The Coyote and Road Runner: Big Food and Start-Ups Friends or Foes?

Dairy giant Danone has announced this week that it’s cutting €1 billion in costs over the next 3 years as business conditions are tough. Where?   …. err everywhere, including fast-growing emerging mega-markets like China. Danone is not alone – in Europe, fellow fmcg titans Unilever, Henkel and Reckitt Benckiser are all desperate for growth. Even resilient Nestlé is struggling – “Swiss giant food company braces for slowdown as new chief hatches revival plan” screams the business press. Across The Atlantic it’s a similar scene for General Mills and Mondelez. There’s a well-worn strategic path taken by “Big Food” in these circumstances:

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  • First, slash costs to maintain margins. The drive is to trim fat/increase efficiency but, also, for self-preservation. Remember, around the corner lurking is 3G Capital and Berkshire Hathaway waiting to do a “Kraft Heinz” buy out and merger hatchet job on you! Scary, just ask Unilever!;
  • Second, acquire a major player who is in a complementary and, preferably, higher growth part of the market. Danone has already done this with its purchase of WhiteWave Foods for $10 billion (completing this quarter) – owner of Alpro, Vega and Silk branded plant-based “non-dairy dairy” products which are expanding sales rapidly. Reckitt Benckiser (owner of Durex condoms, Dettol, Lemsip, Finish, Scholl, etc.) has mopped up infant formula producer Mead Johnson giving RB a jump start entry into fast-growing emerging markets where, currently, it has little presence. Dr. Pepper Snapple Group have snapped up Bai Brands maker of healthy, anti-oxidant rich new age drinks and, similarly, PepsiCo has bought the remaining piece of Kevita drinks company that it doesn’t already own (needless-to-say, Kevita drinks are organic, probiotic, gluten/GMO-free, vegan, stevia-sweetened and have very few calories);
  • Thirdly, give the existing product portfolio a thorough make-over. In January, General Mills launched a raft of “new” or “augmented” products “meeting a range of consumer snacking trends worldwide” – new Cheerios RTE cereal with less sugar, anti-oxidant rich berries and whole grains; Yoplait Greek yogurt with extra protein and only 100 calories; Annie’s organic popcorn; Lärabar natural snacks which are gluten/dairy-free, non-GMO, Kosher and, for the lucky ones may contain a smidgeon of kale; Nature Valley muesli bars meeting the nut and non-dairy trends with added almond butter; and even Progresso soup has a 2017 face – Tuscany chicken broth, if you don’t mind!;
  • Fourthly, and increasingly fashionable, is the trend for ”Big Food & Drink” to take ownership positions in exciting, on-trend, start-ups via their own in-house venture capital funds/companies.

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Why would “Big Food &Drink” take the VC route? It’s an acknowledgement that they’ve been slow to spot and react to trends in increasingly fast-moving markets – fmcg companies they may be, but fast-moving they aint! The General Mills of this world have their genesis in the 19th Century – the brand Cheerios is 70+ years old, a youngster relative to 120 year old Kellogg’s Cornflakes. Brilliant performers in the era when the family sat down together for breakfast with father at the head and mother serving, they’ve looked more and more dated in the rushed world of the 21st Century and, now, sitting in the part of the supermarket that some call “The Morgue”, RTE cereals and highly processed foods look, frankly, old-fashioned. Quick-on-their feet start-ups, often run by those pesky millennials, have run rings around them – Rebel Kitchen and Sneakz Organics come to mind. But, give lumbering old fmcg its due “if you can’t beat them, join ‘em!”. So, they’ve offered VC finance to promising start-ups, taken ownership positions and, if they sense that the start-ups have market traction enough to make the big time, then, they just pop out and buy them:

