The U.S. has a long history of supplying a range of fruit products to the U.K. market, especially for items such as apples, pears, grapes, soft fruit and berries. While for some time the U.S. produce industry has been looking at other growth markets in emerging countries (in the likes of India, China and parts of Latin America to add to the overall export portfolio), it is worth noting what is happening in the U.K. This is may be an indicator as to what might happen in other markets around the world too.
The structure of the U.K. fruit supply chain has altered significantly during the past few years, with increasing consolidation. The key points to note are as follows:
The sale of fruit in the U.K. is still dominated by the “Big Four” retailers (Tesco, Asda, Sainsbury’s and Morrisons). But widespread change is taking place with the growth of the German-based discount chains (Aldi and Lidl), online shopping, and developments in the foodservice sector, which all put pressure on the leading established supermarkets.
Major U.K. retailers are now investing more in direct-supply relationships to ensure the integrity of the supply chain. This maneuver is seen as critical to ensure, and while different retailers all have their own business models to achieve this, the basic aim is the same — more efficient supply chains, removing costs and getting closer to the grower base.
A relatively small number of highly influential importers and distributors is responsible for supplying the leading retailers. They are often specialists on certain products and geographical sourcing areas. They normally supply only two to three key retail customers. U.S. (and other) growers and exporters need to develop close working relationships with these key businesses to be successful in the UK.
The U.S. is still a highly regarded fresh produce supplier to the U.K. and has largely overcome some technical concerns amongst some importers in the past (e.g. water usage and labour issues). There is increasing attention to factors, such as Corporate Social Responsibility (CSR) and the protection of the environment, but the U.S. should now see these as an opportunity area rather than a threat.
Even if U.S. businesses are not marketing fruit direct to the U.K., it is well worth keeping a close watch on key structural changes.
It is clear that the U.S. has also developed other international markets in the past few years. One of the concerns of the U.K. trade is that U.S. growers and exporters pay more attention to markets in the likes of Southeast Asia and China than the U.K. This is understandable from both sides and is just as much about perception as reality. The U.S. could still strengthen its promotional position in the U.K. over the next few years by participating in major trade shows and other trade-based events. As good examples, Chile and South Africa both continued to invest significant sums of money in this sort of activity and were funded by a combination of government, growers/exporters and trade associations.
U.K. retailers are renowned for having some of the highest quality standards and technical specifications in the world. However, the long-term impact of the economic downturn has seen growth of the discount sector and caused retailers to be far more cost-conscious than in the past. High-quality standards and systems of full traceability are key factors for all suppliers to be successful in the U.K., to ensure they meet the requirements of U.K./EU food standards as well as specific additional retailer requirements.
There is extensive U.K. and EU legislation, and further commercial requirements, in areas such as pesticide usage, traceability of produce etc., but these should not act as disincentive to serious U.S. growers/exporters. Accreditations such as the British Retail Consortium (BRC) and GLOBAGAP are seen as minimum standards to achieve.
The traditional system of wholesale markets has been under pressure for a long period of time, but has been rejuvenated by the growth of the foodservice and catering sectors. The leading foodservice businesses in the U.K. now operate to the same technical and commercial standards as the leading retailers. The catering sector is still quite fragmented when compared to the retail sector, but is also beginning to consolidate.
The U.S. sector should look at what is happening in the U.K. as an indication of what might happen in the future in other international markets. While most U.K. retailers have a fairly modest international footprint compared to some of the U.S. and other EU retail chains, their influence on how supply chains develop around the world is strong.
Conversely, the U.K. remains a key import market for many suppliers. The U.K. is roughly a 3 million tonne import market for all fruit. Key suppliers include the likes of Spain, the Netherlands, South Africa, Chile, Central Americans and increasingly new suppliers, such as Peru. Many exporters in these countries use the fact that they supply the U.K., with its exacting technical and commercial standards, as an indicator as to the strength of their offer and ability to do business in one of the most demanding markets in the world.
Even if U.S. businesses are not marketing fruit direct to the U.K., it is well worth keeping a close watch on key structural changes. They act as an indicator as to what might happen elsewhere at some stage in the future.
John Giles is a Divisional Director with Promar International, a leading agricultural and horticultural value chain consulting company and a subsidiary of Genus plc. He has been involved in a wide range of produce related assignments in the UK, the rest of the EU, Latin America, SE Asia and China.
