Kiwi manufacturers consolidate in Q2 after a record start to 2025, according to the newly released Unleashed report.
Kiwi manufacturers eased off their record-breaking Q1 performance in the second quarter of 2025 while preparing for steadier growth, according to new data from inventory management software provider Unleashed.
The average small-to-medium firm generated NZD 268k of revenue in Q2, down 13.3 percent from Q1, but still NZD 110,000 higher than the same period in 2024. While total sales stayed buoyant to round out the first half of the year, gross profit margins (excluding wage costs) dropped to 36.1 percent (down 1.7 percent on the previous quarter), their lowest levels since before 2020.
The figures appear in the latest manufacturing report from inventory management specialist Unleashed. Unleashed is an inventory management software platform popular with small and mid-sized manufacturers; its quarterly report is based on data from more than 1,400 firms using the software, across manufacturing categories such as food and beverage, clothing and fashion, and construction.
With the opening quarter of the year delivering the strongest average revenue numbers since Unleashed records began in 2018, the declines are relative, and there are signs of strength beneath the headline dips in revenue.
“After such a standout start to the year, some pullback was expected,” explains Jarrod Adam, Unleashed Software’s Head of Product.
“What matters is that businesses aren’t retreating - they’re actively rebuilding stock to secure against future demand. That tells us confidence hasn’t evaporated; firms are adapting.”
Lead days, which had been consistently trending downwards since the supply chain complications of the COVID period, registered their single largest quarter-on-quarter increase since 2020. The jump from 12 days to 23 days to receive goods after sending an order reflects a more tumultuous global trade environment that has impacted supply chains. However, the 23 days is still within a normal range by historical standards.
At a sector by sector level, the heaviest revenue falls were in the Clothing, Footwear & Accessories category, which fell more than 40 percent QoQ, and in Sports & Recreation, down over 30 percent QoQ. However, both sectors remain ahead of last year, up 50 percent and 15 percent YoY respectively.
The food and beverage sectors continue to face strong headwinds from high input costs, but Unleashed’s data also shows notes of optimism.
In line with continuing profitability challenges in recent quarters, the beverage sector retreated slightly in Q2. Average beverage sales fell NZD 84k, and gross margins dropped 3pp.
For food manufacturers, sales declined NZD 62k QoQ to NZD 220,482, with profit margins falling 6pp as electricity, freight, and packaging costs weighed heavily. However, the overall sector still shows significant YoY improvement, with revenue up more than 100 percent compared to the same period last year.
“These are sectors where volatility in inputs can erode profitability quickly,” Adam said. “While sales softened, we're seeing firms being disciplined about working-capital management rather than letting costs spiral.”
However cash flow was likely impacted by an uptick in excess stock as both food and beverage manufacturers replenished inventories in response to lengthening lead times. Beverage manufacturers more than tripled their excess stock QoQ to an average of just under NZD 20,000, while food manufacturers more than doubled theirs to NZD 25,000.
This contrasts starkly with the same quarter last year, when the average food manufacturer held only NZD 5,000 in excess stock and beverage makers just NZD 1,000.
“It’s been a tough few years and input costs have been spiking, especially around freight and labour, which has taken the shine off margins in some channels, "said Leighton Cosgrave, GM of Radix Nutrition, a health convenience brand that also provides specialist freeze-dried contract manufacturing.
“We’ve been proactive in establishing supplier relationships and shared material lines to ease raw material holdings, even offloading stock across partners where needed. Stability is finally emerging, and as we pace into the second half of the year, the usual summer confidence is allowing decisions to be made and positivity to enter the market.”
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