Food safety, restrictions on unhealthy foods, employee rights and preventing economic crime: Trends to look out for in the Food & Beverage Sector 2025
2024 was a challenging one for the food & beverage sector with businesses tackling changes in consumer spending, rising input and production costs, supply chain issues, new regulation, increased scrutiny from HMRC and a change in Government, amongst other things. Our international team of food & beverage sector experts were on hand to guide clients through many of these challenges, and assist with furthering their strategic goals.
Some highlights from the year include:
- Advising The Nero Group on its acquisition of Nottingham-based coffee brand 200 Degrees, as part of its growth strategy in the UK. The Nero Group is the largest independent coffee house group in Europe and owners of Caffè Nero.
- Advising long-standing US client, Entrepreneurial Food Group LLC, on the sale of two UK food production businesses, Zorba Foods and SK Chilled Foods, to The Compleat Food Group.
- Advising providers of and suppliers to the food and beverage sector in relation to supply chain risks and disputes and compliance issues arising from product labelling and information requirements.
- Providing clients across the sector with tailored employment and immigration law advice, helping them to navigate complex regulations, manage international legal risks and optimise HR strategies.
- Advising on the Employment (Allocation of Tips) Act, colloquially known as the ‘Tips Act’, which came into force in October 2024 and created a statutory obligation on employers to allocate tips to workers without deductions, with Michael Powner sharing some insights on the topic on the ITV Evening News.
In light of the increase to National Insurance Contributions and the National Minimum Wage outlined in the Autumn Budget 2024, significant increases in business rates payable by restaurants and pubs, and new regulatory burdens on the not-so-distant horizon, there is a huge amount of pressure on businesses in this sector to manage costs. These changes will substantially increase expenditures, including employee remuneration costs for businesses with lots of staff on lower incomes, i.e. pubs, restaurants, factories and food producers. Recent analysis by UKHospitality reveals that the employment tax measures in the 2024 Autumn Budget will increase the cost of employing a full-time staff member, aged 21 or older, earning the National Living Wage, by at least £2,500. With these challenges in mind we predict that some of the hot topics for this sector in 2025 will be food safety, restrictions on unhealthy foods, the Employment Rights Bill, prevention of sexual harassment and the Economic Crime and Corporate Transparency Act.
Food Safety
Food safety, inextricably linked to consumer confidence, is expected to remain high on the agenda for businesses throughout the upcoming year, especially in light of the UK E-Coli outbreak of 2024. It is thought to have originated from seemingly innocuous salad lettuce in prepackaged supermarket sandwiches and other lunch items, but ultimately hospitalised dozens of people.
In addition, there is real pressure to ensure that products are sufficiently and correctly labelled, in supermarkets, restaurants, and elsewhere. Nothing highlights this more than the Owen’s Law campaign, ran by the family of Owen Carey, who tragically died in 2017, having suffered a severe anaphylactic reaction after eating chicken containing buttermilk. Owen’s family are campaigning to change the law to compel restaurants to state the 14 major allergens prescribed by EU law in their dishes in writing at the point of ordering, without the customer having to enquire. Separately, in October 2024, the Food Standards Agency consulted on best practice guidance for non-prepackaged food, and final guidance is expected to be released in Q1 2025. The Food Standards Agency has also released best practise for packaged food, recommending that manufacturers implement rigorous procedures for the application of clear and accurate mandatory and “may contain” labelling. We anticipate further momentum in favour of clear allergen information for consumers.
The financial implications of evolving food safety and labelling requirements are multifaceted. Enhanced labelling and potential reform of allergen information laws may necessitate additional resources to ensure compliance, such as investment in new technologies, staff training, and potentially reformulating products. That should be underpinned by mitigation strategies including comprehensive supply chain management systems with enhanced due diligence of suppliers, packaging services, and distributors, and staff training programmes that enhance traceability and transparency reducing the risk of cross-contamination. Whilst these steps come with ‘upfront’ costs, by doing so, businesses may avoid the costs associated with non-compliance, including fines and reputational damage.
Restrictions on unhealthy foods
The Labour Government has committed to introducing new promotional restrictions on high fat, salt, and sugar (HFSS) products taking forward plans raised by the previous Government. From October 2025, in-scope products will be subject to additional online and in-store restrictions, including a prohibition on volume promotions (such as “buy one get one free”) offers and a ban on pre-watershed TV advertisements and paid online advertising. Some have criticised the wide definition of HFSS in terms of nutritional composition and serving recommendations, though an earlier Court challenge to that effect for cereal served with milk was unsuccessful.
Whilst restrictions on volume promotions come into force in October 2025, there will be a transition period up to September 2026 whereby existing stock with volume price promotions on packaging that cannot be removed may be sold as is, though with an expectation that retailers may add a clear marker that the on-packaging promotion does not apply and what the revised price is.
Businesses may need to reassess marketing strategies in the light of advertising restrictions, as has proven to be the case for similar restrictions applied by Transport for London across its network since 2019. TfL’s ban on “junk food” has notably required the removal of a wedding cake from a West End advert for “Tony N’ Tina’s Wedding” and a hot dog from the comedian Ed Gamble’s “Hot Diggity Dog” tour poster. Of course, reformulated, or other products outside the scope of the HFSS restrictions which may be considered as healthier alternatives can still be advertised and could fill the gap in the market. Investing in marketing campaigns that highlight the quality and nutritional benefits of those offerings can also help to maintain customer loyalty and market share in a changing regulatory landscape.