  • in mid-2016, Kellogg’s via its “all natural” company Kashi (acquired as long ago as 2000) bought vegan snack company Pure Organic; very recently, again via Kashi, Kellogg’s has invested in a tiny start-up Kuli Kuli which makes superfood bars and herbal teas from Moringa (a plant protein). General Mills has boosted its investment in Rhythm Superfoods, a kale chip start-up (gotta love that kale!);
  • the General Mills VC vehicle is 301 INC (Emerging Brand Elevator), and Unilever has Unilever Ventures albeit specialising in financing personal care and digital start-ups. Campbell Soup launched a $125 million venture capital fund named Acre Venture for start-ups in February last year. Kellogg’s VC vehicle is eighteen94capital – “if you have a food-industry consumer product in-market or ready to launch, we have the capital and resources to take it to the next level. We’re all about collaboration, shared passion and a commitment to succeed”;
  • it’s a moot point whether “Big Food” and new age start-ups can gel or are immiscible. We guess only time will tell. But Ben & Jerry’s is a decent example of success – acquired by Unilever in 2000 and still maintaining a slightly rebel edge to its culture and market positioning.

 

It is, however, instructive for “Big Food” to ponder on the following. Over the last 4 years, the entire USA groc
ery store food and beverage sales grew by just 2.3% per year (it’s been much less in the UK, in fact, the last couple of years sales were deflationary). The largest 25 food & beverage companies contributed only 0.1% of that annual growth. Where did the growth come from?: 20,000 small companies outside the top 100 which together saw revenue growth of $17 billion.

 

 

 

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Posted in General, Trends

Veganuary: So Long Sausage?!

Phew, it’s the end of January. It can be a tortuous month as one comes to terms with under-achieving on all those rash New Year resolutions made in haste on guilt-laden, leaden early-January days where we promise ourselves to do less (e.g. eating, drinking) and more (e.g. exercise, mind-expanding reading). Retailers are quick to exploit our soft under-bellies!: Ocado with its “Resolution Boosters” and Aldi with treasure trove offers on Picture1.pngfitness DVDs, exercise bikes (doomed for the garage), and “fitness tracker watches”. Not only have we been exhorted to have a “dry” month and eschew alcohol, also, we’re being asked to reduce meat intake – Veganuary not January, Sainsbury’s incurring the wrath of farmer organisations by planning to place meat and non-meat alternatives together in what was solely “the meat cabinet”, Waitrose giving its much-admired food magazine a front cover on “Eat Veg”.

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What on earth is going on? Eating meat, particularly cooked meat, accelerated human evolutionary progress from gibbering vegetarian homo habilis 2.5 million years ago to our big-brained meat-eating homo sapiens ancestors a mere 200,000 years ago. Now, Northern European governments and special interest groups are recommending we don’t just shave our meat consumption but slash it drastically for health and planet-saving reasons:

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Claptrap or what? Well, the global food industry believes consumers are ready for dietary change and are on a plant-based foods splurge. Flexitarian diets are in vogue and, frankly, have their attractions. Here’s a secret: we’re both vegetarian  … well, every other Thursday we are and, anyway, David doesn’t count bacon and Miguel doesn’t include jamón as meat! The fact of the matter is that there are, increasingly, some brilliant vegetarian products available. Gone are the days when vegetarian fare was akin to wearing a hair shirt and thrashing oneself  with birch twigs  – remember those gritty soyburgers and appalling nut roasts?

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So, do we expect to see per capita meat consumption dwindle? What we eat at home and away does change but slowly. In the UK, white fish consumption, the centre piece of our iconic national dish, has halved over the last 40 years and, God forbid, we drink half as much tea as we used to. But, then, we gobble down salmon fillets and sushi, and prefer fancy coffees and herbal teas. The white bread doorstep sandwich is in steep decline, but wraps and artisan breads are hot to trot. Per capita meat consumption in most high income Western countries is at best static and probably will edge down over time. Crucially, however, for those with some income latitude, when they eat meat they might eat less but they’ll certainly want to eat better meat. The challenge for the meat industry is to work out  exactly what 21st century consumers value in their meat products and what will they pay more for?

And the excitement pervading plant-based proteins – are they bone fide competitors to “old-fashioned” meats or a Guardian-reading, chattering class flash in the pan? In the 1990’s, meat dominated the centre of the dinner plate. “What’s for dinner, Mum?”. “Beef” was the response received with enthusiasm. Now, it’s much more likely to be “pizza, Chinese, Italian, tapas”, with the species of meat being very much secondary. Millennial consumers are much more likely to respond “Dinner, what’s DINNER?” as they graze on snacks and mini-meals through their socially networked day. Our perception of the world of protein is and will continue to expand. Meat has serious competition to deal with from plant-based foods, algae, myco-proteins like Quorn and even insect protein. It will require the red meat industry in particular to drag itself out of the primordial soup and offer consumers snack and meal solutions which are consonant with their lifestyle requirements and values, and which are rich in stories that delight their senses as much as the taste delights their palates.

