Sustainable Growth in the Foodand Drink Manufacturing Industry Grant Thornton report commissioned by the Food and Drink Federation
Contents Contents Section Page 1. Introduction and executive summary 5 2. Methodology and survey population 15 3. UK FDM sector overview 19 4. Growth drivers and exporting 29 5. Competitive advantages and areas for improvement 43 6. Growth barriers and risks 65 7. The role of Government in optimising growth 85Lushani Kodituwakku 8. Feedback from international federations 103Director, Head of Strategy & Commercial AdvisoryT +44 (0) 207 865 2428E email@example.com Bibliography 113Ioana NobelManager, Strategy & Commercial AdvisoryT +44 (0) 207 865 2142E firstname.lastname@example.orgVangelis ApostolidisExecutive, Strategy & Commercial AdvisoryT +44 (0) 207 865 2535E email@example.com Page 3
Glossary Introduction and executive summary Glossary Section 1 ABIA Associação Brasileira das wFIAB Federación Española de Indústrias da Alimentação (Brazilian Industrias de la Alimentación y Association of Agro-food Industry) Bebidas (Spanish Federation of Food & Beverage Industry) ANIA Association Nationale des Industries Introduction & Alimentaires (French National Food & Beverages Food, soft drinks and alcoholic drinks Association of Agro-Food Industry) Food, Beverages & Food, soft drinks, alcoholic drinks and CAGR Compound annual growth rate Tobacco tobacco products Capex Corporate Capital expenditure Above £50m in turnover GVA H&W Gross value added Health & wellness executive summary FAO Food and Agricultural Organisation IBD Institute for Management Development of the United Nations (Swiss Business School) FDF Food and Drink Federation NPD New product development FCPC Food and Consumer ONS Office for National Statistics Products of Canada PBT Profit before tax FDII Food and Drink Industry Ireland SME Small and medium-sized businesses; FDM Food and soft drinks manufacturing below £50m turnover WEF World Economic ForumPage 4 Page 5
Introduction and executive summary1.1 FDF Message from President Jim Moseley Food and drink manufacturing in the UK is a So we decided to ask Grant Thornton to help us in this task by conducting Great British success story. By contrast with an independent research project into what FDF members really think are the many of the UK’s traditional industries, we threats and opportunities they face – and who needs to do what about them. have shown resilience and resolve to grow and adapt: increasing our exports in each of The research findings constitute a powerful case for our industry to be central the last six years, reducing our environmental to the UK’s economic recovery whilst continuing to make a real and unique footprint, providing job opportunities over difference to a more sustainable future for society and to individual health and a range of skills and levels and developing wellbeing. With the right entrepreneurial approach on the part of business, healthier products, while continuing to and the right operating framework from Government, working together we deliver value and choice to our customers. believe we can fulfil our vision to achieve a 20% increase in sustainable output by 2020 – provided that we work in genuine partnership with the shared This has not been easy. Businesses have strategic objective of ensuring safe, nutritious and affordable food for all. dug deep to reduce costs and become more efficient, as well as to cope with a range A number of excellent initiatives are already in place, from us, from of external factors from new regulation to Government and as joint projects. But more needs to be done – this report justifies our belief that we should be ambitious in our aspirations for what extreme volatility in commodity prices. The the food industry can achieve. That is our 20/20 vision for the future.way ahead is just as demanding. We know we are going to have to produce more,from less and with less impact in order to meet the twin challenges of food securityand climate change. And we know that simply improving our efficiency will notautomatically guarantee our future competitiveness – even though it is a vitalpre-condition. It is also clear we need innovation and investment – and a better Jim Moseleyunderstanding of the limits and barriers to our growth potential in a global context. FDF President Page 7
