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Atradius reports 59% drop in payment claims for food and drink sector

Georgios Panzaris, senior underwriter at Atradius, noted that despite the cost-of-living crisis, demand in the food sector has remained relatively strong. Falling material and utility costs and high sale prices have improved profits for many food companies.

The sector has faced numerous challenges, including supply chain disruptions, volatile weather, rising input costs and labour shortages. High interest rates continue to impact highly leveraged companies and household incomes, while labour costs and commodities like cocoa remain high.

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However, food producers are seeing brighter prospects, expected to continue into the summer. Inflation has dropped to its lowest level in two-and-a-half years, with slowing food price rises. The Bank of England is anticipated to cut interest rates later in the season, providing relief to highly leveraged companies.

Several factors contribute to the optimism for food and drink companies, including a packed summer of sport. The men’s Euro 2024 tournament is expected to prompt 13% of people to spend more on groceries, beer, wine, spirits and takeaways.

Panzaris highlighted that sports events like Euro 2024 encourage increased spending, benefitting companies in the food sector that supply the catering and hospitality industry. The onset of summer warmth is also expected to boost spending on food and drink, with many people planning to enjoy outdoor meals and picnics.

“Demand in the food sector has remained relatively strong despite the cost-of-living crisis. This is the main message we have been getting from most companies we have spoken with, and not something we have seen before,” said Panzaris.

“The onset of summer warmth will provide a boost too: many people are planning to spend more on food and drink as the weather improves, dusting off their picnic blankets and spending out on some al fresco treats,” he added.

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• Georgios Panzaris
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