Posted in Consumer, Health

Consumer Trends and Their Impact on Sales

Had enough of grocery pundits pontificating on consumer trends that will take the market by storm in 2017? What do they mean for your business? Are they a genuine trend, or just fancy or fad?! Here’s some thoughts to consider during this end-of-year trendfest.

First of all, looking back is a good start before looking forward:

  • Take tea, it’s our national drink and consumption per person has halved over the past 40 years or so – in 2016, the big brands of “builders’ tea” (e.g. PG Tips, Tetley, Typhoo) had a shocking year. So, bail out of tea? Well, no, upmarket teas (e.g. “single estate” teas with provenance) fared much better and green and herbal teas have had continued growth. In fact, the fermented tea, Kombucha, is highly prized by the chattering classes and, bet your boots, they’ll be drinking it with chia seeds before you can say “quinoa”!;
  • What are we drinking hot if not tea? Instant coffee is struggling to hold its own, but retail sales of roast and ground coffees are on the up – not least in coffee pod form (accelerating since Nespresso compatible pods hit the market). But, it’s been on the High Street where the likes of Costa, Caffè Nero and Starbucks have flourished. Now, you have to go to night school to learn how to order coffee. Coincidentally, the long-term downtrend in cows’ milk would have been more drastic if not for milk in coffee taking up the slack created by falling sales of RTE breakfast cereals;
  • and, in fresh foods, haddock and cod have seen similar long-term declines. Here, it’s more about availability, product knowledge and price rather than the British eschewing one of our famous national dishes (i.e. fish & chips). Supply has been constrained by EU fish quotas (quite rightly), haddock and cod loins have become premium meat cuts still much loved in small portions by oldies but more likely to be exchanged for much cheaper pre-prepared basa fillets by younger consumers unwilling to fuss with fish!

Looking at the UK grocery retail market by category in 2016, what trends can we glean from looking at categories that experienced volume growth? Incidentally, of 112 categories analysed, 40% saw volume increases and 60% volume declines which underlines how tough it is out there in the market place – our UK population grew by 450,000 people in 2016 but the volume of groceries sold shrank in more than half of categories. Does that mean we’re eating less and the nation is wasting away? We think not!

Who did well?:

  • products that are perceived as being good for health and our well-being, and for improving our bodies – “free from” leapt forward, bottled water and sports nutrition products did very well, fresh berries were stellar performers as they have ben for the past 12 years, and products that eased the pain of hard times progressed – e.g. alcoholic drinks particularly sparkling wine, condoms and sex toys, and cosmetics. Mars produced “Protein” versions of its Snickers and Mars bars to ride the non-meat protein trend – the guilt of the indulgent snack can be assuaged by the thought that it’s high protein and contributes to body shape and fitness!

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And who struggled to gain volume growth in 2016?:

  • anything in cans – fruit, meat, fish, soup, beans. Bail out of cans? Not necessarily – redefine the can! John West’s “Light Lunch” is in a contemporary can and ticks a dozen trend boxes – tasty, healthy, one of your 5-a-Day, calorie-controlled, gluten-free, snack/mini-meal, simple and few ingredients, convenient (to buy, carry, eat, dispose), no refrigeration, fish-friendly, recyclable and the reassurance of a famous brand – brilliant (as are JW’s Steam Pots and Infusions);

