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Exporter Guide FOOD & BEVERAGE IN THEUNITEDKINGDOM Market Profile May 2011 This document is one

Exporter Guide

FOOD & BEVERAGE IN THEUNITEDKINGDOM

Market Profile May 2011

This document is one of a series of free information tools for exporters produced by New Zealand Trade and Enterprise. New Zealand Trade and Enterprise provides a wide range of standard services and sophisticated solutions that assist businesses through every stage of the export process. For information or advice, phone New Zealand Trade and Enterprise on 0800 555 888, visit www.nzte.govt.nz, or contact your New Zealand Trade and Enterprise client manager.

CONTENTS 1 MARKET STRUCTURE 3 1.1 Market Overview 3 1.2 Market Drivers 4 1.3 Import
CONTENTS
1 MARKET STRUCTURE
3
1.1 Market Overview
3
1.2 Market Drivers
4
1.3 Import Trends
5
1.4 Key Players in the Market
8
1.5 Regulatory
10
1.6 Sustainability
12
2 MARKET ENTRY AND DEVELOPMENT
12
2.1 Market Entry Strategies
14
2.2 Points of Differentiation
14
2.3 Long Term Strategic Issues for Exporters to Consider
15
2.4 Distribution Channels
15
2.5 Pricing
16
3 MARKET RESOURCES AND CONTACTS
17
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Exporter Guide | UNITED KINGDOM | Food & Beverage| May 2011
1 MARKET STRUCTURE All figures are in $US unless otherwise specified 1.1 Market Overview According
1
MARKET STRUCTURE
All figures are in $US unless otherwise specified
1.1
Market Overview
According to the Economist Intelligence Unit, the United Kingdom has a substantial
demand for imported food and beverage products. It is estimated that about 20 percent of
the United Kingdom's agricultural imports consist of unprocessed products. Consumer-
ready products account for around 50 percent of agricultural imports, one-third of which
are not produced in the United Kingdom. Of the remaining 30 percent of agricultural
imports (highly processed products), around one-half are not native to the United
Kingdom. i
The United Kingdom food and beverage market is mature and intensely competitive, with
large multi-national food and beverage companies dominating the market. New Zealand
companies will need to carefully consider ways to make their product attractive.
Innovative, niche and specialist New Zealand products with a unique selling point have
the best prospect of doing well in this market.
New Zealand companies also need to consider that products from the European Union
have the advantage logistically and benefit from preferential trading agreements.
Food Retail ii
The United Kingdom food retail industry had total revenue of $186.1 billion in 2009,
representing a compound annual growth rate (CAGR) of 4.2 percent for the period
spanning 2005-2009.
The performance of the industry is forecast to slow somewhat, with an anticipated CAGR
of 3.4 percent for the five year period 2009-2014, which is expected to drive the industry
to a value of $219.4 billion by the end of 2014.
Foodservice iii
The United Kingdom foodservice market had total revenue of $28 billion in 2009,
representing a CAGR of 3.3 percent for the period spanning 2005-2009.
The performance of the market is forecast to accelerate, with an anticipated CAGR of 3.4
percent for the five year period 2009-2014, which is expected to drive the market to a
value of $33 billion by the end of 2014.
Café and restaurant sales proved the most lucrative for the United Kingdom foodservice
market in 2009, with total revenues of $13.6 billion, equivalent to 48.9 percent of the
market's overall value. In comparison, sales of fast food generated revenues of $7.8 billion
in 2009, equating to 27.9 percent of the market's aggregate revenues.
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Food Processing The United Kingdom’s agricultural sector accounts for less than 1% of GDP. More
Food Processing
The United Kingdom’s agricultural sector accounts for less than 1% of GDP. More than
two-thirds of agricultural output is bought by the United Kingdom's food and drinks
industry, which is the third largest in the European Union after France and Germany. The
largest sub-sector is the meat-processing industry, which accounts for just over 20
percent of the total food industry in value terms. Other important sectors are dairy, fruit
and vegetable processing, and the cereal and grain-milling industry. iv
Beverages
Non-alcoholic
It is predicted that demand will continue to show a swing from carbonates to stills
(fruit/vegetable juices, smoothies, bottled water), as consumers recognise the value in
healthy alternatives. As a result, carbonates are switching their focus increasingly to diet,
sugar-free and holistic substitutes. v
Despite rapid growth in the last decade bottled water has suffered from an increasingly
bad image in recent years owing to environmental concerns over the processing and
packaging of bottled water. Consumers also have concern over value for money as
claims that bottled water is no better for you than tap water have increased. The outlook
for this product is uncertain.
