John Moverley has re- joined International Supermarket News as a feature writer. John has worked in the food sector for many years and runs his own consultancy business working within the food sector. He is also a well known speaker and conference host. He starts with a short piece about the changing food retail sector.
The UK has a very successful agricultural industry. However, Britain is not self sufficient in food production; in fact it imports around 40% of its total requirement. The food and drink supply chain is the UK’s single largest manufacturing sector accounting for some 7% of GDP. Therefore, as a food trading nation, Britain relies upon both imports and thriving export markets to not only feed itself but also help drive its economy.
Against such a backdrop, there is much change taking place in UK food retail. On the one hand, we have increasing competition in the supermarket business seeking to drive prices down and alter the status quo. On the other, we have growing concerns about food security. Can we feed an ever growing global population? In addition, changing tastes and requirements in other areas of the world are significantly impacting on availability of food imports to Britain.
A German owned discounter, Aldi, first started operating in the UK in 1990. Aldi, and subsequently Lidl, specialise in selling a smaller range of foods at far lower prices than traditional food retailers. For a time they gained market share only slowly and barely troubled the established supermarkets who dominate our markets. However, the financial crisis, and its implications, made shoppers much more price savvy and the German discounters now continue to gobble up market share. The response from the traditional supermarkets, especially the big four, has been to price cut themselves and indeed there have been some reductions in product numbers offered to increase efficiency and maintain margins. This is a battle still being waged and nobody can truly predict the final outcome. What it does mean though is further pressure on suppliers. Of course this is resulting in further pressure on price but the retailers still need to get supplies. The opportunities are now very much for those who are able to deliver in the right quantities at the optimum quality whatever the time. The supply chains are changing.
All of this is taking place at a time when global food trading is also in some flux. The UK depends upon food imports but, with growing food security issues and much increased global competition, it will need to seek out new supply routes and countries that can be guaranteed to deliver. World markets are becoming more volatile leading to far more variable food prices. 2008 was a real watershed when a combination of factors saw astonishing food price rises and this spike signalled the end in the UK of what had been a long term decline of raw product pricing.
So what does this all mean for those who seek to export food products into the UK? Well the changing retail business does not in itself immediately present opportunity currently producing a drive to lower pricing. However, in other ways it does. The retailers are trying to retain market position. They are looking for new ways and products to give them market edge. If the supplier can deliver the right quantities and quality, new markets still exist. This is especially true for innovative products and those from less traditional areas providing greater choice and range but still at a profit.
If you are a food exporter, establishing markets in the UK remains a task which requires careful planning, full scoping and analysis, exact supply chain management and thorough and professional marketing. However the opportunity is there.