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  • frozen products had a tough year – particularly pastries, desserts, pizza, ready meals – and, maybe, this is a British problem for frozen where chilled value-added foods are perceived to have the quality edge and are an affordable indulgence. One answer is to up NPD as McCain for mini-roast and jacket potatoes and Young’s for fish have shown. There’s a more profound problem for frozen foods, ‘tho – the frozen aisle isn’t welcoming (cold and products are behind frosted glass) and it’s easy to by-pass if “we don’t need French fries and peas this week”!;
  • the demonization of sugar and pervasive interest in weight reduction has hit several categories very hard – fruit juice, carbonated drinks, yoghurts, jams, sweet biscuits, for goodness sake even chocolate bars – and products seen as being “carbohydrate-heavy” have struggled, such as sliced bread and dry pasta, although reflecting the strong interest in Asian cuisines, rice and noodles have surged on;
  • and, then, there’s red meat, sausages, bacon, etc. – volume and even more value declined as UK per capita meat consumption struggles to hold historic levels – health, animal welfare concerns and, for some, tight budgets constrain meat purchases. Emerging is consumer interest in a flexitarian dietary approach to food – “sometimes I feel vegetarian and sometimes I don’t” and the market has responded with a wave of convenient, tasty non-meat snacks and meals and, for dairy, “non-dairy dairy” as coconut/almond/even pea milks are on the same shelves
    as cows’ milk. Plant protein meat analogues and plant milks are  just niche market stuff? Not so: Tyson and General Mills have bought into meat analogue start-ups and Danone shelled out $10 billion for WhiteWave Foods – owner  of Alpro
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Picture: Deliveroo.

On trends, one thing is certain – “Big Food” is MUCH more attentive of what’s happening in the pool where food company minnows spawn and grow. The top 5 owners of $billion megabrands saw their sales slip by $15 billion in 2015/16. Silicon Valley entrepreneurs have turned their attention to plant protein foods and non-traditional routes to the consumer – a crazy $5.5 billion has been invested in food delivery start-ups over the past 5 years e.g. Deliveroo is in 100 cities across 12 countries. In its UK home market, Deliveroo is opening 20 “Rooboxes” (so-called “Dark Kitchens”) this year where restaurants with restricted space can expand to establish “delivery only” kitchens from which meals can be delivered within 30 minutes of ordering. Big changes coming – we’ll look back in 20 years at social media holograms showing stressed shoppers in traditional supermarkets buying, to use an old-fashioned term, ingredients for the evening meal and howl with laughter. What were they doing?!

While we have your attention, Happy New Year from David and Miguel and may it be both rewarding for your families and your businesses.

 

Posted in Consumer, Trends

What’s Coming Up in 2017 for the Grocery Industry?

Consumer price inflation in the UK has risen from virtually zero at the beginning of 2016 to 1.2% in November – its highest rate for 2 years and economic pundits are reckoning it might test the Bank of England’s target rate of 2% early in the New Year. Mind you, overall inflation would have been higher through the year if it wasn’t for price deflation for food and grocery products . This has been great news for consumers but cold comfort for food industry participants!2016 12 01 Grocery Price Deflation.jpg

What’s kept food prices down in 2016?:

  • ferocious competition in grocery retail – “traditional” supermarkets desperately cutting prices to stem market share losses to the hard discounters. Is the Price War all over? Not on your nelly!;
  • Food manufacturers “buying forward”, so their ingredient costs in, certainly, the first half of 2016 reflected international commodity prices in 2015. The FAO food commodity price index was 20% lower in 2015 than 2014 and continued to drift lower until mid-year 2016.

So, what can we expect in 2017? In short, higher food prices but, likely, not as high as food suppliers would like. An inexorable continuation of the cost-price squeeze seems inevitable:

  • International food commodity prices have strengthened – the FAO global food price index was 10% higher in November than in May and these are yet to be fed into higher ingredient prices in the UK. Dairy, vegetable oils, coffee and, particularly, sugar prices have seen the strongest growth, with cereal prices actually softening;
  • Sterling has lost 15% of its value against major currencies – when new purchase contracts cut in, they’ll be at higher prices in £s and, remember, we import 35% or so of our food. Eventually, suppliers will be able to pass on to retailers some of the higher ingredient costs but the “Marmitegate” kerfuffle is indicative of the lengths retailers will go to before excepting price increases particularly for sensitive KVIs (known value items);