Alcoholic
According the Economist Intelligence Unit, the alcoholic drinks market has seen a steady
fall in volume and value sales in recent years. Growth in the wine, spirits, and cider/perry
sectors has not been enough to counter the ongoing decline in demand for beer (still the
largest sector in the UK market). Sales of lighter imported beers and niche beers from
microbreweries are expected to hold up better than those of heavier domestic ales. vi
For information on the wine market in the United Kingdom, see the NZTE publication Wine
in the United Kingdom.
1.2 Market Drivers
Private Label
The United Kingdom has one of the most advanced private label markets in the world
(valued at around $100 billion). The United Kingdom's major supermarket chains
dominate the private label market and on average 40-50 percent of products in their
stores are private label. Originally, private label goods were a copy of a branded product,
but today they are often innovative. They give UK retailers the opportunity to diversify their
product ranges and develop new revenue streams. vii
International
The UK population is increasingly diverse and well-travelled and this has lead to an
interest and increased demand for international “ethnic” food products and beverages.
UK consumers are eager to try new products and flavours and this means that there is a
growing range of such products available in supermarkets.
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Exporter Guide | UNITED KINGDOM | Food & Beverage| May 2011
Convenience There has been a long-term rise in the number of women working outside the
Convenience
There has been a long-term rise in the number of women working outside the home, and
also single-person households are becoming increasingly common. This has lead to a
rising consumer demand for convenience foods, such as ready meals, and on-the-go
snacking products. It should also be noted that some 40 percent of all meals are
consumed outside the home, and the UK has one of the most sophisticated food-service
sectors in the world. viii
Food safety / Health consciousness
Consumers in the United Kingdom are becoming increasingly concerned with food safety
and more health conscious in the decisions that they make around food choice. This
means that there is a growing demand for organic, locally grown and ethically produced
food. Consumers are also looking for brands with reduced fat, sugar, and salt. A trend
noted by the Economist Intelligence Unit is that consumers are becoming more willing to
pay a premium for food products that are perceived to be higher quality and healthier.
They note that this has prompted many private label brands to compete at the premium
level and introduce their own lines of organic and fair trade products in competition with
the more established branded products. ix
Ethical / Sustainability
Consumers in the United Kingdom place a high level of importance on ethical issues and
sustainability. Large supermarket chains such as Tesco and Sainbury’s expect their
suppliers to have addressed these issues and have a clear and through sustainability
proposition. Sustainability is now a given and products that do not adequately address
this will be at a distinct disadvantage in the United Kingdom market. For more information
on sustainability in the United Kingdom see section 1.6 of this profile.
1.3 Import Trends x
The United Kingdom is New Zealand’s fifth largest export market for food and beverage
products. In the year ended December 2010 New Zealand exported over $NZ 1.15 billion
worth of food and beverage products to the United Kingdom. This was a decrease of 13.6
percent from the previous year, though it should be noted that much of this overall
decrease reflects the drop in exports of sheepmeat. However, it must be noted that New
Zealand’s exports to the United Kingdom, for most key food and beverage products, have
decreased over the past 12 months. It can be seen that New Zealand faces stiff
competition for market share from the European Union and Australia.
