Chris Evans

27th November 2019

Business News

Brexit, Trump and the UK Cheese market

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Between the never-ending uncertainty of Brexit and the 25% tariffs from ‘Trumps Trade War’, the future has never been more uncertain for the UK’s leading Cheese Makers.

It goes without saying that with 83% of UK Cheese exports going to the EU, a messy Brexit without a comprehensive FTA will be disastrous for the market and its main protagonists. Even a comprehensive future trade deal is unlikely to be as beneficial for producers as the UK’s current, full EU membership.

Elsewhere, Brexit supporters may opine the benefit of a post-Brexit trade deal with the US. While that would eliminate the current 25% tariffs, the power of large US Industrial Dairy could see conditions emerge that floods the UK market with cheap produce. Going the other way, FDA regulations on things such as safe E-Coli levels and the use of wooden boards in the aging process could also pose non-tariff trade barriers for UK producers selling into the US market.

Of course, there are burgeoning emerging markets that UK Cheese Makers can exploit, particularly China. With the US v China trade dispute seemingly no closer to resolution, some UK producers will be looking to the East for their growth in 2020 and beyond.

Our premise at Plimsoll is simple. Financially strong companies survive even the most uncertain conditions. Companies already under financial strain do not. The companies most likely to be brought down by unfavourable market conditions are already visible in the Plimsoll Analysis.

With that in mind, we have produced a special study on the UK’s 186 leading Cheese Makers, separating those already in financial difficulty from those powering ahead regardless. The Plimsoll Analysis assesses each Cheese Makers individually, looking at their short- and long-term financial health, overall trend in performance, future durability and potential for acquisition. Based on the latest financial data for each company, this new analysis shows:

  • 81 of the 186 companies are already rated as Caution or Danger – the former suggests growing issues whereas the latter indicates immediate improvements are required
  • 31 of the companies included are ripe for takeover – these companies are independently owned and with a large difference between current and future value. If the market is to consolidate in the short-term, Plimsoll considers these the most attractive targets
  • 14 companies have lost more than a quarter of their value – As profit margins are increasingly under pressure, valuations have fallen again in the latest period

Political and economic uncertainty has the UK Cheese market is in a state of flux. Once the future becomes more certain the shape of the industry and the companies remaining could have changed significantly. The Plimsoll Analysis provides an easy means of highlighting those companies ill-prepared to ride out the current storm, those well placed to make a strategic acquisition or two and the players powering ahead in spite of it all.

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