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  • Our view is that the economic uncertainties associated with Brexit won’t be helpful in 2017. Look, we’ve had a surprisingly good run since the referendum – no economic melt-down and our GDP growth has been better than our smouldering, snubbed EU partners. However, consumers are nervous – the unemployment rate is the lowest it’s been for 11 years (4.8%) but growth in wage rates is stagnant and, in real terms, wages have declined by 10% since the most recent recession. This decline is particularly felt outside London and the South East (e.g. GDP/head is 250% higher in London than in Wales and the North East of England). With inflation ticking up, consumer confidence is edging down. Now, retailers don’t set regional prices – e.g. Tesco can’t give Liverpudlians a price break on their trolley load of groceries and make it up on the Burghers of Bermondsey, apart from anyone else, The Daily Mail wouldn’t allow it! As a result, there’ll be plenty of families opting for a “Hard Discounter Diet” and the “traditional” supermarket chains will be fighting tooth and nail to ensure that not them but some other competitor takes the hit This means pressure on prices and margins that will be pushed right down the chain. Don’t be surprised to see one of the “Big Boy” retailers crumble in 2017.
  • It’s looking like an economic and social policy-makers nightmare – huge debt load, running a massive deficit, a national productivity problem, increasing regional economic and social inequalities, inflation edging up so “should we increase interest rates?” but just imagine the house-owners response to higher mortgage rates and, to rub salt in to the wounds, OPEC confounds the sceptics and announces the first cut in oil supplies in 8 years (watch out for significantly higher fuel prices)!

Make no bones about it, 2017 is going to be a tough year in the UK and other countries’ grocery industries. But, it was ever thus! Grocery industry folk are made of stern stuff. Global food staples are intrinsically volatile and price instability seems to be increasing, driven by the physical (e.g. unexpected climate events) and the political (e.g. food trade disruption between Russia and the EU). So, don’t be surprised if we get an unexpected bout of one or both of these in 2017 to discombobulate business results and business planning.

Well enough of this festive cheer! A Very Happy Christmas and let’s hope a serene and profitable New Year to you all from David and Miguel.

Posted in Inflation

Trend-Reporting Time in the Food and Drink Industry

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Nestlé’s Cocoa Plan: show me the farmers! Source: Nestlé.

At this time of year, food industry pundits spray their readers with nuggets on the directions new products are taking as we stand on the threshold of 2017.  We like the Innova Market Insights approach as the company analyses new product introductions during the year to distill common attributes of products that indicate a change or reinforcement in market direction seen across the globe. What’s on their trends to watch list for 2017?:

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Health trend and sweet tooth gives an opportunity for Stevia based products.

  • Clean Supreme” – clean and clear ingredient labels with total supply chain transparency where natural rather than artificial, environmental/animal welfare and other social aspects are integral to the product. “The Green Bar” is being inexorably raised and manufacturers have to earn the right to produce. Good social behaviour is simply expected and doesn’t receive a price premium, rather it carries a discount if not provided;
  • Disruptive Green” – the galloping advancement of plant-based ingredients reminding the meat and dairy industries that consumers have a much wider view now of what constitutes protein in food or milk in drinks. Seeds go mainstream. Big Food is on to it – e.g. Danone shelling out billions for WhiteWave and Tyson and General Mills buying in to plant protein start-ups;
  • Sweet Balance” – sugar is demonised but our sweet tooth prevails providing burgeoning opportunities for natural sweeteners such as stevia;
  • Kitchen Symphony” – home cooking moves up a notch driven by endless cooking shows, media attention and consumer desire for fulfilment and family/peer praise! Authentic cuisine, “what sort of Italian/Chinese”, artisanal/local/heritage ingredients – it’s cool to be knowledgeable about food;
  • Body in Tune” – we’re not quite at DNA-profiling for My Diet, but “what’s good for me/my family’s body and well-being” is an increasingly important driver of purchase;
  • Affordable Indulgence” – irrespective of how tough things are, we deserve a treat and, what’s more, we want the proper premium one not the ersatz. Yummy taste and status but within budget!;
  • Horses for Courses and Fuzzy Borders” – is the occasion a snack, mini-meal, regular or special meal? We need food product formats to be in-tune with our specific and immediate needs. What’s the job of the food product for each occasion – reward, on-the-go snack, impress the guest? Flexitarian diets flourish – meat and vegetarian options are interchangeable;
  • Cool Kids Food” – more adventuresome children’s food with better nutritional balance (e.g. “frushi” – fruit sushi – looks good and is fun food).
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Provenance and local products still very important attributes for consumers.

