UK market: Why buyers can no longer expect supply to come automatically

HANDSHAKE

GILES
John Giles

The routes to market are changing fast in the UK, meaning well-organised growers and suppliers have more options than ever before to get their produce to customers. Buyers in all their guises, therefore, no longer can expect supply to come automatically, be it from the UK or overseas.

To understand what fresh produce suppliers will expect from their buying customers in the future and vice versa,
John Giles, Divisional Director at agricultural consultancy company Promar International in the UK will join the Educational Seminar Programme at The London Produce Show and Conference 2018 on Thursday 7 June. Here, PBUK interviews Giles about the complexity of buying fresh produce going forward.

Q: You’re presenting at The London Produce Show and Conference about the routes to market in the UK. Can you provide an overview of your seminar?

A: I’m going to explore the numerous routes to market in the UK that are developing for fresh produce suppliers, and what expectations suppliers might realistically have from their [buying] customers in the future. 

Well-organised growers and distributors have more market options and opportunities than ever before to supply their produce, but the buyer (whoever they might be) can no longer expect supply to come automatically (be it from the UK or overseas) because each of these routes to market – whether they are large and mature, or niche and expanding – are in competition with one other.

This makes the job of choosing to be in the right one more demanding than ever before, and, for the buyer, it makes the task of actually buying more complex than in the past.

Q: So what’s changed? What are these new routes to market in the UK?

A: In the ‘old days’, there were two options for selling produce on the UK market; the wholesale markets or the supermarkets, and that was pretty much it. These days, there are so many different channels, which is good for consumers who want to buy whatever they want, whenever they want. 

There is still the wholesale market and the retail market – although the supermarkets have changed significantly in the past five years with the appearance of discount retailers, the growth in online shopping and the continued growth of the foodservice sector, albeit with slower growth in the past year or so. 

Added to that, there are now various box schemes, grocery home delivery services, farm shops, garden centres and convenience stores, all of which provide fresh produce to the end consumer. The number of options for both UK and overseas suppliers to the UK are infinitely more than 10-15 years ago. Some enterprising UK producers are also looking at exports too.

Q: In what ways is buying more complex today?

A: No one can take for granted the produce they want to source in perhaps they way they have done before. Buyers in the UK shouldn’t assume that everyone, especially from overseas sources of supply, wants to sell to them. In the past, the options were limited, and buyers were very much in control in terms of what they bought and how it was procured. Now, that is not so. There is a whole cocktail of things happening in the market too, and, for me, there’s not an automatic reason why all suppliers should want to supply all of their produce to the UK and its traditional channels. 

Q: What else is influencing the decision to supply the UK?

A: In the past, Europe, North America and Japan were the main markets for the big international suppliers, especially those in Southern Hemisphere countries. Now, their options are considerably more broad – they can supply the emerging markets of Asia, the Middle East, Latin America and even Africa.

Suppliers have got their eyes on other parts of the world and that might be changing their market priority. There’s also increasing concern in the UK about food security, which is being accentuated by Brexit and what will happen when that comes into force. With all the changes going on, it’s not guaranteed that all produce will come to the UK.

Q: How can buyers remain attractive in the face of growing competition within UK channels as well as from external markets?

A: For me, it’s not just about what buyers or, indeed, suppliers need to do – it’s about both sides working much more closely together and engaging with their supply chain. Whether you are one of the largest retail multiples or a much smaller, niche-scale buying business, you’ve got to work closely with your suppliers to get the produce you want. You need to talk sensibly to your suppliers about your game plan, help set out a vision for what you expect and how it will be achieved. You have to become partners.

If you look at the range of pressures on the supply chain – whether commercial, environmental or regulatory – the option of not working closely together is limited. Across the world’s agricultural markets, there is volatility in farm gate prices, weather conditions, energy prices and exchange rates. Plus, in the case of the UK there is Brexit, and there are other concerns around food waste, plastic usage, etc. 

All of these things make it challenging for both the supplier and the buyer, so trying to address all these complex issues individually will be very difficult. Everyone at every stage in the supply chain needs to be proactively engaged too – the packer, the logistics provider, the supplier of agricultural inputs, and even sometimes the consumer. The emphasis shouldn’t always be on the buyer to drive change; others have to respond too. 

As always with any challenge, there will be opportunities for those businesses at the top of their game, those who are well informed and those who have solid partnerships.

Q: So, what will suppliers expect from their buying customers going forward?

