Food and drink: Beer, bread and baked beans on the menu

by William Hall - 03/03/2010

"Food and drink is big business in the north-west. According to Food North West, the promotional body, the region is the UK’s largest for food and drink production, with some 103,000 people employed in more than 2,000 companies."

A number of well-known international brands have their UK headquarters in the region, including Kelloggs cereals at Manchester’s Trafford Park, and Typhoo tea on the Wirral. The Wigan baked bean canning plant of US multinational Heinz is said to be the largest food processing plant in Europe, turning out 1.5m cans of beans a day.

Warburtons, the UK’s second biggest bakery, is probably the best-known local success story. But there are several others, ranging from Frank Roberts & Sons, the Northwich bakers, and Nichols, owner of the Vimto soft drinks brand, to Daniel Thwaites, the North of England’s biggest regional brewer, and Lofthouse, whose Fisherman’s Friend lozenges are sold in more than 100 countries.

Although operating in very different parts of the market, all these companies share a couple of things in common. They remain largely family-controlled and have been operating for more than 100 years. In the case of Blackburn’s Daniel Thwaites, it has recently celebrated its 200th anniversary, and is still going strong.

There are a number of reasons why the north-west has such a strong food and drink pedigree. With a population of 6.8m, it is the third biggest region in the UK, after London and the south-east, so for a start there is substantial local demand.

A quarter of the UK’s dairy farming activity takes place in the region, which accounts for 16 per cent of the UK’s milk deliveries and supports substantial dairy-related activities at companies such as Robert Wiseman, Dairy Crest and Fayrefield Foods.

The region’s central position in the UK, and excellent motorway and airport links, are big draws for food manufacturers, as is the Port of Liverpool. More grain and animal feed is imported through Liverpool than at any other UK port – more than 2m tonnes a year.

The port plays a vital role in the supply chains of some of the UK’s best-known food manufacturers. Multinational agribusinesses, such as Archers Daniel Midland (ADM) and Cargill, have sizeable raw material processing operations connected to the port, which in turn supply the nearby plants of companies such as Cereal Partners, the UK’s second biggest breakfast cereal producer, jointly owned by Switzerland’s Nestlé and General Mills of the US.

The north-west’s food and drink operations have not been immune to cutbacks and closures, particularly on the bakery side. But the sector continues to attract new investment.

Greggs opened a £16m ($24m) bakery in Manchester last September which employs 220 people, and Fine Lady Bakeries has named Manchester as its preferred location for a £20m northern base, which will create up to 250 jobs.

Tulip, a Danish meat products company which closed its sliced meats factory on the Wirral last year, is investing £12m in a new sausage-making factory on the same site, which will create 270 jobs.

New Britain Palm Oil, which produces in Australasia, has commissioned a £18m palm oil processing facility at the port. Its first customer is United Biscuits, one of a growing band of north-west food manufacturers that are keen to demonstrate their ethical policies, by securing a supply of palm oil that can be proven to have come from sustainable plantations.

Overall, the food and drink industry in the north-west – encompassing all parts of the food supply chain: food retail and food service, food processing and agriculture – contributes 10 per cent to the region’s gross value added and accounts for almost 15 per cent of total regional employment.

While the sector still has considerable long-term growth potential, there are signs of increasing consolidation.

Economies of scale in commodity-type food manufacturing, and the need for increased bargaining clout to counter a highly concentrated UK supermarket sector, are putting pressure on mid-sized operators.

The collapse of Blackburn’s Inter Link Foods, a fast-growing cake manufacturer with 11 bakeries, highlighted the vulnerability of some smaller food companies. In a attempt to achieve the critical mass to compete with bigger rivals, such as Northern Foods and Associated British Foods, Inter Link overstretched itself, and had to be rescued by McCambridge, an Irish bakery group, in 2007.

Size is not the sole criterion of success. Bells of Lazonby, a Cumbrian company producing allergy-friendly bakery products, and Cheshire’s Delamere Dairy, the UK’s leading supplier of goats’ milk products, are two small north-west companies that have managed to carve out leading positions in national niche markets.

However, they tend to be the exceptions. “The north-west has some very big companies at the top end and small ‘cottage’ industries at the bottom,” says Julian Wild, food group director at Rollits, a Yorkshire law firm. “Life is most difficult for the food companies caught in the middle.”

Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

More Details: http://www.ft.com/cms/s/0/f2c6a6bc-24c4-11df-8be0-00144feab49a.html