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Exporter Guide | UNITED KINGDOM | Food & Beverage| May 2011
New Zealand’s Top Ten Food & Beverage Exports to the United Kingdom ($NZ millions) %
New
Zealand’s
Top
Ten
Food
&
Beverage
Exports
to
the
United
Kingdom
($NZ millions)
%
Change
Competition
(% share of UK’s imports in
Product
2008
2009
2010 10/09
2009)
Sheepmeat
634.4
723.4
606.6
-16.2
NZ (78%), Australia (11%),
Ireland (4%)
France (34%), Italy (14%),
Wine
249.3
285.1
300.6
5.4
Australia (14%), Spain (8%),
Chile (7%), South Africa (5%),
NZ (4%)
France (26%),
Apples
57.3
58.6
40.3
-31.2
South Africa (22%), NZ (12%),
Chile (7%), USA (6%)
Ireland (27%), France (21%),
Cheese
55.4
58.2
37.6
-35.3
Italy (11%), Germany (10%),
Netherlands (7%),
Belgium (7%), (NZ 2%)
Honey, Natural
29.1
30.8
31.7
3.0
NZ (18%), China (15%),
Germany (11%), Mexico (10%)
NZ (27%), Denmark (19%),
Edible Offal
20.9
29.0
27.0
-6.9
Netherlands (15%), Ireland
(13%), Australia (12%)
Netherlands (35%),
Onions, Shallots, Garlic
27.2
20.2
18.7
-7.8
Spain (21%), NZ (9%),
Poland (8%), Mexico (7%),
Egypt (6%)
Ireland (38%), Uruguay (21%),
Beef (Frozen)
25.8
27.0
17.6
-34.7
Germany (8%),
Netherlands (8%), NZ (7%)
Ireland (71%),
Beef ( Fresh or Chilled)
12.8
10.8
10.3
-4.5
Netherlands (8%),
Australia (4%),
(NZ less than 1%)
Germany (21%), France (17%),
Bread, Pastry, etc.
11.6
11.1
9.7
-12.3
Ireland (14%), Belgium (14%),
(NZ less than 1%)
Source of data: Statistics NZ, via The World Trade Atlas
Kiwifruit and butter are also large export earners for New Zealand in the United Kingdom
market. Butter enters the United Kingdom via Belgium and Denmark. Because the
Continental preference is not for Anchor style butter the majority of New Zealand butter
imports to the European Union are destined for the United Kingdom.
In 2010 the United Kingdom imported approximately $US 52.7 billion of food and
beverage products.
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The United Kingdom’s Top Ten Supplying Markets for Food and Beverage Imports (2010) $US Billions
The United Kingdom’s Top Ten Supplying Markets for Food and Beverage Imports
(2010) $US Billions
Source: International Trade Centre, Trade Map
NB: New Zealand ranked 13th and supplied approximately 2 percent of the United
Kingdom’s food and beverage imports.
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1.4 Key Players in the Market United Kingdom Retail Grocery Market Share 2010 2008 2009
1.4 Key Players in the Market
United Kingdom Retail Grocery Market Share 2010
2008
2009
2010
Tesco
30.7%
30.6%
30.6%
Asda
16.8%
17.1%
16.9%
Sainsbury’s
15.8%
16.1%
16.3%
Morrisons
11.4%
11.8%
11.9%
Co-operative
5.2%
5.4%
6.4%
Waitrose
3.8%
3.9%
4.2%
Aldi
2.9%
3.0%
3.0%
Lidl
2.3%
2.3%
2.4%
Iceland
1.80%
1.80%
1.80%
Netto
0.70%
0.70%
0.70%
Other Multiples
-
-
-
Independents
2.50%
2.30%
2.20%
Source: IGD Retail Analytics, United Kingdom Country Presentation, March 2011
“The Big 5” xi
The United Kingdom’s grocery retail market is dominated by the “big five” supermarkets.
Together they control over 80 percent of the market share.
They are: Tesco (market
share 30.6 percent), Asda (market share 16.9 percent), Sainsbury’s (market share 16.3
percent), Morrisons (market share 11.9 percent), and Co-operative (market share 6.4
percent).
Tesco targets the middle market, offering both economy and premium products.
Asda and The Co-operative pitch themselves slightly below Tesco and Sainsbury’s slightly
above.
Discounters xii
Discounters are price-focused and usually offer a more limited range of products than
supermarkets. They also tend to carry a larger percentage of private label products.
It is estimated that discounters account for approximately 4 percent of the total United
Kingdom grocery retail market.
Examples are: Lidl (580 stores), Aldi (485 stores), Netto (197 stores), Iceland, Budgens
The convenience sector xiii
The United Kingdom convenience store market is highly fragmented, with a large number
of operators. According to the International Grocery Distributors (IGD) the convenience
sector has a 21 percent share of the United Kingdom grocery market. Store operators
may be divided into several types.
 Multiples (stores with 10+ company owned stores, non-affiliated)
These stores account for approximately 13 percent of the convenience sector.
