IN Brief:
- PPWR began applying on 12 August, moving EU packaging into active compliance while major recyclability, recycled-content and reuse deadlines remain ahead.
- Large acquisitions and plant investments continued despite weak confidence, with capital concentrating around scale, automation, productive capacity and established manufacturing networks.
- AI and digital twins extended existing factory automation into process control, while first-half trade data exposed continuing pressure on UK food and drink competitiveness.
Food and drink manufacturing entered Q3 2026 with much of the first half’s operating pressure intact, after Q2 had already combined weak confidence, higher costs, packaging regulation, ingredient consolidation and continuing investment in factory software and automation. Between July and September, those conditions persisted while several moved further into production decisions: European packaging rules crossed into application, sizeable manufacturing assets changed hands, new capacity came online and stronger evidence emerged for digital systems improving physical factory performance.
Unlike many of the pressures inherited from the first half, packaging regulation crossed a specific legal threshold when the EU Packaging and Packaging Waste Regulation began applying on 12 August. Many of PPWR’s major recyclability, recycled-content and reuse requirements remain subject to later deadlines, but manufacturers, converters and importers are now operating within the new framework while preparing specifications, evidence and supply chains for obligations that tighten progressively towards 2030 and beyond.
As the application date approached and passed, compliance became increasingly bound up with practical pack design rather than broad circularity targets. IFS introduced a structured assessment process for PPWR evidence, while Germany updated its method for measuring packaging recyclability. Flexible packaging development continued around mono-material structures, barrier performance and food-contact safety, and September ended with a three-year European recycling programme for aseptic bags, where multilayer construction remains difficult to replace without affecting shelf life or product protection.
Against that regulatory backdrop, manufacturers were still committing substantial capital even though broader sentiment remained weak. Food and Drink Federation data published in August put UK manufacturer confidence at -31% in Q2, extending negative sentiment to nine consecutive quarters, while 84% of respondents were not planning to increase R&D investment over the following year. Avara Foods nevertheless announced more than £100m of investment across its British poultry operations over three years, including next-generation cutting technology, automation and site upgrades, following a restructuring programme built around fewer, better-invested facilities.
Large projects elsewhere followed the same emphasis on capacity that could be expanded, automated or operated more flexibly. Kikkoman opened its third US soy sauce plant in Jefferson, Wisconsin, where brewing began in May ahead of shipments from October. The 240,000-square-foot plant forms part of approximately $560m of planned investment over ten years and adds another production base to a North American network that has been expanding with demand, rather than representing a sudden change in the group’s manufacturing strategy.
Ownership changes also extended patterns established well before Q3, although the quarter produced several particularly large transactions centred on existing production networks. Intersnack Group agreed a $2.9bn transaction to take Utz private alongside the US snack company’s founding families, adding substantial American manufacturing and distribution exposure to a group already built through organic expansion, acquisitions and partnerships. The deal shifts Intersnack further into the US market without changing the broader logic that has driven years of consolidation across global snacks.
British dairy manufacturing saw another major proposed ownership change when Lactalis agreed to acquire Saputo’s UK dairy division for approximately £988m. The transaction covers five manufacturing plants alongside Cathedral City, Davidstow, Country Life, Wensleydale and other brands, subject to regulatory approval. Coming after a first half in which ingredients businesses attracted some of the sector’s largest deals, the Saputo agreement extended consolidation into another asset-intensive part of food production, where plant utilisation, milk supply, brand portfolios and distribution scale remain closely connected.
Automation followed a similarly continuous path, with Q3 adding more evidence of digital systems being used against defined production constraints rather than introducing a wholly new technological direction. Robotics, machine vision, predictive maintenance and production analytics were already established areas of factory investment, but increasingly detailed deployments are connecting those systems with the physical variability of food itself, including changes in ingredients, product orientation and process conditions.
At the Pringles factory in Kutno, Poland, an AI-supported digital twin combines sensor data covering factors such as temperature, humidity and protein levels with process simulation to adjust dough production as raw-material properties change. The system has increased capacity by 10% without new production hardware, while reducing waste by 13% and energy consumption by 7%. In robotic handling, JLS introduced AI vision capable of identifying touching, overlapping and stacked food products, reducing the dependence of selected applications on dedicated upstream separation equipment.
While capital and technology spending continued in selected areas, September’s UK trade data reinforced the difficult economic conditions carried through the year. Food and drink export volumes fell 11.7% year on year during the first half of 2026, their third-lowest H1 level since 2000, while imports rose to their second-highest level on record and the trade deficit widened to £21.1bn. Because the figures cover January to June, the record trade gap does not represent a Q3-only deterioration; its publication during the quarter instead quantified the competitive pressures already influencing investment, pricing and export planning.