Introduction andexecutive summary Introduction and executive summary 1.2 Introduction 1.3 Executive summary 1.2.1 Project objectives – Section 4: (Growth drivers and exporting) presents results from our Sector overview and contribution to the UK economy • However, the segment that is expected to suffer the most is the mid-range The Food and Drink Federation (FDF) commissioned this report to investigate the primary and desktop research on growth drivers for the UK FDM both products category as consumers combine better value at lower prices with The food and soft drinks manufacturing industry (FDM) is the largest manufacturing following key issues: within the UK market and abroad through exports. The section also innovative, premium priced products sector in the UK and contributes substantially to the UK economy. The latest analyses certain geographies where export opportunities may lie for the – How can the UK food and drink manufacturing sector generate available figures show that in 2009 the FDM sector contributed to the UK economy • In terms of brand vs. private label products, the views are split, with corporates UK. These findings are meant to inform the issue of how the UK FDM value and be seen as a contributor to economic recovery? through turnover (£72.7 billion), gross value added (£19.7 billion), exports (£10.8 believing that private label is more likely to drive growth, while SMEs expect can continue to grow in order to contribute to the economic recovery billion), employment levels (377,000 average)1, employment salaries and tax branded products to drive growth. Desktop research (Mintel) indicates that – What are the main risks for the UK food and drink contributions (£10.1 billion) generated. Moreover, as a non-cyclical sector, the – Section 5: (Competitive advantages and areas for improvement) During during the recession, branded food products outperformed private label. manufacturers in a globalised world? FDM has shown particular resilience in the face of major recent challenges such our survey we asked the businesses to rate the UK FDM’s competitive Therefore, it is reasonable to suggest that this trend may continue despite the – What are the competitive advantages that the sector has? advantages and to rate other countries’ advantages and capabilities. This as volatility of raw material prices and low consumer confidence during the increasingly trusted or premium image that private label brands such as Tesco section presents our findings supported by an analysis from secondary economic downturn. Moreover, the exchange rate has favoured exports which Finest or Sainsbury’s Taste the Difference may be enjoying with consumers – What capabilities does the food and drink sector need to grew by 40% in nominal terms during the 2007-2010 period (from £7.7 billion to research on most of the competitive advantages or disadvantages build to effectively compete with other countries? £10.8 billion). In contrast, other manufacturing sectors have been severely affected • The ageing population (both in the UK and worldwide), as well as the health covered by the survey (e.g. skills, labour costs, productivity, NPD, etc) by the economic downturn, reducing their turnover by 15% between 2007-2009 agendas increasingly promoted in the Western world, are expected to impact – What support is needed from the Government to generate growth? – Section 6: (Risks and barriers to growth) presents the current and future (from £441 billion to £376 billion) and employment salaries and tax contribution by the demand for Health & Wellness (H&W) products and, therefore, be one of the 1.2.2 Project structure risks of the UK FDM industry as rated by our companies, namely access £12 billion (reaching £66 billion) over the same period. All these figures indicate main categories to drive the industry’s growth The report has been structured in such a way as to clearly address the to raw materials, education and training, innovation, taxation, and the that the FDM sector is an important contributor to the UK economic recovery. key issues originally agreed with FDF. • Both in the UK and globally, the forecasted population growth will result in a regulatory environment. The section also considers other aspects that have However, during the recession, profit margins have been squeezed, especially for larger consumer base, which should drive the demand within the food and • The report is organised in the following seven sections: a significant impact on the industry such as the bargaining power of food SMEs. Therefore, food and drink manufacturers surveyed/interviewed during this soft drinks market. The UK is amongst the European countries with the fastest manufacturers across the supply chain and their relationship with retailers project are requesting a positive regulatory environment to overcome challenges – Section 1: (Introduction and executive summary) provides an domestically and improve their competitiveness internationally now and in the future. population growth, forecast to reach 71.3 million in 2030 (15% growth from 62.3 introduction to the report, highlighting the five key objectives – Section 7: (The Role of Government in optimising growth) the final million in 2010). France is forecast to grow at 11% reaching 73.5 million in 2030. Growth drivers originally agreed with FDF and an executive summary with the section of our study deals with Government measures that are needed This contrasts with the 1% population decline in Germany and the stagnation key findings from the primary and secondary research across the FDM supply chain. This includes current actions undertaken • From the Grant Thornton surveys and interviews, companies were prompted to