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 Co-operatives (co-operative society convenience stores) UK food co-operatives are moving away from their traditional
 Co-operatives (co-operative society convenience stores)
UK food co-operatives are moving away from their traditional supermarket-type
operations and towards convenience retailing. The largest co-op is The
Cooperative Group (1703 stores), followed by Mid Counties (152 stores) and
Southern Cooperative (95 stores).
 Petrol Stations / Forecourt
This format accounts for approximately 15 percent of the convenience sector in the
United Kingdom. United Kingdom supermarkets are key players in this sector
along with the main petrol companies.
Major players: Esso (592 stores), Shell (582 stores), Total (505 stores), Tesco
(450 stores), BP (351 stores), Morrisons (292), Sainsbury’s (254 stores), The Co-
operative (208 stores), Asda (179 stores), Murco (172 stores), Waitrose (14
stores).
 Convenience outlets at supermarkets
Major supermarket chains are moving into the convenience format. For example
Tesco has 1162 convenience stores (Tesco Express, Tesco Metro), Sainbury’s
has 342 (Sainbury’s Local). Other key players are Martin McColl, the Simply Food
format of Marks & Spencer, Whistlestop (SSP), and Mills.
 Symbols groups and franchises (stores affiliating to a symbol group, branded
fascia retail club or franchise).
This format comprises approximately 37 percent of the convenience sector.Major
players in this sector are Spar UK (2,580 stores), Premier/Booker (2,507 stores),
Bestway (2,164 stores), Landmark (2,051 stores), Musgrove (1,963 stores),
Costcutter (1,580 stores), and Nisa Today’s (1,480 stores).
 Non-affiliated independents (organisations with less than 10 stores, non-affiliated)
There are 20,860 unbranded independent grocery retailers in the United Kingdom.
Independent store numbers are in decline, down 5 percent on 2009.
Food halls xiv
Food halls are usually situated within large department stores such as Harrods. Most
customers are shopping for premium and specialist food and beverage products for gifting
or special occasions and these food halls are well-known for this type of product.
Key Players: Harrods, Harvey Nichols, Fortnum & Mason, Selfridges, House of Fraser,
Whole Foods Market, Partridges, Lewis & Cooper, Holland & Barrett.
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1.5 Regulatory Information provided in this section is for reference only. When negotiating supply contracts
1.5 Regulatory
Information provided in this section is for reference only. When negotiating supply
contracts and before beginning actual export, companies are advised to consult closely
with their importer or distributor.
General Food Law
The United Kingdom is a member of the European Union and follows all European Union
Directives, regulations and obligations.
The two major regulatory authorities are the Department for Environment, Food and Rural
Affairs (DEFRA), and the Food Standards Agency (FSA).
DEFRA has responsibility for animal and horticultural product import regulations, and
agricultural policy. www.defra.gov.uk
The FSA has responsibility for food standards, regulations, quality, and health and
consumer protection: www.food.govt.uk
British Retail Consortium (BRC) Standards
The BRC is a trade association representing the whole range of retailers, from the large
multiples and department stores through to independents, selling a wide selection of
products through centre of town, out of town, rural and virtual stores.
The BRC Global Standards are a suite of four industry-leading Technical Standards that
specify requirements to be met by an organisation to enable the production, packaging,
storage and distribution of safe food and consumer products. Originally developed in
response to the needs of UK members of the British Retail Consortium, the Standards
have gained usage world-wide and are specified by growing numbers of retailers and
branded manufacturers in the EU, North America and further afield.
BRC certification is not mandatory or legally required though certification is a pre-requisite
for supplying to most of the major retailers in the United Kingdom.
For more information on the standards see the BRC Global standards website:
www.brcglobalstandards.com.
Labelling requirements
The FSA is responsible for the implementation of European Union labelling requirements
in the United Kingdom and for any additional national requirements. Advice on food
labelling may be found on the FSA's website at: www.food.gov.uk.
The Food Labelling Regulations 1996 contain the main set of rules governing the labelling
of foods. For a copy of the regulations see: www.england-legislation.hmso.gov.uk.
The FSA provides a useful guidance note on the Regulations at www.food.gov.uk. Food
labelling is also subject to certain acts and regulations which have wider application, and
brief descriptions of these are given in the notes.
