The UK Market for Agri-Food and Horticultural Products: opportunities for Dutch SME’s

The UK Market for Agri-Food and

Horticultural Products: opportunities

for Dutch SME’s

1

Report produced on behalf of the Embassy of the Kingdom of the

Netherlands, UK by Promar International.

July 2013

http://www.promar-international.com/default.aspx

Background

• The Embassy of the Netherlands commissioned leading agri-food consultancy Promar International to

review the UK agri-food and horticultural market.

• The purpose of the research was to identify opportunities in the UK agri-food market for Dutch food and

drink Small and Medium Sized Enterprises (SME’s) (1-5 year time horizon).

• The research was carried out between April and June 2013, consisting of:

– Desk-based analysis of a significant body of published information and data.

– Supplemented by telephone interviews with industry leaders.

• This report documents key analysis, insights and conclusions.

2

http://www.promar-international.com/

Contents

Chapter 1: Executive Summary........................................................................4

Chapter 2: Economic Outlook..........................................................................11

Chapter 4: UK Agriculture.................................................................................26

Chapter 5: UK Food and Drink Manufacturing................................................56

Chapter 6: UK Trade in Food and Drink............................................................66

Chapter 7: UK Food Retail and Food Service Market......................................87

Chapter 8: Opportunities for Dutch Suppliers.................................................135

Chapter 3: UK Agri Food Sector Map...............................................................23

3

Chapter 9: Supporting Information...................................................................151

Chapter 1: Executive Summary

4

Chapter contents:

•Key research findings.

•Key conclusions and opportunities for Dutch SME’s

http://www.google.co.uk/url?sa=i&rct=j&q=pen+and+paper+white+background&source=images&cd=&cad=rja&docid=afvNKeM_6e2vAM&tbnid=scZO6_8bc7ByhM:&ved=0CAUQjRw&url=http://www.123rf.com/photo_7049655_vintage-quill-pen-parchment-paper-and-ink-well-isolated-on-white.html&ei=VjzMUe_uOYr40gW-3YCQDg&bvm=bv.48340889,d.d2k&psig=AFQjCNH9k5VCXTVHM5VIJXW6Crdl_6RDug&ust=1372425630193637

Executive Summary

• We believe the UK is an attractive market for Dutch businesses for several reasons.

• A large and growing population means there is significant demand for food and drink products:

– In 2012 total household expenditure on food and drink through retail and food service channels was £187*

billion – a figure that has grown by 2.5% per annum since 2008.

– The UK has one of the biggest and most advanced grocery retail markets in Europe. It is more than

twice the size of the retail market in the Netherlands and UK grocery retailers are considered to be some of

the best in the world.

– The food service market in the UK is more than 3.5 times the size of the Netherlands. There are many

leading global businesses as well as a huge variety of cafes, restaurants and bars.

• The agri-food industry in the UK is becoming increasingly globalised:

– This means the UK is becoming more reliant on trade. This is extremely promising as the Netherlands is

the UK’s biggest trading partner accounting for 12% of all food and drink imports in 2012.

– The UK welcomes direct inward investment by foreign businesses. Indeed, in the last decade there

have been several major, high profile investments made by foreign investors in the UK and foreign firms now

occupy major positions in the UK agri-food sector. There is no reason to suggest this trend cannot continue.

5

Includes retail sales of alcoholic drinks

Executive Summary

• The UK agri-food market is also highly competitive and there are no easy opportunities

• The UK is a major food producer focused on supplying the domestic market:

– Dutch businesses must compete against a large, well established and technically proficient agricultural

industry, which supplies two-thirds of the food industry’s domestic requirements.

• Consolidation of the agricultural industry and supply chain integration has created greater alignment between

farmers and the food chain, which (aided by volatile market conditions) has led to the formation of long-term

supply chain relationships between buyers and suppliers in both retail and food service channels. It will be

especially difficult for Dutch businesses to establish a foothold in the market where long-term supply chain

relationships are already in place.

• The current climate supports a pro-British approach to sourcing some commodity items; in particular meat,

seasonal fresh produce, poultry, cereals and milk. In some cases (especially liquid milk) the UK market is

effectively closed to foreign businesses unless they invest directly in the supply chain.

• The demands and specifications of buyers can be extremely challenging, especially for those new to the market:

– Product safety and quality protocols are extremely high and recent events have only increased the

requirements for suppliers to demonstrate transparency and traceability throughout the supply chain.

– Price is important and negotiations can be notoriously difficult but there are also high expectations with

regards to product innovation, marketing requirements, demonstrating sustainability and ethical credentials.

• There are many established global and local players that fiercely defend their market share.

• It can take suppliers a long time and require significant investment to enter the market.

6

Executive Summary

• Overall we believe that suppliers from the Netherlands are in an excellent position.

• Dutch businesses have several key assets which enhance the potential for doing business in the UK:

– Significant potential for innovation at all stages of the value chain. The Dutch agri-food

landscape (i.e. the interaction of universities, R&D centres and businesses) promotes innovation and

knowledge transfer.

– An entrepreneurial and progressive mindset. The Dutch agri-food complex has arguably evolved

at a quicker pace than its European counterparts when it comes to the withdrawal of political

intervention.

– Focussed on supplying international markets. Dutch businesses have historically aligned their

businesses to supply target markets.

– Already a key supplier to the UK market. There is a long history of doing business between Dutch

and UK markets, which facilitates even more engagement.

7

Executive Summary

8

• However, suppliers must also be responsive to a fast changing environment and consider how best

to engage the UK market.

• How things have been done in the past is not necessarily how things should be done in the future.

– How and where consumers purchase food and drink is changing.

– Consumers, heavily influenced by the economic environment, increasingly seek value (price) as well

as values (e.g. ethical considerations).

– Local and global provenance co-exist as local and global issues matter more to consumers.

– There is increased pressure for supply chains to be shorter, more agile, more transparent and based

more on a long-term relationship focus than short-term and transactional.

– Market and economic conditions constantly change the dynamics of the industry.

• There is no reason to suggest that businesses in the Netherlands cannot succeed in the UK market

providing they have a good product / service, a clear strategy, operational plan and the right mentality.

Executive Summary

• We believe there are two broad ways in which Dutch suppliers should approach the UK market.(1)

• The difference is distinguished by whether the business is a volume player in the market or a niche player in the

market.

Volume players

• Volume suppliers to the UK market have benefited from a well functioning wholesale market system on both sides

of the channel.

• This has undoubtedly helped the Netherlands to achieve its current position as the leading non-domestic source of

food supply to the UK market.

• However, the wholesale market model is under threat from buyers that increasingly demand short, transparent and

dedicated producer aligned supply chains and – for some commodities - growing support for British product.

• We believe the wholesale market model will be an opportunity for some but it will not be the preferred route-to-

market the major UK buyers would like to use.

• In our view, this leads to an increasing necessity for Dutch suppliers to ‘get closer’ to the UK market in other

ways; for example:

– By establishing direct-supply relationships with UK buyers.

– By utilising a UK based marketing partner.

– Through direct investment in the UK supply chain (M&A or greenfield investment).

(1) We do not suggest these are by any means the ‘only’ opportunities. Our conclusions are based on

the weight of evidence analysed and the insights obtained through trade interviews. 9

Executive Summary

10

Niche players

• The innovative potential of Dutch suppliers provides an excellent platform for Dutch SME’s to create opportunities

at all stages of the value chain.

• The precise opportunities are potentially endless but we have categorised them in three broad areas as follows:

1. ‘Exporting’ high-tech production and processing technologies and agri-food intellectual capital.

Enabled by significant clusters of R&D organisations in Food Valley and close collaboration between

government, academia and industry.

2. Creating higher value products from standard foodstuffs to provide high value solutions to UK

businesses. For example, functional food ingredients such as enzymes, proteins, flavours, colours and

nutraceuticals.

3. Marketing artisanal and traditional Dutch speciality products on a ‘global provenance’ platform.

Current knowledge and awareness by UK consumers of Dutch specialities (e.g. cheeses, cooked meats,

waffles and so on) is low but, with appropriate marketing, could follow in the footsteps of suppliers from

France, Spain and Italy.

Chapter 2: Economic Outlook

Chapter contents:

•Brief overview of UK economic position.

•Impact of economic environment on UK consumers.

•Industry perspectives.

Economic outlook

• The financial crisis of 2008 caused a deep recession in the UK economy lasting 15 months.

• An initial rebound in 2009/10 gave way to a second recession in 2011 which lasted for 9 months.

• Recent data from the Office for National Statistics shows that the UK narrowly avoided a third recession at

the end of 2012 and beginning of 2013. In fact the economy grew by 0.3% in the first quarter of 2013.

• This recent data has meant more people are cautiously optimistic that the UK economy is on the ‘road to

recovery’.

– GDP growth of up to 1% is forecast for the UK in 2013.

– GDP growth of 2% per annum is forecast from 2014 onwards.

• At the same time as the outlook for Eurozone countries has got worse:

– Economic growth in the Euro area in 2013 will be virtually nil according to the OECD.

– Debt problems in southern Mediterranean countries and the political structure of the EU continues to

prevent recovery.

• In the short term the UK economy looks to be in a better position than Europe.

• We believe this creates immediate opportunities for businesses in the Netherlands to invest in

and/or trade with the UK.

• Once the UK economy is on a path to sustainable growth we believe that the UK economy will

continue to be a fundamentally attractive long term market for businesses in the Netherlands to

invest in and/or trade with.

12

Industry perspective(1)

• “I would expect 2013 to be more or less a carbon copy of 2012. Little or no growth. I think 2014 will feel

like the year of recovery.”

• “I am cautiously optimistic about the economy in 2013.”

• “The sense of optimism is improving. We are clearly not out of the woods yet but we are getting there.”

• “Europe looks to be in a far worse position than the UK. Some of the unemployment data looks terrifying

and Germany is fundamental to keep the whole economy going. I question how sustainable that is.”

• Right now I think the UK is more attractive because it’s outside Europe; our prospects look better and we

are a relatively less risky economy to do business with at the moment.”

13

(1) Trade interviews

Economic outlook

-8

-6

-4

-2

0

2

4

6

2007 2008 2009 2010 2011 2012 2013

UK GDP growth (%)(1)

Quarter-on-quarter

Year-on-year

UK inflation growth (CPI measure (%) (1)

Euro: Sterling Monthly Average Spot

Exchange Rate (2)

0

1

2

3

4

5

6

7

2007 2008 2009 2010 2011 2012 2013

UK Central Bank Interest Rate (%) (2)

0

1

2

3

4

5

6

2007 2008 2009 2010 2011 2012 2013

Bank of England Target

Actual

(1) Office for National Statistics

(2) Bank of England

0.8

0.9

1

1.1

1.2

1.3

1.4

1.5

1.6

2005 2006 2007 2008 2009 2010 2011 2012 2013

14

Regional economy

Map of the UK distorted to reflect

population density(1)

(1) The Daily Telegraph


• The UK population is estimated to be 63.2 million (31 million men and 32.2 million women).

• London is the most highly populated area (circa. 8 million people).

• Other densely populated urban areas include major cities such as Birmingham, Manchester, Leeds, Liverpool,

Newcastle, Glasgow, Bristol, Edinburgh, Cardiff and Belfast

• Average earnings are highest in London (£34,984 p.a.) and the South East (£28,181 p.a.) and lowest in

Wales (£23,617) and the North East (£23,779).

0 10,000 20,000 30,000 40,000

United Kingdom

North East

North West

Yorkshire and The Humber

East Midlands

West Midlands

East

London

South East

South West

Wales

Scotland

Northern Ireland

Average Annual Earnings by Region (£)(2)

London and the South

East has proven to be

more resilient to the

economic environment

than other regions of the

UK.

15

Demographics

People in a non-white ethnic group as a

percentage of all people(1) • The UK population is ageing. In 2011 16% of the

population was aged 65 and over a figure that is

expected to increase to circa 23% by 2035.

• The median age of the population in 2011 is

circa. 40 years and is increasing.

30.818.8 17.6

63.8

65.4 66

5.315.9 16.4

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1911 2001 2011

65+

15-64

0-14

Changing age structure of UK

population 1911-2011)(1)

• The UK is an ethnically diverse population. There are concentrations

of ethnic groups in major urban centres such as London,

Birmingham, Leicester and Manchester.

• Indian is the largest non-white ethnic group followed by Pakistani and

Black/African/Caribbean/Black British.

16


Consumer reaction

• UK consumer activity has been heavily influenced by the prevailing economic environment since 2007.

– Household expenditure (all items) has been subdued.

– Unemployment is currently at 7.8% - its highest level for some time.

– Slow growth in average earnings has failed to compensate for rising prices (especially fuel and food). As a

result most households in the UK feel ‘worse off’.

• Although food and drink is less exposed to the effects of recession than other sectors of the economy,

there has been a notable impact on consumer behaviour:

– Consumers are far more conscious of food prices.

– Consumers have been buying less or trading down (i.e. selecting more economical options) for products

such as bread, cereals, red meat, fruit and vegetables (amongst others).

– Promotions, discounts and value for money are important motivating factors for consumers.

– Eating out (e.g. in restaurants) has once again become more of an indulgence or to mark a special occasion

than a regular occurrence.

17

Consumer reaction

• At the same time UK consumers are also more demanding that their food and drink deliver additional benefits and

are still prepared to pay a price premium for them; for example:

– Many (but not all) consumers increasingly expect staple items such as bread, meat, milk, seasonal fruit and

vegetables to be of British origin.

– Many (but not all) consumers increasingly expect food to be produced in a fair and ethical way. Consumers

rely on third party product labels (e.g. FairTrade, Red Tractor, RSPCA Freedom Foods) as evidence of

welfare/sustainability credentials.

– Health and wellness is a key motivating factor for many consumers that seek out products which are low in

salt, fat and sugar, contribute to their daily required intake of 5 portions of fruit and vegetables, are free-from

artificial additives and ingredients, contain functional health ingredients and so on.

– Consumers are increasingly demanding convenience products that fit in with busy time poor lifestyles

(especially for weekday meals), particularly those that are positioned on a health and wellness platform (e.g.

healthy prepared meals, salad pots, fruit juices and smoothies and so on).

• The legacy of the events of recent years appears to be an adjustment in what consumers consider to be

value-for-money.

– Consumers will seek out promotions and discounts for undifferentiated everyday products.

– Consumers are prepared to pay more on products that deliver clear tangible benefits (e.g.

convenience, health).

18

http://www.fairtrade.org.uk/

http://www.redtractor.org.uk/home

http://www.freedomfood.co.uk/

Consumer reaction

-2

-1

0

1

2

20

08

Q4

20

09

Q1

20

09

Q2

20

09

Q3

20

09

Q4

20

10

Q1

20

10

Q2

20

10

Q3

20

10

Q4

20

11

Q1

20

11

Q2

20

11

Q3

20

11

Q4

20

12

Q1

20

12

Q2

20

12

Q3

20

12

Q4

UK Household Expenditure Growth(%

change, quarterly)(1)

0

2

4

6

8

10

12

2008 2009 2010 2011 2012 2013

European Union

United Kingdom

UK Unemployment (%)(1)

Comparison of Monthly Earnings (EUR)(2) Growth in earning and prices (%)(1)

0

1

2

3

4

5

6

2007 2008 2009 2010 2011 2012 2013

Earnings Prices €0

€500

€1,000

€1,500

€2,000

€2,500

€3,000

€3,500

€4,000

Ger Nl It Fr UK Sp


(2) Eurostat (as at 2012)

19

Food retail prices & consumer reaction

0

2

4

6

8

10

12

14

2007 2008 2009 2010 2011 2012 2013

CPI

Food RPI

UK Food Inflation (percentage change on

last year)(1)

%

Bo

ugh

t 4

.2%

less

•Consumers bought 4.2% less food

in 2011 than in 2007, in particular:

•Bread

•Beef

•Lamb

•Fish

•Fruit

•Vegetables

•Potatoes

•Alcoholic drinks

Spe

nt 1

2%

mo

re

•Consumers spent 12% more for food in

2011 than in 2007, especially on:

•Butter

•Eggs

•Sugar and preserves

•Chocolate

•Bacon

•Cereals

•Coffee and other hot drinks

•Consumers saved 6.8% by trading

down, especially on:

•Cereals

•Biscuits and cakes

•Lamb

•Pork

•Fish

•Butter

•Eggs

•Tea


20


• “We regularly track consumer behaviour and one of the key things that we see is a re-evaluation of

value for money. Overall the quantity of consumer goods being purchased is falling as consumers

improve their own financial position by paying down debt.”

• “Food prices remain a key issue for shoppers; they are very aware and sensitive to changes.

Shopping behaviours are becoming more polarised – there is growth in the premium and economy

extremes of the market but little to no growth in the middle. I believe that is because the value for

money proposition is more obvious to consumers at the premium and economy extremes of the

market.”

• “We are still seeing double digit growth in our food service sales channels, which is not the rational

response we expected to see. People do not seem to be cutting back on food purchased out of

home and ‘affordable indulgences’.

• We are seeing increased demand for messaging and labelling on menus; for example, dietary

information, sustainability information because consumers are more concerned about how their

food is produced.”

21



• “Consumers are more price conscious and that has led to an increased expectation that

promotions are more common, loyalty has diminished as consumers are prepared to seek out the

best deals and private label products are a bigger feature of the market.”

• “We see a mixture of consumer behaviours. London and the South East is quite different, it’s more

multi-cultural and affluent and people seem to be prepared to experiment more, try new products.

In other parts of the country people are more conservative and less prepared to take risks.”

• “Consumers appear to be a lot more price and issue driven. Price is a symptom of the economic

environment. Issues such as sustainability, waste, provenance, animal welfare, safety are more

important to consumers but as they tend to be informed mostly by the media the level of knowledge

is mostly superficial.”

22


Chapter 3: UK agri-food sector map

Chapter contents:

•Diagrammatical overview of the UK supply chain.

•Brief discussion on key trends.

UK agri-food sector map(1)

UK Consumers

63 million

Total consumer expenditure (retail and food

service channels) £187bn

Consumer spend – food retail £106.4bn Consumer spend – food service £81bn

Food retailers

Gross Value Added - £26.1bn

Employees – 1,246,000

Enterprises – 53,641

Stores – 89,679

Food service outlets


Employees – 1,514,000


Outlets – 431,109 Whoelaslers


Employees – 195,000


Manufacturing (includes everything from primary processing to more complex foods)




Manufacturing sites – 9,340

Agricultural Whoelaslers




Supply industry (incl. Machinery)

Gross Value Added - £407m

Employees – 6,000

Enterprises – 433

Farmers & Primary Producers



Farm holdings – 222,668

Agricultural supply industry (machinery,

fertilizers, pesticides)



Enterprises - 427

Imports

37.6bn (of which)

Highly processed – £13.8bn

Lightly processed £16.8bn

Unprocessed £7.1bn

Exports

£18.2bn(of which)

Highly processed – £10.6bn

Lightly processed £6.9bn

Unprocessed £1.6bn

(1) Defra 24

Key trends

• The key stages of the UK agri-food supply chain include production, processing and manufacturing, wholesaling,

import and export and sales direct to consumers via retail and food service channels.

