With the obesity crisis and intense price competition, the UK’s food and drink industry is facing massive challenges. But it is also making the most of opportunities to bring the best of British fare to tables at home and abroad.
The UK agri-food supply chain, from farm to fork, contributes £96bn each year to the national economy. According to the UK Food and Drink Federation (FDF), 16,000 new products are brought to market each year – more than France and Germany combined. And food and drink exports shrugged off the recession and an overall downturn in exports, doubling in 10 years to £12.8bn in 2014.
These numbers paint a picture of an industry in rude health. But what are the challenges holding it back? What are the vital ingredients for its future success? And what is possible, if producers, manufacturers and suppliers are given the support they need to thrive?
Food and drink manufacturers clearly face operational challenges common to those in other sectors. For example, according to an npower survey earlier this year 75 per cent of UK food and drink manufacturers – an energy-intensive sector – said that rising energy costs were weighing on decisions about expanding their business.
More than 25 per cent blamed these costs for recruitment freezes – or worse; 16 per cent said they had considered moving production offshore and 15 per cent said they planned to pass costs on to customers.
However, the energy challenge is also leading to new ways of working, with nearly two-thirds of firms investing in energy efficiency, and just shy of one-third planning to generate their own electricity or go completely off-grid.
The industry is responding to the long-term issue of sustainability in other ways too. The FDF has tracked a 35 per cent reduction in CO2 emissions and a 15 per cent fall in the amount of water used over the five years to 2014.
And the Courtauld Commitment – a voluntary agreement aimed at improving resource efficiency and reducing waste within the UK grocery sector – has succeeded in saving the equivalent of 184,500 refuse lorries of waste between 2010 and 2012 – enough to stretch from Edinburgh to Geneva.
Avoiding the sugar rush
But a more immediate challenge – as the industry awaits the government’s anti-obesity strategy – is the focus on sugar levels in food. The industry has already shed billions of calories from soft drinks and food and reduced the amount of salt added to products, which saw adult intakes of salt fall by 15 per cent between 2003 and 2011. But Public Health England has now called for a price increase of at least 10-20 per cent on high-sugar products through a tax or levy to tackle the UK’s sweet tooth.
Both prime minister David Cameron and health secretary Jeremy Hunt have openly opposed such a tax saying there are “better ways” to deal with childhood obesity.
But what exactly are these better ways?
A national partnership is a good starting point, says FDF director-general Ian Wright. “We need interventions which address the problem, and tax and marketing restrictions simply do not,” he says, pointing to Denmark’s repealed fat tax as an example of the shortcomings of single nutrient taxes.
“We need experts in behavioural change to use techniques they know can move people in the direction of healthier choices. Industry has a role to play in that, as does the NHS, schools, employers and the media.”
Many manufacturers are already reformulating their products and launching smaller portion sizes to turn the challenge of health into an opportunity.
Healthier alternatives are a key growth area for McVitie’s maker United Biscuits, according to CEO Jeff van der Eems. “We recognise snacks are a part of consumer habits and lifestyles but they need to be balanced,” he says.
The price squeeze
Public health challenges come as UK food and drink companies grapple with an already hostile environment riddled with intense price competition. An imbalance between global milk supply and demand following Russia’s import ban on EU products and a slowdown in Chinese consumption have squeezed margins across the whole supply chain.
This summer, the plummeting price of milk and further supermarket cuts culminated in two cows being paraded by farmers through an Asda supermarket in Stafford and other protests at distribution centres across the country.
Dairy suppliers are also battling a country of origin labelling system, which they argue does not fairly serve farmers, businesses or consumers. Currently, foreign cheese and other dairy products can be marketed as British because the final stages of production – typically cutting and packing – take place in this country. “This is a real disadvantage to our business and one which we need to eliminate,” says Mark Allen, CEO of Dairy Crest, which is lobbying for a new system.
Our world-class supply chain is trusted around the globe
Developing exports and improving the competitiveness of UK dairy is a central theme of the government’s new 25-year food and farming strategy, announced in 2015. This was underlined in November with the secretary of state for environment, food and rural affairs, Elizabeth Truss, taking a trade delegation of eight British dairy businesses to China.
With swelling, wealthier populations, and dietary habits leaning towards the West, it is little surprise that Truss is looking East. And she’s not alone. Suppliers – small and large – intend to capitalise on the global growth opportunities for dairy.
Somerset-based Wyke Farms hopes to quadruple its international cheese sales over the next 12 months with a new range that dials up its British credentials on the pack.