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Some types of foods and beverages (such as: bottled water, milk products, meat products, honey)
Some types of foods and beverages (such as: bottled water, milk products, meat
products, honey) have specific labelling requirements. More information on this can be
found on the DEFRA website at this link: ww2.defra.gov.uk
Registration
All food products of animal origin must come from European Union approved premises. A
list of European Union approved premises is available at: ec.europa.eu
Licensing
Some food and beverage products are subject to import licence restrictions. Information
about these licensing requirements is available on the website of the Rural Payments
Agency www.rpa.gov.uk (under RPA Schemes > External Trade).
Health Claims Regulations
The Regulations cover voluntary nutrition and health claims made on foods; labelling,
presentation and advertising; trademarks and brand names. In this context, examples of
nutrition claims are: low fat, no added sugar, high in fibre. The European Food Safety
Authority (EFSA) has the lead role in implementing the legislation and the Food Standards
Agency is the UK’s relevant competent authority.
On the FSA website, you will find links and tables which show the final version of the
United Kingdom list of health claims which was submitted to the European Commission on
30 January 2008 - see www.food.gov.uk.
Genetically Modified (GM) Foods
Genetically modified (GM) foods and other types of novel foods can only be marketed in
the European Union if they have passed a rigorous safety assessment.
For further information see: food.gov.uk/gmfoods.
Novel Foods
A
novel food is defined as a food or food ingredient that does not have a significant history
of
consumption within the European Union before 15 May 1997. More information about
safety assessments under the Novel Food Regulation (EC) 258/97 can be found this link:
food.gov.uk/gmfoods.
Organic products
The European Commission has recognised that some countries operate production rules
and systems of inspection equivalent to that operating within the European Union. New
Zealand is one of the European Union recognised third countries. Imports of organic
products into the United Kingdom and European Union from these countries are permitted
without prior approval from DEFRA provided that:
the conditions of their equivalence agreement under Commission Regulation (EEC) No
94/92 are met; and
Certificate of Inspection (CoI) is produced for each consignment entering the European
Union by one of the approved third country inspection bodies listed in the Annex to
Regulation (EEC) 94/92, as amended. The CoI needs to be checked and endorsed by the
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Exporter Guide | UNITED KINGDOM | Food & Beverage| May 2011
relevant Port Health Authority in the United Kingdom or Customs Official for most other parts
relevant Port Health Authority in the United Kingdom or Customs Official for most other
parts of the European Union, and
the importer is registered with one of the United Kingdom organic certifying authorities
approved by DEFRA, such as the Soil Association
More detailed information is available on the DEFRA website: www.defra.gov.uk.
Duties and tariffs
Value Added Tax (VAT)
The standard rate of VAT is 20 percent. However, most food and some drinks which are
sold through retail channels are zero-rated, though food service outlets must still charge
the standard rate of VAT on everything they serve.
Further information about VAT is available on the United Kingdom Government’s website:
www.direct.gov.uk.
Tariffs
Tariffs vary depending on the product being imported.
For more information on United Kingdom tariffs and a tool that allows you to search for
tariff rates by product see the following link at the United Kingdom Business Link website:
www.businesslink.gov.uk.
Quotas
Quotas are applicable for several categories of foods such as beef, sheep meat and dairy
products. To establish if a quota applies it is important to check the UK tariff commodity
code for the product. See the United Kingdom Customs website customs.hmrc.gov.uk for
more detail.
1.6 Sustainability
In the United Kingdom there has been growth in the number of ‘ethical consumers’ who
are increasingly concerned about the environment, food provenance, and wasteful
packaging of food and beverage products even during a recession.
