Kiwi cosmetics and health products are breaking downturn trends in SME manufacturing, according to new research from Unleashed. Photo / 123RF
Kiwi cosmetics and health products are breaking downturn trends in SME manufacturing, according to new research from Unleashed. Photo / 123RF
Small-to-medium Kiwi manufacturers are lagging behind Australia and Britain with beauty and health manufacturers defying the Kiwi downturn, according to research from inventory management software provider Unleashed.
Kiwi cosmetics and personal care manufacturing outshone all other sectors with a score of 100, followed by industrial machinery, raw material and equipment (83) and energy and chemical manufacturing (81).
The Unleashed Manufacturing Health Index ranks manufacturing industry progress, including sales performance, purchasing and internal efficiency on a scale of 0-100 for SME manufacturers in Britain, Australia and New Zealand.
Scores below 50 represent below-average performance for each sector, scores above 50 show above-average performance, and scores of zero or 100 show historic minimum or maximum performance respectively.
New Zealand manufacturers managed to maintain an average performance in the third quarter of 2023 (Q3), scoring 51 out of 100 on the Manufacturing Health Index, lagging behind Australia (63 out of 100) and Britain (77 out of 100).
Kiwi food and manufacturers are being squeezed with low margins and high production costs.
Head of product Jarrod Adam said, “While the NZ manufacturing overall is keeping its head above water, a more detailed look at the sectors that make up the industry show that there have been some overperforming, as well as some doing it really tough.”
He said smaller independent manufacturers had been comparably stable, with the sector scoring 51 out of 100.
‘’In difficult economic environments like these, our SMEs have proven themselves more nimble to make quick changes for their businesses and better insulated against some of these larger pressures.”
Adam said Aotearoa-based cosmetics and personal care manufacturers’ top score comes after a tough run through the pandemic and is a result of the right “balance between having the right amount of stock on hand and heightened profitability”, beating Australian manufacturers in the same industry.
“While Kiwi cosmetics businesses have enjoyed their best quarter in years, on the other side of the Tasman, Q3 marked their worst. Scoring 13 out of 100, Australian cosmetics had the poorest health score of all of the [Australian] industries analysed,” Adam said.
He added that cosmetics production is improving “due to increased demand and operating costs lowering as local production scales up”, but food and beverage manufacturers have not been as lucky.
First Retail managing director Chris Wilkinson said the growth in demand for Kiwi health and beauty products comes from more awareness of local brands in NZ and overseas.
‘The perfect storm’
On the bitter end of the downturn, Kiwi manufacturers had the lowest scores across the three countries with clothing, footwear and accessories manufacturing scoring 0, followed by food (1) and alcoholic and non-alcoholic beverage manufacturing (2).
Adam said rising costs and shrinking disposable income for consumers have created the “perfect storm for independent manufacturers” in these industries.
“These industries have razor-thin margins right now, are facing tightening consumer pockets, and have been in the thick of the cost of living crisis firestorm,” he said.
Wilkinson said the drop in demand for alcoholic drinks was significant in the past 12 months.
“Drinks have been one that has been particularly evident in the past 12 months — reflected in the number of craft beer businesses that have had difficulties. This is coupled with the fact younger people are drinking less and there’s an overall shift away from alcoholic drinks,” he said.
Unleashed showed that NZ’s construction industry scored 49 out of 100 in Q3, showing stable profitability and general health, defying expectations of a steeper downturn.
Construction showed an average score despite the widely reported industry downturn. Photo / Dean Purcell
Overstock dropping
Adam said NZ manufacturers are shaking off the pandemic in control stock, with overstock making a gradual decrease, holding an average of $155,334, down from $166,372 last year.
The Kiwi beverage and food industries experienced growth in overstock levels since Q3 last year, with food overstock increasing by $30,000 in the past year, coming in at $135,343 in Q3 2023. Beverage manufacturers experienced a $20,000 increase, to $106,180 in the past year.
NZ construction manufacturers have been getting overstock levels under control, averaging $185,933 in overstock, down from $268,533 last year.
NZ lead times
Metal and fabrication experienced the biggest improvement in lead times, from a high across all measured industries of 85 days in 2021, 52 in 2022, down to a NZ industry average of 20 days in Q3 2023.
Clothing, footwear and accessories had the highest lead time of all measured groups at 29 days, an improvement from a 61-day lead time on the previous period.
The embattled beverage industry had the fastest lead times of the group at 13 days on average, down from 21 days in 2022.