A: Historically, the focus has been on agreeing good, sustainable prices that enable suppliers to reinvest in their business, to make a return on their investment and to make a living. Rather than the conversation being all about price, I think growers want assurances from which ever customer they choose that they will have a long-term future, and they want part of the deal to recognise the investments they make into better and new varieties, environmental responsibility, better packaging and improved logistics. It needs to be a more holistic relationship; it can’t just be about suppliers putting fruit and vegetables on a lorry, boat or plane and the customer sending money back. 

Q: Buyers have certainly started to work more closely with their suppliers in this respect. Do you think their efforts need to go further? 

A: Some businesses are inherently much better than others, and there have been big strides forward made in the past five to 10 years. But I don’t think you can ever reach a situation where enough has been done. There are many good growers and exporters around the world, as well as in the UK, who know how to grow fruit and veg, and how to transport it in good, if not excellent, condition. The real challenge now, and it’s been on the cards for a long time, is ensuring genuine sustainability of supply. This applies to following good agricultural practices, building a resilient supply chain and taking care of the environment, water and labour. Those who don’t rise to this challenge will be caught out. 

Q: How exactly do you envisage the collaboration between buyers and suppliers working?

A: Buyers of all types have got to try to help suppliers understand where they are going as a business. Growers and distributors want to feel inherently confident in what their customer is doing, in what they expect from their suppliers and where the buyer is going as a business. 

To give one example from the agriculture industry, processing companies in the dairy sector have started to offer longer-term deals on pricing, i.e. they pay a fixed price in some cases for milk for three years. By comparison, the produce sector, where the pressures are ultimately no different to dairy farmers, contracts still often work on a season by season basis

Retailers and other buyers have to look at developing partnerships and setting out what their expectations are to give growers and distributors the confidence to supply. Don’t just think about this year or next year – think about the longer term. We’ve got some really good produce companies in the UK who would make ideal and very good partners. They are keen to partner up with their buying customers too.

Q: What about overseas suppliers – how should they approach the new market reality in the UK? 

A: Suppliers need to make a strategic decision regarding whether the UK is still a critical market. If so, they need to try to understand what’s happening in the UK, how consumers are behaving and what is happening in the rest of supply chain in terms of innovation. They need to try to understand Brexit as another aspect of market regulation. There are no easy routes to market these days, including the myriad of them in the UK.

Q: Do you feel the UK is still an attractive market? 

A: Yes, the UK will still be a very attractive market, even after March 2019 [when the UK leaves the European Union]. Post-Brexit, some aspects won’t change, but it won’t ever be quite the same in the UK, either. That said, there will still be opportunities. What Brexit will do is probably accelerate the pace of change we have seen in the past five years or so. 

Growers and exporters around the world need to work out where the UK fits in terms of their long-term development. Many produce companies and countries have spent a lot of time building up their position on the UK market, and even though the attraction of emerging markets in Asia, Africa, the Middle East etc. remains very strong, these are still very challenging markets. They may have strong growth rates, but remember this growth is coming from a fairly small starting point. Emerging markets are also very competitive because everyone wants to be there. 

Q: Why is the UK an appealing destination?

A: There are 65 million people living in the UK. In relative terms, it’s still a wealthy market where consumers have high disposable income. The market is pretty well defined. Plus, it has a very good enabling environment. From the macro-economic perspective, doing business in the UK, compared to many other parts of the world, is good, although it may not be perfect. The legal systems work (if you need them), the banking systems are good too, and, generally, the physical infrastructure is much better than in many other parts of the world.

On top of that, the UK can’t grow all the fresh produce that it needs; it’s not self-sufficient and there are some things it just can’t grow because of the climate. Furthermore, UK consumers are increasingly interested in where their food comes from. UK consumers also respond to promotional activity and social media. UK consumers like new products and new varieties too. We also have a set of world-class retail customers and a diverse foodservice sector. 

Q: What are UK consumers demanding at present? 

A: Some of the current consumer trends in the UK actually play strongly in to the hands of the fresh produce sector. There is an increasing interest in veganism and reducing meat consumption through concepts like ‘Meat Free Monday’. There is still consumer interest in organics and increasing encouragement to eat a healthy, well-balanced diet. The fresh produce industry now has to stand up on its own two feet to make its own compelling argument as to why consumers should buy more fruit and veg. 


 

John Giles will be speaking as part of the Educational Seminar Programme at The London Produce Show and Conference 2018 (LPS18).

Join John’s seminar on Stage 2, The Buckingham Suite, at 16.00 on Thursday 7 June. 

Register your place at the LPS18 here. 

Explore the agenda for the event here.

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