• The processes within the grocery supply chain are becoming more integrated. Retailers want to work closer with

suppliers so that they can increase flexibility, reduce lead time and increase frequency of deliveries to lower the

amount of stock held.

• Consolidation within the supply chain has also become more widespread. Certainly vertical consolidation has seen

strong growth.

– Retailers for specific product categories are now using their own processing facilities, with direct sourcing

pools.

– Manufacturing facilities will have direct agreed contracts with retailers, and will have to deliver large volumes

at competitive pricing.

• Horizontal consolidation has also occurred, with fewer, but larger processors, and the same is seen with

producers.

• Whilst retailers work directly with suppliers and processors for their products, and will already have established

relationships, smaller chains and independent retailers use wholesalers to buy produce. Price tends to be the main

driver.

25

Chapter 4: UK Agriculture

Chapter contents:

•UK agriculture facts and figures

•Overview of key product sectors (production & self-sufficiency)

•Sector specific summary of the supply chain vertical.

•Key trends analysis.


UK agriculture overview

• Farming defines the national landscape and plays a critical role in supplying two thirds of the UK’s food and drink

manufacturers raw material requirements.

– Land in agricultural use is +17million hectares (~70% of total UK area) and nine times that of the

Netherlands.

– There are 221,000 registered holdings and employs 476,000 workers, which is three times that of the

Netherlands.

– It contributes £8billion gross value added to the UK economy (~2% of total UK output) and twice that of the

Netherlands.

• The UK’s temperate climate and varied geography means that a broad base of commodities can be sustainably

produced; key sectors include livestock ((i.e. meat - beef, lamb, pig and poultry) equivalent to 35% of total

agricultural output), cereals and industrial crops (21% of total output), livestock products (e.g. milk and eggs) (19%

of total output) and vegetable and horticultural products (10% of total output).

• UK self-sufficiency for all food and drink products in 2012 was 62% and varies considerably by sector:

– Self-sufficiency is highest in cereals (105%), milk (102%), beef (89%) and poultry (87%).

– Self-sufficiency is lowest for fruit (12%), vegetables (59%) and pigs (56%).

• UK farming is regarded as technically proficient and globally competitive and plays an important role in managing

the natural environment.

27

Land, labour and holdings

21%

10%

3% 3%

35%

19%

9%

Cereals & industrial crops

Vegetables & horticultural products

Potatoes

Fruit

Other crop products

Livestock

Livestock products

Other

Agricultural land use(1) Land use by farming type(%)(1)

Number of holdings by size (000’s)(1) Agricultural labour force (000’s)(1)

Ave decline of 3,000 pa

Emp

loye

es a

nd

ow

ner

s

(1) Defra: “Agriculture in the United Kingdom: 2012”

28

68%

69%

70%

71%

72%

73%

74%

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

20 000

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

Utilised agricultural area (000 ha)

% of total UK area

420

440

460

480

500

520

2000 2002 2004 2006 2008 2010 2012

120 104

49 42

37

34

42

42

0

50

100

150

200

250

2005 2012

100 hectares and over

50 to under 100 hectares

20 to under 50 hectares

under 20 hectares

0

5 000

10 000

15 000

20 000

25 000

2007 2008 2009 2010 2011 2012

Gross output (basic prices)

Gross value added (basic prices)

Total income from farming

UK agricultural output and value added

CAGR (07-12) 7%

CAGR (07-11) 7%

CAGR (07-11) 8%

Agricultural accounts UK 07-12 £million(1)


29

UK agriculture compared to the Netherlands


17,190

1,858

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Agriculturalland use (000ha)

UK NL

222

83

0

50

100

150

200

250

Number of holdings (000)

UK NL

476

209

0

50

100

150

200

250

300

350

400

450

500

Employment (000)

UK NL

8

4

0

1

2

3

4

5

6

7

8

9

Gross value added (EURbn)

UK NL

30

UK agriculture trends

• The route-to-market for agricultural commodities has become increasingly consolidated.

• Farmers are increasingly aligned to the supply chain with long term supply contracts. Often these are through

business structures such as co-operatives, which may also own processing operations or through marketing

groups which act as an intermediary between the farmer and processor.

• These supply chain relationships sometimes extend to the retailer where they see benefit in securing long-term

supplies or in marketing the provenance of key products such as milk. This arrangement creates a vertically

integrated supply chain model from producer to retailer, which is a barrier to entry to foreign businesses

without direct inward investment.

• Sectors with the highest degree of vertical integration – and therefore represent a major barrier to businesses

in the Netherlands – include:

– Liquid milk. Virtually all retailers have a long term supply contract with farmers via the major milk

processors (Muller/Wiseman, Arla and First Milk).

– Poultry. +70% of poultry consumed (by volume) in the UK flows through a supply chain involving a major

integrator and multiple retailer.

• Other sectors such as pork, beef, fresh produce are also integrated but to a lesser extent (i.e. they may involve

integration of some but not all of the supply chain such as production and processing only) but other supply chain

models are also evident (such as wholesale markets for fresh produce). These chains remain less closed to

opportunities for Dutch traders.

31

http://www.muller-wiseman.co.uk/

http://www.arlafoods.co.uk/


http://www.firstmilk.co.uk/


• “The underlying and long term trend is of consolidation. In all sectors we see fewer farms but they tend

to be operating on a larger scale.”

• “One of the biggest challenges in the agricultural industry remains farmer succession. We struggle to

recruit enough young farmers into the industry to replace those retiring and exiting the industry. The

average age of a farmer in the UK is 58 which is far higher than other industries.”

• “UK agriculture is benefitting from the global tightening in the balance of supply and demand for

agricultural commodities. It is helping to drive prices up and provides long-term optimism they might

remain at a higher level.”

• “A lot of knowledge is leaving the industry. As older farmers retire and there are fewer younger people

taking over we risk losing valuable farming know-how.”

32



• “Following the ‘Horsegate’ scandal [i.e. Detection of horse meat in products labelled otherwise] we

have seen renewed demand for British agricultural produce, not just in the retail sector but also in

the food service sector from companies such as Greggs and Boots.”

• “We have seen the ‘strategic supply chain’ model in the retail sector start to take hold in the food

service sector. Companies such as KFC are wanting to build closer relationships with suppliers.”

• “The outlook for the agri-food sector in the UK is very positive. The UK is home to world class

farmers and agri-food businesses who are technically proficient and globally competitive. We have

strong domestic markets in sectors such as dairy, grains, pig poultry and beef and food companies

that are interested in local sourcing.”

33


http://www.greggs.co.uk/

http://www.boots.com/

http://www.kfc.co.uk/

Cereals

Cereals(2): The UK is the fourth largest producer of cereals and oilseed crops in the EU. 5 million hectares of land in the UK is used for growing crops with 80% of this used for production of cereals and oilseeds. Cereal production in the UK tends to be focused on the Eastern side of the country. As a result cereal processing units and stores tend to be located in the same parts of the country.

Total value of production and prices (1)

£/to

nn

e

£m

illio

n


(2) Agriculture and Horticulture Development Board

34

85%

90%

95%

100%

105%

110%

115%

0

5 000

10 000

15 000

20 000

25 000

30 000

2007 2008 2009 2010 2011 2012

Vol (000 tonnes)

Production as % of total usage (rhs)

0

50

100

150

200

250

300

350

400

450

0

500

1 000

1 500

2 000

2 500

3 000

3 500

2007 2008 2009 2010 2011 2012

Cereals production £millions

Milling wheat price £ tonne

Malting barley price £tonne

Oilseed rape price £tonnes)

Production (000 tonnes) and self-

sufficiency (1)

Cereals vertical summary

Cereal farming

Maltsters Millers/ flour mills Starch

manufacturers Feed

Exports

Imports

Food industry E.g. manufacturers of baked goods,

breakfast cereals, sauces

Bread, biscuits, cakes, flour, breakfast cereals, sauces

Brewers & distillers

Beer and whisky

Merchants/FCBs

Central Storage

Livestock farms

Meat, Dairy, Eggs

Production

Primary Processing

Secondary Processing

Consumption

35

Horticulture: fruit

Horticulture: 200,000 hectares of land is

used to grow horticulture (fruit,

vegetables and ornamentals) in the UK.

The highest concentration of horticultural

production is in Eastern England – with

much of the glasshouse production

occurring in this area. Flower production

again occurs mainly in the East with

another cluster in Cornwall in the West.

Total value of production (£million) and prices

(£/tonne)(1)


(2) Trade interview

36

0%

2%

4%

6%

8%

10%

12%

14%

320

330

340

350

360

370

380

390

400

410

420

430

2007 2008 2009 2010 2011 2012

Vol (000 tonnes)


0

1000

2000

3000

4000

5000

6000

7000

8000

0

100

200

300

400

500

600

700

2007 2008 2009 2010 2011 2012

Fruit production £millions

Dessert apples

Pears

Raspberries

Stawberries


sufficiency (1)

Horticulture: vegetables

Total value of production (£million)

and prices (£tonne)(1)

£/to

nn

e £m

illio

n

0

50

100

150

2007 2008 2009 2010 2011

Total production area (000 ha)(1)

99% open production

1% protected


37

0%

10%

20%

30%

40%

50%

60%

70%

0

500

1 000

1 500

2 000

2 500

3 000

2007 2008 2009 2010 2011 2012

Vol (000 tonnes)


0

200

400

600

800

1 000

1 200

1 400

0

200

400

600

800

1 000

1 200

1 400

2007 2008 2009 2010 2011 2012

Fresh vegetable production £millions"

cauliflowers

tomatoes


sufficiency (1)

Horticulture: potatoes

38



0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

2007 2008 2009 2010 2011 2012

Vol (000 tonnes)


0

50

100

150

200

250

300

350

0

100

200

300

400

500

600

700

800

2007 2008 2009 2010 2011 2012

Fresh potato production £millions

early potatoes

maincrop potatoes

all potatoes




sufficiency (1)

130

135

140

145

150

2007 2008 2009 2010 2011 2012

Fresh produce vertical summary

Seed merchants, agro-chemicals, machinery, plant breeders, R&D

UK horticultural farms 200,000ha planted area

Producer groups, Co-Ops, marketing agents

Food service PYOb/Farm shop/veggie boxes Multiple retailers

(c.80% by volume)

Wholesalers

Independent retailers

Packing facility

Fresh fruit Fresh Vegetables

Fruit and Vegetables

imports

39

UK floriculture production by type (000tonnes)(1)



Floriculture

40

The overall value of production

in the ornamental sector

remained static at £1.0 billion in

2012, reflecting slow and

challenging trading conditions

across all market sectors

17

17

18

18

19

19

20

20

2007 2008 2009 2010 2011 2012

Production (£ million) and self-

sufficiency (1)

43%

44%

45%

46%

47%

48%

49%

50%

51%

52%

53%

0

200

400

600

800

1 000

1 200

2007 2008 2009 2010 2011 2012

Total production £million

Production as % of total usage

Floriculture vertical summary

41

UK production (incl. bulbs, cut flowers, foliage, indoor

plants, outdoor plants and trees (c. £1.05bn)

UK exports (mostly

narcissi) £0.47bn

Imports (c.£1.05bn)

NL account for 77%

Wholesale Markets

(e.g. New Covent Garden

Market)

Garden centres &

nurseries Online Supermarkets

Consumers (c. £2.05bn

spend)

Retailers are increasingly

establishing direct sourcing

relationships with growers (UK

and overseas).

Pigs Production (000 tonnes) and self-

sufficiency (1)

47%

21%

11%

9%

12%

1 to 9 pigs

10 to 49

50 to 299

300 to 999

1 000 and over

Total 10,900 holdings

UK pig holdings (000’s), by size of holding(1)


42

0%

10%

20%

30%

40%

50%

60%

70%

0

100

200

300

400

500

600

700

800

900

2007 2008 2009 2010 2011 2012

Vol (000 tonnes)


0

20

40

60

80

100

120

140

160

0

200

400

600

800

1 000

1 200

2007 2008 2009 2010(e) 2011 2012

Total production £millions

Pig price (pence/kg deadweight)



Pig meat vertical summary

Pig marketings

Pig Herd

Live pig imports

Wholesalers, traders, depots

Processors

Retail Fresh/Frozen Retail Processed Food Service

Consumers

Imports

Live pig Exports

Feed, Agrochem, Machinery

Marketing Groups

Abattoirs

Exports

Retail Bacon

43

Poultry

58% 25%

17% 1 to 9 999 broilers

10 000 to 99 999

100 000 and over

UK poultry holdings (000’s), by size of holding(1)



44

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2007 2008 2009 2010 2011 2012

Vol (000 tonnes)



sufficiency (1)

0

20

40

60

80

100

120

140

0

200

400

600

800

1 000

1 200

2007 2008 2009 2010(e) 2011 2012


Prices (average producer prices (pence per kg carcase weight)):



Poultry vertical summary

Company Growing Units

Raise broilers (hens reared for

meat, not eggs)

Marketable broilers

Abattoirs

Processors

Fresh exports (mostly

dark meat)

Wholesalers

Fresh and processed

Imports

Food Service Retailers

Processed Exports

Consumers

Breeding Farms &

Laying Hens

Egg Hatcheries

Contract Broiler

Growers This aspect of the

chain is typically

integrated by major

players

45

Beef

UK beef holdings (000’s), by size of holding(1)

39%

19%

13%

13%

11%

5%

1 to 9 beef cows

10 to 19

20 to 29

30 to 49

50 to 99

100 and over



46

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

100

200

300

400

500

600

700

800

900

1 000

2007 2008 2009 2010 2011 2012

Vol (000 tonnes)


0

20

40

60

80

100

120

140

160

180

200

0

500

1 000

1 500

2 000

2 500

3 000

2007 2008 2009 2010(e) 2011 2012


Finished cattle (pence per kg liveweight): All prime cattle




sufficiency (1)

Beef vertical summary

Feed, Agrochem, Machinery

UK Dairy farms UK Suckler Herd

Store producers Finishers

Live cattle imports

Marketing Groups Auctions

Abattoirs

Processors Exports Intervention Wholesaler

s/traders

Retail Fresh/Frozen Retail Processed Food Service

Consumers

Imports

Home fed beef marketings

Live cattle Exports

47

Dairy

32%

14% 22%

15%

17% 1 to 9 dairy cows

10 to 49

50 to 99

100 to 149

150 and over

UK dairy herd (000’s), by size of holding(1)



48

0%

20%

40%

60%

80%

100%

120%

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

2007 2008 2009 2010 2011 2012

Vol (000 tonnes)


0

5

10

15

20

25

30

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

2007 2008 2009 2010(e) 2011 2012


Prices (average price received by milk producers, net of delivery charges (pence per litre)) (f)




sufficiency (1)

Dairy vertical summary

Feed, Agrochem, Machinery UK Dairy farms

Available for human

consumption

On farm waste and stock use

Liquid imports Liquid exports

Liquid milk Manufacture

Doorstep Retail

Consumers

51 Dairies 11 Dairies n/a 6 Dairies 11 Dairies

Cheese Butter Cream

Condensed SMP

42 Dairies

49

Cross-cutting themes

• Environment. As agriculture accounts for 70% of total land use in the UK its role in managing the environment is

key. It is also a key feature of the CAP (recent negotiations identified three core areas: crop diversification,

ecological focus areas and retention of permanent grassland ) which will continue to have a significant bearing on

farming practices.

• Compliance & legislation. Driven in-part by environment factors as well as pressure to increase supply chain

transparency and accountability there has been a significant increase in the extent of legislative compliance UK

farmers are required to complete. Whilst seen as burdensome it also helps to raise production standards across

the whole of the farming base.

• Profitability. Total Income From Farming (TIFF), which is the governments measure of profitability, indicates that

UK farming is the most profitable periods it has been for over 30 years. However, profitability varies considerably

depending on enterprise size and type (e.g. dairy / livestock / arable / fresh produce etc) as well as natural cycles

and unforeseen events. As the UK agricultural industry is increasingly liberalised profitability is increasingly

affected by global events, in particular the balance of global supply and demand for commodity products

influencing UK prices.

• Confidence and investment. Investment by agricultural enterprises in the UK also varies in line with profitability.

In some sectors, such as pig production, extended periods of poor profitability has left a legacy of under-

investment in assets. Even when profitability levels improve farmers are sometimes reluctant to invest because of

a lack of confidence that profitability can be sustained.

50

Cross-cutting themes

• Succession. The average age of a farmer in the UK is 58 and there is a shortfall of younger people entering the

industry. Business succession is therefore a major issue to many businesses but particularly in family run

generational farms. Rather than family farm being passed on to the next generation it is increasingly likely that

farms will continue to consolidate so that there are fewer, larger farms.

• Supply chain practices. In 2009 the Competition Commission introduced a Grocery Supply Chain Code of

Practice (GSCCOP) to govern practices and policies throughout the supply chain. The code of practice was

introduced following sustained concerns of unfair practices.

• Economic liberalisation and political reform. Ongoing CAP reform and globalisation of markets means that the

UK agriculture industry is increasingly exposed to global developments. For example, global commodity prices

have much more significant bearing on UK commodity prices, changes in natural business cycles, the

development of global supply chains, geopolitical shocks (such as trade restrictions) and so on.

51


• “UK [horticultural] production is highly exposed to the weather because the vast majority of production is

not protected under glass. This makes it difficult to guarantee volume supply at the edges of the growing

season. It also influences consumers. An early sunny spell in March creates instant demand for produce

that is not yet in season.”

• “Food on the move is a key target for us. We target out of home consumption opportunities [such as

lunch] with single serve salad products that are, healthy, easy and convenient to eat.”

• “Safety is much less of a concern in fresh produce supply chains so the decision to source British or

imported produce is more of a commercial or moral decision. Low prices can still open doors in some

parts of the market.”

• “Currently our pre-prepared salads are showing the strongest sales growth. These are premium lines that

retail for £2.50 to £3.00 per item, which is not what we expected to see given the economic environment. I

think that consumers see these as value-for-money because the cost of purchasing all the individual

elements are greater and there is less waste.”

52



• “The UK liquid milk market is effectively closed to foreign suppliers without direct inward investment in

the UK supply chain. It is difficult to envisage a SME entering this market as it is highly concentrated and

capital costs of entry very high.”

