Puredairy Trade


An appetite for growth – challenges with food sector finance


| 11 Nov 2022

Every company worth its salt wants to grow. That idiom applies regardless of the sector you operate in. But for food sector companies, there are considerable headwinds driven by the depth and complexity of the sector – its supply chains, its consumers, the extraordinary levels of competition, the influence of international trade and currency. Add to that challenges with cash flow, inventory management of perishable products, exposure to capital costs and labour constraints. It’s little wonder that food industry players struggle to settle on the most effective way to finance operations and growth.
Food industry operators – right along the supply chain – face a combination of retailer price pressure, fickle consumer trends, intense regulatory pressure and, particularly in Australia, considerable supply chain pressure driven by costs of labour and transport. Every one of those elements is also heavily influenced by international trade pressure, whether in the form of fuel costs, exchange rates, import pressure or export barriers. And margins are slim to start with, so any adverse impact can rapidly put pressure on profitability and growth aspirations.

Any business looking to grow and influence the market needs access to the right kind of finance to support its aspirations. But traditional financiers that don’t understand the food sector are pretty averse to lending in highly competitive, low margin, cash volatile, capital intensive and trade exposed sectors. If you’re a food service business owner, accessing finance can be a serious challenge.

Fortunately, there are finance providers that get the food sector – that understand the cyclical nature of the food services sector and are prepared to consider innovative ways to look at supporting growth for food businesses. But operators in food services still need to understand where they are exposed and what variables they need to cover off with clever finance. Depending on which sector you operate in, and where along the supply chain you sit, these variables could include:
• Commodity price and supply exposure
• Inventory financing
• Currency exposure
• Capital financing
• Capital leveraging opportunities
• Cash flow protection
Operators in the food service industry need to be more agile than ever to compete.

Operators in the food service industry need to be more agile than ever before to compete.

If you are serious about growing your food services business then you need to understand what your financial touch-points are and be prepared to find the right finance option.

At the end of the day, food services is an incredibly rewarding sector to run a business in. People need to eat and drink – it’s the most basic instinct. Getting your product right and getting the right finance to get it to market and grow your market share is essential to success in this most important service.

Written By

Adrian Josephson