The poultry sector needs “more permanent fixes” to address the mountain of issues it is facing, the boss of 2 Sisters Food Group has warned.
The industry was facing an “existential threat to its future if we have another year like this”, warned the poultry giant’s CEO Ronald Kers, pointing to soaring production costs in energy, feed and labour, and this year’s worst-ever avian flu outbreak.
“Whenever you lose tens of millions of pounds in revenue, that has an influence on any business, large or small,” he added.
“Many businesses (across the whole of the food sector) are now in a very precarious position and the worst is yet to come.”
As a chicken specialist, 2 Sisters has faced less disruption from the bird flu outbreak than its sister company Bernard Matthews. However, it had still lost “millions” of pounds in recent months, Kers told The Grocer.
Bernard Matthews, meanwhile, has lost a figure “well over” £10m, as hundreds of thousands of turkeys in its supply chain were either killed by bird flu or culled as a result of the outbreak.
2 Sisters had primarily felt the impact of bird flu through increasing supply chain inefficiencies in areas such as exports, which are currently banned due to bird flu restrictions, Kers explained.
“Those carcases and back ends that would normally go into export markets have had to stay on the domestic market, and that collapses prices, bringing far less value back [into the business] and pushing up our cost of production,” he noted, while calling for more work to develop a viable vaccine.
In total, the supplier’s cost of production had risen by 35% year on year, Kers said. And while its prices to retailers and shelf prices had also risen, he warned they may need to keep climbing into 2023.
“We have adapted the business over the past five years and are far more agile and resilient,” he said, following a series of divestments to focus 2 Sisters towards its core operation in poultry. That policy was continued by confirmation its bakery division, which includes Holland’s Pies, would be sold to an Irish boutique investment firm this month.
Despite those moves, the pressure on the supply chain would continue to hamper the business, he added, while pointing to unresolved issues around soaring energy prices – also highlighted by NFU president Minette Batters this week – as another issue that required “urgent” action.
“We don’t want the government to give us a cheque, but we need a solution to have a sustainable food supply chain,” he said. “At the moment, the energy companies are having their cake and eating it [with financial support not being passed on to business].
Without any action, “costs will rise even further”, he warned.
It comes as Batters told members of the media on Tuesday that wholesale gas prices had risen by 650% since 2019, but despite the sector’s concerns over energy costs, there was currently no solution to the situation.
Business secretary Grant Shapps had declined a meeting with her over the issue last week because he “didn’t have time”, while environment secretary Thérèse Coffey was yet to meet any food sector groups “one to one”, since being appointed in September, she claimed.
”I worry enormously that the interface between Number 10, BEIS and Defra is not working as well as it should,” she said. ”An energy relief scheme [for the food sector], and how it will be targeted, is really important.”
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