• “The big picture indicators for UK dairy are positive. We are close to cost of production prices but that’s

largely due to 2 years of poor weather. We are currently seeing prices pick up and this is leading to

increased confidence.”

• “There are opportunities outside of the cow liquid milk market. Alpro have been successful not just in the

UK market but globally as the appeal for non-dairy sources of milk [e.g. Soy, rice, almond] grows amongst

a group of consumers that perceive them as healthier.”

• “I believe that the major milk processors in the UK will increasingly look to capitalise on milk powder

markets in high growth economies such as the BRICs.”

• “The biggest barrier to entry to the UK liquid milk market is scale.”

53


http://www.alpro.com/uk


• “Although the UK is technically self-sufficient in lamb we still import a considerable amount of meat from

New Zealand because UK consumers demand year round supply.”

• “The horse meat scandal has helped UK producers in the short-term at least. We have seen demand for

British beef sustained and people have traded up and purchased more expensive cuts.”

• “One of the biggest challenges to producer profitability [meat sector] is the price of feed...it often means

the difference between a producer making a profit or a loss.”

• “There is a massive opportunity for Dutch growers to get closer to the UK market. Projects such as

Thanet Earth demonstrate that it is possible.”

• “A major challenge for Dutch SME businesses is going to be receiving financial backing.”

• “The fresh vegetables industry is in a period of consolidation. Farming and packaging has become very much a

scale business. It is difficult to compete without scale now because the business is capital hungry on the

production.”

54


http://www.thanetearth.com/


• “In some cases producers have invested in processing, packing and distribution facilities and deal

directly with multiple retailers”

• “We have one of the best [pig meat processing] plants in the UK, which is about 10-15% more efficient

than the rest. But if you compare this plant with European ones, particularly in Denmark and Holland we

are only really on a par with their average and a long way behind the best”

• “I think that in the next five years we will see more rationalisation and consolidation across the

processing sector. However, there is also likely to be more investment in new processing facilities,

especially in East Anglia.”

• “The rise in feed [prices] has significantly impacted the profitability of the [poultry] industry because the

price increases at retail have not been sufficient to compensate. This cost pressure will force more

rationalisation and drive more efficiency in the supply chain.”

55


Chapter 5: UK Food and Drink Manufacturing

Chapter contents:

•UK food and drink manufacturing key facts and figures

•Investment examples.

•Procurement strategies.



UK food and drink manufacturing

• Employing 400,000 people, worth £72 billion in total turnover and contributing £19.5 billion in gross value added

food and drink manufacturing is the single biggest manufacturing sector in the UK and is therefore vital to the UK

economy.

• There are approximately 7,000 food and drink manufacturers registered in the UK. There is tremendous variety –

the UK is home to many of the world’s most recognised global FMCG brands as well as many local and regional

players.

– Beverages represents the biggest manufacturing sector worth £16.5 billion.

– Meat and meat products represents the second biggest sector worth £14 billion.

– Bakery (£10 billion) and Dairy (£8 billion) are other major sectors.

– They are also mature sectors and output growth is in the low single digits.

– Although fruit and fresh vegetables processing is a smaller market by comparison (£6 billion), it is a sizeable

high margin opportunity that is growing by as much as 10% per annum.

57

Size and performance

£66,0

52

£69,6

73

£72,8

62

£72,0

62

£18,3

09

£18,7

62

£19,3

43

£19,4

76

6,4

89

6,3

27

6,3

80

6,4

39

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2008 2009 2010 2011

Total t'over food manufacturing (£million)

Gross value added (£million)

Number of enterprises

Food manufacture t'over as % of total UK manufacturing t'over (rhs)

UK food manufacturing industry(1) CAGR (08-11) +2.2% +1.6% -0.2%

(1) Office for National Statistics, Annual Business Survey

18%

8%

2%

10%

8% 12%

19%

23% Meat and meat products

Fruit and fresh vegetables

Vegetable and animal fats

Dairy products

Grain mill and starch products

Bakery

Other food

Beverages

UK Food manufacturing turnover by industrial

classification (%)(1)

58

UK manufacturing compared to the Netherlands

(1) Office for National Statistics and CBS (Statistics Netherlands)

6,439

4,195

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

UK NL

Number of enterprises(1) 400

171

0

50

100

150

200

250

300

350

400

450

UK NL

Number of employees (000) (1)

61 59

0

10

20

30

40

50

60

70

UK NL

Gross output EURbn(1) 17

11

0

2

4

6

8

10

12

14

16

18

UK NL

Gross value added EURbn(1)

59

Meat and meat products, £14,741

Fruit and fresh vegetables, £5,985

Vegetable/animal oils and fats, £1,111

Dairy products, £8,386

Grain mill and starch products, £6,647

Bakery, £9,880

Other food products, £15,647

Beverages, £18,440

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

-6% -4% -2% 0% 2% 4% 6% 8% 10% 12%

Manufacturing growth by industrial classification(1)

Turnover growth (% p.a.)

GVA as a percentage of turnover

(1) Office for National Statistics, Annual Business Survey & Promar International Calculations.

Other foods includes: sugar; cocoa, chocolate and sugar confectionery; tea and coffee; condiments and seasonings; prepared

meals and other foods not easily classified.

Size of bubble equates to market size £million 60

Foreign investment in UK manufacturing

• In recent years some of the biggest investment in food and drink processing and manufacturing has come from

overseas investors, for example:

– Bright Foods, a Chinese owned firm purchases 60% of leading cereal brand Weetabix in 2012 – remaining 40% held

in private equity firm Lion Capital.

– Tulip (part of Danish Crown group), established in UK since 2003 through acquisition of Hygrade Foods and Flagship

Foods.

– Arla, a Danish owned dairy co-operative with a 26% share of the liquid milk market, present in UK since 2003

– The Muller Group, German owned dairy business established £30m UK operations in 1991 to sustain rapidly growing

demand for its Muller Corner product.

– Bakkavor Group, Icelandic processor made major step in UK by acquiring Geest (Dutch) business in 2005.

– ForFarmers, a Dutch owned feed company that acquired BOCM Pauls for £58million in 2012.

• The recent history of inward investment is evidence of the strategic value investors see in the UK and that the UK

welcomes and protects foreign investment.

• Dutch businesses that are also considering direct investment in the UK should therefore feel positive.

• However, the scale of these investments also indicate the funds required to enter key sectors of the UK market,

which may be a barrier to entry for small and medium sized businesses.

61

http://www.weetabix.co.uk/


http://www.tulipltd.co.uk/


http://www.bakkavor.com/


http://www.bocmpauls.co.uk/

Demand for agricultural materials

• UK food manufacturers purchase over £50 billion in goods and services per annum:

• Approximately two thirds of manufacturers requirements are supplied by domestic producers with the remaining

balance supplied by importers.

• Many large manufacturers employ sophisticated procurement strategies to sourcing and supply of raw materials.

• Price volatility and continuity of supply has increased the importance of effective procurement.

– In general, manufacturers sourcing strategically important raw materials are under pressure by stakeholders

(such as customers and consumers) to demonstrate transparency and provenance are adopting long term

partnership style relationships with suppliers.

– At the same time, manufacturers also seek opportunities to improve their margins by making the

procurement process more competitive between suppliers and use purchasing tactics such as auctions,

e-tenders and so on to obtain the best price.

• The matrix below is a quick and effective way for suppliers to evaluate their position in relation to buyers in order

to anticipate strategies and tactics buyers are most likely to employ.

62

Identifying procurement strategies

Leverage

•Short term relationship

•Focus on price

negotiation

•Highly competitive

•Deal only with buyer

Transactional

•Minimal (no) contact

•Automated processes

•Contact with junior staff

Strategic

•Long-term partnership

•High level of contact &

communication

•Personal relationships

•Deal with senior staff

Security

•Off and on relationship

•Contact high but

infrequent e.g. agreeing

specifications

Low High

Low

High

Buyer spend*

Market difficulty**

Where you are supplying a

strategically vital ingredient

where there are little/no

available alternatives. For

example, a rare breed/variety

that the retailer is known for

selling.

Where you are supplying an

undifferentiated product and

competing against many other

suppliers and it is a high

spend item for the customer;

for example bread-making

flour for a bakery.


undifferentiated product, there

are other suppliers in the

market and it is a low spend

item (e.g. salt).


ingredient to a detailed

specification or where an

element of risk is involved

(e.g. shellfish) but the

customers overall spend is

low and infrequent.

*Determined by value of spend and/or percentage contribution to customer costs of production

**How easy/difficult it is for the customer to obtain ingredient/material from other suppliers and/or extent of

technical specification required. 63

Demand for speciality ingredients

• Speciality food ingredients (flavours, flavour enhancers, preservatives, sweeteners, colours, enzymes,

hydrocolloids, acidulants, antioxidants etc) are in high demand by UK food manufacturers.

• Speciality ingredients typically represent a small proportion of overall costs of production but have the potential to

add significant value to the product; for example:

– Salt reduction solutions (especially in meat, bread and cheese) to help achieve industry-wide salt reduction

targets set by government.

– Natural, non-caloric sweeteners (such as Steviol Glycosides extracted from the leaf of the Stevia plant and

Monk Fruit) enable drinks manufacturers to reduce sugar levels in response to consumer demand and

industry pressure groups.

– ‘Natural’ food additives such as colours, flavours, sweeteners and preservatives to support a widespread

trend in positioning food and drink products as ‘natural’ or ‘free-from artificial additives.’

• Fruits, vegetables, herbs, leaves feature as the raw material source for artificial additives e.g.

Anthocyanins are found in a wide range of fruits, flowers and vegetables and have a red to purple

colour that can be used in a wide range of products such as confectionery, jellies, jam, soft drinks.

– Ingredients such as beta-glucans, calcium, vitamins, plant stanol esters, pro and pre-biotics etc that provide

functional benefits to heart, bone, digestive health etc. The UK market for functional products is worth an

estimated +£700M with annual growth of +5%.

64

Speciality ingredients create value not cost

65

57%

18% 17%

4%

3%

Dried milk

Sugar

Vegetable fat

Functional systems

Flavour

Ice cream cost structure (1)

(1) Danisco

• Functional ingredients provide benefits that are closely aligned

with consumer benefits and therefore create value.

• In the ice cream example (opposite) the value adding ingredients are

the flavour and functional systems (e.g. emulsifiers that may be used to

stabilise a low fat ice cream).

• Milk, sugar and fat account for 93% of costs of production but do not

necessarily add value (i.e. these are ingredients consumers would

expect to see and therefore do not attribute a higher value to them).

• Functional ingredients solutions are derived from sustained investment

in R&D and core competencies in technical and scientific disciplines

such as food technology and biosciences.

• The Dutch agri-food industry is extremely well placed to capitalise

on these opportunities.

• Significant R&D expertise

• Agri-food landscape promotes close working relationships

between academia, R&D centres (TNO, NIZO, Food Valley) and

business.

• Extremely high educational standards (esp. in universities).

• A progressive and innovative mindset.

Chapter 6: UK Trade in Food and Drink

Chapter contents:

•UK food and drink trade key facts and figures

•Sector specific analysis of position of the Netherlands.



Trade overview

• UK self-sufficiency in food and drink was 62% in 2012 (underlying trend of long term decline).

• The UK is a net importer of food and drink. In 2012 the UK’s trade gap (value of exports minus cost of imports)

was -£18.1 billion.

• The UK is particularly reliant on imported fruit and vegetables and meat, which account for 22% and 15% of total

imports respectively.

• The Netherlands is the single biggest source of food imports to the UK ahead of France, Ireland, Germany

and Spain. In 2012 the UK imported £4.6billion worth of food from the Netherlands, which is equivalent to 12.2%

of total UK imports.

• Key products the UK imports from the Netherlands include (amongst others):

– Poultry (145,000 tonnes equivalent to 38% of total poultry imports. The Netherlands is the UK’s single

biggest source of imported poultry).

– Bacon and ham (116,000 tonnes equivalent to 37% of total bacon and ham imports. The Netherlands is the

UK’s second biggest source of imported bacon and ham).

– Vegetables (600,000 tonnes equivalent to 32% of total vegetable imports. The Netherlands is the UK’s

second biggest source of imported vegetables).

– Pork (64,500 tonnes equivalent to 18% of total pork imports. The Netherlands is the UK’s second biggest

source of imported pork).

67

£4,568

£4,363

£3,501

£3,287

£2,329

£2,072

£1,947

£1,452

£1,032

£1,031

0 1000 2000 3000 4000 5000

Netherlands

France

Irish Republic

Germany

Spain

Italy

Belgium

Denmark

U.S.A.

Poland

Trade

UK Food Self-Sufficiency(1) UK Balance of Trade in Food and Drink(1)

£million UK Imports by country of despatch(1)

£million

12% of UK total

22%

15%

13% 8%

7%

7%

7%

7%

6% 5%

3% Fruit and Veg

Meat

Drink

Coffee, tea, etc.

Dairy

Fish

Cereals

Misc.

Oils

Animal feed

Sugar

UK Imports by commodity type (%) (1)

(1) HM Revenue and Customs

68

-13

,24

8

-13

,58

3

-14

,35

1

-15

,41

9

-16

,52

1

-17

,01

4

-17

,37

0

-20

,15

8

-20

,34

6

-18

,74

8

-18

,64

6

-18

,17

9

-£25,000

-£20,000

-£15,000

-£10,000

-£5,000

£0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

0

10

20

30

40

50

60

70

80

90

2000 2002 2004 2006 2008 2010 2012

% of all food

% of indigenous type food

Trade balance – fruit

69

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Fresh fruit Imports

Fresh fruit Exports


000 tonnes

Total imports and exports 2002-2012(1)

The UK is a major net importer of

fruit and currently imports 3.4

million tonnes.

Exports have grown since 2004

but still represent 3% of imports.

16

9

8

7 7 6

5 4

4

34

Spain

South Africa

Costa Rica

Colombia

Netherlands

Dom Republic

France

Brazil

Ecuador

Others

Importer share - fruit

6% 5% 5% 5% 5%

6%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2005 2006 2007 2008 2009 2010

Spain Costa Rica South Africa

Colombia Netherlands

UK Fruit imports (% of total) by country of

despatch – Provisional 2012(1)

Share of UK fruit imports by country of despatch

(top 5 countries only) (1)


Equivalent to circa 5% of total

domestic demand.

70

Trade balance - vegetables

71

0

500

1,000

1,500

2,000

2,500

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Fresh vegetables Imports

Fresh vegetables Exports

000 tonnes



The UK increasingly has a trade

deficit in fresh vegetables.

Despite a slight decline in 2009/10

imports have continued to rise in

2011/12. The UK currently

imports +2 million tonnes per year.

39

31

4

4

2

20

Spain

Netherlands

France

Poland

Irish Republic

Others

Importer share - vegetables

Share of UK vegetable imports by country of

despatch (top 5 countries only) (1)

32% 31% 31% 30%

31% 32%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2005

2006

2007

2008

2009

2010

Spain Netherlands France Poland Irish Republic



domestic demand.

72

UK Vegetable imports (% of total) by country

of despatch – Provisional 2012(1)

Trade in seed potatoes

73

54%

46%

68%

60% 58%

63%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2007 2008 2009 2010 2011 2012

NL Belgium France

Germany Ireland Others

UK seed potato imports by country of

despatch, 000 tonnes(1)

Share of UK vegetable imports by country of


- 5,000 10,000 15,000 20,000

NL

France

Belgium

Germany

Ireland

Average annual seed potato imports are

circa. 25 million tonnes. The majority of

which come from the Netherlands. Dutch

seed imports account for ~4% of total UK

seed potato supply(2).

(1) United Nations

(2) British Potato Council

Trade in flowers and plants

-1200

-1000

-800

-600

-400

-200

0

200

Bulb

s

Cut flo

wers

Folia

ge

Indoor p

lants

Outd

oor p

lants

Tre

es

Oth

er

Tota

l

Import Export

UK imports and exports of plants and flowers,

£million (2012)(1)

77

9

6 11 6

The Netherlands Kenya

Colombia South Africa

Spain ROW

Origin of flower and plant imports (%)(2)

(1) Defra


74

The Netherlands has a dominant position

accounting for over three quarters of cut

flower imports. Cut flowers from other

destinations are also likely to have passed

through the Netherlands flower auction

markets at some stage.

Daffodils are the only main UK export.

Trade balance – poultry meat

75

0

50

100

150

200

250

300

350

400

450

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Poultrymeat Imports

Poultrymeat Exports

000 tonnes



The UK has a long-run trade

deficit in poultry meat. 2011 was a

record year for poultry meat

imports; therefore the fall off in

2012 does not necessarily mark a

period of decline.

46

12

8

7

27

Netherlands

Poland

Germany

Irish Republic

Others

Importer shares in poultry meat(1)

Share of UK poultry meat imports by country of


39%

43% 45% 45%

47%

38%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2005 2006 2007 2008 2009 2010

Netherlands Irish Republic

Poland Germany

Belgium-Luxembourg

(1) Poultry meat: includes fresh, chilled or frozen carcase meat, cuts and offal (inc.

liver).



domestic demand.

76

UK poultry meat imports (% of total) by

country of despatch – Provisional 2012(1)

Trade balance – poultry meat products

77

0

50

100

150

200

250

300

350

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Poultry meat products Imports

Poultry meat products Exports

000 tonnes



Imports of poultry meat products

(including (prepared, salted,

cooked poultry meat) have more

than doubled in the 10 years to

2012.

Exports have also increased in

this time but equivalent in volume

to 15% of imports.

46

11

10

7

26

Thailand

Netherlands

Irish Republic

Brazil

Others

Importer shares in poultry meat products(1)

Share of UK poultry meat products imports by

country of despatch (top 5 countries only) (2)

15% 14% 14% 16%

12%

8%

0%

10%

20%

30%

40%

50%

60%

2005 2006 2007 2008 2009 2010

Thailand Irish Republic Brazil

Netherlands Germany

(1) Poultry meat products: includes prepared, preserved, salted or cooked poultrymeat and offal

(inc. liver).


Consumer concerns over food

safety may threaten poultry meat

imports from Thailand, possibly

to the advantage of the NL

78

UK poultry meat product imports (% of total)

by country of despatch – Provisional 2012(1)

Trade balance - pork

79

0

50

100

150

200

250

300

350

400

450

500

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Pork Imports Pork Exports

000 tonnes



There has been a gradual

decline in the volume of fresh

pork imports since a peak of

462,000 tonnes in 2007.

In 2012 the UK imported

349,000 tonnes.

At the same time exports have

been gradually increasing and

reached their highest level in

2012 -154,000 tonnes.

