Beverage businesses top sector growth as food falls flat

02 August 2019 3 min. read
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The top 50 most profitable companies in the UK food and beverage sector are increasingly focused on food and drink, fuelling M&A interest in the segment. Overall, Sticks’n’Sushi led the top 50 index, recording profit growth of 129.2% CAGR for the past two years, followed by MW Eat Group and Oakman Inns.

The UK high street has seen a considerable level of impact from various avenues, including uncertainty stemming from Brexit, low real-wage growth hitting consumer spending as well as a shift in consumer preference around consumption channels. One area that has recently been affected is the casual dining segment.

As consumers have tightened their belts, it has had a knock-on effect for the industry, particularly as Brexit ramps up import prices and makes it more difficult to source staff. That has led to a number of major insolvencies in recent months.

Growth Company Index 2019

Yet not all companies in the space have suffered, or not to the same degree – reflecting the diversity of the market. New analysis from AlixPartners has examined the top food and beverage businesses in the UK, in terms of a variety of factors, shining a light on the best practices of the industry.

The top performer in terms of 2-year profit CAGR was Sticks’n’Sushi, growing by 129.2% CAGR to an absolute £2.4 million on revenues of £15.7 million. The Copenhagen-based company with PE backing, founded in 2004, has eight sites in the UK and 12 in Denmark. MW Eat Group took second place, with the privately funded company raking in a profit CAGR 111% over the same period. New entrant Oakman Inns meanwhile saw profit growth of 95.8% over the period to £1.2 million.

The most significant increase for a previous entrant in the current top 25 was The Alchemist, which climbed 13 spots on the back of 54.2% CAGR profit growth over a two-year period. Rosa’s Thai saw a drop of 3 spots to number six, with profit growth at 48.2% in the latest surveyed. The New World Trading Company fell 12 places, although still enjoying a solid 13th spot and 27.3% two-year profit growth CAGR.

Squeeze continues

The squeeze on restaurants was acutely noticeable in the latest survey, with the industry seeing its share of top 50 entrants fall from 56% in 2017 to 36% in 2019. The sharp decline was accompanied by an increase in the number of ‘wet’ beverage companies, whose share increased to 60% of the top 50. The relative popularity of drinking out establishments among consumers has seen M&A deals in the space increase, as the overall quality in the segment continues to grow.

Split by sub-sector

When it comes to the overall market constituency between private, family-owned and PE, the research notes a relatively stable market overall since 2012 – among the top 50, family owned companies increased their share from 16% to 20% in the latest survey, while PE firms increased their share from 34% to 42%. Privately owned companies saw their respective share decrease the most significantly, falling from 46% to 38% over the period. PE firms fell back from 48% last year, as they retrench following rapid investment in previous years.

Regarding the segment as a whole, the authors concluded, “This year’s list highlights that both fledgling and established businesses can thrive, through offering a strong customer experience and an innovative approach, allied to operational discipline and robust management – despite the on-going headwinds buffeting the eating and drinking out sector.”