How will summer 2021 be remembered in the UK in fresh produce?

The summer of 2021 has been a busy one for the UK fresh produce industry. We entered it still feeling the impacts of Brexit. It took a long time to determine the basis for how we were ultimately going to leave the EU. While the final deal with no tariffs or quotas on trade between the UK and the current EU-27 was probably as good as you might expect, the impact of so-called the “trade frictions” face), caused major problems.

Brexit, far from over

The UK is not a big exporter to the rest of the EU for fresh produce, but is a big importer of a wide range of fruit and vegetables from Holland, France, Italy and Spain specifically. This trade friction has manifested itself in delays at points of entry. While the fruit and vegetable sector has probably escaped reasonably in this regard, there have been much more significant problems with the trade in meat, dairy and seafood. There are still some problems, however. techniques to be solved in areas such as potatoes and seed potatoes.

This will change again in October this year, when new health certificates for imports into the UK will be required. The UK is still considering changes, if any, to its own certification requirements by October. Import customs declarations are still required, but can now be deferred until January 2022, when the border checkpoints start to operate. The full roll-out of this, however, will not be completed until March 2022, with the final stage (relating to risk-based inspections on arrival) operating from January 2022.

As such it is a bit of a moving party and there is always the problem of trade between mainland Britain, Northern Ireland and the Republic of Ireland – it has far broader consequences than just movement. physics of food products.

From pandemic to pingemic – the labor supply under pressure

The rollout of the COVID vaccination program has been widely regarded as a success, with nearly 90% of the adult population having been ‘bitten’, but the system that alerts people to whether they have been in contact with anyone that carried an infection – carried out by an application alert system – caused huge problems.

The so-called “pingemia” has seen hundreds of thousands of people self-isolate – when they may not need to – for up to 10 days at a time. Some have been “pinged” more than once. This has seen fresh produce companies sometimes struggle to recruit staff for packaging operations and to be able to provide a full range of distribution services.

The issue of manpower in the horticultural sector is not new, of course, and certainly not unique to the UK. We have been talking about it for 15 to 20 years (maybe even more?), But we have relied on an immediate supply of relatively cheap migrant labor to deal with it. The post-Brexit situation seems to have fundamentally changed. As a result, interest in robotic planting and picking technology has probably never been higher.

Beyond that, there is now also a structural shortage of truck drivers to physically move fresh produce across the UK. All of this was exacerbated by Brexit which saw thousands of truck drivers – often from Eastern Europe – returning home. Antisocial hours and low wages were cited as other reasons for this shortage. As a result, in some cases stores have not been able to stock a full range of products.

This has seen supermarkets and distribution companies in the UK offering to raise wages in an attempt to resolve the situation. However, there are fears that the situation will worsen before it improves and could already have an impact on the supply of fresh produce as the all-important Christmas period approaches.

And oh, the weather …

And then we have the great British summer. Or rather, its absence. This has dampened the demand (literally!) For seasonal products such as berries and hampered the eventual production of other crops such as premium fruits.

As one leading actor recently told me: “We don’t have enough staff to pick and pack the fruit, we don’t have enough truck drivers to move it and the weather has been terrible overall. I never knew it was such a chaotic time ”.

At the point of sale …

At the same time, important developments have taken place at the point of sale for production companies. Notably, large private equity firms have targeted UK supermarkets, which they see as undervalued and attractive due to their large property portfolios.

As an example, in recent months Morrisons – one of the so-called Big 4 retailers in the UK – has been the subject of a take-over bid by a US-based consortium and supported by private capital. The initial offer was recently increased to £ 6.7bn following speculation of a competing offer. Morrisons is the UK’s fourth largest supermarket chain, with nearly 500 outlets across the UK and over 110,000 employees.

What are the chances of copy deals now for the other two major UK listed supermarket chains, Tesco and J Sainsbury? Industry analysts suggest Tesco might be just too big for a private equity raider – its current market capitalization is almost £ 18 billion, almost three times the size of the Morrisons deal. And at Sainsbury’s, there is a potential blocking shareholder in the form of Qatar Holdings, which still owns 15% of the chain. If the Qataris can be sidelined, perhaps Sainsbury’s could become a takeover target.