By the end of September, the divide between difficult sector-wide conditions and selective corporate investment had become increasingly pronounced. Packaging compliance was moving into detailed engineering and documentation, sizeable manufacturers were still funding modern capacity, and acquisition activity continued to concentrate production inside larger networks. At the same time, weak confidence and trade performance left little room for inefficient assets or capital projects without a demonstrable operating case, reinforcing trends already visible earlier in 2026 rather than replacing them with a new cycle.
What were Q3 2026’s biggest food manufacturing and packaging stories?
PPWR moves from preparation into application
On 12 August, the EU Packaging and Packaging Waste Regulation began applying across the bloc, moving food packaging into the new regulatory framework after an extended preparation period. Major recyclability, recycled-content and reuse requirements continue to phase in over later years, but companies placing packaging on the EU market now have to work through current composition, documentation and compliance provisions while developing packs for future thresholds. Technical uncertainty did not disappear with application: the Commission issued further guidance ahead of the date, while industry work continued around responsibility, recyclability assessment and material definitions. The final run-up to 12 August showed how much implementation detail still had to be absorbed alongside the legislation itself.
Intersnack agrees $2.9bn Utz transaction
Intersnack Group agreed in July to acquire all publicly traded Utz shares for $14.25 each, valuing the US snack manufacturer at approximately $2.9bn including debt. Following completion, Utz is expected to become privately held, with Intersnack and the Rice and Lissette founding-family entities each owning 50%. The transaction gives Intersnack substantial additional exposure to US snacks, manufacturing and distribution while retaining the founding family as an equal shareholder. Rather than opening a new phase of consolidation, the planned privatisation of Utz extends a long-running strategy in which scale, brands, manufacturing footprint and geographic reach remain closely linked.
Lactalis agrees £988m Saputo UK dairy acquisition
Lactalis agreed in August to acquire Saputo’s UK dairy division for approximately £988m, subject to regulatory approval and other closing conditions. Five manufacturing plants are included alongside Cathedral City, Davidstow, Country Life, Clover, Wensleydale and other brands, substantially expanding Lactalis’s UK cheese and spreads operations if the transaction completes. Dairy processing has consolidated over many years as companies pursue plant utilisation, milk supply security, brand strength and national distribution, and the transaction sits firmly within that established direction. The proposed transfer of Saputo’s UK manufacturing network nevertheless makes it one of the year’s largest ownership changes in British food production.
Kikkoman opens third US soy sauce plant
Kikkoman opened its Jefferson, Wisconsin plant in September, adding a third US production base after Walworth, Wisconsin and Folsom, California. Brewing began in May and shipments are scheduled to start in October, with the 240,000-square-foot facility producing soy sauce and related seasonings for a North American market where Kikkoman has recorded continued growth. Approximately $560m of investment is planned over a ten-year period, rather than representing the cost of the initial plant alone. The Jefferson manufacturing programme reflects sustained regional capacity expansion around established demand, with additional space and infrastructure intended to support future production requirements.
UK food and drink trade deficit reaches £21.1bn
Food and Drink Federation data published in September showed UK food and drink export volumes falling 11.7% year on year during the first half of 2026, their third-lowest H1 level since 2000. Imports reached their second-highest level on record and the resulting trade deficit widened to £21.1bn, the largest recorded since 2000. Those figures cover January to June rather than Q3, but they provided a firmer measure of the competitive conditions under which manufacturers were making decisions later in the year. The widening gap between imports and exports adds to established pressure from production costs, trade friction and overseas competition, while domestic investment remains concentrated in operations able to support productivity or growth.
IN answer to…
What changed for food packaging in Q3 2026?
The EU Packaging and Packaging Waste Regulation began applying on 12 August 2026. Many major recyclability, recycled-content and reuse obligations have later deadlines, but packaging placed on the EU market is now covered by the PPWR framework. Manufacturers therefore need to account for current compliance requirements while developing packs for progressively tighter design and material rules.
Why are food manufacturers still investing when confidence is weak?
Sector-wide confidence and individual investment cases do not necessarily move together. Manufacturers continued funding projects where automation, capacity, plant utilisation, labour efficiency or regional supply could improve the economics of production. Q3 therefore combined substantial investment at businesses including Kikkoman and Avara with continued pressure to consolidate or rationalise less competitive capacity elsewhere.
How is AI being used in food manufacturing?
AI is increasingly being incorporated into established automation, machine vision and production-data systems. At the Pringles factory in Kutno, a digital twin uses process and ingredient data to adjust dough production as raw materials vary, while robotic vision systems are being developed to recognise overlapping or irregular products. Current applications are concentrated around measurable production constraints including waste, yield, energy use, handling and available capacity.
What does the £21.1bn UK food and drink trade deficit show?
The figure covers the first half of 2026 rather than Q3 alone. Export volumes were 11.7% below H1 2025, while imports reached their second-highest level on record, widening the deficit to £21.1bn. The data shows that export weakness and import competition remained significant constraints as manufacturers assessed investment, capacity and growth during the second half of the year.
