British confectionery firms suffer 13% revenue downturn amid inflation pressures

Manufacturers across the confectionery sector have reportedly seen sales revenues drop 13% on average in the past year, following the impact of supply chain challenges that have negatively hit ingredients costs, writes Neill Barston.

The new figures, from inventory management software provider Unleashed, analysed the broader British food and drink sector, and found that companies across the sector appeared to have been impacted by a combination of factors that have held back growth.

According to its latest analysis, average sales revenue from confectionery firms fell from £1,983,461 in 2023 to £1,718,605 in 2024, with companies being impacted by inflationary pressures, and other factors including the ongoing consequences of Brexit, which has significantly increase export costs to the EU, as well as increasing unnecessary red tape.

As Confectionery Production has reported during the past two years, there have indeed been a number of instances of inflated costs for manufacturers that have placed pressure on their margins and their ability to export effectively, with many companies offering anecdotal evidence that the heightened cost of trading with mainland Europe has severely dented their established trade with the continent. 

Notably, the study from Unleashed found that manufacturers in the confectionery category also generated an average of £2.33 for every pound spent on inventory last year, compared to £2.36 in 2023.

Moreover, the organisation analysed data from SME suppliers in seven grocery categories – and found that average sales across all of them jumped almost £2.1m in 2024. This represented a 17% uplift on the previous year, driven by a spike in sales in Q3. Drinks companies recorded impressive results, with average sales up 76%, from £708,212 to £1.246m.

However, the research also suggests that manufacturers, wholesalers and retailers are still feeling the squeeze on margins, even after the high inflation of 2022/23 subsided. They generated an average of £2.07 for every pound spent on inventory last year, compared to £2.61 in 2023.

Category performance: how does Confectionery compare? Of the seven grocery categories analysed, all but three recorded positive sales performance across 2023/24.

The Sauces, Condiments & Seasonings category led the way, with an increase of more than 42% (£894,638 to £1.2 million), followed by Mixed Goods at just over 30%, and Snacks at 17% (from £984,000 sales per company in 2023, to £1.1 million lats year), while confectionery slipped back from £1.98 million achieved two years ago, to £1.7million per business in 2024.

While profitability on inventory was down in 2024 compared to the previous year, there were some notable exceptions in the Sauces, Condiment & Seasonings, and Sport Supplements categories.

They saw the biggest rises in Gross Margin Return On Inventory investment (GMROI), which measures a firm’s ability to efficiently turn money spent on raw materials into profit, at 118% and 100% respectively. The Mixed Goods category was also up by almost a fifth.

Joe Llewellyn, general manager of ERP Small Business at The Access Group, the parent company of Unleashed, said: “The strong sales performance seen last year across all categories is a sign that the UK’s small food manufacturers are adept at tapping into the public’s appetite for new food experiences.

“However, this hasn’t been reflected in confectionery, which saw a dip in sales and a squeeze in its margins. This year margins will be front of mind for many, and our analysis showed that lead times have crept up, which supply chain managers will no doubt be eyeing carefully.

“In this environment tight inventory control will be a big help in ensuring small firms have the cash flow to stimulate demand through marketing and sales activity.”

Meanwhile, Dan Pope, host of Hungry, a podcast for challenger food and drink founders, highlighted challenges facing the sector.

“It’s the tension between cost-of-living and brand survival,” he said. “Consumers have less to spend and will switch to own-label for some items. Brands are becoming more expensive as they’re having to put through price increases to stay in the green and retailers aren’t wanting to accept cost price increases. It’s the perfect storm.”