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What drives the food and beverage industry

Written by Darren Wingfield | Feb 11, 2019 3:24:00 PM

The food and beverage industry is a major part of the UK economy and also affects each and every one of us. If we think initially about the number of people employed in manufacturing our food, then it feels like a huge industry. But if you then factor in the other people employed in delivering the food, serving it and those involved in the retail side of things then you will see that it indirectly involves a massive number of people both nationally and globally. 

Quite simply, we all have to eat! 

And there are so many things that businesses in the food and drink sector need to do in order to delight their customers. The pressure is there to – 

  • Deliver healthier choices 
  • Look at free-from alternatives 
  • See if there can be organic choices 
  • Cut the price 
  • Extend the best before date 

This pressure comes equally from consumers and regulators. The UK food industry is one that is looked up to across the world for the high standards it maintains. But all of this regulation and innovation comes at a cost. Let’s take a look at what drives the food and beverage industry – 

Legislation 

One of the main drivers of the UK food and beverage industry is the legislation that surrounds it. The sugar tax that has been implemented over the past couple of years is a prime example. The details were as follows – 

  • Drinks with over 5g of sugar per 100 millilitres would face a levy of 18p per litre 
  • Drinks with over 8g of sugar per 100 millilitres would face a levy of 24p per litre 

Beverage manufacturers had a stark choice – pass this extra cost on to the consumer, swallow the tax themselves or look to reduce the sugar in their drinks. Many opted for the last one. This is Research and Development in action. Any SME that made changes to their formulation at that time would have a qualifying R&D tax claim on their hands. 

What the customer wants 

The eyes of the regulator are one thing. But another influence that could send a business soaring or crashing – and that is the customer. It is easy to speak to customers and find out what they want. We suspect that the most called-for item is a chocolate cake that tastes divine but carries no calories at all. Whatever the reason for these changes here, R&D plays a significant role in dealing with these trends. This driving force behind the food and drink sector is prime for R&D tax claim. 

Ethical considerations 

As well as moving with what regulators and consumers want, the food and drink business must also consider the ethics of their operation. There are many things to consider here – 

  • Animal welfare is a major concern 
  • People want to know that the suppliers have been treated fairly 
  • There is much debate about packaging going to landfill 
  • GM food is a conversation that will arise again in the future 

All of these can drive a food and beverage company to make changes to what they do. If this has happened to you or any business you know, then you maty well be eligible for an R&D tax claim. 

Commercial factors are at play 

You may not readily associate commercial decisions with Research and Development, but they happen all the time – often even more so in the food and drink industry. Shelf life, for example, is a significant buying-decision influence for a supermarket. If they feel like a product will go out of date quickly then they are far less likely to carry it. So, the business that makes changes here to appeal to the retailer at the end of the chain will have gone through a process of R&D. These are perfect candidates for R&D tax claims. 

R&D tax is a government scheme that puts cash back in the pockets of businesses that innovate and make change. It is an ideal solution for a business in the food and drink sector. So, we suggest that you do your research here and understand what R&D tax credits mean to you. 

If you have any questions, then Lumo are the food and drink industry’s R&D tax adviser of choice