Food & Beverage

Reduction in average DWC driven by lower average DSO and DIO, despite an offsetting decrease in average DPO.

Our sample of Food & Beverage companies delivered average revenue growth of 5% in FY24, with 90% of operators reporting higher sales. Price increases were the main driver, with the annual CPI for food and non-alcoholic beverages of 3.3% comparable to the average CPI of 3.8% for all household expenditure (for the 12 months to June 2024). Annual price increases were highest for take away foods, although there were spikes in some fruit and vegetable prices. In a reverse of the prior year trend, the majority of companies sampled (78%) were able to convert higher sales into higher earnings, indicating a clear focus on input cost and overhead management.

From a working capital perspective, average DWC for our sample decreased by 1.2 days (to 29.6 days) in FY24. Operators achieved a 7.6 day reduction in average DIO (to 42.7 days), however there was an offsetting shortening of supplier payment cycles with average DPO falling by 8.2 days (to 52.2 days). There was also a small reduction in DSO (0.8 day decrease to 31.5 days). Interestingly, two thirds of the companies that collected more quickly from their customers passed this onto their suppliers through faster payments.

The decrease in DIO followed a large reduction in FY23. However, there remains a large spread in DIO between the “best” and “worst” performers in our sample (77.9 days or over two months), which can be attributed to the mix of inventory types being managed, from perishables to products and ingredients with longer shelf-lives.

Our analysis of international metrics shows that the average DWC for our Australian sample was lower than their counterparts in Asia and Europe due to lower average DSO and DIO, however it was higher than the US sample, who collect from their customers more quickly.

Looking forward, we expect that the cost-of-living pressures and variable consumer sentiment will mean that management teams will need to continue to focus on operations and inventory planning in FY25.