britain’s exports to its nearest neighbours on the continent contributed to reduced demand for EU ingredients for use in UK manufacturing, while import substitution by UK manufacturers and retailers also had an impact.

As the UK’s full border controls are put in place, the FDF predicts imports from the EU to deteriorate further in 2022. While the pandemic has certainly been a factor, the difficulties facing British businesses are largely driven by the administrative and logistics burdens placed by post-Brexit trading issues, including lorry driver and warehouse worker shortages across the UK’s food and drink supply chain. “Unless steps are taken to address these issues, the ability of businesses to fulfil vital export orders will be impacted,” adds Goudie.

Although UK confectionery manufacturers face a new level of uncertainty in the months to come, there is some hope on the horizon with new business opportunities within the segment.

Notably, the country still has major manufacturing operations for Nestlé in York (city pictured in main image), as recently featured in our site visit. feature, as well as production sites for the likes of Mondelez and Mars, which have maintained its position as a key player in the European sector.

For its part, In its 2021 UK chocolate confectionery market report, Mintel highlights how positive nutritional benefits can appeal even for snacks that are considered indulgent. This is evident in the 60% of chocolate eaters and buyers who expressed interest in trying chocolate with added vitamins and minerals. Clearly there is untapped potential in this area, as vitamin and mineral fortified claims featured on less than 1% of chocolate launches in 2020.

Additionally, manufacturers offering vegan alternatives have benefitted from consumer preference for plant-based products.

UK brand Love Cocoa’s tapped into the boom in oat milk with its HiP (Happiness in Plants) series of chocolate, which the company’s founder James Cadbury said was a notable success after its recent launch. Over in the sugar candy segment, confectionery brand Free From Fellows launched new vegan marshmallows in October to join its range of gummies and hard-boiled sweets.

The cannabinoid (CBD) market is another growth area for the British confectionery segment, according to the Association for the Cannabinoid Industry (ACI) and Centre for Medicinal Cannabis (CMC). Figures from the ACI estimated that the CBD sector will generate £690 million in annual sales for 2021, far surpassing predictions made in the CMC’s 2019 market sizing study, which predicted the market would be worth £526 million in the same year.

The organisation’s report ‘Green Shoots – Sowing The Seeds Of The New UK Cannabis Industry’ stated that the UK now has the most evolved regulatory framework in the world for CBD. However, to overcome regulatory issues, the report calls for government intervention and investment to ensure that the UK optimises what it describes as ‘Britain’s quiet cannabis revolution’.

This call to action echoes the UK confectionery industry as a whole, as government intervention is needed if businesses are to recover from the pandemic and Brexit complications. Of the 260 UK SME manufacturers who took part in the recent Manufacturing Barometer – a key industry survey operated by SWMAS (South West Manufacturing Advisory Service) and supported by the Manufacturing Growth Programme (MGP) – 96% are struggling with price changes within their supply chain.

Furthermore, almost half of all firms (49%) cited recruitment challenges as a barrier to growth. Amid labour shortages and prices changes, feedback from those involved in the survey expressed a desire for more UK government support to help fund apprentices, additional backing for investment into new machinery and technology in the form of interest free loans, and assistance for capital investments on the same level as what had previously been possible when Britain was part of the EU.

With key challenges and uncertainty ahead, such measurements will be key to the recovery of confectionery manufacturers in the months to come. Nick Golding, managing director of SWMAS, commented: “It is a vital priority that SMEs in our sector receive guidance and support to help them address these issues and ensure the recovery is not impeded.”

Related content

Leave a reply

Confectionery Production