GlobalData’s Consumer and Retail Intelligence Centre Offering delved into the post-Brexit food and drink landscape to focus on products, prices and milestones for the industry, reports Thomas Lawrence
The webinar, hosted by Business Review Webinars’ Tareq Audhali, took a broad overview of the impact of Brexit on the foodservice industry. It also drilled more deeply into potential consequences, strategies for managing disruption and specific trends to watch like growth of local produce and the boom among discounters.
GlobalData’s Molly Johnson-Jones, senior food and grocery analyst and retail consultant, and Peter Hays, associate analyst, took to the podium for an insightful discussion followed by questions from the audience.
Almost a year of Brexit negotiations have elapsed, but the outlook remains uncertain as key deadlines approach. Hays began with a warning that the projections weren’t looking good. A “cliff-edge Brexit,” he said, could see an increase in food prices of between 5 and 12%, while even a Canada-style free trade agreement – considered the most likely outcome from negotiations – would mean new restrictions on trade in services and movement of people. “Such disruption should cause concern among members of the food and drink industry,” said Hays.
Change is afoot for consumers according to Johnson-Jones. Price pressure are likely to dominate while negotiations proceed; 31% of the UK’s food comes from the EU, putting them in the firing line for tariff increases of up to 22% post-Brexit. With a whole host of preferential trade agreements that will also have to be replicated, Johnson-Jones predicted a “volatile and inflationary” couple of years for shoppers.
Appetite for change
One of the big trends to look out for, as a consequence of rising prices and the need to forge new trading relationships, is the prospect of a wholesale change in eating habits. For example, Johnson-Jones suggested the loss of EU subsidies to UK farmers could see once commonplace meat and dairy products become unaffordable. A shift towards cheaper cuts could result.
Furthermore, local produce may become more desirable as former larder staples originating from abroad fall out of favour. Food standards are a major battle line in the EU negotiations with critics warning products from less regulated markets (like America’s chlorinated chickens) could flood Britain post-Brexit.
With two-thirds of consumers commenting that a product’s environmental credentials would influence their purchasing habits according to a GlobalData survey, Hays noted marketing opportunities could blossom for local producers. Increased awareness around food miles and the chance to emphasise freshness and sustainability could see British artisans dealt a strong hand post-Brexit.
An accompanying trend is the rise of the discounters. “Discounter penetration is highest in the grocery market” according to Johnson-Jones – it’s not hard to see why, with disposable income tumbling and inflation at 2.8%. Hays commented that discounters are doubly advantaged as they have two ends of the spectrum to consider, with consumers searching for value-oriented basics while “trading up for treats.” This is particularly significant as a new generation of consumers are much more open to cut-price shopping than their parents.
As purchasing power and prices continue to diverge discounters are seeing their market share grow. Chains like Aldi and Lidl – based, ironically, in EU member states – are stepping up their luxury and local offerings to tap into consumer demand. Brexit could allow these relative newcomers to challenge the dominance of the old Big Four UK supermarkets.
Navigating stormy waters
Clearly change is afoot; foodservice brands will have to respond accordingly. Hays and Johnson-Jones identified four key ways in which this could be done: emphasis on localism as affinity with EU produce falls, strengthening labels to ensure their continued relevant in a hostile climate, reengineering and repackaging products to accommodate for fluctuating raw material prices and thinking long-term to protect against further future turbulence.
The overall message was a gloomy one, but the webinar did conclude with a ray of hope. Asked about the positives of Brexit, Johnson-Jones said a lot depended on maintaining subsidies and sterling’s stability; however, domestic producers stand to gain from a brewing resurgence of seasonality and locality.
Additionally, businesses can use the upheaval of Brexit to renew relationships with their customers. Hays pointed out that increasing costs will force firms to make difficult choices about pack sizes and ingredient usage. But transparency, said Johnson-Jones, could be a benefit, with “open and honest” evaluations by businesses to minimise sacrifice a way of streamlining costs and advancing a productive consumer-business dynamic.
It’s an uncertain time for businesses and consumers, but there are some crumbs of comfort. GlobalData’s industry-wide insights offer a good opportunity to salvage them. Foodservice consultants should take note.