Food miles and ‘Buy Local’ movements
The “Food miles” issue is no longer as prominent in the media as it was, with a growing
understanding that it is the carbon footprint or sustainability that is key. However, media
coverage has raised consumer awareness of the issue and it is easily grasped by
consumers so many British companies are pushing the buy local stance. According to
research conducted by the International Grocery Distributors (IGD), 38 percent of British
shoppers expect to be buying more locally produced foods in the coming year. xv Several
United Kingdom supermarkets have made commitments to buy locally. An example of a
major retailer addressing the buy local trend is the announcement by supermarket chain
Morrisons that it is now sourcing of all of its fresh meat (beef, lamb, pork and poultry) from
within the United Kingdom. xvi
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Carbon footprint The concept of the carbon footprint has become increasingly popular over the past
Carbon footprint
The concept of the carbon footprint has become increasingly popular over the past year
with consumers, and is likely to be one of the key indicators that consumers will use to
measure their own contribution to climate change. As a result, a number of companies are
taking steps to measure and reduce the carbon footprint of their products. The PAS 2050
specification is now the main reference standard that retailers draw on when determining
their own approaches to the carbon footprint, including labelling. Information about PAS
2050 is available at the BSI British Standards website.
Food provenance
Food provenance is gaining ground as an issue for both consumers and retailers, and
particular attention is being paid to animal welfare issues. For example, high-profile
campaigns to raise the awareness of standards in the poultry farming industry has seen a
number of major United Kingdom supermarkets commit to phasing out battery farmed
poultry. The International Grocery Distributor’s recent research showed that 32 percent of
British shoppers claimed to be changing their purchasing behaviour as a result of concern
over animal welfare issues. xvii
Packaging
The United Kingdom has implemented the European Directive on Packaging and
Packaging Waste (94/62/EC) through two sets of regulations. Responsibility for these is
shared between the Department for Environment, Food & Rural Affairs (DEFRA) and the
Department for Business, Enterprise & Regulatory Reform (BERR). BERR leads on
European Union single market aspects of the EC Packaging and Packaging Waste
Directive, European Union negotiations, and has responsibility over the United Kingdom’s
domestic Packaging (Essential Requirements) Regulations 2003, as amended. At a local
level, enforcement is through Trading Standards Departments of local councils. Further
information is available at the BERR website.
DEFRA leads on the United Kingdom waste policy and all other aspects of domestic
implementation of the Packaging Directive, including the setting of recycling and recovery
targets, through the Producer Responsibility Obligation (Packaging Waste) Regulations.
Further information is available at the DEFRA website.
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2 MARKET ENTRY AND DEVELOPMENT 2.1 Market Entry Strategies Access to buyers Access to supermarket
2 MARKET ENTRY AND DEVELOPMENT
2.1 Market Entry Strategies
Access to buyers
Access to supermarket buyers can be very difficult. For example Tesco insists on
receiving a written proposal before they will consent to any discussion. Some retailers can
be more forthcoming but their buyers and technologists can be hard to reach.
The process of obtaining a listing
In order to maximise the chance of getting a meeting, New Zealand companies should
prepare a short presentation highlighting their unique point of difference and why this is
relevant to the retailer’s customers’ needs. Buyers are interested in price; but also in real
product differentiation; marketing or promotion to pull stock though; market or consumer
research you have done; how well you understand the consumer; how you will guarantee
top quality customer service and your ethical code. The lead time to get a meeting with a
buyer can be several weeks or even months. It is more productive to arrange meeting
timings before travelling to the United Kingdom, rather than trying to set up high level
meetings at short notice.
Samples
Samples are often difficult to import without an import licence. However they are often
crucial to getting a listing. New Zealand companies may need to employ specialist export
companies to help them with this vital element. Buyers need demonstrable proof of any
claim, especially if they have to convince other people within their own organisation.
Need for an importer
New direct suppliers are not encouraged by supermarket chains as the cost and
inconvenience of adding another supplier to their stock management, food safety and
logistical systems is high. They much prefer to simplify and rationalise their supplier base.
One route to minimise this potential difficulty is to conform to British Retail Consortium
(BRC) standards (see section 1.5 of this profile for more information on BRC standards),
so that product safety and quality are assured, and to use an existing supplier to the
supermarket as your distributor. Alternatively some companies act as consolidators of
products to minimise the number of deliveries to their central warehouses.
Importers are key to doing business in the United Kingdom. Food importing is a specialist
business, and the importer plays an important role in navigating the hurdles of United
Kingdom/European Union food law. The importer is very useful in keeping up to date with
United Kingdom and European Union law, especially in specialist areas. It is essential that
a New Zealand company has an importer/distributor, at least in the frame if not actually
appointed, before making a pitch for a listing. Without this the company may not be
considered seriously.
