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Ambient Grocery: Will sales evaporate and management heads roll in this summer heatwave?

Posted on: July 4th, 2018 by Will Carter

Although I confess to having used it myself on occasion, blaming the weather is, in my experience, an over-used excuse to explain away sales which fall below target.

If you sell ice-cream, BBQ ingredients or salads, it’s fair to say that an exceptionally good or bad summer can make or break your budget, but for most manufacturers and brand owners (especially those who operate across a portfolio of product sectors) the weather usually plays only a modest role in a year’s success or failure.

But perhaps not this year.

2018’s summer thus far has been exceptional; not least because it has followed what seemed to be an interminable winter and a cold, wet Spring. It may not last, but thus far it is uncannily reminiscent of 1976, when high temperatures lasted in parts of the country until well into August.

Two other factors make this heatwave different for grocery manufacturers.

Firstly, the heatwave is pretty much nationwide, with areas such as Wales and Northern Ireland enjoying record temperatures alongside the South and North of England and even Scotland. In the past, heatwaves may have impacted the purchasing patterns of pockets of the country, but rarely have they affected all 66 million of us simultaneously.

Secondly, this exceptional summer has coincided pretty much to the day with a small football tournament taking place in Russia. Even if the UK had been shivering in below-average temperatures and rainstorms, the supermarkets would have prioritised two months’ worth of promotional focus to beer, crisps and the like.  As it is, this focus on summer partying will have been increased by a material factor with BBQ ingredients taking up what little slack is left. Not much gondola space will have been left for the makers of cans of beans, chocolates or gravy granules!

At Food Strategy Associates we will watch the coming months of grocery audit data and quarterly Company results with interest. If the heat continues, profit warnings may become the order of the day for some businesses without the diversity to gain as well as lose from the exceptional weather.

CEOs already under pressure from activist shareholders seeing real or perceived failings in their approach to the dramatic changes to the shape of the UK grocery market, the growth of the discounters, input cost inflation, and now one-offs like the CO2 shortage, may find themselves under still more pressure due to weather-related factors genuinely beyond their control; at least in terms of immediate remedial steps.

In a world of increasingly unpredictable weather extremes, diversification of product portfolios may become a must-do for some of the more exposed food businesses.

Whilst not every manufacturer of soups and other winter warmers can or should balance their portfolios with ice-creams and the like, there are other, more achievable diversification options available to some of the most vulnerable out there.

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