The food industry is taking seriously the need to find new routes to market, according to a Grant Thornton survey, with almost half of firms examining their business strategy.

A sector survey has found that one in three food businesses have already sought to alter their route to market and  sought new service providers and customers.

Nearly half are examining their business strategies and c.25% have already pivoted their business model, according to Grant Thornton. All will need to follow suit, given the pain inflicted on the sector by the Covid-19 crisis, say the consultants.

Four out of five respondents in the survey said that they expect a decline in revenue as a result of the pandemic, with two thirds of those saying this decline was ‘significant’. 

While panic buying fuelled a surge in supermarket turnover in March, this was offset by falling demand for food services and the closure of restaurants and cafes. Revenue also fell as exports suffered.

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According to Grant Thornton, many food firms operate on single-digit profit margins, so it is necessary to operate close to capacity to yield a decent ROI. Declining revenue and output inevitably has eroded these margins.

Cost Reduction

The sector has set out to reduce costs, postponing investments and internal improvement, and in some cases cutting staff levels. Companies has also negotiated with financial institutions to change credit terms, and sought more favourable terms of business with buyers and suppliers.

The GT report states: “In addition to declining revenues, supply chain and people management issues have challenged businesses in the industry.  As we transition to a new normal there will be structural changes that the industry will have to adapt to ,including new regulatory and customer requirements and lingering market access and supply chain challenges. 

“While the industry’s outlook is somewhat pessimistic, only a minority within the industry feel a high degree of pessimism. There is also a cohort who see opportunities arising as a result of Covid-19.”

Business consulting team director Padraig Ryan (pictured) commented: “Under these unprecedented circumstances food businesses have delivered large scale change in a matter of weeks. The motivator for this change has been survival. Businesses need to assess how elements of the organisation may need to pivot as society returns to normal.”

The full report is available on the Grant Thornton website here.