in Poland (at 39.7 million people in 2030 vs. 39.5 million in 2010). However, by the Government and quotes additional measures needed based on identify key growth drivers for UK FDM with reference to the types of products in the UK, the shape and pace of economic recovery may impact consumer – Section 2: (Methodology) presents the methodology we followed that will help drive growth during the next 5-10 years. Companies believe that the responses received from our survey and follow-up interviews expenditure which in turn may affect consumer purchasing patterns and the in order to build the report. It depicts the different types of primary “value” products are more likely to drive the growth of the UK food and drink degree of real growth of the food and drink industry. Therefore, the positive research that we undertook with leaders of the UK FDM industry and – Section 8: (Feedback from international federations) provides a high- market than premium products, as the disposable income of UK consumers is effect from the forecast population growth figures showing a 2.5 million increase five foreign food federations. Moreover, the section provides details level analysis of the competitive advantages, risks and the role of the increasingly squeezed and consequently consumers will continue to look for between 2010 and 2015 may be moderated due to the latest negative consumer of the survey population that answered our online questionnaire Government in each comparison market. This analysis is based on better value products and business confidence indicators as well as the Bank of England’s 1% GDP interviews with FDM federations in Brazil, Canada, France, Ireland and Spain – Section 3: (Sector overview) provides a perspective of the UK FDM. 1 According to FDF this does not account for seasonal fluctuations, and therefore the employment level can peak to growth forecast for 2012 400,000 at some points in the year It includes the sector’s historic performance, its business structure, M&A activity over the last five years, and export performance Page 8 Page 9
Introduction andexecutive summary Introduction and executive summary Export opportunities industry, according to the executives interviewed, are efficient supply chains, Areas for improvement • The interviews with FDM executives also revealed that access to finance and low waste and high levels of regulatory compliance retailer consolidation pose growth barriers for the sector. Businesses stated that • Although UK FDM businesses continue to regard Europe as an important • The businesses surveyed rated the UK FDM’s competitiveness low in terms of access to finance is currently an issue in particular for SMEs, as banks have trading partner, they also recognise the increasing opportunities presented by • These characteristics were considered to contribute towards the industry’s labour cost. An international comparison proves that not only are UK labour tightened lending criteria and are more risk-averse, affecting ability to invest in developing nations. Globalisation, fast economic growth and rising income competitiveness, allowing it to maintain margins and present itself as a reliable costs above other countries’, but, unlike most countries analysed, the growth in order to drive future growth. This view is supported by data from an EU survey levels in the emerging markets are expected to drive a shift in their populations’ partner when conducting business abroad labour costs outpaced productivity growth (between 2003-2007) (with 25,000 SMEs across 20 countries and across industries) which indicates diet, specifically an increase in the consumption of proteins and convergence • The analysis conducted based on desktop research supports the FDM • Businesses also stated that they operate in a highly regulated environment that in the UK, the success rate of bank loan applications has decreased from towards Western diets executives’ views. According to Mintel’s NPD Database, the UK food and drink and Government does not adequately support them in areas such as taxation, 91% in 2007 to 65% in 2010. Only Ireland and Spain had a success rate of bank • However, businesses will need to strategise effectively whilst marketing their industry has the highest number of new product variant launches outside the advice provision and cutting ‘red tape’. Therefore, they ranked the UK FDM’s loans lower than in the UK, whilst in France and Germany, 84% and 75% of products to these markets to ensure they address local consumer needs, US. Between 2005-2011 (up to October), UK manufacturers launched 49,995 competitiveness low in areas such as the ability to operate in a positive SMEs respectively were able to access loan financing in 2010 purchasing power and preferences product variants compared to 47,677 in Germany, 41,005 in France, 36,652 in regulatory environment, indicating that this is an area where the sector may • Retailer consolidation has skewed the balance of power in the industry’s supply Brazil, 32,019 in Japan, 24,209 