29

19

14

11

27

Denmark

Germany

Netherlands

Irish Republic

Others

Importer shares in pork(1)

Share of UK pork imports by country of despatch

(top 5 countries only) (2)

(1) includes carcase meat and cuts, both bone-in and boneless.


12% 13% 12% 11%

15%

18%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2005 2006 2007 2008 2009 2010

Denmark Netherlands

Belgium-Luxembourg Germany

Irish Republic

Unbalanced consumer

demand for loin meat creates

supply deficit and import

requirement. UK

exports/processes surplus

cuts such as shoulder and

leg.

80

UK pork imports (% of total) by country of

despatch – Provisional 2012(1)

Trade balance – bacon and ham

81

0

50

100

150

200

250

300

350

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Bacon and ham Imports

Bacon and ham Exports

000 tonnes



The UK has a long-standing trade

deficit in bacon and ham products

although recently imports have

been falling and currently stand at

257,000 tonnes – its lowest level

in over a decade.

41

41

12

3 3

Denmark

Netherlands

Germany

Irish Republic

Others

Importer shares in bacon and ham

Share of UK bacon and ham imports by country of


50%

45%

49%

44%

37% 37%

0%

10%

20%

30%

40%

50%

60%

2005 2006 2007 2008 2009 2010

Denmark Netherlands Germany Italy France


Bacon is an everyday item for

British consumers and highly

price sensitive. UK bacon is

sold at a substantial premium.

82

UK bacon and ham imports (% of total) by


Trade balance – beef and veal

83

0

50

100

150

200

250

300

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Beef and veal Imports

Beef and veal Exports

000 tonnes



Beef exports have been rising

since 2005 because of the lifting

of an export ban (exports prior to

2005 were beef and veal of non-

UK origin).

Beef and veal imports have been

fairly stable since 2005, the

majority of which originates in

Ireland.

68

9

5

3

15

Irish Republic

Netherlands

Germany

Poland

Others

Importer shares in beef and veal

Share of UK beef and veal imports by country of


5% 5% 6% 7% 7% 6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2005 2006 2007 2008 2009 2010

Irish Republic Netherlands Uruguay

Germany Namibia


In contrast to Europe veal has

limited appeal to the UK market.

It is more likely to be sold

through specialist independent

butchers and food service

channels.

84

UK beef and veal imports (% of total) by


Trade balance in wheat

85

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Wheat, unmilled Imports

Wheat, unmilled Exports

000 tonnes



Wheat is one of the few products

where the UK consistently runs a

trade surplus. The reversal of this

trend in 2012 was caused by

extremely adverse weather in the

summer of 2012 prompting record

level of imports.

32

26

10

9

23

Spain

Netherlands

USA

Portugal

Others

Importer shares in wheat(2)

Share of wheat imports by country of despatch (top

6 countries only) (1)

2% 4%

1% 2%

1% 3%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2005 2006 2007 2008 2009 2010

Canada Germany France

U.S.A. Irish Republic Netherlands


(2) Bread making wheat

86

UK unmilled wheat imports (% of total) by


Chapter 7: Retail and Food Service Market

Chapter contents:

•UK retail and food service market key facts and figures

•Category specific market analysis, trends and opportunities.



Grocery retail market

• With a population of 63million, household expenditure on food and non-alcoholic drink worth £88.5billion and

growing by +4% p.a. the UK is one of the most attractive grocery retail markets in Europe.

• Over +95% of food and drink purchased for consumption in the home is sold through a supermarket chain; the

remaining share of the market is accounted for by independent retailers (such as butchers or farmers markets).

• Four supermarket chains account for 76% of the market.

– Tesco is the market leader with a 29.9% share.

– Asda, part of the Wal Mart group has a 17.5% share

– Sainsbury’s has a 16.9% share

– Morrisons, following acquisition of Safeway group in 2007 has an 11.5% share.

• Collectively, the ‘Big 4’ have grown their share of the market by 8.1% since 2010 at the expense of small

independent and convenience stores.

• Recently, premium retailer Waitrose and discount stores Aldi and Lidl posted record collective market share figures

of 4.9% and 6.4% respectively. Aldi and Lidl have benefitted from their position as a cheaper option for shoppers,

whilst Waitrose has been successful by re-positioning themselves from being expensive to value-for-money.

• These recent successes aside, it is still the four leading retailers Tesco, Asda, Sainsbury’s and Morrisons

that exert considerable influence over the UK food and drink industry and shape opportunities and

challenges for suppliers.

88

http://www.tesco.com/

http://www.asda.com/

http://www.sainsburys.co.uk/sol/index.jsp

http://www.morrisons.co.uk/

https://www.aldi.co.uk/

http://www.lidl.co.uk/cps/rde/www_lidl_uk

http://www.waitrose.com/

Food service market

• The ‘Food service market’ defines food and drink consumed out of the home. It includes food and drink consumed

in public sector organisations (e.g. hospitals, schools etc) as well as private sector organisations (e.g. bars,

restaurant, hotels etc).

• UK consumer expenditure on food eaten out of the home in 2012 was £51.8billion, which is 3.5 times that of the

Netherlands. In the five years to 2012 expenditure grew by 3% p.a.

• The UK foodservice market is highly fragmented. In 2012 there were 168,000 foodservice units, of these, 72%

were independently ran.

• The foodservice market is highly mature, with many outlets established for a number of years. Recent years have

seen the decline in foodservice sales and the sector become more competitive, with consumers cutting back on

their spending.

• With a decline in sales, operators have had to concentrate on what the consumer is demanding so to gain sales.

Areas of success have been;

– Health and wellness

– Convenience – home delivery and take away

– Ethical sourcing

– Innovation

• Large food service chains, such as McDonalds have consolidated their supply chain, and now have direct links

with farmers. Other larger food service businesses have contracts with suppliers for their produce.

• Smaller, or independent retailers will often use wholesalers for their produce of work with suppliers for the more

expensive products e.g. meat. For high end restaurants the sourcing of the product and the story behind it is more

important, however this tends to be the case for the main element of the dish, e.g. meat.

89

http://www.mcdonalds.co.uk/ukhome.html

Food service supply chain (simplified)

90

Consumers

Profit sector Cost sector

Restaurant

(e.g.

Traditional

‘sit down’

restaurant)

Quick

service

restaurant

(e.g. Fast

food)

Pubs

(e.g.

Traditional

pubs)

Hotels

Leisure

(e.g. Sports

clubs)

Staff

catering

(e.g. In the

work place)

Health

education

services

(e.g.

Schools,

hospitals)

Food service operator (Compass, Sodexo &

Aramark are the major players in the market) Delivered wholesale

(Brake Bros. and 3663 are

the major players)

Wholesale / Cash &

Carry (click here to

see list)

Manufacturer / producer / supplier

NB: Distribution channels in the food service market can be complex. Manufacturers/suppliers can have direct supply

relationships with the outlets (e.g. Restaurant) or supply through a food service operator (i.e. A contract caterer that prepares and

serves the meal); through a wholesale / cash and carry business or through a delivered wholesale business (this is the same as a

wholesale but they physically deliver the goods as well).

http://www.compass-group.com/

http://uk.sodexo.com/

http://www.aramark.co.uk/

http://www.brake.co.uk/

http://www.3663.co.uk/

Food retail & food service market value

UK Household Food Expenditure (Food and

Non-Alcoholic Drink) £millions(1)

UK Expenditure Food Eaten Out £millions(1)

CAGR 07-12: 3%

CAGR 07-12: 4%


91

0%

1%

2%

3%

4%

5%

6%

£0

£10,000

£20,000

£30,000

£40,000

£50,000

£60,000

£70,000

£80,000

£90,000

£100,000

2007 2008 2009 2010 2011 2012

Household Food Annual % change

-4%

-2%

0%

2%

4%

6%

8%

10%

£0

£10,000

£20,000

£30,000

£40,000

£50,000

£60,000

2007 2008 2009 2010 2011 2012

Food eaten out Annual % change

UK food retail & food service compared to the

Netherlands

63

17

0

10

20

30

40

50

60

70

UK NL

Population (millions)(1) Consumer retail spend on food and

drink (EURbn)(2,3)

Consumer food service spend on

food and drink (EURbn) (2,3) Per capita spend on food and drink

through all channels (EUR p.a.) (2,3)

(1) Office for National Statistics and CBS (Statistics Netherlands)

(2) Defra

(3) Agricultural Economic Report 2012, LEI Wageningen 92

88

40

0

20

40

60

80

100

UK NL

51

13

0

10

20

30

40

50

60

UK NL

2,206

2,352

2,100

2,150

2,200

2,250

2,300

2,350

2,400

UK NL

UK country variations in food and drink

expenditure

26.32

25.4

24.15

24.28

2.97

3.38

2.79

2.99

11.01

8.72

7.35

8.49

4.11

3.2

2.7

3.09

0 5 10 15 20 25 30 35 40 45 50

N Ireland Total £44.40

Scotland Total £40.69

Wales Total £37.05

England Total £38.85

H'hold food & drink ex. alcohol H'hold alcoholic drinks

Eating out food & drink ex alcohol Eating out alcoholic drinks

Country variations in average food and drink expenditure £ per

person, per week(1)

Population: 53 million

Population: 3.1 million



93


Regional differences – food retail

25

.45

27

.32

25

.52

27

.23

26

.84

28

.59

27

.6

30

.33

29

.14

27

.84

23

24

25

26

27

28

29

30

31

No

rth East

No

rth W

est

Yorksh

ire & th

e Hu

mb

er

East Mid

land

s

West M

idlan

ds

East

Lon

do

n

Sou

th East

Sou

th W

est

Englan

d ave

Regional variations in average household food and

drink expenditure £ per person, per week(1)

UK ‘big 4’ supermarket density (Tesco,

Sainsbury’s, Asda and Morrisons only, 2010)(2)

94


(2) Ordnance Survey

Regional differences – food service

5,375

15,185

11,580

9,545

11,400

13,095

23,805

20,955

13,940

7,300

12,030

4,075

0 5,000 10,000 15,000 20,000 25,000

North East

North West

Yorkshire and The Humber

East Midlands

West Midlands

East

London

South East

South West

Wales

Scotland

Northern Ireland

Number of food and beverage service businesses, by

region(1)

(1) Office for National Statistics (based on VAT registrations and PAYE data)

Regional variations in average out of home food and

drink expenditure £ per person, per week(1)

11

.13

10

.87

11

.24

10

.66

10

.52

11

.55

13

.48

13

.44

12

.56

11

.93

0

2

4

6

8

10

12

14

16

No

rth

Eas

t

No

rth

Wes

t

York

shir

e &

th

e H

um

ber

East

Mid

lan

ds

Wes

t M

idla

nd

s

East

Mid

lan

ds

Lon

do

n

Sou

th E

ast

Sou

th W

est

Engl

and

ave

.

95

Regional variation

• On the whole there is little distinction in food consumption patterns between the regions.

• One of the major reasons for this is the national distribution network of the major supermarkets which account for

the majority of food and drink purchased in the UK whose local adaptation of product lines is fairly limited.

• Many of the major food service companies operating in the UK also tend to standardise their menus.

• That said, some regional differences do exist:

– There is a higher concentration of food service establishments in London and the South East. Average

earnings are also higher in these areas and eating out is more commonplace than in other areas of the UK.

– Ethnic and religious influences on food consumption patterns are more pronounced in major urban areas

with diverse population ethnicities (e.g. London, Birmingham, Manchester, Leeds).

– London stands out as the only region in the UK that could be described as ‘distinctly different’ to

the rest of the UK.

– Some companies are reportedly implementing organisational structures to serve London as a distinct

market.

96

Food retail

Retail Expenditure Share % (14 April 2013) (1)

“Pressure on household budgets is undoubtedly driving some of the

growth at the discounters, but messages about quality are starting to

resonate. Lidl announced this week that it will increase its fresh meat

and poultry floorspace by 50% within the year, and Aldi’s new

‘convenience’ store in Kilburn is a departure from its traditional edge-

of-town offering. These changes are likely to appeal to a new and

different group of shoppers which will bolster the performance of the

discounters even further.(1)”

(1) Kantar Worldpanel

(2) Trade Interviews

2.7

3.1

2.1

0.2

-1

0

1

1.3

-9.4

-15 -10 -5 0 5

Tesco

Asda

Sainsbury's

Morrisons

Co-Op

M&S

Waitrose

Hard discounters

Others

Changes in retailer share of the grocery market (2010 – 2013) %

With the exception of the Co-Op all retailers have

increased their market share at the expense of ‘other’

supermarkets, made up of independent retailers and

symbol groups. Asda, Tesco and Sainsbury’s have

benefitted. So too has Waitrose and the hard

discounters both of which have increased their share.

97

Retailer profiles can be

found in Chapter 9:

Supporting Information


• “Growth in the grocery retail market has come mainly from the premium and budget end of the market.

The middle ground is being squeezed and is highly pressured. It appears that the value for money

proposition is strong at the premium and budget market but less clear in the middle.”

• “Growth is coming from convenience store formats and online sales, larger supermarket stores are faring

less well. This is clear when you look at retailers such as Morrison and the Co-Operative that are not

exposed to online or convenience store formats performing less well.”

• “There’s a competitive and consumer element to consider in the polarisation of the retail market.

Necessity is a major driver; consumers generally aspire to shop in more stores that are perceived to be

more premium so as confidence improves they will look to trade up not down. Other retailers will also

look to regain market share and use powerful tools and mechanics such as promotions to attract

consumers. In time I expect this issue will settle down.”

• “We have seen a resurgence in small, independent retail stores that have exciting and new concepts such

as Cook and Laverstoke Park. These tend to be at the premium end of the market and located in affluent

areas (e.g. London, Harrogate in the North) where there is a strong food culture.”


98

http://www.co-operativefood.co.uk/welcome/



http://www.cookfood.net/

http://www.laverstokepark.co.uk/twickenham.aspx


• “We are starting to see retailers segment the UK retail market geographically to isolate London as its own

market supported by a management structure purely focussed on this market. This is quite exciting,

suppliers can really capitalise on this if they are quick to react.”

• “Online is an exciting development in the UK grocery retail market. It’s not a simple case of what’s in-

store is also on-line; the supply chain cycle is shorter and products (e.g. especially packaging) needs to

be carefully adapted. Online brings suppliers from the Netherlands closer to the UK, products could be

packaged and shipped from the Netherlands to the UK with relative ease.”

• “The retailers are extremely good at what they do. They are capable of creating an extremely good

environment to showcase our [fresh produce] products ensuring it’s fresh, displayed well and they

respond well to consumers. Ultimately they are able to grow category sales, which benefits us

financially.”


99


• “Our retail customers are extremely demanding, we have to operate to tight deadlines, usually 2 weeks is

a maximum to deal with any issues and questions they need solving. We are also expected to provide a

lot of technical and R&D support and we have therefore needed to invest heavily in this area.”

• “Retailers say they understand the pressure on suppliers but do not engage in dialogue with them. They

are only concerned with shareholders and are resistant to change.”

• “The UK is much more sophisticated than other European/World markets. For example, processing

standards much higher, many more accreditations, sophisticated retailers, tiered branding, sourcing &

supply chains. A brand is “not just a crest” like in many other countries – it must have ethics, CSR,

genuine point of difference, has to mean something.”

• “Price is important but becoming less of a way to achieve competitive advantage. In an era when price

matching is so prevalent buyers look to other ways of differentiating their category. This opens up

potential discussions on how suppliers can add value in other ways, such as through improved

sustainability. These are good ways to position yourself as supplier.”


100

Category dynamics(1)

(1) Various sources incl. Mintel, Kantar, Defra

*Flowers and plants consumption per capita in £ not kg

Bread & Bread products, £3.8

Butter & Yellow fats, 1.5

Cheese, £2.5

Desserts, £1.5

Ice Cream, £1.1

Processed Meat, £6.8

Ready Meals (inc pizza), 3.8

Yoghurt, £1.8

Red Meat (beef, pork, lamb),

£3.7

Vegetables, £5.0

Fruit, £3.8

Potatoes, £1.1 Salad, £1.7

Milk, £3.2

Poultry, £4.0

Flowers and plants, £2

-10

0

10

20

30

40

50

60

70

-3 -2 -1 0 1 2 3 4 5

Consumption per capita, per annum (kg) *

Volume growth/decline (y-o-y%)

Bubble size varies according

to market size (£bn)

101

Category dynamics

Product Trend* Driver >5 years

Poultry Increasing -Perceived as value for money

-Positive health perceptions

-Sustained market growth.

-”Nations favourite protein”

-Welfare, safety and traceability essential.

Red meat Decreasing -Perceived as expensive & indulgent

-Negative health perceptions

-Steady decline.

-Changes in demand by cut (less premium

cuts)

-Special occasion protein.


Fresh vegetables Increasing -Convenience: growth in processed

‘ready to cook’ vegetables.

-Heavy category promotions

-Convenience: pre-packed portions

-British when in season

Fresh fruit Increasing -Convenience: growth in processed

snacking fruit.

-Heavy category promotions



Processed meats Increasing -Convenience

-Increased product innovation

-Sustained growth.

-Improved profile of frozen foods.


*Volume consumption

102

Category dynamics


Ready meals Increasing -Convenience

-Quality improvements (own label)

-Increased product innovation

-Improvements to health profile

-High growth.

-Increased innovation.

-Labelling transparency.

-Own label products dominate brands

Salad Increasing -Growth in salad bowls

-Heavy category promotion.

-Product innovation (e.g. leaf varieties)



Milk Decreasing -People drinking less milk.

-Dietary changes.

-More functional milk innovation

-Niche markets (soy, rice milk) on the

rise.

Yoghurt Increasing -Product format innovation (e.g. pouring

yoghurt, pouches).

-Strong health positioning (e.g. digestive

health).

-More ‘occasion’ driven product innovation

(e.g. breakfast, dessert yoghurts)

-Sustained market growth.

-Indirect health claims.

-Packaging/format innovation.

103

*Volume consumption

Category dynamics


Cheese Increasing -Category innovation driven by

convenience (e.g. snacking).

-Improved health profile (e.g. low fat)

for everyday consumption.

-Appeal of speciality cheese

(occasional consumption), artisanal

producers

-Processed cheese growth via NPD

(convenience & health important).

-Speciality cheese growth via product

innovation, category promotion.

Bread & bread

products

Decreasing -Fall in white bread consumption.

-Sensitivity to price changes.

-Increased consumption of ‘healthy

breads’.

-Further decline in white bread sales.

-More ‘healthy breads’.

Ice Cream Decreasing -Decline of everyday consumption but

increase in occasional indulgence

-Continued shift from everyday to

indulgent consumption.

Butter & yellow fats Decreasing -Increased use of cooking oils over

fats on health grounds.

