The annual Ifac Food and Agribusiness Report 2023 has found “plenty of red flags” for owners of small and medium enterprises (SMEs) active in the agrifood sector.
The report – the sixth annual edition – is based on research that was conducted in July and August 2023, and includes the views of nearly 75 leaders who run “some of our most innovative food businesses and agribusinesses”, Ifac said.
The agribusiness professional services firm said that each of these businesses is “an important employer and key contributor to its local economy”.
However, the report found that these businesses were experiencing a range of challenges at present. While 90% of them have either sustained or grown their turnover – partially due to increased pricing – net profits have improved for only three out of every 10.
Ifac said: “The headwinds keep coming for those who have managed to navigate the past few years with war; economic uncertainty; inflationary pressures; the energy and cost of living crisis; and the global pandemic.”
43% of the respondents to the Ifac survey were concerned about rising interest rates, while personal pensions have “taken a back seat” according the professional service firm, with over half of the business owners not having a personal pension plan in place.
Ifac said that this potentially suggests that the current environment is also harming future financial planning.
Other “red flags” the report highlights include:
- 33% of respondents are experiencing late payments from customers;
- 35% are experiencing short or medium-term cash flow issues;
- 35% of respondents’ products or services are discretionary spends and therefore could be cut;
- 26% of respondents are experiencing slowing trade or trade not returning to pre-pandemic levels;
- 26% are firefighting daily rather than proactively managing the business.
According to Ifac, these issues could become more problematic over time for several businesses.
Apart from these factors, recruitment and retention of staff is a “constant concern” for businesses.
61% of companies are finding it difficult to recruit the right team and 42% see it as a growth threat. Notwithstanding these difficulties, 55% still intend to increase the size of their workforce, and 38% hope to retain their current employees.
In terms of growth in the future, their seems to be a growing focus on international markets. This is particularly the case for agtech and agribusinesses which are being impacted by a slowdown in the significant growth in dairy farming.
47% of respondents agree that export remains a key avenue for future prosperity. However, 41% of respondents face sales and marketing challenges, and 39% say finding the right distributor is difficult.
Elsewhere, 87% of food and agribusinesses are taking climate change action, including using sustainable packaging; investing in solar or other renewable energy sources; and managing waste and by-products.
Other key findings from the report include:
- 82% of respondents are pursuing cost savings to deal with inflationary pressures;
- 75% reported an increase in costs this year;
- 42% cite lack of available staff as the biggest threat to growth;
- 38% cite rising salary costs as a major threat to their business;
- 37% of food businesses are investing in innovation;
- 53% see the launch of new products/services as a major growth opportunity;
- 79% of respondents are not actively using artificial intelligence for their business.