in Spain and 13,868 in Canada have a competitive disadvantage • Despite growing its food, beverage and tobacco exports by 5.4% year-on- chain and, to an extent, has acted as a growth barrier for the sector, despite year between 2000-2010, the UK has lost market share as world exports grew • The businesses surveyed credit the UK FDM with equally developed R&D, Risks and growth barriers offering manufacturers increased access to consumers and driving innovation. by 10% year-on-year. Over the same period (2000-2010), most comparison and technology capabilities when compared to Western counterparts. This • The businesses surveyed perceive labour cost/legislation and the tax system as More specifically, the difficulties in passing on raw material price increases markets grew faster than the UK (Canada at 7.7%, France at 6.5%, Spain is consistent with the R&D investment data available from Organisation for the biggest risks the industry has to deal with at present, while access to raw and the need to participate financially in retailers’ promotion campaigns have at 8.9%), whilst some countries have increased their market share by Economic Cooperation and Development (OECD) which indicates that among materials is expected to be the major risk in the future resulted in lower margins for FDM businesses outperforming the world average export growth (e.g. Poland at 21%, Brazil comparison markets, the UK food, beverage and tobacco companies invest the • The UK has improved its ranking in international competitiveness indices and • Another barrier that the industry faces is access to skills. The industry’s at 16.9%, Germany at 10.7%). This indicates that despite the opportunities highest percentage of revenue in R&D (0.48% of turnover). However, the UK is seen as an attractive destination for business investment overall. However, outdated image has led to a small number of students pursuing food degrees presented by export markets, UK FDM businesses are likely to face strong FDM is lagging behind Japan and Switzerland both of which when expressed as it is facing increasing competition from a range of developed and developing (3,360 higher education students enrolled in food and drink degrees compared competition from other countries who are also focusing on exports as a way to a percentage of turnover invest almost double in R&D countries. This is echoed by the businesses surveyed which point out that the to the total student population of 2.5 million). Although the economic downturn grow their industry • The FDM executives interviewed stated that productivity improvement is a UK may not have a regulatory environment and tax system that encourage and higher unemployment rate have increased the availability of personnel, the Competitive advantages constant priority for their businesses, although they believe that the UK FDM businesses to invest and thus, puts British manufacturers at a competitive industry still struggles to find suitable candidates for engineering, science and industry has many legacy assets and is characterised by overcapacity. Although disadvantage food technician positions. In particular, companies face issues in recruiting food • The UK FDM industry needs to exploit its competitive advantages, minimise its weaknesses and overcome a range of barriers in order to remain competitive utilisation rates were not tested, international productivity comparisons indicate • In this context, food and drink manufacturers emphasised that corporation tax scientists, food nutritionists as well as technologists and engineers with the in the world FDM market. Some of these issues remain the responsibility of that the UK food and beverages industry has consistently improved productivity is much more attractive in other countries such as Ireland, Poland, Slovakia or ability to handle complex bespoke automated systems. These views expressed businesses, but in many cases they will require the Government to provide a when measured as gross value added per employee. UK’s FDM productivity has Romania, while the highest personal tax rate of 50% in the UK acts as a barrier by FDM businesses during the interviews are consistent with data from FDM’s positive regulatory environment which optimises their growth been steadily growing at an annual rate of 4.7% during the 2003-2008 period. to recruiting skilled personnel from abroad sector skills council Improve and other agencies showing that there is a If compared in Sterling terms, UK ranks above Germany and Japan, both of shortage of qualified food scientists and technologists • The food and soft drink manufacturers that participated in this study regard • Although at present UK FDM businesses have access to raw materials, they are which have substantial manufacturing sectors and are traditionally considered product quality, branding and new product development (NPD) as the industry’s affected by volatility in commodity prices and believe that the UK should have a • According to the FDM businesses surveyed/interviewed, potential employees to invest heavily in technology as a means of improving their productivity main competitive advantages. Other areas of distinction for the UK FDM national food policy to address food security do not find a career in the food industry attractive. They view the food industry Page 10 Page 11