-Further decline of use as cooking

ingredient.

-Use as spread driven by NPD.

104

*Volume consumption

Innovation examples: flavoured milk

Product name Frijj Milkshake

Company Dairy Crest

Price (£) 1.25

Size 471ml

Product description Frijj is a fresh milkshake product

which is said to be ‘thick and

smooth’. The range contains

several flavours such as vanilla,

chocolate, banana etc

Positioning claims Low fat, free-from artificial

colouring and flavourings, fresh,

high in calcium

Ingredients Skimmed Milk (76%), Whole Milk

(18%), Sugar, Buttermilk Powder,

Modified Maize Starch, Strawberry

Flavouring, Stabilisers

(Carrageenan, Guar Gum), Colour

(Beetroot Red).

Analysis Dairy Crest has

invested in the Frijj

brand to create a much

fresher and healthier

image and emphasise

health driven benefits

such as fat content,

calcium levels,

absence of artificial

colours and flavours.

The product still retains

a sense of fun

(appealing to a younger

market) as well as

capturing the food-to-

go market.

http://www.google.co.uk/url?sa=i&rct=j&q=frijj&source=images&cd=&cad=rja&docid=_yY90YBiGSJatM&tbnid=sWX0ZOXBWAr5yM:&ved=0CAUQjRw&url=http://www.ocado.com/webshop/product/FRijj-Strawberry-Milkshake/15732011&ei=zcakUaWhKuXB0gWZroHQCQ&bvm=bv.47008514,d.d2k&psig=AFQjCNFctZp5QC8OlGwAvO11ku0Tud75pg&ust=1369839688617485

Innovation examples: lactose-free milk

Product name Lacto-Free

Company Arla

Price (£) 1.29

Size 1litre

Product description Lactose free*, pasteurised semi

skimmed filtered dairy drink. Part

of a lactose-free range of products

that also includes cream and

cheese.

Positioning claims Lactose free*

Ingredients Semi Skimmed Milk, Lactase

Enzyme

Analysis Lactose and gluten free

product have

significantly increased

in popularity in recent

years owing to

consumer perceptions

that they are ‘healthier’

than conventional

varieties (regardless of

a diagnosed allergy).

The ‘free-from’ market

continues to grow

rapidly and several

major companies

(including Arla) have

entered this market.

*We make every effort possible to ensure that Lactofree dairy drink contains no lactose. We carry out rigorous scientific testing using the most accurate UKAS-accredited tests available which enable us to detect lactose at the trace level of 0.03%. At this detection level our tests show that there is no lactose present in Lactofree. Please refer to www.lactofree.co.uk for more information. Not suitable for milk allergy sufferers.

http://www.google.co.uk/url?sa=i&rct=j&q=lactofree&source=images&cd=&cad=rja&docid=9lg0mmJKIXuA8M&tbnid=e-gNE1GHS1FtLM:&ved=0CAUQjRw&url=http://nedcolville.wordpress.com/2011/02/24/dear-lactofree/&ei=DcukUaHkDcLU0QWgjIHoCg&bvm=bv.47008514,d.d2k&psig=AFQjCNHeFTF3zntBvjv3OOtUGQMLcDiCyw&ust=1369840778972753

Innovation examples: extra filtered milk

Product name Cravendale Milk

Company Arla

Price (£) 1.98

Size 2litre

Product description Pasteurised, homogenised, semi-

skimmed, fresh filtered milk

Positioning claims Stays fresh for 7 days

Red Tractor (Assured Food

Standards) , Recyclable Materials

Ingredients Semi-skimmedmilk

Analysis The filtration process

that keeps milk ‘fresher

for longer’ is designed

to fit in with busy

consumer lifestyles

(less frequent trips to

local shops) and to

minimise waste.

The product has been

supported with heavy

marketing and stands

out as most milk is sold

unbranded.

http://www.google.co.uk/url?sa=i&rct=j&q=cravendale&source=images&cd=&cad=rja&docid=wErdAVTYVewdfM&tbnid=qu5uNuktzMPgNM:&ved=0CAUQjRw&url=http://www.ocado.com/webshop/product/Cravendale-Semi-Skimmed-Milk/24581011&ei=Ks2kUcawH-Gz0QWDlICwDA&bvm=bv.47008514,d.d2k&psig=AFQjCNFlBS-aQWzKI4pyf7NOUGUxMYJVLw&ust=1369841317310948

Innovation examples: Danone Activia

Product name Activia

Company Danone

Price (£) 1.84

Size 4X125g

Product description Strawberry flavoured yoghurt, which is

said to be ‘deliciously creamy’

Positioning claims Contains Bifidus ActiRegularis, suitable

for vegetarians, recyclable packaging

Ingredients Yogurt with Bifidus ActiRegularis®

(Whole Milk, Skimmed Milk Powder,

Cream, Yogurt Cultures), Strawberry

(10%), Sugar (8.3%), Stabilisers

(Modified Maize Starch, Pectin, Guar

Gum), Colours (Anthocyanins, Beta-

Carotene), Acidity Regulators (Citric

Acid, Calcium Citrate, Sodium Citrate),

Flavouring.

Analysis Activia has successfully repositioned its

message in light of European health claims

legislation on ‘functional health claims’. Despite

being unable to make digestive health claims the

brand and products still have mass appeal with

the UK market on the basis of ‘softer’ health

claims messaging and use of imagery.

Innovation examples: Dairylea Dunkers

Product name Dairylea Dunkers

Company Kraft Foods

Price (£) 1.12

Size 4X47g

Product description Cheese dip with breadsticks

designed as a lunchbox/snack item

primarily aimed at children.

Positioning claims Free-from artificial colours, flavours,

preservatives, convenience, suitable

for vegetarians

Ingredients Cheese Dip: Skimmed Milk (Water,

Skimmed Milk Powder*) (58%), Cheese

(16%), Whey Powder (from Milk), Butter,

Milk Proteins, Concentrated Natural Lemon

Juice (from fresh lemons), Stabiliser

(Sodium Carbonate)**, Citrus Fibre, Salt,

White Breadsticks: Wheat Flour, Vegetable

Fat, Wheat Dextrin (5.5%), Barley Malt

Extract, Yeast, Wheat Germ (1%), Salt,

*Spray Dried, **To hold all the ingredients

together.

Analysis A good example of a

product that aims to

increase out of home

cheese consumption.

Positioned as a

children's lunchbox

item. The product is

supported by health

driven marketing claims

in particular the

absence of artificial

colours, flavours and

preservatives.

http://www.google.co.uk/url?sa=i&rct=j&q=dairylea+dunkers&source=images&cd=&cad=rja&docid=CwAOZ3_61retKM&tbnid=mG_zxIPtAQroTM:&ved=0CAUQjRw&url=http://www.dairylea.co.uk/dairylea2/page?siteid=dairylea2-prd&locale=uken1&PagecRef=655&ei=vdOkUZeqC8i80QWu7YCoAg&bvm=bv.47008514,d.d2k&psig=AFQjCNG1A8avF3Ks6PO1PILSgpcj3GpaGw&ust=1369842997583470

Innovation examples: Cathedral City

Product name Cathedral City Cheddar

Company Dairy Crest

Price (£) 2.55

Size 200g

Product description Cheddar cheese available in various

line extensions said to be the

“nations favourite cheddar brand”

Positioning claims “The nations favourite cheddar

brand”

Ingredients Reclosable stay fresh packaging

Analysis Mass market cheddar cheese (like liquid milk) is largely

undifferentiated and therefore heavily dominated by

sales of retailer own label products.

Dairy Crest have been able to create a brand with

significant mass market appeal.

http://www.google.co.uk/url?sa=i&rct=j&q=cathedral+city&source=images&cd=&cad=rja&docid=DrsLiB8n5gj9HM&tbnid=URFFiTj1QEZtKM:&ved=0CAUQjRw&url=http://www.cathedralcity.co.uk/products/family-favourites.aspx&ei=RNakUfS5GfCa1AW69YCADQ&bvm=bv.47008514,d.d2k&psig=AFQjCNHwrSoBqdGs8fFRgnneNmMeR6PzCw&ust=1369843595151848

Innovation examples: processed meat

Product name Mattessons Fridge Raiders

Company Kerry Foods

Price (£) 1.49

Size 3X25g

Product description Roast flavour chopped and shaped

chicken breast with added starch

Positioning claims High protein, children, convenience

Ingredients Chicken Breast (91%), Vegetable Oil, Roast

Seasoning (Salt, Yeast Extract, Garlic

Powder, Onion Powder, Sage, Flavourings),

Rusk (Wheat), Tapioca Starch, Dextrose

Analysis Mattesons Fridge

Raiders have

capitalised on a

number of key trends

such as snacking and

convenience to

increase the popularity

of their meat snacks

range.

Mattessons has also

countered possible

consumer concerns by

highlighting the high

meat content of the

product.

http://www.google.co.uk/url?sa=i&rct=j&q=mattesons+fridge+raiders&source=images&cd=&cad=rja&docid=1fw8TQI6ge5rZM&tbnid=CmpMCD-4n9LnCM:&ved=0CAUQjRw&url=http://www.mattessons.co.uk/?page_id=186&ei=7wCuUdenDcX50gWczoGIDg&bvm=bv.47244034,d.d2k&psig=AFQjCNHSgiSTgu_sTxio_ywqlRFIypKhVQ&ust=1370444386611801

Innovation examples: prepared meals

Product name Innocent Veg Pot

Company Innocent

Price (£) 3.99

Size 390g

Product description A hearty stew of sweet potatoes, beans,

red peppers and smoky paprika.

It's a delicious meal of fresh veg, tasty

sauce, rice and herbs - giving you 3

portions of veg in every pot. With no

colourings, flavourings or nasty things you

wouldn't add yourself.

Positioning claims 5-a-day, natural product, convenience, recyclable materials

Ingredients Cooked Brown Rice (17%) [Water, Brown Rice], Tomato, Water, Carrot, Pinto

Beans, Red Kidney Beans, Onion, Sweet Potato (5%), Potato, Red Pepper (4%),

Sweetcorn, Spinach, Vegetable Oil, Red Chilli (0.8%), Cornflour, Lemon Juice,

Garlic, Sea Salt, Cajun Seasoning [Spices, Herbs, Mustard Seed, Salt, Sugar],

Smoked Paprika (0.2%), Green Chilli Purée, Coriander, Black Pepper.

Analysis Innocent are a well

known and loved juice

brand in the UK and

have diversified by

launching ‘veg pots’ – a

prepared vegetable

meal which can be

paired with meat or fish

(or eaten on its own)

with a range of

flavours.

The product embodies

several trends

including; natural,

healthy, 5-a-day

message, convenience,

recyclable materials.

Product name Charlie Bighams Cottage Pie

Company Charlie Bigham

Price (£) 7.00

Size 650g

Product description Tender pieces of British beef slow cooked with red wine and fresh thyme then topped with our

handmade creamy mashed potato

Positioning claims Premium, convenience, provenance

Ingredients Cottage Pie Filling (53%), Creamy Mashed Potatoes, Cheese and Herb Topping, Cottage Pie Filling is

made from: Fresh Beef (39%), Fresh Onions, Fresh Carrots, Fresh Celery, Red Wine, Beef Stock,

Worcestershire Sauce, Wheat Flour, Sunflower Oil, Molasses, Tomato Purée, Fresh Garlic Purée, Fresh

Thyme, Salt, Fresh Bay Leaf, Black Pepper, Ground Star Anise, Ground Cloves, Creamy Mashed Potatoes

are made from: Potato, Single Cream, Butter, Free Range Pasteurised Egg Yolk, Salt, Cheese and Herb

Topping is made from: Cheddar Cheese, Fresh Parsley, Black Pepper, Fresh Thyme, Beef Stock is made

from: Beef Bones and Meat, Water, Salt, Worcestershire Sauce is made from: Malt Vinegar (from Barley),

Spirit Vinegar, Molasses, Sugar, Salt, Anchovies, Tamarind Extract, Onions, Garlic, Spices, Flavouring.

Innovation examples: prepared meals

Analysis Charlie Bighams meals retail at a significantly higher price point than other prepared meals (circa £7 compared to circa.

£5) yet continue to perform well in the market because of the clear positioning and high quality.

http://www.google.co.uk/url?sa=i&rct=j&q=charlie+bigham's+cottage+pie&source=images&cd=&cad=rja&docid=vCXVM1LIl3mtpM&tbnid=FOiM1w6jA2yU8M:&ved=0CAUQjRw&url=http://www.ocado.com/webshop/product/Charlie-Bighams-Cottage-Pie/61881011&ei=dQCuUfapOuiJ0AW9t4DYDQ&bvm=bv.47244034,d.d2k&psig=AFQjCNElkiaJkOtxakgAPqc2QWiBPfrvYw&ust=1370444275339244

Innovation examples: prepared vegetables

Product name Sainsbury's Ready To Roast

Mediterranean Vegetables Drizzled With

Olive Oil 400g

Company J Sainsbury’s

Price (£) 2.00

Size 400g

Product description A mix of red onion, courgette, peppers,

tomatoes, olive oil, garlic and basil

Positioning claims Convenience, fresh

Ingredients Red Onion (29%); Courgette (20%); Red Pepper

(19%); Yellow Pepper (18%); Cherry Tomatoes

(11%); Olive Oil (2%); Garlic Purée (1%); Basil.

Analysis Basic processing of vegetables provides

consumers with instant meal options that require

very little preparation in the home. The variety of

vegetables per portion is a key selling point as

consumers would otherwise have to purchase a

larger number of individual items if they were to

prepare it themselves which potentially increases

costs and waste.

Innovation examples: prepared fruit

Product name Sainsburys Classic Fruit Salad


Price (£) 2.00

Size 320g

Product description Prepared and ready to eat

pineapple, Apple, Orange,

Strawberry & Grape

Positioning claims Convenience, fresh

Ingredients Pineapple (29%); Apples (27%); Oranges

(21%); Strawberry (13%); Grape (11%).

Analysis Prepared fruit is increasingly popular as a snacking

item and/or meal portion (e.g. as a lunch time item).

Convenience and variety is a key selling point to

consumers. Such products tend to retail at a relatively

high price point (e.g. £2+).

Innovation examples: prepared salad

Product name Sainsbury's Pomodorino Tomato Side Salad

Bowl, Taste the Difference


Price (£) 2.50

Size 175g

Product description Mix of baby salad leaves and salad

vegetables with baby pomodorino tomatoes, a

sachet of balsamic dressing and a sachet of

Parmigiano Reggiano

Positioning claims Convenience, premium, fresh

Ingredients Pomodorino Baby Plum Tomato (31%); Salad Leaves;

Cucumber; Balsamic Dressing (11%); Parmigiano

Reggiano Cheese (from Cows' Milk) (6%); Chive;

Parsley.Salad Leaves contains: Green Batavia, Red

Cos Lettuce, Wild Rocket.Balsamic Dressing contains:

Balsamic Vinegar (30%) (Wine Vinegar, Grape Must),

Water, Extra Virgin Olive Oil (16%), Sugar, Rapeseed

Oil, Dijon Mustard (Water, Mustard Seed, Spirit

Vinegar, Salt), Molasses, Cornflour, Salt, Black Pepper

Analysis Prepared salads offer similar benefits to

consumers as prepared vegetables and fruit;

namely variety, low wastage, convenience.

Products typically contain a dressing either in

a sachet or small plastic tub.

http://www.google.co.uk/s Pomodorino Tomato Side Salad&source=images&cd=&cad=rja&docid=VhIx2Y2jPG_XBM&tbnid=9srmwjoo-NvT-M:&ved=0CAUQjRw&url=http:/www.nutracheck.co.uk/CaloriesIn/Product/83/Sainsbury

The importance of innovation

• Continual innovation is extremely important in the UK market.

• Circa 12,000 food and drink products are launched every year in the UK including:

– New products

– New varieties

– Line extensions

– New packaging types / materials

– Promotional / seasonal (short life) products

• In particular retail buyers are looking to source products that are different and add value to the category and that

continue to innovate once in the market.

• Innovation is relevant throughout the entire value chain; and could include for example:

– New consumer products and concepts (e.g. Dutch speciality cheeses / meats etc)

– New sustainable packaging solutions

– Production solutions that improve quality, adds variety, reduces waste, improves sustainability, reduces cost

and so on

– Technical manufacturing solutions that help to reduce or remove, for example, salt, fat and sugar, artificial

additives and ingredients or add functional health benefits.

• Products that are genuinely innovative are much more likely to succeed in the UK.

117

Trends – online shopping

• Internet access in the UK is around 85%, this is lower than the Netherlands where it is 94%, but still higher than

many other European countries.

• Shoppers are now accessing the internet on a much more frequent basis, and through many different forms of

technology. In terms of what consumers are buying when using the internet, grocery and food shopping is ranked

8th.

• On-line grocery shopping in the UK was worth £5.9 billion in 2011, it is forecast to be worth £11.2 billion by

2016 (an increase of 89%). On-line retailing is the fastest growing type of grocery retailing in the UK, e.g.

ahead of hypermarkets and discounters.

• 17% of people in the UK use the internet to purchase groceries, a figure that is expected to rise to 44% by 2016.

• The average frequency of on-line shopping is 1.4 times per month. The number of customers using in every

fortnight or more, currently stands at around 29%, this is down from 36% in 2009. Shoppers are using on-line

grocery shopping for special occasions, with 35% using it every 2-3 months.

118

E-commerce - direct to consumer opportunities for

suppliers

Graze is a healthy snack box that can be delivered via post as they are

specifically designed to fit through mail boxes. Each box typically include

nuts, dried fruit, dips, olives and seeds, as well as some well-deserved

flapjacks, cakes, popcorn and natural treats.

Payments are usually on a subscription basis so once signed up they receive

regular boxes (e.g. Weekly) delivered to their home.

The Blue Pig Company is an example where farmers have created their own

website to generate online sales direct to consumers. The company sells pork

products such as bacon and sausages as well as fresh pork. The website

also provides the opportunity to tell the production story and has information

about the family run aspect of the company, a blog links to social media such

as Twitter, recipes and so on.

119

http://www.graze.com/uk/help/howitworks

http://www.bluepigcompany.com/


suppliers

Dairy Crest is one of the largest dairies in the UK and owns brands such as

Cathedral City, Clover and Frijj. More recently Dairy Crest established Milk and More

which delivers fresh milk direct to consumers door steps – a traditional delivery

channel which declined over many years as consumers increased their food

purchases at supermarkets. Consumers pay for milk online (a direct debit system).

Other ‘essentials’ such as bread and orange juice can also be delivered by the milk

man.