Employment Rights Bill
In October 2024, the Labour Government published the Employment Rights Bill as part of its “Plan to Make Work Pay”. Whilst the majority of the proposed reforms will not take effect until 2026, consultation will take place throughout 2025 and there are steps those in the food & beverage sector can take to prepare for implementation of the reforms and mitigate or spread the associated compliance costs.
The introduction of the Employment Rights Bill heralds significant changes for all sectors, but its impact on the food & beverage industry is particularly noteworthy. This industry is characterised by a high turnover of staff, a reliance on flexible working patterns, and a substantial proportion of part-time and zero-hours contracts. The Employment Rights Bill's provisions, aimed at enhancing worker protections, will impose new operational challenges for food and beverage businesses. For instance, increased statutory entitlements to leave and pay could significantly raise overheads for businesses that typically operate on tight margins. Moreover, the Employment Rights Bill's focus on strengthening the rights of those with atypical working patterns, by adding additional regulatory burden on those employers relying on zero-hours contracts and widening the current flexible working regulations, will in many cases necessitate a comprehensive review of employment contracts and shift in scheduling practices, potentially leading to a reduction in the flexibility that many businesses in this sector have come to rely on.
Another aspect of the Employment Rights Bill that could have a profound effect on the food and beverage sector is the enhancement of protections against unfair dismissal and the extension of redundancy rights. Many businesses in this sector are small to medium-sized enterprises (SMEs) that may not have the robust human resources infrastructure to navigate the complexities of the enhanced procedural requirements. The increased risk of litigation, coupled with the potential for higher compensation awards, could incentivise businesses to invest in better training and development of staff to reduce turnover and the likelihood of dismissals. This investment, while potentially beneficial in the long term, could represent a significant short-term financial burden.
Compliance with the Employment Rights Bill will also likely require additional administrative effort and resources, which could be particularly onerous for smaller operators. In a sector where profit margins are often squeezed by fluctuating commodity prices and consumer demand, the additional costs of compliance could have a tangible impact on the viability of certain operations. As the consultation processes proceed, we will keep clients updated on what steps they can take to prepare for implementation and mitigate these costs.
Prevention of Sexual Harassment
With employees and workers in mind, we note that the new duty to prevent sexual harassment which came into force in October 2024 will be a hot topic across all sectors in 2025, especially given recent news regarding the ongoing harassment claims by young McDonald’s workers and the alleged conduct of a well-known cookery show host. Employers in the food and beverage space will be under renewed intense pressure to foster a safe and respectful environment for its employees (taking special care of its younger workforce) and heed guidance published by the Equality and Human Rights Commission (EHRC). Employers’ mandatory legal duty to take proactive steps to prevent sexual harassment includes implementing preventative measures such as regular training, clear policies, and effective reporting and response systems and creating an environment where employees feel empowered to report any issues without fear of retaliation. Although third-party harassment (for example harassment by clients or customers) is not currently explicitly outlawed, employers may still face liability if complaints are not addressed particularly from the EHRC. Non-compliance could lead to investigations and reputational harm. The Employment Rights Bill seeks to make third-party harassment of all kinds unlawful so the sooner employers in this space can get to grips with the new rules, the better placed they will be when the Bill becomes law.
Economic Crime and Corporate Transparency Act 2023
The Economic Crime and Corporate Transparency Act 2023 (ECCTA) contains wide-ranging reforms to the way companies and limited partnerships in the UK are formed, managed and operated. Some of the provisions of ECCTA came into force in 2024, and we are seeing Companies House take a much more active role in questioning the accuracy of information held on its register for example. 2025 will see, amongst other ECCTA implementations, the introduction of the identity verification regime and the new failure to prevent fraud offence for large in-scope organisations.
ECCTA is far-reaching and will impact on all UK companies, whatever the sector they operate in. Amongst the new requirements, in Autumn 2025, it is expected that provisions will come into force requiring every director, person with significant control of, and person filing documents at Companies House on behalf of, a company registered in the UK to have their identity verified with Companies House. In addition, on 1 September 2025, ECCTA will introduce a new failure to prevent fraud offence for large organisations. New guidance on the offence was published by the Home Office in November 2024, which confirms that the offence also applies to bodies incorporated and partnerships formed outside the UK but with a UK nexus. The cost of these additional regulatory burdens will be heavily dependent upon the size of the business and the current governance structures it has in place. Many large companies falling within the scope of the new failure to prevent fraud offence, given their size, will already have comprehensive governance and anti-fraud measures in place. However, this may not be the case smaller organisations, who may, as a result of an agency arrangement or by providing services for example, be considered ‘associated persons’ of a large organisation for the purposes of the offence, and may therefore be required to implement reasonable anti-fraud procedures by the large organisation with whom they are contracting.
We have picked out only a few of the challenges that will be faced by businesses in the food & beverage sector, if we covered them all you may still be reading this in 2026! However, despite the myriad challenges that the food & beverage sector faces, there is ample reason to remain optimistic in 2025. The sector has consistently demonstrated resilience and adaptability, responding to regulatory changes and consumer trends with innovation and strategic pivots. Businesses within the sector are increasingly adopting new technologies, including AI, and sustainable practices, to both comply with regulatory demands and meet the evolving preferences of consumers. This adaptability, and the ability to leverage these challenges as opportunities for differentiation and growth, is key to long-term success.