According to Andy Williams, it’s the most wonderful time of the year - but for many of the industries that rely on it, Christmas 2021 looks set to be yet another filled with disruption and uncertainty.
The festive period remains the most important part of the year for many industries, particularly those that feed into consumer markets. Following on from a locked-down Christmas Day in 2020, this year couldn’t have been much worse. However, while this year’s “big day” might feel more traditional than last year, 2021 is bringing with it new problems that could prove even more burdensome.
The embers of the pandemic are rekindling across Europe and weekly deaths surpassed 1000 in the UK for the first time in eight months. Supply shortages are biting, distribution costs are rising, human shortages are becoming increasingly acute and monetary policy looks set to be tightened.
Plimsoll has analysed more than 1600 UK markets, assessing the stability and future outlook of the key companies in each. Based on our comprehensive analyses, we have identified several markets, reliant on Christmas for an outsized portion of their annual revenue, and the challenges they face in 2021:
Despite warnings of a looming turkey shortage over the past few months, UK poultry companies seem to have managed to turn the situation around… just. Warnings that choice will be much less than in previous years, companies have been forced to streamline products and reduce variety so that there will be “a bird for everyone that wants one”.
Temporary visas for EU workers to “save Christmas Dinner” attracted under half of the 5500 workers the industry said they needed. However, it looks like it has been sufficient to get just enough produce onto British dinner tables on the 25th.
However, the future outlook for the UK’s leading turkey producers remains uncertain. Without a permanent seasonal influx of veterinary and slaughter staff, this problem will recur each year. Elsewhere, the fragility of CO2 supplies, Brexit regulation complicating previously effortless cross border trade, and the soaring cost of distribution is adding to a general sense of unease in the market.
Plimsoll’s latest assessment of UK turkey producers shows a market that was undergoing something of a renaissance before Covid and Brexit. With the growth of around 6% in each of the past three years and profits not falling below 5% over the past five years, the market has the capacity to adapt, but what damage will the current headwinds do as we head into 2022?
Each year, the extent to which houses, even entire streets, explode into sensory obliterating displays of celebration seems to grow ever more elaborate. Whereas a British Christmas living room was once a mix of anaemic tinsel, broken lights and foil garlands adorning the ceiling, in 2021 turning living rooms into real-life festive grottos is big business.
Recent surveys reveal that British households are spending an average of £185 at Christmas on decorations and other goods. However, as with other sectors, the theme of Christmas 2021 seems to be “buy early to avoid disappointment” as the supply shortage sweeping the country becomes more acute as demand spikes and supply struggles to cope.
Plimsoll’s latest assessment of the Christmas goods industry shows a market having gone through an austere 12 months during the compromise nature of last year. That follows steady 3% growth in each of the preceding 3 years. Average profit margins have been much less stable, fluctuating from 0% to 3% in recent years. Will consumers go all in for a big Christmas this year or will supply problems and the stalking threat of lockdowns keep a brake on demand?
Christmas Tree Growers
If any part of the Christmas industry is entirely seasonal, it’s the good old tree. However, the UK consumer faces higher prices and potential shortages of trees as the market suffers from the same macro-economic factors as other industries.
With 10% of trees traditionally imported, the introduction of import complexity from Brexit is deterring some suppliers from bringing trees into the country. While this should provide a potential boon for domestic growers, meeting demand could prove difficult. A lack of agricultural staff to harvest such a seasonal product and a lack of haulage to transport them is a key challenge. With trees taking 10 years to mature to harvest, the ability to meet demand looks far from certain and could lead to a price war.
Plimsoll’s latest assessment of the UK Christmas tree market shows a market of relative stability. Half of all companies included in the Plimsoll Analysis have been rated as “strong”, reflecting longevity in the market and the ability of many to ride out any near-term issues. However, weakness does remain for others, so will the supply crisis reduce the number of providers in the UK or will companies be able to pass on enough of the increased costs to remain viable?
With the reemergence of Toys”R” Us in the UK, Australia and the US there is a growing nostalgia for some of the old retail magic. However, the almost complete dominance of e-commerce is here to stay as product consideration remains extremely low. Kids know what toy they want and parents want the most convenient option at the lowest price. Toys”R” Us are focused on “digital-first” and while nostalgia may fill stores at launch, their experiential, in-store offering will need to be strong to maintain footfall.
For the rest of the toy market, the last quarter remains the part of the year of most importance. However, the supply crisis is likely to visit the same disruption in the toy market as in other parts of the economy. From the latest must-have figures like L.O.L Surprise and CoCoMelon to the microchip starved consoles and digital toys, supply constraints are already apparent in the build-up to Christmas 2021. The message from the British Toy Association and retailers alike is “buy early to avoid disappointment”
Plimsoll’s latest assessment of the UK toy retailers market shows an industry that has seen sales growth fall over the past year or two as discretionary purchases fell during lockdown. The 4% growth rate of preceding years has halved in the latest period. As the supply costs spike has taken hold, so profit margins have come under pressure, falling below 1% in the latest year. As a result, over a third of retailers are rated “danger” in Plimsoll’s latest assessment. What next for a market so reliant on international trade, cheap just in time distribution channels and plentiful pounds in consumer pockets?
Christmas 2021 should be better than 2020, but it’s a low benchmark to breach. However, the reality behind the improvement on last year looks set to be one of supply chain crises and shortages. At Plimsoll, we believe that monitoring your own business health and that of your rivals before a crisis hits is the key to corporate success. Strong companies thrive in crises whereas weaker businesses fail, and knowing who fits into which category in your market before the next unexpected event occurs is a vital competitive advantage.
A Plimsoll Analysis of your industry is a key tool to monitoring your performance and that of your peers. You will be able to spot those with the lowliest health rating, pick out companies with the most potential for takeover and position your business to capitalize on opportunities.
For more information on what Plimsoll has revealed in your industry, please visit www.plimsoll.co.uk today.