Relevance is key for UK retail

VIDEO: Denis Punter discusses the future of the UK’s production, retail and wholesale sectors

Speaking exclusively to Produce Business UK, Denis Punter, chairman of Total Produce UK, gives his perspective on the future of UK supply and retail

With the European Union (EU) enduring prolonged political and economic instability, and promising new produce suppliers and consumption markets emerging outside the region, the big challenge ahead for markets including the UK will be to remain relevant and attractive as competition for the world’s fruit and veg supply hots up.

So says Denis Punter, chairman of Total Produce UK, one of world's largest fresh produce businesses, who believes the industry needs to respond and adapt to significant changes that lie around the corner.

“Whether you’re a retailer or a supplier, if you’re not relevant you won’t survive,” Punter tells Produce Business UK. “Whilst the population of Europe is growing I don’t see massive increases in consumption. That means there’s going to be limited potential for growth for many, which will impact on retailers and produce suppliers.”

The turmoil the UK retail sector is currently experiencing is also affecting other EU markets  says multinational operator Punter, which will ultimately have a knock-on effect on the whole supply chain. “We’ve all got to find a different way to become more efficient and more effective. I’m sure the industry will respond because it always has.”

Challenges for UK producers

As the EU implements solutions to boost the region’s economy as a whole, UK growers in particular could see significant challenges ahead. Already, the devaluation of the euro in recent weeks has made overseas product more attractive to UK retailers.

“The issue is there will be opportunities for the EU to export product which, of course, is the whole point of quantitative easing and the depreciation of the currency,” points out Punter.

“There will be an impact on UK growers, I’m sure. Suddenly, if you’re an apple producer in Poland, for instance, your product is far more attractive to a UK retailer, and even more so if you’re a Dutch tomato grower.”

Punter says it will be interesting to see in these circumstances whether UK retailers remain as supportive as they would generally profess to be of national growers who have already come through some tough years.

Since the financial collapse of 2007 funding has become difficult for growers not only in the UK but around the world, which has placed enormous constraints on their ability to grow, develop and invest, he says. “The question retailers need to ask themselves is this: do they want a vibrant supply base with vibrant growers?,” adds Punter. “What they have to try to work out is how they can help the growers so they can deliver the product the retailers want.

“I don’t know if every buyer will see that picture but the people at the top of the retail industry do understand that picture without a doubt. However, if you ask most growers honestly they would say they don’t see that coming through at a grassroots level.”

Retaining overseas suppliers

UK growers are not alone in facing increased competition either, says Punter. In future, the UK import market will have to work harder to attract increasingly sophisticated suppliers who are opting to spread their risk across multiple global destinations, including emerging markets.

“It was quite common, certainly in my early days, to go to somewhere in Chile and find a grower supplying one shipper in the US and one in the UK that supplied one or two retailers,” Punter explains. “Now they don’t think that way. They think on a global platform and about how they can spread their load and maximise their returns. And they’ve started looking at markets that you wouldn’t think of.”

Punter points to Nigeria as a good example of a market that had not been considered previously but thanks to its growing middle class, the African nation is presenting new opportunities for global suppliers.

With that in mind, he warns the real issue for the UK is how the market will maintain and sustain its attractiveness.

“To be frank, we need to change some of our ways,” states Punter. “In some respects we’ve become a market that is seen to be too hard and too difficult. Our requirements are tough. The cost burden on growers is tough.

“Growers are attracted to the size of the market but they don’t want to suffer at farmgate price and have a lower return. That’s what we need to think about.”

The EU at large must also be careful to ensure it remains an attractive place to do business, according to Punter, in view of the region’s increasing regulation, which is unpopular with many.

“That’s not to say that people are anti-EU,” Punter clarifies. “But they’re not happy with the bureaucracy and the continuing process of increased cost burden that falls on businesses which makes them hard to run.

“We need less bureaucracy. What we want are governments that don’t interfere and [do] stimulate the economy. If we get that, we’ve got a chance.”

Retailers must find their proposition

At a UK retail level, Punter claims the rise of the discounters is already bringing about positive change in the way the country’s supermarkets do business and serve customers.

As the market has polarised – with the upmarket and experiential retailers performing well at one end and the discounters winning at the other – the middle has become enormously congested and is now looking for a new way forward.

“Those in the mass market became complacent and stopped recognising the importance of delivering value and a proposition,” Punter notes. “So, when consumers started shopping around they realised the product they were buying wasn’t much different but it was a lot cheaper.

“In some instances I think if you took every label out of the stores and got rid of all the colour schemes the consumer wouldn’t know which supermarket they were in. But that won’t last and it’s not lasting now.”

Retailers are trying to stand back and question what their proposition is, he says. “It’s really hard to see how the mass market is going to come through. But certainly it will.

“Price is not the panacea for every problem,” Punter states. “I think service will come back. The consumer also wants to have different things; it wants innovation and new thinking. If you can deliver that then maybe there’s an opportunity.”

Indeed, while the discounters have ridden a wave of success off the back of the recession in the UK, Punter believes nothing is forever. Already, he says the discounters in Germany are beginning to lose some market share as people start to look for something different.

According to data from market research agency Gesellschaft für Konsumforschung (GfK), in Germany the discounters saw their turnover contract by 1.4% during the first 11 months of 2014, while the conventional supermarkets performed better.

“The reality is you have to be in the right place at the right time,” Punter points out. “We’ve gone through a period in probably the last 10 years when the UK consumer has become more focused on value. Wage increases have been very slim and when that happens people start to trade down or to change their habits. The changing habits that we’ve seen is the rise of the discounters and also people buying less.”

The UK wholesale market will also need to adapt more quickly to sustain its own relevance and survive the changing landscape, Punter says. The relocation of existing markets and the development of new markets is already giving the sector a real opportunity to put in place the right infrastructure for the future.

“It will come through but it will be very different,” he predicts. “We [at Total Produce] are moving towards a more delivered business and a more structured procurement. We’re dealing more directly with growers and they’re dealing directly with us.”

Punter says this continuity of programmes is paving the way for a more predictable wholesale business which, in turn, is giving companies the incentive to invest and will prove vital to the developmental changes that are necessary in places like Birmingham, Liverpool or Bristol.

What certainly looks positive for the future, says Punter, is that people in the UK still love food. “They’re just looking for things that are different and they want something that’s going to excite them,” he concludes.

 
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2 comments

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  1. D.Thakar | Mar 05, 2015

    Hi Denis,

    Enjoyed listening to the video clip. 

    David, Superfoods(UK)

  2. Graham Alexander | Feb 22, 2015

    Hello Denis, this is Graham from Sicily. very impressed with the video and your concise views of the status of the UK market at this moment in time. Most imformative.

    Best wishes, Graham

      

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