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In-market resource It is not impossible to supply United Kingdom retailers direct. However there are
In-market resource
It is not impossible to supply United Kingdom retailers direct. However there are few
instances where this is a viable option. A United Kingdom importer or sales agent / broker
is often vital to ensure prompt clearance of customs and to meet customer service
standards. Most retailers expect to be able to speak to someone in the same time zone.
A competent local contact is therefore very important to good customer service. This
person must be responsive and have some executive authority.
2.2 Points of Differentiation
The United Kingdom is already well supplied from across the globe; therefore a relevant
innovation or a unique selling point (USP) is necessary. Historically being from New
Zealand might have been enough of a USP but this is no longer the case.
One New Zealand company has been successful because they developed an innovative
tasty product with a relevant consumer benefit (of being a traditional pudding but
individually sized and microwavable) and they also offered exemplary customer service.
One New Zealand wine has succeeded because its innovation was to offer consumers the
chance to enjoy carbon neutral Sauvignon Blanc. Residue free apples for example would
therefore be a logical proposition for New Zealand fruit growers because it capitalises on a
consumer concern about pesticides.
Retailer’s private label is a route that could be worth exploring for New Zealand
companies, especially one that cannot afford the cost, duration and risk for branding
investment. Retailers can be very loyal to their suppliers if they continue to offer
innovation and excellent service. As New Zealand is perceived as logistically difficult they
will probably insist on a buffer stock being held in the United Kingdom, especially at
launch when demand is unpredictable. This cost will be borne by the supplier. If the own
brand route is being considered then ideally an experienced own label manager should be
employed as this is likely to save the company a lot of money in negotiations as well as
helping customer service.
2.3 Long Term Strategic Issues for Exporters to Consider
The United Kingdom consumer is becoming increasingly ethically driven. Despite the
pressures from belt tightening ethics are here to stay; as exemplified by Fair Trade or
animal welfare. Sustainability is essential, and increasingly thorough provenance is
expected. Supermarkets will not even list products they consider to be unethical and
consumers rely upon them to ensure this. A sustainability communication strategy is
important, as well as a continuous sustainability improvement process. Exporters cannot
afford to sit on their laurels but must be seen to be constantly striving to improve their
sustainability.
Social media is growing and this enables rapid mass communication and also micro
communication. A good tweet could yield substantial dividends but an ethical gaffe could
reach millions. For exporters wanting to target the iPhone generation social media is
essential. It also promotes direct communication with the consumer, which can yield many
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benefits such as better understanding of consumers’ needs, the opportunity to take a larger share
benefits such as better understanding of consumers’ needs, the opportunity to take a
larger share of the profit chain and at the same time to protect the brand’s route to market.
Exporters must pull their products through, not just push them into distribution. Many
retailers have sophisticated algorithms to determine if a product will be retained or
delisted. Frequently they track the first 12 weeks of a product’s sales and if they are
inadequate it will be delisted. A marketing and PR campaign may be essential to ensure
survival.
2.4 Distribution Channels
Exporters need to decide if they want to supply an ingredient to targeted industrial food
processors, an ingredient to food service outlets, a branded finished product or a private
label finished product. This will determine the distribution channel.
Food service: Brakes, 3663 and DBC are the main distributors to restaurants and pubs,
whilst Sodexo dominates the “for cost” institutional market.
Cash & Carries: These provide the opportunity to sell to food service and independents.
Bookers and Makro are major players.
Premium independents: Hider, Petty Wood, Cotswold Fayre, Blueberry Group and
others distributors access farmers’ markets, garden centres and premium independents
for specialist food stuffs. They also distribute to top end retail like Harrods, Fortnum and
Mason.
Access to the multiples for brands and private label has been covered earlier in section
2.1.
Online shopping is growing rapidly even for perishables and produce. This is being
spearheaded by the major retail chains but exporters can set up their own operations too.
2.5 Pricing
The pound has weakened against the New Zealand dollar exchange rate and this has put
pressure on many exporters margins as retailers have been very reluctant to put prices up
and expect exporters to absorb the margin loss. One exporter publicly announced price
rises together with expected volume sales reductions, in order to restore its margins.
Exporters need to determine what pricing the market will bear, rather than doing a cost
price upwards calculation, as, if a market will bear higher prices it is sensible that the
exporter should benefit from this. A European pricing approach is becoming increasingly
necessary as many retailers are multinational in their scope and they will play different
national prices off against each other.