Internet, engine of international growth

Marks & Spencer has launched a wide range of its food products on the global export platform, the British Corner Shop, allowing customers in over 150 countries to purchase M&S lines for the first time. The range is made up of more than 800 M&S products. Through British Corner Shop’s export platform, customers from the United States to Australia will be able to purchase a range of bespoke M&S foods for the first time and have it at their doorstep in one to three days . The launch is part of M&S’s commitment to accelerate its international growth through online channels.

The Russians are coming!

At the other end of the market, Russian discount chain Mere has announced plans to open more than 300 stores in the UK within eight to ten years. They said it will undermine Lidl and Aldi by 20-30% and will step up its presence in the UK once the processes are established. The first four British stores will open this year mainly in the north of England.

As part of its business model, Mere’s suppliers are required to deliver directly to stores and only pay for the inventory sold. Food will be displayed on pallets in stores approximately 10,000 square feet, including a walk-in cooler. Each store will have a maximum of 1,200 SKUs at room temperature, refrigerated and frozen, and only eight employees, including approximately four cashiers and three delivery handlers.

Retail food industry analyst group IGD predicts that unprecedented 8.5% growth in 2020 will slow to 1.7% in 2021, then to 0.9% in 2022, as buyers save and the restaurant industry recovers its sales. This sharp decline will be followed by a period of modest recovery, which will see the UK food and grocery retail market grow by 8% to reach £ 229 billion over the period 2021-2026.

The recovery will be driven by rising employment levels, growing consumer confidence, the economic recovery and the new channels and opportunities created by the disruption of COVID-19, such as rapid commerce. Discount chains – led by Aldi and Lidl – will continue to grow, as will the convenience store sector. The growth of supermarkets and hypermarkets will be more uneven.

Discounters help set the tone

Lidl, which employs nearly 26,000 people in the UK, will invest £ 1.3bn this year and next with a plan to open around 50 new stores in 2021 to add to the 800 qu ‘it is already operating – and will move to a new UK headquarters in South West London and build a new warehouse in Luton. The company also plans to install 300 electric car charging points in its parking lots by 2022 and install solar panels on new freehold stores.

Aldi has also confirmed plans to open more than 450 new stores in the UK – and has therefore released a ‘wishlist’ of locations for expansion. In total, the chain says it wants to open more than 400 stores in England, 30 in Wales and 20 in Scotland. Aldi currently has over 900 stores in the UK and opened its first stores here in 1990.

What does all this mean?

So what does all of this mean for product suppliers? Several things stand out:

  • the supply chain has come under enormous pressure over the summer months – this has at times shown how resilient the UK supply chain has become, but at other times how resilient it can be brittle
  • the UK market, despite all its challenges – still seems an attractive market with US, German and Russian companies all looking to invest
  • the impact of Brexit – it’s not over
  • UK market will continue to recover from impact of COVID, but routes to market continue to change
  • interest in horti -tech products, technologies and services has never been so high, but the proof will be, as always, “still in the pudding”
  • Concerns about environmental and sustainability issues are intensifying, with ambitious targets throughout the supply chain to reduce carbon emissions. It will be interesting to see what comes out of the annual UN climate change conference COP 26 to be held in Scotland in November.

Where it all leads, time will tell, of course, but one thing is for sure – summer 2021 is a summer we won’t soon forget. Manufacturing companies, both in the UK and overseas, will need to be more resilient and better prepared for what appears to be changing the market, regulatory and environmental landscape like never before. .

John is a Division Director at Promar International, the consulting arm of Genus plc. He has worked on fresh produce assignments in some 60 markets around the world including the EU, US, New Zealand, South Africa, Chile, Peru, India, China and the Gulf region. He is the current chairman of the Chartered Institute of Marketing’s Food & Agricultural Group and chairman of the annual City Food Lecture.

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