Following a year of UK food volumes dropping as consumers become more cautious with their spending, sales of food in the first quarter of 2012 have remained under pressure according to data recently issued by the British Retail Consortium (BRC). The latest BRC Shop Price Inflation index showed that although food inflation was at 4.3 percent in April, down from 5.4 percent in March, volumes were lower by year-on-year comparison.
The tightening of belts caused by the recession has had a significant impact on the food retail sector, which has switched its focus to value and discount offerings in order to tempt consumers into parting with their cash. This however has prompted a widespread squeeze on prices, led by mainstream supermarkets, and a fiercely competitive market that is eating heavily into margins and pushing food manufacturers and farmers to the limit.
The meat industry in particular has felt the impact of this drop in prices, with livestock farmers and slaughterhouses struggling to maintain a healthy cashflow. SFP was recently appointed Administrator after the failure of the Skegness-based Lincolnshire Prime Meat Company, and this is just one of many meat producers that has suffered from a faltering cashflow following recent economic events.
In the once niche area of Halal meat production, which now accounts for 25 percent of the entire UK meat market, abattoirs and meat producers have not escaped the fallout of the volatile financial conditions and falling meat prices. Though Halal meat is a growing consumer market, with around 2.5 million Muslim consumers in the UK and 1.6 billion Halal consumers globally, UK companies producing Halal meat must still contend with a strong flow of imported products and are consequently seeing financial failure among their ranks.
Two such Halal meat manufacturers that failed to maintain a healthy cashflow were Sher Halal Foods Limited, an abattoir producing meat products including poultry, and United Halal Foods Limited, which dealt with the production and preservation of meat. Both companies operated out of a facility on the Cibyn industrial estate in Caernarfon, Gwynedd, and had a joint annual income of approximately £12 million. The owner of both businesses, Arfan Sher Rafique, had hoped that the facility would eventually offer employment prospects to as many as 150 people, but both companies only employed around 35 people when they entered administration.
SFP’s Daniel and Simon Plant – both licensed members of the Insolvency Practitioners’ Association – were appointed Joint Administrators on May 1 2012 after the two firms encountered financial difficulties leading to combined debts of almost £650,000 and filed for insolvency. Daniel Plant, Group Partner at SFP, says: “Recent problems with cashflow have caused a cessation of trading at these two companies and suggest an increasingly tough environment for the food processing industry, coming as they do soon after the failure of the Lincolnshire Prime Meat Company earlier this year.
“Despite having a substantial turnover between them, Sher Halal Foods Limited and United Halal Foods Limited were both unable to continue trading but we are undertaking a marketing campaign in order to achieve a sale of the businesses and their assets.”
The failure of these two companies has garnered a great deal of interest from the media, including the BBC and the Caernarfon Herald, which quoted Mayor of Caernarfon Ioan Thomas as saying: “I was disappointed hearing the news that Sher Halal Foods Limited had gone into administration, but not totally surprised. In recent conversations with farmers and union representatives it was clear that the company was having difficulties.
“Local farmers have lost out when previous operators of the site encountered financial difficulties and I hope that farmers have not been affected this time,” he continues. “In the present economic conditions cashflow is becoming an increasing problem. A company may have a strong order book but without having ensured sufficient cashflow provision, it will encounter difficulties and banks now seem reluctant to help.”