Provision in the cost structure must be made to pay for marketing and PR support.
Premium independents and food service are less sensitive on pricing, but the volumes are
much lower than the retail chains.
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3 MARKET RESOURCES AND CONTACTS ORGANISATION WEBLINK Department for Environment, Food and Rural Affairs (DEFRA)
3 MARKET RESOURCES AND CONTACTS
ORGANISATION
WEBLINK
Department for Environment, Food and Rural Affairs
(DEFRA)
ww2.defra.gov.uk
Food Standards Agency (FSA)
food.gov.uk
HM Revenue and Customs
www.hmrc.gov.uk
Business Link (International Trade Section)
www.businesslink.govt.uk
Food and Drink Federation
www.fdf.org.uk
Institute of Grocery Distribution (IGD)
www.igd.com
British Retail Consortium (BRC)
www.brc.org.uk
Soil Association
www.soilassociation.org
The Grocer (trade publication)
www.thegrocer.co.uk
TRADE EVENTS
WEBLINK
There are relatively few United Kingdom only food and beverage trade shows. The largest food and
beverage trade shows in Europe are Anuga in Cologne and SIAL in Paris. PLMA in Amsterdam is the best
show for private label. All these shows have a high United Kingdom attendance, as do Fruit Logistica in
Berlin and ISM for confectionery and bakery in Cologne.
www.nzwine.com/events/annual-trade-tasting-
NZ Winegrowers Annual Trade Tasting Event
london
Food and Drink Expo UK
www.foodanddrinkexpo.co.uk
Natural and Organics Product Europe
www.naturalproducts.co.uk
PLMA Annual "World of Private Label"
www.plmainternational.com
International Trade Show
London International Wine Fair
2011.londonwinefair.com
Specialty and Fine Food Fair
www.specialityandfinefoodfairs.co.uk
The Restaurant Show
www.therestaurantshow.co.uk
World Fruit and Vegetable Expo
www.wfvexpo.com
The International Food and Drink Event
www.ife.co.uk
OTHER NZTE PUBLICATIONS
 United Kingdom Country Brief
 Wine Market in The United Kingdom
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i Economist Intelligence Unit, United Kingdom; Consumer Goods and Retail Report, published November 2010 ii
i Economist Intelligence Unit, United Kingdom; Consumer Goods and Retail Report, published
November 2010
ii Datamonitor, Food Retail in the United Kingdom, published June 2010
iii Datamonitor, Foodservice in the United Kingdom, published September 2010
iv Economist Intelligence Unit, United Kingdom; Consumer Goods and Retail Report, published
November 2010
v Economist Intelligence Unit, United Kingdom; Consumer Goods and Retail Report, published
November 2010
vi Economist Intelligence Unit, United Kingdom; Consumer Goods and Retail Report, published
November 2010
vii USDA, United Kingdom: Retail Foods, published February 2011
viii Economist Intelligence Unit, United Kingdom; Consumer Goods and Retail Report, published
November 2010
ix Economist Intelligence Unit, United Kingdom; Consumer Goods and Retail Report, published
November 2010
x Statistics NZ, via The World Trade Atlas
xi International Grocery Distributors (IGD), United Kingdom Country Presentation, published
March 2011
xii International Grocery Distributors (IDD), United Kingdom Discounters, published March 2011
xiii International Grocery Distributors( IGD), UK Convenience, March 2011
xiv USDA, Key UK Retail Outlet Profiles, February 2011
xv International Grocery Distributors (IDG), Top Shopper Trends for 2011, published February
2011
xvi Morrisons Press Release, Now all fresh meat at Morrisons is 100% British, Morrisons
website, link: http://www.morrisons.co.uk/corporate/press-office/corporate-releases/Now-all-
fresh-meat-at-Morrisons-is-100-British
xvii International Grocery Distributors (IDG), Top Shopper Trends for 2011, published February
2011
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Use of and reliance on the information/products/technology/concepts discussed in this publication, and the suitability of
these for your business is entirely at your own risk. You are advised to carry out your own independent assessment of this
opportunity. The information in this publication is general; it was prepared by New Zealand Trade and Enterprise (NZTE)
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