Editor’s Letter no. 2 – What change may come

The UK’s Food and Drink Industry finds itself at a pivotal moment, buffeted by five major changes that will define it over the next decade.

Chief among them looms Brexit. Exiting the Single Market without alternative trade deals in place could dampen the ability of businesses to both export and procure the produce needed for domestic consumers. On the upside, buccaneering and creative organisations may find new territories open to their products and those with strong UK supply chains could see foreign competition leave the market.

The combination of Brexit and Michael Gove, the radical Secretary of State for the Environment, will also bring significant change to the countryside. Subsidies from the EU’s Common Agricultural Policy total £3.21bn a year and make up 61% of farm income in England alone. These will be phased out post-EU and replaced with funding awarded not on size but on a number of variables, chiefly each farm’s efficient maintenance of the countryside.

And farming has a productivity problem. 7% of farms produce 55% of agricultural output. The industry needs time to improve and subsidies may provide a buffer during this transition. However, in its current state, there is huge opportunity for bold innovators to help this industry realise its massive potential.

Government also leads the third force shaping the industry. The Conservatives have discovered an appetite for legislating on food and drink. Fed by the success of the Sugar Tax, the government is introducing a ban on selling energy drinks to children and is mulling further legislation on sugar following targets to reduce sugar across the board by 2020. Nimble businesses that can respond quickly to this new landscape have the chance to grow.

Retailers are following the government’s lead. Supermarkets have implemented their own bans and big changes on plastic packaging are in the offing.

These businesses themselves are being disrupted by the rise of the discounters. As outlets selling fewer SKUs prove their worth, the multiples are shedding brands to better control prices, creating a challenging environment for companies seeking stockists. However, Amazon, armed with its recent purchase of Whole Foods Market, and Ocado are waiting in the wings promising to bring a long-awaited digital revolution to the grocery market.

Innovation of this nature represents the fifth major change facing the industry, but it is this sort of ingenuity that may provide the eventual solutions that will deal with the above challenges. The industry can be confident in the inventiveness of the businesses that operate within it. The wave of new brands that are meeting consumer demand for health-focussed, free-from and vegan foods is a good example of this. And it is only one example. From delivery apps to street food markets, the industry is ever-adapting and will continue to play a major role in the nation, whatever changes come its way.

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