Reassuringly, irrespective of product category, there are recurring themes emanating from this years trendfest. Here’s what Cargill Cocoa and Chocolate Division think are the key drivers in the chocolate confectionery market:

  • Indulgent: flavours – chocolate and vegetable combinations, building on chili, the irrepressible kale finds a place in our 2017 chocolate treats, and beetroot features alongside chocolate in cakes; texture – bigger chunks, and crispy chocolate layers; colour – cocoa powder in various shades (red through black) to add depth;
  • Premium: provenance/origin/where manufactured, artisan links (pushing big players to acquire trendy, successful start-ups at astonishing multiples!), type of processing (e.g. stone-ground, slow-churned);
  • Healthy: avoiding the perceived “unhealthy” (e.g. palm oil) and seeking the “healthy” (e.g. organic, coconut milk) and a focus on “-free” – gluten/HFCS/lactose) and removing guilt through protein enrichment and claims of healthy snacking;
  • Sustainable and Clean: even more of where the food comes from and who grew the ingredients (real farmers or factory farmers?) and what are the environmental and social impacts ? – supported by 3rd party accreditation and web links to see at first hand. Short ingredient lists with natural products to colour and flavour and real fruit, vegetables and plant extracts.

 

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Fancy a different pigs on blankets this Christmas? Sainsbury’s version is affordable and looks upmarket.

Posted in Consumer, Trends

All Aboard! Where To? Mmmm Not Quite Sure!

There’s so much happening in the world of food, and we do our best to explain past and anticipate future developments in the global food industry for you. For example, we have talked about:

  • demographic and lifestyle changes in all markets that are driving growth in meal solutions at the expense of “traditional ingredients”;
  • the 3 meals a day family eating format breaking down as mini-meals and snacking surge across the world;
  • consumers seeking fewer, more natural, “pronounceable” ingredients;
  • some dairy products declining but sales of plant-based proteins going through the roof!;
  • a ferociously competitive global retail sector with the big guys desperate to stem market share losses and return to sales growth and distinct polarisation between the discount and premium ends of the retail spectrum;
  • on-line grocery finding its place in many markets and the increasing convergence of food retail and food service;
  • retail brands (private label) edging forward in some countries at the expense of secondary national brands; although stalling where retail range rationalization has taken a severe toll on manufacturer and retail brands in mature markets;
  • increasing concentration in big agribusiness with the Giant Six firms emerging as the Gigantic Four;
  • “Big Food Bad Food” struggling in developed markets and hell bent to change radically their portfolios and partner with or purchase fast-growing start-up companies with natural and artisanal credentials;
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Here is David, talking in Canada about the huge growth in consumer and investor interest in plant-based protein foods.

  • environmentalists clamouring for new agricultural and food production models to respond to a burgeoning global population which is upgrading its diet to more premium meat proteins (although in developed markets, per capita meat consumption has clearly peaked);
  • and, then, of course Brexit – with the prospect of an end to 32 months of food deflation in the UK as sterling plummets against other major currencies;
  • yet, notwithstanding the neo-Malthusian outlook associated with global population growth and dietary change, world food commodity prices have been in slow decline for 5 years or so (only stabilizing in the past 4-5 months). With an increasingly unpredictable climate, are we to face the spectre of a return to hyper-price volatility for food staples?;
  • and, as consumers increasingly seek more “credence attributes” in their food and drink (e.g. free-range/-from, “green”, socially-conscious, known provenance, etc.), then, so the risk of food fraud grows with the consequential threat to major manufacturer and retail brands.

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Fresh produce is one of the key sections for the Spanish Grocers, competiting with independent greengrocers.

There’s so much more that will have a direct impact on the future of your business in this second half of 2016. Next year will be a raucous ride – buckle up seatbelts and crash hats on!

This Summer, David and Miguel are travelling to Australia, New Zealand, Thailand, Malaysia, Cambodia, South Korea, Brazil, Argentina, Uruguay and Spain. So expect some “exotic” posts during this period – we’re collecting food industry insights for our Autumn talks. If you’re mulling over 2017 and beyond business plans we are ready to speak to your board, senior managers, present and prospective customers, or other stakeholders, discussing topics in English or in Spanish.