South Caernarfon Creameries is a leading farmer owned dairy co-operative,

which is based in North West Wales. The company produces a range of hard

pressed cheeses and salted Welsh butter. In addition to selling through retail

channels the company now operates its own website which delivers direct to

consumers.

120

http://www.dairycrest.co.uk/

http://www.milkandmore.co.uk/home

http://www.sccwales.co.uk/


suppliers

A significant proportion of cut flowers are purchased online through companies

such as Interflora, who are specialist flower businesses as well as major high

street retailers such as Tesco, Sainsbury’s M&S, Waitrose and so on.

Online purchases of wine is well established in the UK. Majestic Wine are the

most high profile wine specialist operating on a national scale with over 175

stores across the UK as well as selling online for home delivery.

Other companies such as Laithwaites operate in a similar way but on a

smaller scale (12 stores) and an online presence. Because wine can be

distributed and stored in ambient conditions it makes it easier to distribute.

121

http://www.interflora.co.uk/

http://www.majestic.co.uk/

http://www.laithwaites.co.uk/

Trends – social media

• Social media usage in the UK is high.

– Facebook is the biggest social network with +30 million UK accounts in the UK.

– There are +25 million Twitter accounts in the UK.

– There are +10 million LinkedIn accounts in the UK.

– Other social media forms such as Pinterest, Instagram and Flickr are used but less frequently.

• Many consumers – particularly younger consumers – use the internet and social media to form opinions about

products and companies, which in-turn influences consumption patterns.

• Social media can be a powerful way to build brand equity amongst UK consumers, especially if targeting younger

consumers (i.e.<40) where social media usage is higher.

• Companies that have been successful in using social media include:

– Innocent Smoothies; Tesco; Aldi; Walkers; Waitrose; Rekordilig Cider; Lurpak, Cadbury’s amongst others

• Use of social media tends to be more successful when:

– It is used as an extension of the brand i.e. where the voice, tone, imagery, content and so on are all

consistent with the personality of the brand.

– It encourages two-way communication and engagement with consumers.

– Is fun and appealing.

122

http://www.innocentdrinks.co.uk/

http://www.innocentdrinks.co.uk/

http://www.tesco.com/

https://www.aldi.co.uk/

http://www.walkers.co.uk/

http://www.waitrose.com/

http://www.rekorderlig.com/gb/

http://www.lurpak.co.uk/

http://www.cadbury.co.uk/

Social media examples [click on picture to follow]

123

https://twitter.com/CadburyUK

https://www.facebook.com/CadburyUK

https://twitter.com/walkers_crisps

https://en-gb.facebook.com/pages/Walkers-crisps/107869032581111

https://twitter.com/UKTesco

https://en-gb.facebook.com/tesco

https://twitter.com/LurpakButter

https://www.facebook.com/LurpakButter

https://twitter.com/rekorderlig

https://www.facebook.com/Rekorderlig

Trends - sourcing policies

• In recent years grocery retailers have been lobbied hard by trade organisations, action groups and (to some

extent) by consumers to implement policies that source as much British produce as possible at a ‘fair price’ i.e.

one that the lobbyists state will provide a reasonable return to producers, processors and manufacturers.

• Partly motivated by external pressure and partly by commercial benefit, some retailers have committed to sourcing

British produce, in some cases e.g. milk, fresh meat committing to source 100% British produce effectively

preventing foreign businesses from entering the UK market without direct inward investment in the supply chain.

– Retailers such as Waitrose have made the biggest commitment to sourcing British produce (100% British

milk, cream, yoghurt, beef, pork, lamb, poultry (and in processed meat items), fruit and vegetable British in

season) but occupy a relatively small share of the total grocery retail market.

– Wm Morrisons operate a vertically integrated supply chain model from production to retail on fresh seasonal

produce, beef and lamb.

– J Sainsbury’s have committed to “double the amount of British food we sell by 2020”.

124

Trends – own label

• Private label products have become increasingly popular with UK consumers because of their value-for-money

proposition.

• The pressure on private label is increasing, with high expectations for new products which are innovative, whilst

strong in quality. Going forwards shoppers expect to be buying more private label products, with the products often

used as a way to differentiate between retailers.

• The growth of own label has allowed for wider ranges to become available.

• Opportunities exist from value to premium ranges.

• Often the premium ranges are viewed by consumers as being of higher quality and as luxury products compared

to brands; this is particularly the case for prepared meals.

125

Trends - convenience

• Convenience is a major factor for all product categories, in particular prepared convenience meals.

• The UK ready meal market was worth £3.8billion in 2012, bigger than any other major European country. The

sector positively benefited from the economic crisis, being used as an alternative to eating out.

• Ready meals are often used due to limited time for cooking, or lack of culinary skills.

• Ethnic products are most popular with shoppers, with 40% of the European market held by Indian, Chinese and

other Asian dishes. The sector is one which is seeing constant introduction of new products as it responds to

changing trends.

• Over recent years consumers have become increasingly worried over ingredients and additives that their ready

meals contain. As such premium products and ranges have been launched which are low in fat, salt and food

additives.

• As well as main meals being sold in a ready format, snacks on the go is also big in the UK. Snack bars, made with

cereals, fruit and chocolate now have a significant market size, along with snack size, single packets of crisps and

chocolate.

• Fruit is also now being sold in a convenient format so they can be eaten on the go. Packets and pots of pre sliced

and washed fruit are now sold on the market, these range from 80g packs of grapes and apples to tropical fruit.

126

Trends – health & wellness

• UK consumers are currently driving a strong trend for health and wellness; as such they prefer products low in fat,

salt and sugar, along with demand for those products which carry a functional health benefit.

• The use of artificial sweeteners and preservatives is in decline by food manufactures; instead they are favouring

the use of ‘natural’ flavours, and healthy and functional additives.

• The use of natural additives signals increased demand for the ingredients used to make them, such as plants and

fresh produce.

• The health and wellness trend in food is expected to drive growth in the next few years for functional dairy

products (fortified milk, pro-biotic yoghurts and drinks); healthy breakfast cereals (oat-based, high wholegrain);

healthy snacks (cereal and energy bars, cereal-based and fruit-based snacks) and healthy confectionery (additive-

free sweets, low sugar / sugar free products).

• Beverages are also likely to see a change in the products being sold. With the likes of fruit juices, energy drinks,

fortified water, and various dairy drinks offering an alternative to the carbonated drinks on the market.

127

Trends - traceability and quality assurance

• For food to be sold in the UK, whether imported from the EU or produced within the UK it must meet the general

food safety requirements of EU law.

• For imported products which contain animal origin products, they must abide to the ‘Trade in animals and related

products (TARP) Regulation 2011’. For products which are non-animal origin products governing regulations

include; ‘EU official controls regulation 882/2004’ and ‘The official feed and food controls regulations 2009’. All EU

manufacturing establishments must have approval under regulation EC 853/2004, if they are handling products of

animal origin.

• Products produced within the UK also can carry with them further certifications if eligible.

– The Red Tractor logo is for products which are produced within the UK, and for British products is a widely

used marketing tool.

– Freedom Foods is a logo used to indicate that the way the products were reared meets RSPCA (Royal

Society for Prevention of Cruelty to Animals) standards.

– Other logos are used to mark organic food and if from a protected origin, supermarkets will also often have

their own certifications and inspections. Often the logos can bring a higher selling price, and are regarded

with consumers as being of higher quality, despite probably not understanding what they mean.

128

Trends - traceability and quality assurance

• In terms of animal rearing the UK has stricter rules than in the EU for some products. Sow crates for pork

production have been banned for a number of years in the UK.

• Veal is a contentious product in the UK, a limited amount is produced in the UK but this is increasing. Due to the

ban on veal crates a number of years ago, rose veal is the only type produced in the UK, and as such white veal is

avoided by customers due to the perception of poorer welfare conditions.

• Traceability is an issue with consumers today, food scares and outbreaks are widely publicised and have an

adverse effect on sales and consumption. Retailers are more aware of what impact this could have on their

reputation, brand and sales, as such are demanding of suppliers.

129

Trends – cut flowers

• Annual sales of cut flowers and house plants are worth circa. £1.75 billion. However, sales are in decline since a

peak in sales in 2007 of £2.4billion(1).

– Cut flowers are estimated to account for £1 billion sales (2)

– House plants are estimated to account for the remaining £0.75 billion(2)

• According to market research agency Kantar around a third of cut flower purchases are driven by specific

occasions such as:

– Wedding flowers: £121.5 million

– Funeral flowers: £103.8 million

– New Baby flowers: £59.55 million

– Valentines day flowers: 34.5 million

• The remaining two-thirds of cut flower sales are impulse purchases.

• The most popular varieties of cut flowers are:

– Daffodils, roses, tulips, chrysanthemums and lilies.

• A significant proportion of cut flower sales are through the major multiple supermarkets who have made everyday

cut flower consumption more affordable.

• Online sales channels still play an important role in flower gifting occasions because of the home delivery

distribution network.

• Analagous to food products, there has been an increase in flowers bearing a FairTrade logo.

130

(1) Flowers and Plants Association

(2) Ibis World UK Market Research report

Trends – waste reduction

• Recent years has seen greater publicity on food waste and reducing it. In the UK households throw away 7million

tonnes of food, around 20% (by weight) of total purchases.

• As consumers try to save money, they have been doing more to limit the amount of food thrown away.

• Consumers have made a number of changes to their habits;

– Reduced the amount of food thrown away,

– Buying what is needed, not tempted by sales mechanics,

– Using leftovers,

• The environment is becoming more of a concern with shoppers, and the industry is viewed by them as not doing

enough to protect it.

131

Trends – niche markets

• The ‘free-from’ food category in the past 12 months has increased by 25% in terms of value, taking it up to

£288million. The free-from food category includes products such as; gluten free, dairy free and lactose free.

• The growth in this market has been suggested to be due to the increasing number of consumers self diagnosing

food intolerances.

• The UK has the leading ethnic food market in Europe. The ability for consumers to travel, at lower costs than

previously, means more people are now going abroad and experiencing new cultures and foods. This is also

strengthened by the new rising ethnic population in the UK.

• The ethnic food market in the UK is constantly developing, with new cuisines and dining experiences.

– Chinese is the most popular ethnic cuisine in the UK, with Indian second.

– Together the cuisines account for 70% of the ethnic market, with Indian sales the highest. Recently sales in

ethic ready meals have declined slightly, with sales of sauces and accompanying dishes increasing. This

suggests that consumers are now cooking dishes themselves, with a strong demand for authentic

ingredients.

• At its peak the organic food market was worth +£2 billion but it has been falling since the impact of economic

recession in 2008 and is currently worth £1.64billion according to the Soil Association (sales of organic food

through food service channels are much less developed (in total £15.9 million). Organic food shoppers tend to be

wealthier, live in London and perceive it to be healthier, greener and tastier than conventionally produced products.

However, several reports in the last few years have challenged this notion and the value-for-money proposition

has come under pressure.

– Going forward the major challenge for organic food is to improve its image with consumers that have “fallen

out of love” with the concept.

132

http://www.soilassociation.org/


• “Buy British is more of a moral and safety issue, rather than a commercial one. It increases the need for

foreign suppliers to be more open and transparent with customers and consumers about how the product

was produced, by who, where, when...in short they need to be prepared to tell the story of the journey of

that product. That will help to overcome the Buy British barrier.”

• “UK manufacturers are becoming more alert to export opportunities in some of the higher growth

economies and are staring to implement strategies to capitalise on them. As this develops there may also

be increased opportunities for importers to meet increased demand requirements created by a supply

shortfall.”

• “The food service market has typically been slow to adopt retail practices. However, we have seen some

of our bigger food service customers move quite quickly to the strategic supply chain models adopted by

the retailers. They want more transparency and insight of an industry where openness, transparency and

traceability has not been possible because of how the wholesale markets operate.”


133


• “This is a short-term pressure point but buyers are not incentivised by showing loyalty to British

suppliers, they are incentivised by growing the category and financial performance. In order to do that

they need to work with suppliers that will give them the best opportunity to do that, which means the right

product at the right price and the confidence to entrust suppliers with the reputation of the retailer, which

means ensuring the product is safe, legal, delivered in the right quantity at the right time.”

• “What the horse meat contamination example has shown is that it is robustness of processes that matter,

not the amount of accreditations and standards a supplier can evidence.”

134


Chapter 8: Opportunities for Dutch Suppliers

Chapter contents:

•SWOT analysis.


•Opportunities and recommendations for Dutch food and drink businesses.

Strengths of the Dutch agri-food sector

• The Netherlands is the single biggest source of food imports to the UK.

• High degree of specialisation in the production of floriculture, meat, dairy, animal feeds, beverages, fruit and

vegetables making the Netherlands is a highly competitive global supplier. In particular:

– Concentration in the meat production industries (i.e. poultry and pork) means that the Netherlands typically

benefits from a cost of production advantage over the UK.

– The development of the glasshouse sector means that the Netherlands is able to produce year round

supply of cut flowers, ornamentals, fruit and vegetables with consistent quality. UK suppliers cannot

replicate this system of production.

• Businesses such as The Greenery, ForFarmers, Heineken, Vion, Friesland Campina, Unilever, DSM amongst

others help to raise the profile of the Netherlands in the UK.

• A world renowned wholesale sector provides Dutch producers with access to international markets without the

need for foreign direct investment.

• Focused on delivering innovation through sustained investment in R&D e.g. through centres of excellence such as

TNO, NIZO, Wageningen and proven models of knowledge transfer.

– This knowledge base positions the Netherlands well in providing technical solutions to food manufacturers

(e.g. functional health ingredients, enzymes, natural additives).

• Geographic proximity to the UK and cultural similarities.

136

Weaknesses of the Dutch agri-food sector

• Dutch producers typically sell their produce through wholesale markets but UK grocery retail buyers are

increasingly looking for direct relationships with suppliers in order to more closely control costs, quality, safety and

traceability.

• Supply of Dutch produce to the UK is heavily skewed towards high volumes of largely undifferentiated commodity

products where economies of scale are typically required to achieve a cost of production advantage. This

potentially limits the scope for small and medium sized enterprises which typically lack the scale to participate in

these markets.

• Relative to the UK the grocery retail market is less developed and concentrated; supplier pressure is less intense.

This may make it difficult for businesses with a domestic market focus to adjust to the UK grocery retail market

where a substantial level of resource is required for effective account management.

• Limited consumer availability, awareness and appeal of Dutch gastronomy and speciality produce in the UK

(especially when compared to France, Spain and Italy). Building consumer demand for Dutch speciality produce

is likely to require significant investment in marketing.

137


• “Rotterdam is known as a major trading juncture in Europe. This can be seen as a negative giving a

reputation for being transactional, not building long term partnerships – a bit one-dimensional and

seasonal.”

• “I think we have strong cultural similarities.”

• There are some traditional Dutch foods that are virtually unknown in the UK such as Oliebol, Kroket,

Metworst, a huge variety of cheeses and Vla all of which could appeal to UK consumers because they are

similar to other products on the market. We don’t do a very good job at marketing authentic Dutch foods

as a speciality product but it’s possible because other countries have done exactly that.”

• “Fresh produce is synonymous with the Dutch as is pork and bacon as well as dairy. But these are not

brands just general product descriptions.”

• “Europe has more of a common culture and homogenous undertone to it whilst the UK is somewhat

different such as our style of humour which can be critically important to get right when marketing

products in the UK.”

138



• “The Dutch have more of an advantage in fresh produce production because the glasshouse system is

less exposed to the weather. We source a lot from Holland and the produce is always of excellent quality

and suppliers on time. During the winter we rely on Dutch suppliers for tomatoes, cucumbers, peppers

and some herbs.”

• “I believe the Dutch are very strong when it comes to export and scale. There are several Dutch dairy

companies that are very successful and have slick operations.”

• “The Dutch are very efficient and industrial in their approach. Products tend to be more mainstream with

less emphasis on differentiation. Key sectors that spring to mind are dairy and pork.”

• “I can’t see demand for Dutch exports changing a great deal but if they want to get closer to the UK

market it’s not the right model to use.”

• “The Dutch auction markets do not have the level of transparency and traceability that UK buyers are

looking for.”

139


Opportunities

• A stable economy with improving near-to-medium term prospects, which is open to trade and investment.

• A relatively affluent population of 62million (3.7 times that of the Netherlands) with a combined expenditure on food

and drink of +£187billion per annum through retail and food service channels.

• The 4th biggest grocery retail market in Europe with annual sales (food and drink) in excess of £88billion and

CAGR 4%.

– World class grocery retail businesses each with considerable market share, sourcing a considerable range

of food and drink products via highly efficient global and local supply chains.

– Identifiable growth trends in high value product categories such as poultry, salads, fruit, vegetables, ready

meals, processed meats plus others which align with the type of products the UK typically imported from the

Netherlands.

• Extremely diverse food service market made up of global restaurant chains, local cafes and restaurants and

catering businesses with annual sales in excess of £51billion and CAGR of 3%.

– A route-to-market that is dominated by wholesale markets, a model which favours Dutch suppliers.

– Significant clusters of businesses in London and South East to cater for a more affluent, ethnically diverse

population.

• Over 7,000 highly innovative food manufacturers and processors launching +12,000 new products per year

utilising local and global raw materials as well as speciality food ingredients.

• Technically proficient and productive farming industry.

140

Threats

• UK grocery retailers are increasingly adopting supply chain structures that build direct relationships with British

producers and processors in core product categories such as meat, processed meats, liquid milk, seasonal fruit,

vegetables and salads.

– However, whilst promotion of British produce in-store is high, the extent of long-term commitment to sourcing

only British produce varies considerably.

• Recent contamination of processed meat products (e.g. burgers) with horse meat is likely to lead to increased

efforts to by manufacturers to label the country-of-origin of meat used. This is likely to favour UK suppliers and

threaten Dutch meat suppliers and potentially extend to other product categories too.

• UK agricultural industry is strong and in a period of growth driven by domestic demand. Although not 100% self-

sufficient UK producers are capable of achieving a significant amount of domestic demand.

• Since 2007 sterling has lost circa. 20% of its value against the Euro, which as effectively led to higher import costs

for the UK and a weakened position for European suppliers. Exchange rates are notoriously volatile and very

difficult to predict with any accuracy and so it is difficult to foresee how long this situation will remain.

141

SWOT summary

Strengths Weaknesses

•The NL is the single biggest non-domestic supplier of food

to the UK

•Competitive producers of poultry, pigmeat, processed

meats (e.g. ham, bacon), fruit and vegetables.

•NL is innovative and advanced in terms of production

know-how and technologies (e.g. Greenhouse system).

•Entrepreneurial and progressive mindset to agri-food

production – strong in added value products.

•Substantial knowledge base and extensive collaboration

between industry, government and academia.

•Reliance on wholesale markets.