Introduction andexecutive summary Introduction and executive summary less prestigious and innovative compared to sectors such as automotive, • Tax system Government bodies could be better at providing SMEs with more – Therefore, FDM businesses have expressed their desire for support engineering, or pharmaceutical effective guidance and advice on the technical, administration and from the Government to widen the definition of R&D activities to – Food and drink manufacturers identified the tax system as the main area logistics processes associated with exporting to specific countries include improvements in products, technology, packaging, not just • These arguments combined with the low numbers of apprenticeships and on- in which the Government can provide support. Despite Government blue sky research which is rare in food and drink manufacturing the-job training programmes lead to many positions being filled by people with plans to gradually reduce the main corporate tax rate from 26% to – During interviews, FDM executives mentioned that other countries are insufficient qualifications and skills 23%, businesses believe the UK tax system is not competitive enough better at supporting their manufacturers to participate in international – In addition, they believe that Her Majesty’s Revenue and trade fairs. In contrast, they perceive that the UK Government is Customs (HMRC) staff would benefit from specialist training to • However, the companies interviewed stated that the food and soft drinks and faces strong competition from both developed and emerging not providing sufficient marketing support. As a result, there is a understand the type of innovation taking place in the food and industry is a more stable employer compared to other industries and has a markets. Currently the UK’s corporation tax rate is on par with the perceived lack of enthusiasm in the UK stands and the UK is under- drink industry and, therefore handle claims more effectively range of roles that need to be better advertised so that potential employees, average of OECD countries, but countries such as Ireland, Poland, represented at international food fairs compared to other EU countries especially young people, understand the wide range of long-term career options Slovakia and Romania have much lower corporate tax rates • Trade barriers and food security such as Germany, Italy or even smaller countries such as Greece available to them in creative, science and engineering areas • Regulations and ‘red tape’ – FDM businesses highlighted the need for the Government to re- • Education and training • In response, the FDF has launched a campaign called “Taste Success engage in discussions with international organisations for the removal – Another area where businesses would welcome Government involvement – Education reform (focused on improving the quality of primary and – A Future in Food” to raise public awareness about the FDM industry’s of trade barriers to help grow exports and reduce the cost of raw is in reducing the burden of EU/Government imposed regulations and secondary education and making courses more relevant for the business contribution to society. The campaign aims to promote the food and soft materials imported. Moreover, they expressed the need for a food the ‘red tape’. SMEs in particular, do not have the resources to deal world) is of major importance to the FDM sector as a means of gaining drink manufacturing sector as a career of choice for new graduates, hoping to policy that clearly addresses long-term issues such as food security engage young people and change the outdated image of the industry. At the with the administration required to comply with regulations. Moreover, improved and appropriate access to skills. Businesses would also like and measures to shield the UK FDM from commodity price volatility same time, FDF hope this may help addressing the forecast demand gap of businesses would like Government to push for a uniform implementation to receive Government support to revitalise apprenticeship schemes 137,000 new recruits needed to replace the workforce that will retire or leave of EU regulations across Europe, as they believe that the UK is an early which they perceive as essential for securing a future workforce with • Balance of power in the supply chain the industry in the next few years adopter of EU Directives compared to some countries where regulations industry-specific skills. In this context, the Government pledge to increase apprenticeships across industries by 250,000 until 2015 and – Businesses would welcome Government support in the are not enforced, which puts the UK FDM at a cost disadvantage • However, it is unlikely the industry’s