Posted in General, Uncategorized

Oh, BREX IT!

 

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After the Brexit, brace yourselves for the Great British Summer! (Picture of Asda Store)

What a seven days! Out of the EU and England out of the European Soccer Championships. Those pesky Vikings bounced us in 793 AD and 1223 years later repeated the dose. Grocery cartoonists have had a field day: “Imagine if we had been playing Aldi?”. To rub salted cod in the wounds, Iceland beat us in establishing a democratic parliament, too (930 AD). We’ve been good at inventing games (e.g. soccer, rugby, cricket, golf) and, then, enjoyed admiring those countries that excel at them! We didn’t invent the  referendum but we should have done and shown the world how it can be used to establish the archaic sport of wall-building!

So, 7 days ago, the nation’s majority voted for BREXIT, after more than 40 years of being part of the EU (as it became). Mind you, Charles de Gaulle vetoed our membership of the European Economic Community in 1963 (he was still peevish about our Agincourt success in 1415). Let’s be honest, we’ve always been reluctant members which is strange as the English aristocracy invented the notion of a “Gentlemen’s Club”! But, we think the nation was genuinely surprised when they woke up on Friday morning to embrace BREXIT – and believe that many of the brexiteers really wanted to give that lot in Brussels a  jolly good kick up the pants and, now, have a sneaking suspicion that we have contracted Munchausen’s syndrome (the predilection to do self-harm).

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No worries Chorizo Lovers! No import tariff will ever be applied to the Chorizo we manufacture in this country!

We don’t have much wisdom on the immediate implications of this historic decision. Plenty of analysts and pundits have said very little, but do have a peek at James Walton’s (IGD) views on the impact of Brexit on the UK grocery industry. Frankly, nothing much is going to happen in a hurry, but give consideration to factors such as:

  • the resilient stock market has bounced back but forex rates may take longer to align – as a major food importer, a weaker pound may place upwards pressure on food prices for consumers and on imported ingredients for manufacturers, but UK exporters may give two cheers (better export prices but higher costs);
  • the EU has a range of relationships with third countries that may suit or could be modified to suit us and them. Remember, too, that we run a £15 billion deficit with the EU on grocery trade and, so, we are hugely important trade partners for our European neighbours;
  • of course, we can negotiate trade deals with countries and trading blocks that, currently, are covered by the EU but this will be a long and tortuous process and VERY taxing for our public servants who are a little out of practice in such dark arts:
  • we are low-60’s% self-sufficient in food and, in an era where buying local/national has become de rigueur, there’s plenty of upside in our home market but, then, our home market is only 65 million rather than the 510 million in the EU;
  • we’ve been surprised at the Brexit support given by farmers – taking close to half the total EU budget, direct financial support to farmers comprises a significant portion of total farm income of, in particular, smaller-scale producers. For them, may the UK national government be as munificent!

Is the future rosy or bleak?: likely, something in between. In part, it will depend on the performance of our political leaders and, as of right now, it’s difficult to be enthused with optimism! Our grumpiness reflects that, whereas by no means ideal, the EU has and does represent a political and economic front that is substantial and demands respect from other major world players. Even darker, imagine if the Brexit legacy was the break-up of the UK?! Both of us are or have been immigrants and firmly believe that fluid movement of labour can and does bring benefits to all. Anyway, take some deep breaths and get stuck in for the long haul. Our bet is that the UK food and drinks industry will be stronger and more resilient by decade end than it is now.

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We are ready if the future means less olive oil in our shops!

What of the football? Look, Miguel is Spanish and is still in denial that Spain has failed to reach the quarters and David is Welsh and thankful that his soccer team is having more success than his rugby team did in New Zealand. Onwards!

Posted in General

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About the authors
Prof David Hughes: Around the world, David speaks to senior agribusiness and food industry managers about global food industry developments that are and will affect their businesses and industry. Energetic, engaging, humorous and insightful, David gains the very highest evaluations at seminars, conferences and Board level discussions in every continent he visits. Miguel Flavián: works for several Spanish organisations and companies to help them to learn from the developments of the British grocery market and improve their business back home.