I thinks it’s fair to say we’ve all started 2021 thinking about something like ‘Well it can’t be worse than 2020’ but as we near the end of what has been another volatile year, I’m not sure our hopes for January have been proven successful.
The year was characterized by even more supply chain shocks. The big fear for the fresh produce supply chain is that all of this will escalate just ahead of the all-important Christmas trading season and end what has been, for some, a hectic 2021.
Now, many are wondering what could happen in 2022. In a volatile time like the one we are experiencing now, it can be difficult, but “looking back to look ahead” is one way to do it.
So what happened in 2021? The answer is a lot, including:
The question of personnel and work: throughout the supply chain, from farm to packaging / storage, product distribution and then outlets, both retail and foodservice, this has been a major headache throughout. the year. Are we seeing a sudden influx of labor into the supply chain in the coming months? In short, no. This will continue to be a busy and sometimes stressful time in the supply chain.
Energy costs: we have seen a huge increase in the cost of energy since the september / october period, but none of the root causes of these increases have disappeared and we will see them persist until the new year.
Commercial friction: at the start of the year, we reached a position with the rest of the EU which saw no tariff and / or quota on trade. However, the role of non-tariff barriers has turned out to be a much bigger problem for UK businesses. But what were we really expecting? We have, in effect, ended a 40-year marriage with the EU. To wait for relationships to normalize after just a few months was unrealistic. It may be several years before this is all resolved and we are on “good terms” again. The UK has never been a major supplier to the rest of the EU for fresh produce, but the dairy, meat and seafood trade has likely been more affected. We are of course a big importer from the Netherlands, France, Italy and Spain.
Supply disruption: We have seen shortages of fresh produce, but these have been short-lived in most cases. Food shortages involve empty shelves for prolonged periods. We won’t see it, but what we will likely see is a more periodic disruption of the continuous flow of fruits and vegetables in supermarkets that we are so used to.
Food service: boom or bust? Consumers, who were not allowed out for Christmas last year, appear determined to make up for lost time and meal reservations at pubs and restaurants are at a high level. Over the next few weeks, however, the likely spread of the new Covid variant, Omicron, may well see them decide to stay closer to home. The restaurant industry will therefore be on a knife-edge for the next few months or so, as consumers decide to go out and play or stay home.
Consumers buy early and online: there is ample evidence that consumers started shopping for Christmas much earlier than they traditionally did in the past. People like Kantar have published a lot of data to show it. Over the past 18 months, we’ve gone through the somewhat still experimental phase of online shopping to develop into a full-scale obsession with it. This Christmas we will see more food purchased online than ever before. Great news for online retailers like Ocado etc. but probably less good news for more traditional retailers
So what sort of 2022 will the fresh produce industry have? The factors mentioned above all need to be evaluated, but we do not see, in the short term, anything fundamentally change from what has happened over the past 11 months. This could, to some extent, be accentuated for a short time during the actual Christmas season.
What we have seen is that supply chain shocks of whatever nature simply accelerate, in most cases, what has already happened.
Is everything bad?
It all depends on what happens over the next few weeks with Omicron, of course. Until recently, however, some banks predicted that the UK economy would recover sharply in 2022, possibly with GDP growth of up to 6%. This will start to make life a little easier for most members of the product supply chain, including consumers.
Online sales continue to soar. Some enterprising producers have found new markets in the Gulf and Southeast Asia. The seasonal workers scheme has recently been extended. The UK market, despite all of its challenges, still appears to be an attractive market with US, German and Russian companies all looking to invest in the retail space.
Interest in horticultural products, technologies and services has never been greater as a solution to problems such as labor, but the proof will, as always, be “in the pudding”. Money has poured into vertical farming projects, not only in the UK but also in many other parts of the world.
While the UK fresh produce supply chain has been much more vulnerable than we would like over the last 18 months or so, and may continue to be, we must remember that it has also been very resilient . The major chains and their suppliers have worked hard to ensure that no future disruption occurs beyond a modest scale.
There is still work to be done; a good grasp of the basics is essential. Be very close to customers and determine what needs to be done and when. Have a “worst case scenario” in place. It is important to keep staff informed of what is going on and how the business is doing.
The need for good environmental and sustainability practices is growing, with ambitious targets throughout the supply chain to reduce carbon emissions. It will be interesting to see what ultimately comes out of COP26. A strong sustainability plan is now a ‘must’ for all product operators, wherever they are in the supply chain.
Planning for 2022 is also essential. Many of the factors we have mentioned here are not just going to go away. It is essential to undertake a proactive audit of business resilience. Developing a really good idea of your upstream and downstream supply chain (s) is going to be essential. We have seen in the past that too many companies do not have it.
In all this time of change, keep in mind the opportunities that may exist. It might sound like a little trite thing to say, but we think it’s true. However, it will only be companies with a well-developed plan for the future that will see them, let alone benefit.
What is clear is that the UK products sector has not seen the end of change. Indeed, after Brexit and after Covid, we will likely see a new wave of market and consumer trends take hold of the industry, and the rest of this decade will be characterized by the impact of the new trade deals that we aspire to. to be signed in the coming months and years.
John Giles is a Division Director at Promar International, the consulting arm of Genus plc and has worked on production assignments in some 60 countries around the world, including the UK, the rest of the EU, the Gulf, South Africa, New Zealand, Chile, India, China and South East Asia. He is also president of the annual City Food Lecture.