image will change overnight, and will FDF’s initiative of doubling food and drink manufacturing apprenticeships enforcement of a UK Grocery Supply Code of Practice. They most likely require a combination of actions from FDF, manufacturers and – Businesses view compliance of 160 labour regulations as costly and have in England and Scotland will contribute towards securing some of the believe that in order to ensure fairness and competition, the the Government (particularly around the reform of the education system and emphasised the importance of flexible and streamlined regulations in order pipeline of new recruits necessary to replace the ageing workforce Government should monitor not only the food price paid by the support for apprenticeships) in order to improve perceptions, close the skills to help manufacturers grow and in turn maintain employment levels consumer, but also take into account unfair trading practices gap and attract higher calibre candidates • R&D and innovation • Export incentives The role of Government in optimising growth – Businesses would also like the Government to reform R&D tax – In many cases, FDM businesses and SMEs in particular are not credits and tax breaks in order to offer better access to funding and • During the survey and follow up interviews, businesses mentioned several main aware of the end-to-end actions they need to take in order to export. promote innovation. SMEs find the process of claiming R&D tax areas where the industry requires the Government to provide a positive business They also require administration support to navigate through the credits burdensome and have to bring in external consultants to help environment in order to maintain its performance and encourage sustainable regulations of the countries they are planning to export to. SMEs them submit applications. Moreover, FDM companies may not qualify growth. They are: for R&D tax credits or tax breaks as authorities do not recognise requested a greater level of support for their export efforts. Specifically, the type of innovation specific to food and drink manufacturing Page 12 Page 13
Introduction andexecutive summary Methodology and survey population Section 2 Conclusion • In conclusion, the FDM industry can generate sustainable growth and contribute to the UK economic recovery by building on its strengths and minimising its weaknesses. However, the industry will only be able to achieve this if it operates in a supporting regulatory environment which incentivises business investment Methodology & and nurtures British food and drink manufacturers. In many cases, to remain competitive the role of the Government in optimising growth is seen as a necessary requirement by those in the industry survey population Page 14 Page 15
Methodology andsurvey population Methodology and survey population 2.1 Methodology 2.2 Survey population 2.1.1 Primary and secondary research approach • Our study is also supported by desktop research and analysis. The breadth of Number of companies surveyed by business turnover and number of 2.2.1 Business size and sub-sector representation our sources (please see the bibliography on Page 110) were complemented employees specific to UK FDM This report has been prepared based on extensive primary research supported by The survey and interview sample represents more than 29% of the UK food & secondary research to build a robust picture of the FDM industry in the UK. The by the UK FDF and the foreign food federations who provided us with further soft drinks manufacturing market in turnover terms and covers all sub-sectors methodology includes: information and market data of the industry By business turnover By number of employees • Online survey – Following consultations with FDF, Grant Thornton developed Primary research completed Over £500m Over 2,000 • The businesses that completed the survey and took part in our interviews £0-5m a questionnaire that was sent out to members of the UK FDM industry via International federation 8 10 9 0-49 represent c.29% of the total FDM industry by turnover value 15 Online survey UK FDM interviews interviews an online survey. The questions asked were directly linked with the topics £250-500m 1,000-1,999 Corporates 35 13 Not applicable 8 £5-10m 6 • In terms of the business size distribution across our survey population, it is presented in the project issues objectives section 6 SMEs 42 12 Not applicable almost equally split amongst micro, small, medium and large enterprises. Our • The survey was addressed primarily to executives and other senior members of 5 (Brazil, Canada, France, analysis covers a wide range of businesses from 10 micro companies with Total 77 25 500-999 Ireland, Spain) FDM (SME’s and Corporates) in the UK. The survey was sent out to £100-250m 10 turnover below £5 million to 9 large corporates that each employ more than 11 £10-25m 2,000 people – FDF members (166 members); 16 2.1.2 Research limitations 50-249 25 • Out of the 35 corporates, 12 did not have FDM facilities