The whole issue of Brexit has become an all-consuming subject for many, not just in the fresh produce sector, but in the wider economy as well. The decisions made in the next 18 to 24 months will have a profound impact on British society as a whole. These will be mirrored in the fresh produce sector.
Key issues to contend with will be those surrounding the availability of labor, the ability to trade with other European countries, the potential to open new markets outside of the European Union and the level of support farmers will receive under what might be a new “British Agricultural Policy” that will replace the current Common Agricultural Policy (CAP). The outcomes of all these issues are unsure. This adds to a sense of uncertainty for U.K. growers, packers, importers and distributors, as well as retailers, foodservice customers and eventually, consumers.
Fresh produce companies are in a situation where they are being asked to plan for a future where there are many unknowns. A good deal of flexibility will be required in looking forward, as these companies have to contend with what might be either a hard or softer Brexit, and then maybe some form of transitional period, too — or not, as the case might be — as we exit the EU in the middle of 2019. This is far from easy, and does not mean the issues should not be thought about.
What is clear, however, is that a number of other fundamental drivers will remain at play in the U.K. and international fresh produce sector, regardless of the Brexit outcome. While many of these are also entwined with this big picture “end game,” there is a danger in getting so wrapped up in Brexit that the eye is taken off the ball in other important areas. There are many other factors fresh produce companies need to be focusing on as they come to grips with the possible outcome of Brexit. These include:
The changing face of retail. The continued growth of discount retailers has transformed the market in the past six years. It has added a new level of competition to an already highly competitive market. Until recently, there was a sense that the German-based discounters were not for the United Kingdom. However, U.K. consumers like shopping these chains. Their presence has shaken up the market in a way that was unimaginable, and it looks like the discount retailers will continue to gain market share.
Online growth. Kantar Worldpanel, which tracks spending data across the grocery industry globally, reported that in 2016, global FMCG, also known as CPG (consumer package goods) online sales grew by 26 percent, with e-commerce now contributing 35 percent of global FMCG growth. In the U.K., online sales grew from 6.7 percent to 7.3 percent value share in the past year alone, making British shoppers second only to South Koreans in the proportion of groceries they buy online. With the entry of new players such as Amazon Fresh to the online supermarkets, consumers will have a plethora of choices to buy fresh produce in the future. The U.K. online market is expected to continue to grow in both market share and new players.
Fresh produce companies are in a situation where they are being asked to plan for a future where there are many unknowns.
Sustainability issues. Growers, packers and distributors will need to make further efforts to show how they are looking to mitigate issues relating to water usage, input applications, energy utilization, carbon emissions, etc. These are major issues, and looking to reduce their impact not only makes good sense from an environmental perspective, but in most cases, from an economic one.
Consolidation of the supply chain. This has been an ongoing feature of the sector for some time now. It began with U.K. supermarkets looking to shorten supply chains some 20 years ago. In many categories, the number of key players has been reduced significantly. In the future, there will probably be fewer but larger growers, fewer packers and distributors and fewer support/service providers.
Supply security. The U.K. has always been a net importer of fresh produce. The country exports relatively little, and most of what is exported goes to other EU markets. The attraction of places such as Africa, the Middle East and Asia means that the best quality produce will not automatically come to the U.K. in the future. U.K. customers will need to strengthen supply chain relationships with international suppliers and make a strong proposition to them as to why the U.K. should still be seen as an attractive market. Will these countries stop supplying the country? It’s unlikely, but there are now other options to consider.
Technology. There is a plethora of supply chain technologies available for pre- and post-harvest applications, as well as communicating with consumers. Having good, quality fresh produce and logistics is a given these days. To be successful, companies will need to understand and harness new technology, and develop more efficient and sustainable supply chains.
All this adds up to a challenging U.K. market and industry environment, but one that will present opportunities for the well-prepared and informed. Brexit will still be a major issue and talking point. The outcome to the key issues it raises will gradually become clearer over time. In the meantime, there are plenty of other things happening in the supply chain that will need time, effort, resources and thought given to them. Nothing stays the same for long in the world of fresh produce. In the next few years, this will clearly continue to be the case.
John Giles is a divisional director with Promar International, the value chain consulting arm of Genus plc., Basingstoke, Hampshire, England. He has worked on fresh produce assignments in more than 60 countries around the world and can be contacted at [email protected]