•Knowledge and awareness of Dutch gastronomy in the UK

is low making it more difficult to market unique Dutch food

products.

Opportunities Threats

•The UK has the 4th biggest grocery retail market in Europe

and a thriving food service market.

•Sales of products where the NL has a strong import

presence such as poultry, fruit, vegetables, salad, flowers

and plants are growing.

•UK agri-food sector open to trade and foreign investment.

•Demand for innovation at all stages of the value chain to

meet industry needs.

•The wholesale route-to-market model is under threat from

growing trend for shorter, dedicated and transparent supply

chains.

•Retail and food service buyers moving to a 100% British

sourcing policy on strategic commodity items such as meat,

milk and in-season fresh produce.

•Highly competitive environment with long standing

preferred supplier relationships in place.

142

The way forward for Dutch suppliers (I)

• We believe there are two broad ways in which Dutch suppliers should approach the UK market.

• The difference is distinguished by whether the business is a volume player in the market or a niche player in the

market.

Volume players

• Volume suppliers to the UK market have benefited from a well functioning wholesale market system on both sides

of the channel.

• This has undoubtedly helped the Netherlands to achieve its current position as the leading non-domestic source of

food supply to the UK market.

• However, the wholesale market model is under threat from buyers that increasingly demand short, transparent and

dedicated producer aligned supply chains and – for some commodities - growing support for British product.

• We believe the wholesale market model will be an opportunity for some but it will not be the preferred route-to-

market the major UK buyers would like to use.

• In our view, this leads to an increasing necessity for Dutch suppliers to ‘get closer’ to the UK market in other

ways; for example:

– By establishing direct-supply relationships with UK buyers.

– By utilising a UK based marketing partner.

– Through direct investment in the UK supply chain (M&A or greenfield investment).

143

Export via the ‘traditional’ wholesale market model

The Netherlands is the biggest trading partner in food and drink with the UK and has a competitive

advantage in the production of key commodity products. The strong economic incentive to trade with the

Netherlands will continue to exist because of the economic rational and/or because the climatic conditions

in the UK do not favour domestic production (e.g. fruit).

Rationale:

•Dutch suppliers are in an excellent position as the biggest trading partner with the UK.

•Sustainable underlying economic incentive for UK to import food products

Method:

•Continued export to UK through wholesale markets.

Advantages: Disadvantages:

•Low risk exposure to UK market.

•Established and well functioning route to market.

•Reputation of Dutch exporters high.

•Low prices, influenced by exchange rate.

•Not aligned with current retail sourcing practices and

integrated supply chain model.

•Competition from large scale domestic exporters

More suited to:

•Businesses with low strategic interest/reliance on UK market.

144

Utilise a marketing partner in UK

Production occurs in the Netherlands but produce is marketed through a UK based marketing partner with

existing supply chain contract relationships to provide a route-to-market. For this strategy to work there

needs to be a strong rationale for the marketing partner to co-operate (e.g. volume supply).

Rationale:

•Controlled exposure to UK market.

•Chance to build presence in UK with support of marketing partner with ‘local knowledge’.

Method:

•Production in the Netherlands to supply a UK partner with existing contracts.


•Existing on the ground infrastructure/knowledge.

•Stepping stone to further investment.

•Heavy reliance on UK partner.

•Needs to be reciprocal value between both parties.

•Margin loss to partner – might not be as profitable as

direct exporting.

More suited to:

•Businesses with long term interest in UK but limited resources / appetite to invest directly.

145

Direct investment in UK market

In some cases direct investment in production and/or processing operations is the only way to enter the UK

market in sectors where supply chains are highly integrated and sourcing policies strongly favour

domestic supply (e.g. milk and to some extent fresh meat) .

Rationale:

•Only/most beneficial method of entering UK market in key sectors such as liquid milk, red meat.

•Ability to build permanent strategic position in UK market and overcome country of origin barriers.

Method:

•Acquisition, merger, greenfield investment.


•Permanent presence in market – greater knowledge,

closer relationships.

•Increased potential access to markets closed via

export method.

•High level of investment and risk.

•Scale of investment required generally high, difficult

for SME’s to finance this strategy.

More suited to:

•Businesses with significant strategic reliance on UK market and competing in strategic commodity categories.

146

The way forward for Dutch suppliers (II)

147

Niche players

• The innovative potential of Dutch suppliers provides an excellent platform for Dutch SME’s to create opportunities

at all stages of the value chain.

• The precise opportunities are potentially endless but we have categorised them in three broad areas as follows:

1. ‘Exporting’ high-tech production and processing technologies and agri-food intellectual capital.

Enabled by significant clusters of R&D organisations in Food Valley and close collaboration between

government, academia and industry.

2. Creating higher value products from standard foodstuffs to provide high value solutions to UK

businesses. For example, functional food ingredients such as enzymes, proteins, flavours, colours and

neutraceuticals.

3. Marketing artisanal and traditional Dutch speciality products on a ‘global provenance’ platform.

Current knowledge and awareness by UK consumers of Dutch specialities (e.g. Cheeses, cooked meats,

waffles and so on) is low but, with appropriate marketing, could follow in the footsteps of suppliers from

France, Spain and Italy.

‘Exporting’ high-tech production and processing

technologies and agri-food intellectual capital. Dutch businesses are renowned for being innovative and investing in production technologies such as

glasshouse production and seed potatoes (amongst many others). This core competence is underpinned

by a hard to imitate supporting infrastructure where there is close collaboration between government,

businesses, academic institutions, which nurtures innovation.

Rationale:

•Global challenges such as the need to produce more food with minimal impact on natural resources, producing safe,

secure and affordable food, improving health and wellness, being more sustainable and so on are all highly relevant to the

UK agri-food market.

Method:

•Numerous commercialisation methods e.g. sell, license production technologies directly to businesses in the UK.


•Capitalises on key strength of Dutch businesses and wider

sectors of industry.

•Potentially high financial rewards

•Requires investment by UK businesses (may not be

feasible).

•Competition from UK organisations also working in this

area.

More suited to:

•R&D organisations and businesses with high-technology production solutions looking to expand internationally.

148

Creating higher value products from standard

foodstuffs to provide high value solutions to UK

businesses. Limited geographical scale has meant that Dutch producers work more intelligently to increase the value of

their products, transforming them into processed products, transforming residual products such as waste

into by products and extracting micronutrients from foodstuffs to provide manufacturing solutions with

ingredients such as enzymes, proteins, colours, flavours and neutraceuticals. These solutions are in high

demand by UK food manufacturers.

Rationale:

•High value ingredients which (potentially) enable manufacturers to position their product in a number of key ways

(e.g. natural, low in salt, fat, sugar, providing a functional health benefit and so on)

Method:

•Numerous.


•Significant added value potential.

•High demand.

•Global B-2-B industry, origin less of a concern.

•Competition from large global players e.g. DSM.

•High upfront R&D costs.

More suited to:

•R&D and knowledge intense businesses.

•Spin out businesses from academia

149

Marketing artisanal and traditional Dutch speciality

products on a ‘global provenance’ platform. Countries such as France, Italy and Spain have demonstrated it is possible to build a sustainable market for

speciality produce for high value items such as cured meats, cheeses etc on the basis of global provenance

and authenticity. This strategy would require significant investment in marketing to UK consumers and buyers

to create ‘pull through’ demand for artisanal products.

Rationale:

•Provides access to UK market for artisanal producers with unique products.

•Success of countries such as France, Italy, Spain ‘proof of concept’ for global provenance.

Method:

•Create ‘pull through demand’ by promoting and showcasing authentic Dutch produce through UK trade shows, judging

competitions, collaborative marketing, trade support organisations.

•Numerous routes-to-market.


•New and unique to UK market, possibly provides category

differentiation.

•High levels of investment in marketing.

•Overall profile of Dutch specialities low.

•May require collaboration from other organisations /

businesses.

More suited to:

•Artisanal producers wanting to develop internationally.

•Businesses with a collaborative mindset.

150

Chapter 9: Supporting Information

151

Chapter contents:

•Retailer profiles.

•Further information sources.

http://www.google.co.uk/url?sa=i&rct=j&q=signpost&source=images&cd=&cad=rja&docid=V6iLyzpNNfLS3M&tbnid=4SM159I0C54MbM:&ved=0CAUQjRw&url=http://ovh.org.uk/2011/05/change-in-accessing-our-services-3/&ei=XjzNUeioL4Kn0AWy1oCQDg&bvm=bv.48572450,d.ZGU&psig=AFQjCNGXSAF9LoiCGUyihALHVg3Jma6qww&ust=1372491141009211

Banner Total sales

2012 (£m) Format

Number of

stores 2012

Sales area

(sq ft)

Average

sales area

(sq ft)

Tesco, Tesco Extra,

Tesco Metro 21,813

Superstores /

Supermarkets 673 16,197,995 24,068

Tesco Extra 14,032 Hypermarket 238 17,050,992 71,643

One Stop, Tesco

Express 4,751

Convenience &

Forecourt 2,186 4,579,000 2,095

Tesco.com, Tesco

Direct 2,766 Online n/a n/a n/a

Source: IGD Datacentre

• Tesco is committed to a six point

plan to “build a better Tesco” in

the UK. Areas of focus for

2013/14 are:

• Service & staff: recruiting more

staff and investing in training

• Stores & formats: focusing

expansion on smaller formats and

remodelling space in larger stores

• Price & value: using Clubcard to

personalise marketing and

communicating new Price

Promise coupons-at-till to boost

shopper loyalty

• Range & quality: Completing

relaunch of Tesco own brand and

relaunching Tesco Finest

• Brand & marketing: creating a

warmer feel and stronger trust in

the Tesco brand

• Clicks & Bricks: further rollout of

Click & Collect drive and more

focus on Tesco Direct

Source: IGD

Banner Total sales

2012 (£m) Format

Number of

stores

2012

Sales area

(sq ft.)

Average

sales area

(sq ft.)

Sainsbury’s 18,042 Superstores /

Supermarkets 527 15,883,226 30,139

Sainsbury’s 2,759 Hypermarkets 60 4,178,550 69,643

Sainsbury’s

Local 1,490

Convenience &

Forecourt 525 1,226,278 2,336

Sainsbury’s 868 Online n/a n/a n/a

• Sainsbury’s is working to strengthen value perceptions, with initiatives such as Brand Match coupons-at-till, more impactful promotions and through the completion of its three year relaunch and overhaul of its mid tier by Sainsbury’s brand.

• Non-food growth is being accelerated through new ranges in hero categories such as clothing, cookshop and papershop and by introducing a 15,000 sq ft non-food offer to more stores.

• Convenience is a key growth focus with 500 stores now open and a continuing commitment to open 1-2 stores per week.

• Sainsbury’s is committed to becoming an ‘omnichannel retailer’ with mobile and digital entertainment key parts of this strategy. Source: IGD

Banner Total sales

2012 (£m) Format

Number of

stores

2012

Sales area

(sq ft.)

Average

sales area

(sq ft.)

Asda 18,885 Superstores /

Supermarkets 500 2,709,750 31,581

Asda

Wal-Mart

Supercentre 2,410 Hypermarket 32 15,790,657 84,680

Asda 907 Online n/a n/a n/a


• Asda aims to become the clear number two retailer in food and number one non-food retailer.

• The Asda Price Guarantee underpins retailer’s value positioning with its guarantee to be 10% cheaper than rivals.

• Asda is also focusing on quality and innovation with the expansion of its customer tested ‘Chosen by You’ products and its partnership with Leiths School of Food and Wine to ensure the quality of its Extra Special range.

• Counters are a key source of investment as Asda builds its fresh food focus.

• Asda has developing strengths in small store retailing with its Asda Supermarket format and is actively pursuing a multi-faceted digital strategy to extend its reach and build shopper engagement. Source: IGD

Banner Total

sales 2012

(£m)

Format

Number

of

stores

2012

Sales area

(sq ft.)

Average

sales area

(sq ft.)

Morrisons 17,905 Superstores /

Supermarkets 486 13,382,996 27,537

M local 9 Convenience &

Forecourt 12 37,997 3,166

Morrisons 1 Online n/a n/a n/a


• Morrisons strategy revolves around

three areas: driving the topline,

increasing efficiency and capturing

growth.

• By the end of 2013, Morrisons aims

to rollout its new Fresh Format

concept to 100 more stores and

complete the renewal of its own

brand offer.

• Morrisons is committed to becoming

a major player in convenience

through the rollout of its M local

format, with development

concentrated on the South-East.

• Morrisons plans to launch its first

online grocery offer by Jan 2014.

• Morrisons non-food offer will be

limited in-store to priority categories

such as childrenswear; a broader

range will be offered online.

• Communicating value and in-house

craft skills better will be key to Morrisons marketing strategy.

Source: IGD

Banner

Total

sales

2012

(£m)

Format

Number of

stores

2012

Sales area

(sq ft.)

Average

sales area

(sq ft.)

The Co-operative

Food 4,773

Superstores /

Supermarkets 980 8,924,143 9,106

The Co-operative

Food 2,738

Convenience &

Forecourt 1,909 3,986,371 2,088


• The Co-operative Group is the

largest consumer co-operative in

the world and it aims to further

increase membership to 20m by

2020.

• A new advertising strapline “Here

for you for life” aims to emphasise

shopper awareness of the retailer’s

value, quality, ethical and

convenience strengths.

• The Co-operative is committed

to expanding its portfolio of

small format stores further,

faces increasing competition in this

sector from other major food

retailers.

• Improving ranging and availability

and customer service are key

priorities for the business.

• The Co-operative is exploring how

best to pursue an online grocery

strategy.

Source: IGD

Banner Total

sales

2012 (£m)

Format

Number

of stores

2012

Sales

area

(sq ft.)

Average

sales area

(sq ft.)

M&S 3,283 Department

Store Food Hall 299 2,841,855 9,505

Marks & Spencer

Simply Food 2,484

Convenience &

Forecourt 399 1,742,462 4,367

Marks & Spencer

Simply Food 19

Superstores /

Supermarkets 4 43,917 10,979


• M&S operates food halls in its

department stores as well as

standalone small format stores.

• Over the last two years M&S has

introduced deli counters, in-store

bakeries, a stronger fresh offer

and exclusive to the UK

international brands are being

introduced to key stores to move

M&S’s positioning closer to a food

specialist.

• M&S is developing its estate and

making stores easier to shop with

segmentation according to

location, affluence, demographics

and competitors.

• M&S has upped its focus

innovation and tiering within its

heavily private label offer.

• It also aims to build its position in

beauty through its ‘Best of

Science and Nature’ concept.

Source: IGD

Banner Total sales

2012(£m) Format

Number of

stores

2012

Sales area

(sq ft.)

Average

sales area

(sq ft.)

Waitrose Food &

Home 225 Hypermarket 6 322,551 53,759

Waitrose 4,878 Superstores /

Supermarkets 248 4,658,663 18,785

Waitrose, Waitrose

Local 115

Convenience &

Forecourt 36 159,263 4,424

Waitrose 198 Online n/a n/a n/a


• Waitrose differentiates its offer

through focus on quality, service

and ethics.

• While primarily a premium

operator, Waitrose is keen to

emphasise its value credentials

through its Brand Price Match

commitment (to match Tesco),

more eye catching promotions,

special offers focused on events

and deals through the MyWaitrose

loyalty card.

• Waitrose is working towards a long-

term target of 600 stores and

£10bn turnover by 2020 - double

that of 2010.

• The ‘little Waitrose’ convenience

format is a key growth channel

with up to 300 stores planned by

2020.

• Online is a major opportunity, with

drive through and non-store

collection pods now being rolled

trialled.

Source: IGD


Banner Total sales 2012

(£m) Format

Number

of stores

2012

Sales

area

(sq ft.)

Average

sales

area (sq

ft.)

Aldi 3,599

Hard &

Soft

Discount

465 4,124,300 8,869

• Aldi is the leading discounter in the

UK market.

• In the current economic climate it is

performing very strongly with

effective communication of its

keen pricing and quality

comparability with branded

products striking a chord with

shoppers.

• Increased tiering within its private

label offer and the inclusion of

strategic brands in selected

categories is broadening Aldi’s

appeal to more shoppers.

• A stronger fresh produce and

meat offer is enabling Aldi to

increase traction with shoppers

undertaking full weekly shops.

• The development of a new smaller

store format should enable Aldi to

increase its penetration of urban

areas.

Source: IGD


Banner Total sales

2012 (£m) Format

Number

of stores

2012

Sales

area

(sq ft.)

Average

sales area

(sq ft.)

SPAR 2,886 Convenience &

Forecourt 2,600 4,002,022 1,539

• Spar aims to be the largest

convenience retailer in the UK and

is focused on the small-store

sector.

• Key priorities include strengthening

value perceptions through own

brand investment, enhancing its

fresh offer and aligning stores

better with customer missions and

meal occasions.

Banner Total sales

2012 (£m) Format

Number

of stores

2012

Sales area

(sq ft.)

Average

sales area

(sq ft.)

Budgens 375 Superstores /

Supermarkets 377 358,438 9,688

Budgens,

Londis 726

Convenience &

Forecourt 322 547,625 1,701

• In the UK, Musgrave supports

franchised stores under the

Budgens and Londis banners in

Britain and also the Centra and

SuperValu fascias in Northern

Ireland .

• These independently owned stores

operate in local communities

providing convenient retail

solutions.

Source: IGD


Banner Total sales

2012 (£m) Format

Number

of stores

2012

Sales

area

(sq ft.)

Average

sales area

(sq ft.)

Lidl 2,720 Hard & Soft

Discount 635 6,083,224 9,580

• Lidl is also benefiting from the

uncertain economic climate and is

showing strong growth

• Its value positioning shows a

strong customer appeal and has

been developing this further

through investment in its fresh offer

and communication of provenance.

• Wine is also a category of

opportunity.

Banner Total sales

2012 (£m) Format

Number

of stores

2012

Sales

area

(sq ft.)

Average

sales area

(sq ft.)

Iceland 2,478 Superstores /

Supermarkets 750 3,697,403 4,930

• Iceland is a frozen food focused

retailer operating limited line

easy-to -shop stores with a

clear value positioning.

• Though the frozen offer remains

private label dominated, Iceland

is working more with brands to

broaden its appeal.

