Collaboration across food & drink: when manufacturing confidence is low, where can energy management improve margins and ease the pressure?

We’ve focused on food and drink manufacturing and retail sectors in previous blogs and in sector-specific webinars.  As these sectors negotiate the current energy shock, we look at immediate issues facing food manufacturing – and how a collaborative approach with retailers can help businesses through testing times.

 

In April and May this year, the Food and Drink Federation (FDF) published reports that reflect an historic lack of confidence across their manufacturing base while forecasting unprecedented rises in food inflation. At the same time, the British Retail Consortium (BRC) responded to the recent King’s Speech, highlighting the need for immediate action as the cost of living crisis continues.  Both sides of the supply chain are aligned, with energy prices as a priority: particularly pertinent when negotiating a volatile energy market.

 

The Worst Energy Crisis in History?

This is how FDF have described the conflict in Iran in their State of the Industry Q1 2026 report, according to the International Energy Agency[1].  And this comes at a time when the sector is still negotiating structural shocks from Brexit, COVID-19, and the war in Ukraine. 

In their April report on food inflation, FDF present some stark findings[2]:

• Since 2022, food prices have risen sharply. Food inflation has remained above both its historical average and overall inflation, reflecting the scale and persistence of cost pressures facing the sector.
• Rises in costs are passed through to final retail prices with a delay of seven to twelve months.
• We currently expect the war in Iran to push food inflation to 9-10% in December 2026.

Given the energy-intensity of food and drink manufacturing, where businesses have little control over input costs, as “price takers”, the energy crisis impacts every stage of the food and drink supply chain: from manufacture – with energy-intensive processes such as baking, pasteurisation, refrigeration and packaging – through to retailers and, ultimately, passed on to the public.  With the second-highest electricity prices in Europe, 40% higher than the Netherlands and 35% higher than Spain, these costs are a significant constraint on the UK’s food manufacturing competitiveness[3].

 

Rising prices – across the supply chain

Over 80% of manufacturing businesses surveyed by FDF in their Q1 2026 report said sales growth is their main priority – across businesses of all sizes.  At the same time, 82% indicated that raising prices is a necessary approach to managing the impact of cost pressures created by this latest energy crisis.  But this is a last resort.  Without control across the full supply chain’s pricing strategies, manufacturers risk the perception of lack of competitiveness from their retail customers when they are forced to increase prices.  As FDF emphasise, “…during recent shocks, food manufacturers cut advertising and training expenses, changed procurement strategies, reduced product lines and operating hours, and absorbed part of the cost increases.  Manufacturers have only increased prices when all other avenues have been exhausted.”[4]

 

However, the pressures are not one-sided.  In the current economic context, retailers find themselves similarly exposed when looking to energy costs – operating in the same environment where the ultimate pressure comes from cost of living and the long-term impact of inflation on food and drink. 

 

 

Retailers’ position and supply chain collaboration

Looking to inputs and outputs and pricing for food and drink manufacturers, FDF note:

“Retail pricing is mainly determined by the structure of the grocery market”[5]

And this evolving market is crucial to understanding the need for collaboration for manufacturers and retailers.  Where retailers are under increasing consumer pressure, the price war between UK grocery companies has grown over the last 18 months[6].

 

Last month, the King’s Speech outlined government policy for the forthcoming Parliamentary year.  The Energy Independence Bill offered nothing to instil confidence for either manufacturers or retailers in the sector.  However, the proposed Small Business Protections Bill is more promising.  And, the response from BRC’s Chief Executive, Helen Dickinson, indicates a reinforcement for the need for collaboration across the supply chain to support the sector,

 

“Retailers rely on strong and trusted relationships with their suppliers and work hard to support this through fair payment terms and processes that can benefit all parties. While the devil will be in the detail, we welcome the focus on supporting small businesses, and the exemption for payment arrangements between large businesses. Government must continue to engage businesses to ensure the Bill allows for the practical flexibilities businesses need.”[7]

 

Collaborating on energy savings – for immediate savings and future proofing energy demands

Food and drink manufacturing is energy-intensive.  The sector is low in confidence.  But for companies looking to take greater control over their energy spend, there are options: modern energy management technologies.

 

Powerstar work with clients in food and drink manufacturing, as well as some of the UK’s largest retailers, helping them to  improve their energy management: to lower energy spend and reduce emissions – strategic for both FDF and BRC.

 

We have saved costs for food and drink manufacturers 

 

For more information, click on the case studies below:

 

MI Dickson

https://powerstar.com/case-study/mi-dickson/

 

Quorn Foods

https://powerstar.com/case-study/quorn-foods/

 

Understanding Collaboration

At Powerstar, we know what collaboration means, and it’s the approach we take to every customer project, working closely with our clients to establish the most effective solution for their site, operational requirements and energy objectives.  

 

As a Professional Affiliate member of the Food & Drink Federation, we talk to, learn from, and support manufacturers across the sector. And we work with some of the largest supermarket chains. We know your customers and what drives their energy management requirements.

 

Join us for our forthcoming webinar, where we show energy-saving collaboration in action: You can’t control what you can’t predict: Managing energy costs in food & drink | The Food & Drink Federation