abroad and the rest – The Regional Food Group Alliance members; and • Our analysis was constrained by the following desktop research limitations: 250-499 £50-100m 12 were multinationals producing in a number of markets, most of which were 10 £25-50m – Grant Thornton’s FDM contacts - Inconsistent time series in the statistical data collected with 8 based in developed markets. Out of 42 SMEs, only 10 manufactured FDM lack of recent data for some countries or gaps in information Sources: 1. Grant Thornton survey analysis products abroad • The online survey ran from 16th of September 2011 until the 12th of October 2011 and the table opposite sets out the response breakdown (SMEs vs. across a number of countries during certain years • By categorising each FDM sub-sector using the SIC 2007 codes, the Number of companies surveyed by manufacturing sub-sector (SIC 2007) corporates) - Wherever food and soft drinks specific data was not available, it businesses that completed the survey represent the whole FDM spectrum FDM manufacturing sub-sector Number of businesses was substituted for food, beverage and tobacco data. However, (excluding alcoholic beverages) with some businesses operating in more than • Parallel to the survey, Grant Thornton conducted 25 telephone/face-to- Processing and preserving of meat and production of meat products 10 wherever this is the case, it has been clearly indicated Processing and preserving of fish, crustaceans and molluscs 3 one sector. Meat, bakery products and soft drinks are strongly represented face interviews with executives and senior staff of UK FDM businesses. The Processing and preserving of fruit and vegetables 7 interviews were designed to gain in-depth views around some of the topics Manufacture of vegetable and animal oils and fats 5 - The surveys included 25 questions for SMEs and 22 questions Manufacture of dairy products 4 addressed by the survey questionnaire and included some additional questions for corporates covering a wide range of issues (e.g. market Manufacture of grain mill products, starches and starch products 8 Manufacture of bakery and farinaceous products 17 • In addition, we conducted further interviews with five food federations from performance, growth drivers, exports, M&A etc.). Therefore, this Manufacture of other food products 30 report does not attempt to analyse in great detail a specific issue/ Manufacture of prepared animal feeds 2 emerging and developed markets to gain a better understanding of their Manufacture of soft drinks; production of mineral waters and other bottled waters 13 markets’ historic performance and outlook, strengths and weaknesses and the area, instead it considers all of the above issues in the context of Wholesale of other food, including fish, crustaceans and molluscs 3 Other (please specify) 2 role of Government in their countries. These interviews were conducted with the addressing and supporting FDF’s key strategic objectives Note: a. Some of the 77 companies surveyed are active across more than one sub-sector federations of: Brazil (ABIA), Canada (FCPC), France (ANIA), Ireland (FDII) and Sources: 1. Grant Thornton survey analysis Spain (FIAB) Page 16 Page 17
Methodology andsurvey population UK FDM sector overview 2.2 Survey population Section 3 Exporting activities by category 2.2.2 Export and R&D profile of businesses surveyed 100% Most of the companies surveyed are active both with exporting and 23% 19% R&D Activities % of companies surveyed 80% • The majority of the companies (61 out of 77) that took part in the survey export 60% No exporting their goods. Only 19% of the SME participants do not export. Overall, out of UK FDM Exporting the companies that do not export, one third were large businesses, one third 40% 77% 81% medium sized and the rest small businesses 20% • In terms of exporting activities, SMEs are focused on the near Western EU sector overview 0% countries. Overall, companies are primarily exporting to the EU and Russia. In Corporates SMEs addition, many companies export to USA, Australia, Middle East and a few to emerging markets • In terms of R&D facilities, the majority of corporates stated they maintain an Sources: 1. Grant Thornton survey analysis R&D facility within the UK whilst four corporates stated they have more than one facility. Approximately half of the SMEs said they have a UK R&D facility. UK R&D facilities by category However, through the interviews, a few SMEs noted that their R&D facilities are 100% not focused so much on research and development of brand new products and 23% packaging formats but are more concentrated on investigating and improving % of companies surveyed 80% 48% existing products 60% No UK facility • Moreover, half of the corporates also have R&D facilities abroad, based in 40% 77% UK facility in place mainly developed countries across Western Europe and North America 52% 20% 0% Corporates SMEs Sources: 1. Grant Thornton survey analysis Page 18 Page 19
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