Source: IGD

Major companies(1) - Meat

Name Ownership Turnover £m(2) Web

2 Sisters Food Group Family 2,300+ http://www.2sfg.com/index.asp

Tulip Foreign owned 957 http://www.tulipltd.co.uk/

Cranswick PLC 653 www.cranswick.co.uk

Anglo Beef Processors Family 577 www.abpfoodgroup.com

Dawn Meats Foreign owned 298 www.dawnmeats.com

Danish Crown UK Foreign owned 269 www.danishcrown.com

JW Galloway Family 151 http://www.scotbeef.com/

Direct Table Foreign owned 101 http://www.directtable.co.uk/

Dovecote Park Family 98 http://dovecotepark.com/

162

(1) The Grocer/OC&C

(2) Approximate

http://www.2sfg.com/index.asp

http://www.tulipltd.co.uk/

http://www.cranswick.co.uk/



http://www.abpfoodgroup.com/

http://www.dawnmeats.com/



http://www.danishcrown.com/



http://www.scotbeef.com/

http://www.directtable.co.uk/

http://dovecotepark.com/

Major companies(1) - Poultry


Moy Park Foreign owned 736 http://www.moypark.com/index.php

Bernard Matthews Family 339 www.bernardmatthews.com

Faccenda Family 337 www.faccenda.co.uk

Banham Poultry Family 96 www.banhampoultryuk.com

O’Kane Group Family 138 http://www.okanepoultry.com/

163

(1) The Grocer/OC&C

(2) Approximate

http://www.moypark.com/index.php

http://www.bernardmatthews.com/



http://www.faccenda.co.uk/



http://www.banhampoultryuk.com/



http://www.okanepoultry.com/

Major companies(1) – Fresh Produce


Wm Morrison Produce PLC 1,013 www.morrisons.co.uk

Argent Food Group Family 446 http://www.argentgroup.com/

Fresca Group Family 353 http://www.frescagroup.co.uk/

G’s Group Holdings Family 281 http://www.gs-fresh.com/

Produce World Family 251 http://www.produceworld.co.uk/

Berry Gardens Family 186 http://www.berrygardens.co.uk/Pages/defa

ult.aspx

Albert Bartlett & Sons Family 182 www.albertbartlett.co.uk

Greenvale AP Family 173 http://www.berrygardens.co.uk/Pages/defa

ult.aspx

William Jackson Food Group Family 168 http://www.wjs.co.uk/

Dole Fresh Foreign owned 122 http://www.dolefreshuk.com/

Del Monte Foreign owned 113 http://www.delmonte.com/

Barfoots of Botley Family 76 http://www.barfoots.co.uk/

164

(1) The Grocer/OC&C

(2) Approximate




http://www.argentgroup.com/

http://www.frescagroup.co.uk/

http://www.gs-fresh.com/



http://www.produceworld.co.uk/

http://www.berrygardens.co.uk/Pages/default.aspx


http://www.albertbartlett.co.uk/

http://www.albertbartlett.co.uk/



http://www.wjs.co.uk/

http://www.dolefreshuk.com/

http://www.delmonte.com/

http://www.barfoots.co.uk/

Major companies(1) - Dairy Name Ownership Turnover £m(2) Web

Dairy Crest Group PLC 1,630 www.dairycrest.co.uk

Arla Foods Foreign owned 1,435 www.arlafoods.co.uk

Muller Wiseman Dairies www.muller-wiseman.co.uk

Milk Link Family 547 www.milklink.com

Muller Dairy UK subsidiary 401 www.mullerdairy.co.uk

The Kerrygold Company Foreign owned 249 www.kerrygold.co.uk

Meadow Foods Family 247 www.meadowfoods.com

The First Milk Cheese Company Family 206 www.firstmilk.co.uk

Danone UK subsidiary 195 www.danone.co.uk

Yeo Valley Group Family 178 https://www.yeovalley.co.uk

Lactalis McLelland Foreign owned 168 www.mclelland.co.uk

Glanbia Cheese Foreign owned 122 www.glanbia.com

165

(1) The Grocer/OC&C

(2) Approximate












http://www.milklink.com/



http://www.mullerdairy.co.uk/



http://www.kerrygold.co.uk/



http://www.meadowfoods.com/








http://www.danone.co.uk/




https://www.yeovalley.co.uk/



http://www.mclelland.co.uk/



http://www.glanbia.com/



Major companies(1) – prepared foods


Bakkavor Foreign owned 1,650 www.bakkavor.com

Greencore PLC 1,200 http://www.greencore.com/

Samworth Brothers Family 599 www.samworthbrothers.co.uk

Kerry Foods Foreign owned 500 http://www.kerrygroup.com/index.asp

Birds Eye UK subsidiary 457 http://www.birdseye.co.uk/

McCain Foods UK subsidiary 351 http://www.mccain.co.uk/

Adelie Foods Private equity 250 http://www.adeliefoods.co.uk/

Noon Products Family 131 http://www.noon.co.uk/

Pork Farms Private equity 130 http://www.pork-farms.co.uk/

HJ Heinz Frozen and chilled foods Private equity 118 www.heinz.co.uk

CP Foods Foreign owned 111 http://www.cpfoods.co.uk/

Branston Family 110 http://www.branston.com/

166

(1) The Grocer/OC&C

(2) Approximate




http://www.greencore.com/

http://www.samworthbrothers.co.uk/



http://www.kerrygroup.com/index.asp

http://www.birdseye.co.uk/

http://www.mccain.co.uk/

http://www.adeliefoods.co.uk/

http://www.noon.co.uk/

http://www.pork-farms.co.uk/



http://www.heinz.co.uk/




http://www.cpfoods.co.uk/

http://www.branston.com/

Major companies(1) – branded manufacturing


Associated British Foods PLC 9,280 www.abf.co.uk

Mondelez International PLC www.mondelezinternational.com

Tate & Lyle PLC 3,607 www.tateandlyle.com

Premier Foods PLC 2,682 www.premierfoods.co.uk

Unilever UK subsidiary 2,172 www.unilever.co.uk

Mars UK subsidiary 1,594 www.mars.com/uk

Coca-Cole UK subsidiary 1,492 www.coca-cola.co.uk

Nestle UK UK subsidiary 1,374 www.nestle.co.uk

United Biscuits Private Equity 1,185 www.unitedbiscuits.com

Findus Group Private Equity 1,092 www.findusgroup.com

167

(1) The Grocer/OC&C

(2) Approximate

http://www.abf.co.uk/



http://www.mondelezinternational.com/



http://www.tateandlyle.com/



http://www.premierfoods.co.uk/



http://www.unilever.co.uk/



http://www.mars.com/uk




http://www.coca-cola.co.uk/






http://www.nestle.co.uk/




http://www.unitedbiscuits.com/



http://www.findusgroup.com/



Major companies(1) – branded manufacturing

168

(1) The Grocer/OC&C

(2) Approximate


Princes Foreign owned 1,081 www.princes.co.uk

Britvic PLC 981 www.britvic.co.uk

HJ Heinz Company UK subsidiary 736 www.heinz.co.uk

R&R Ice cream Private equity 354 http://www.rr-icecream.co.uk/

Weetabix Private equity 315 http://www.weetabix.co.uk/

Burtons Foods Private equity 296 http://www.burtonsbiscuits.com/

Nutricia UK subsidiary 292 http://www.nutricia.co.uk/

General Mills UK UK subsidiary 234 www.generalmills.co.uk

Walkers Snack Foods UK subsidiary 224 www.walkers.co.uk

Tropicana UK subsidiary 224 www.tropicana.co.uk

http://www.princes.co.uk/



http://www.britvic.co.uk/






http://www.rr-icecream.co.uk/




http://www.burtonsbiscuits.com/

http://www.nutricia.co.uk/

http://www.generalmills.co.uk/








http://www.tropicana.co.uk/



Major companies – wholesale/cash & carry and

food service operators

169


Palmer & Harvey PLC 4,227 http://www.palmerharvey.co.uk/

Booker Wholesale PLC 3,179 http://www.booker.co.uk/home.aspx

Bestway Cash & Carry Family owned 1,920 http://www.bestway.co.uk/

Musgrave retail partners Family owned 1,370 http://www.musgravegroup.com/en/index.p

hp

Name Ownership Turnover £m Web

Compass PLC 16,905 (global)* http://www.compass-group.com/index.htm

Sodexo PLC 18,000 (global)* http://uk.sodexo.com/uken/about-

sodexo/group-presentation.aspx

Aramark PLC 12,000 (global)* http://www.aramark.co.uk/

Brake Brothers Private equity 1,673 http://www.brake.co.uk/

3663 UK subsidiary 1,694 http://www.3663.co.uk/#

(1) The Grocer/OC&C

(2) Approximate

http://www.palmerharvey.co.uk/

http://www.booker.co.uk/home.aspx

http://www.bestway.co.uk/

http://www.musgravegroup.com/en/index.php

http://www.musgravegroup.com/en/index.php

http://www.compass-group.com/index.htm



http://uk.sodexo.com/uken/about-sodexo/group-presentation.aspx





http://www.aramark.co.uk/

http://www.brake.co.uk/

http://www.3663.co.uk/

Information sources Organisation Description Web: Information

Agriculture & Horticulture

Development Board (AHDB)

A statutory levy board, funded by farmers,

growers and others in the supply chain.

Umbrella organisation for sector specific

bodies:

http://www.ahdb.org.uk/ Market information

Industry news

R&D transfer

British Pig Executive (BPEX) Pig sector body of the AHDB http://www.bpex.org.uk/ Market information

Industry news

R&D transfer

English Beef and Lam Executive

(EBLEX)

Beef and lamb sector body of the AHDB

http://www.eblex.org.uk/ Market information

Industry news

R&D transfer

Potato Council Potato sector body of the AHDB

http://www.potato.org.uk/ Market information

Industry news

R&D transfer

DairyCo Dairy sector body of the AHDB

http://www.dairyco.org.uk/ Market information

Industry news

R&D transfer

Home Grown Cereals Authority Cereals sector body of the AHDB

http://www.hgca.com/content.t

emplate/0/0/Home/Home/Ho

me.mspx

Market information

Industry news

R&D transfer

Horticulture Development Council Horticulture sector body of the AHDB

http://www.hdc.org.uk/ Market information

Industry news

R&D transfer

170

http://www.ahdb.org.uk/

http://www.bpex.org.uk/

http://www.eblex.org.uk/

http://www.potato.org.uk/

http://www.dairyco.org.uk/

http://www.hgca.com/content.template/0/0/Home/Home/Home.mspx



http://www.hdc.org.uk/

Information sources

Organisation Description Web: Information

Institute of Grocery Distribution

(IGD)

Representative body of grocery retailers.

Registered as a charity. http://www.igd.com/ Grocery retail market data

and insight

Industry news

Food and Drink Federation Representative body of UK food and drink

manufacturers

http://www.fdf.org.uk/ Data, information and

insight of food

manufacturing industry

British Retail Consortium Trade association representing all retailers

in UK (not just grocery)

http://www.brc.org.uk/brc_

home.asp

Authoritative market

knowledge, insight and

high profile lobbyists

British Soft Drinks Association the national trade association representing

the collective interests of producers and

manufacturers of soft drinks including

carbonated drinks, still and dilutable drinks,

fruit juices and smoothies, and bottled

waters.

http://www.britishsoftdrink

s.com/

•Influencing government

•Communicating with the

media

•Promoting sustainability

•Enhancing sector skills

and competitiveness

The Chartered Institute of

Purchasing & Supply

To promote and develop high standards of

professional skill, ability and integrity

among all those engaged in purchasing and

supply chain management

http://www.cips.org/ Training

Qualifications

Knowledge

171

http://www.igd.com/

http://www.fdf.org.uk/

http://www.brc.org.uk/brc_home.asp

http://www.brc.org.uk/brc_home.asp

http://www.britishsoftdrinks.com/

http://www.britishsoftdrinks.com/

http://www.cips.org/

Information sources

Organisation Description Web: Information

Department for Environment Food

and Rural Affairs (Defra)

Government department responsible for

environment, food and rural affairs http://www.defra.gov.uk/ Extensive data/information

of agriculture in UK

Department of Health (DoH) Government department responsible for public

health

https://www.gov.uk/govern

ment/organisations/departm

ent-of-health

Campaigns to improve

health profile of food

Food Standards Agency (FSA) Government department responsible for food

safety

http://www.food.gov.uk/ Responsible for food safety

and hygiene across the UK.

We work with businesses to

help them produce safe

food, and with local

authorities to enforce food

safety regulations.

The Food and Environment

Research Agency (FERA)

Government department responsible for food

and environment research (e.g. Crop

research)

http://www.fera.defra.gov.u

k/

Agri-food research outputs

Department for Business,

Innovation and Skills

Government department responsible for all

manner of trade and industry

http://webarchive.nationalar

chives.gov.uk/+/http://www.

berr.gov.uk/index.html

Guidance on doing

business/investing in UK

Office for National Statistics Official statistical authority of the UK http://www.ons.gov.uk/ons/i

ndex.html

Comprehensive statistics

databases on UK

HM Customs & Excise Royal authority responsible for collection of

taxes

http://www.hmrc.gov.uk/ Comprehensive source of

information on UK tax

172

http://www.defra.gov.uk/

https://www.gov.uk/government/organisations/department-of-health







http://www.food.gov.uk/

http://www.fera.defra.gov.uk/

http://www.fera.defra.gov.uk/

http://webarchive.nationalarchives.gov.uk/+/http:/www.berr.gov.uk/index.html



http://www.ons.gov.uk/ons/index.html

http://www.ons.gov.uk/ons/index.html

http://www.hmrc.gov.uk/

Major UK wholesale markets

New Spitalfields Market (fruit & veg)

New Covent Garden Market (fruit, veg &

flowers)

Smithfield Market (meat)

Billingsgate Market (fish)

Western International (fruit)

Birmingham Wholesale Market

(multiple products)

Manchester New Smithfield Market

(multiple products)

Liverpool Market

(multiple products)

Glasgow Wholesale Market

(multiple products)

The National Association of British Market Authorities (NABMA) estimates annual total turnover for traditional UK

wholesale markets at £2.5 - £3bn

173

NB trader directories

can be accessed via

individual wholesale

market websites

http://www.google.co.uk/url?sa=i&rct=j&q=UK+map+outline&source=images&cd=&cad=rja&docid=odLAdiKHJ3plWM&tbnid=4cekS383x5n8IM:&ved=0CAUQjRw&url=http://commons.wikimedia.org/wiki/File:Uk_outline_map_2.PNG&ei=z055Uej6KeHG0QXT6oHQCA&bvm=bv.45645796,d.d2k&psig=AFQjCNFsdFv0Vl_B7F7Ogz9Ipql_puC44w&ust=1366990915065678

http://www.wholesalefruitvegetableflowers.co.uk/




http://www.newcoventgardenmarket.com/

http://www.smithfieldmarket.com/

http://www.cityoflondon.gov.uk/business/wholesale-food-markets/billingsgate/Pages/default.aspx

http://www.westerninternational.co.uk/

http://www.birmingham.gov.uk/cs/Satellite?c=Page&childpagename=SystemAdmin/CFPageLayout&cid=1223092598370&packedargs=website=4&pagename=BCC/Common/Wrapper/CFWrapper

http://www.manchester.gov.uk/newsmithfieldmarket

http://liverpool.gov.uk/leisure-parks-and-events/markets/

http://www.citymarketsglasgow.co.uk/Wholesale_Fruit_Market/

Academic* and scientific research bodies

Institute of Food Research

Leatherhead Food Research

Campden BRI

Reading University

Newcastle University

Cranfield University

Bangor University

Aberystwyth University

Nottingham University

Sheffield University

Lancaster University

BBSRC**

*Only includes academic organisations with a significant interest/capability in agri-food.

**Biotechnology and Biosciences Scientific Research Council 174

http://www.google.co.uk/url?sa=i&rct=j&q=UK+map+outline&source=images&cd=&cad=rja&docid=odLAdiKHJ3plWM&tbnid=4cekS383x5n8IM:&ved=0CAUQjRw&url=http://commons.wikimedia.org/wiki/File:Uk_outline_map_2.PNG&ei=z055Uej6KeHG0QXT6oHQCA&bvm=bv.45645796,d.d2k&psig=AFQjCNFsdFv0Vl_B7F7Ogz9Ipql_puC44w&ust=1366990915065678

http://www.ifr.ac.uk/

http://www.leatherheadfood.com/

http://www.campdenbri.co.uk/

http://www.reading.ac.uk/

http://www.ncl.ac.uk/

http://www.som.cranfield.ac.uk/som/

http://www.bangor.ac.uk/

https://www.aber.ac.uk/

http://www.nottingham.ac.uk/

http://www.shef.ac.uk/

http://www.lancs.ac.uk/

http://www.bbsrc.ac.uk/home/home.aspx

Airport, sea port, rail and road infrastructure

“In recent decades the UK has seen the transformation of its ports industry. It is now a thriving and competitive industry, with specialist terminals capable of handling large volumes. Key Ports on the eastern side of the UK for trade with the Netherlands includes, Felixstowe, Grimsby, Immingham, Tees and Hartlepool” Flight times from the Netherlands are short, at around an hour

The strong network of both sea and air ports are all connected by rail or major road networks (see Figure 2), allowing for easy transport of goods around the UK. Due to the UK’s size transport times are low compared to many other larger European countries.

175

Agent, distributor & wholesaler

• The terms “agent” “distributor” and “wholesaler” are referred to throughout this report. For clarification these terms - and the

contexts in which they might be used – are described below.

• Agent. A person(s) that is authorized to act on behalf of another (sometimes called the ‘principal’) to create a relationship

with a third party. The principal authorises the agent to act on their behalf (the terms of what they agent will/wont do are

usually set out in a contractual relationship). In this context an agent in the UK might be used by a Dutch business to create

a relationship with a customer (e.g. a buyer) to negotiate a sale of goods. The agent would normally be used because they

have specific knowledge / contacts in the UK market and / or because of a cost / time advantage as opposed to establishing

a direct buyer / supplier relationship. The agent does not normally take ownership of the goods at any point.

• Distributor. A person(s) that is responsible for the transportation of goods from the seller to the buyer. The distributor is

responsible for the logistics of physically moving the goods (sometimes in a controlled (e.g. chilled/frozen) environment).

The distributor does not normally get involved in commercial negotiations between buyer and seller.

• Wholesaler. A person(s) responsible for the resale (i.e. sale of goods without transformation) of goods to buyers (which

might include retailers, agents, brokers, other wholesalers and so on). Wholesalers typically buy in bulk amounts and repack

and redistribute in smaller amounts. In the UK ‘traditional’ wholesale markets such as New Covent Garden Market and

Smithfield market products such as fresh produce, flowers and meat. There are also warehouse wholesale businesses

which market fresh products as well as ambient groceries.

• In the UK agri-food market there is sometimes little or no difference between these entities. For example, Brakes and 3663

are referred to as ‘distribution wholesalers’ as they perform both functions.

176

177

Matt Incles

Senior Consultant, Promar International E: [email protected]

M: +44 (0) 7694122587

Contact