A study by StubbsGazette has found that 20% of companies in the Irish food and drink industry have credit ratings 'below the point where reassurances and/or guarantees are recommended where credit is requested.
The Food and Drinks Industry Report, described as 'the most comprehensive picture of the industry's financial DNA', was derived from a database of 3,000 companies within the sector.
In terms of a category by category breakdown, the lowest credit rating scores were found in the Beverages sector, where 33% of companies were rated in the highest credit risk category (0-43), according to StubbsGazette's credit ratings service.
Prepared Foods companies also exhibited a low credit rating on average, with 21% of businesses rated in the high credit risk category. By contrast, the Fruit & Vegetable, Seafood, and Meat & Livestock sectors all had a 'better than average' rating, with 35% of companies in the Fruit & Vegetable and Seafood sectors respectively deemed to have a 'Low Credit Risk'.
"The food and drinks industry doesn’t have absolutely everything going for it," the report notes. "The banking crisis and associated credit crunch has limited funding to primary producers (although it should be said that larger companies are considered well funded to continue of their paths to growth).
"On the retail side, price pressure is relentless with private label brands providing an increasing challenge to brands as customers modify their buying behaviours in the age of austerity.
"There is also the factor of creeping bureaucracy, with quality control and requirements on traceability adding sizably to the cost base. That said, the costs could usually be justified in the face of the costs from the periodic food scares that have caused immense damage."
The study also found that Diageo leads the way in terms of pre-tax profits in Ireland, ahead of British Sugar plc and Kerry Group, while Diageo also recorded the highest turnover of the companies tracked, ahead of Kerry Group and Musgrave Group.
© 2014 - Checkout Magazine by Stephen Wynne-Jones