Meanwhile, Dairy Crest, which is already listed in more than 50 countries, plans to take its Cathedral City cheese brand further into emerging markets. “We should be marketing our combined British provenance and dairy heritage – the government has a role to play here,” says Allen, adding that trade delegations are a useful tool. “We have an ideal climate, a strong dairy tradition and excellent farmers. Our world-class supply chain is trusted around the globe.”
Other elements of Truss’s strategy include a campaign to secure protected food name status for more UK products, releasing vast data reserves to the public and increasing exports in other segments including beer, wine and spirits, such as gin.
A taste for international success
Kent-based Chapel Down, which produces wine and its Curious brand of beer and cider, exports less than 5 per cent of its products but is targeting growth – particularly of beer – in “sophisticated markets” such as the US, Australia, Hong Kong and the Nordics over the next three years.
“The export potential for Curious is absolutely huge because it’s a lager, which is what most of the world drinks, and it has a genuinely different proposition,” says CEO Frazer Thompson.
English wine is more of “a long haul” given the smaller production levels relative to prosecco and Champagne, he adds, but “there’s a huge amount of growth to go”.
Scottish food and drink needs to be on the map internationally; it will help our country and it'll help our businesses
To get there, the good work must start at home, but this is being hampered by a fragmented duty regime for alcohol, he says. “It needs to be simplified. There’s a real cost in exorbitantly high levels of duty that we have, but there’s also a hidden cost in bureaucracy to manage that regime. By all means, take the tax from English sparkling wine, but let’s see some investment come back into the industry in the form of grants, loans or export support.”
With the UK’s growing thirst for sparkling wine, building domestic appetite for English offerings and demonstrating the economic value of supporting local businesses is vital, says Thompson, and he points to the success of devolved nations such as Scotland in this area.
“Scotland has food and drink right at the top of its agenda – probably just below oil. They’ve tilted their hat very firmly and said Scottish food and drink needs to be on the map internationally; it will help our country and it’ll help our businesses.
“We don’t have that yet. We’ve got to start educating people to believe our products are better and worth paying more for. France has had the upper hand in food and drink globally. There is no reason why Britain, if it’s marketed correctly, can’t grasp that mantle.”
A five-year food plan
Truss is hoping a raft of new initiatives could go some way towards achieving that. In early 2016, she will launch a Great British Food Unit, bringing together the work of the department for environment, food and rural affairs (Defra) and UK Trade & Investment to champion “the excellence of British food and drink worldwide”.
A cohort of “food pioneers”, including Leon co-founder Henry Dimbleby and culinary architects Bompas and Parr, gathered at London’s British Museum of Food in early November to officially launch the five-year Great British Food campaign. Trade missions and pop-ups are set to follow in 2016, the “Year of British Food”, to ensure British produce is people’s first choice at home and internationally.
Global demand for British food and drink is already strong. United Biscuits, a poster child for exports, has quadrupled the size of its international business in the past six years. Total export sales are up from 5 per cent of the business to more than 20 per cent and CEO van der Eems is targeting 30 per cent over the next three years. Today, the business counts Nigeria as its second biggest market after the UK.
Van der Eems believes it is time for British food and drink to push its way to the front of the shelf both at home and abroad. “It is trusted and has a reputation for really good provenance and quality overseas,” he says. “British consumers are often really switched on to food and drink trends too, so it’s a great place for companies to start to build brands and then take them overseas.”
One company helping British grocery brands do just that is wholesale exporter Ramsden International, which supplies to 133 countries around the world. Greater social mobility and the rise of the global middle class have prompted more manufacturers to broaden their horizons, helping Ramsden post a 27 per cent year-on-year average increase for the past 15 years and grow annual turnover to about £50m.
However, a broad geographical customer base has also created new challenges for exporters as markets develop bureaucracy around the policing and implementation of compliance, says CEO Sean Ramsden. “A great example is China – there is an opportunity but it’s harder than it’s ever been to get imported products into the country,” he says.
British products have led the world for generations. We have the scale, we have the opportunity
At a time of scarce resources, government efforts are “best spent helping facilitate trade at a government-to-government level than trying to create marketing or branding support for Britain,” he adds.
And while the merits of Defra’s latest initiatives are perceived differently from company to company, the food and drink industry is united in its calls for the government to support the nation’s smallest businesses.
“There are more than 3,000 small and micro-food businesses in this country,” says FDF’s Wright. “They almost always start with one good idea and taking that idea, scaling it and merchandising it is often a challenge.”
However, he adds: “British products have led the world for generations. We have the scale, we have the opportunity and we have the best access to free trade agreements anywhere in the world.”
“As long as we have those, there is nothing we can’t achieve.”