In 2016 we saw change on a scale that will affect the UK food and drink industry for years to come. Developments in technology, regulation and constantly evolving consumer requirements changed the rules of the game for food and drink businesses.
Those changes continue. Meanwhile, the grocery industry is increasingly resorting to cut-throat pricing to retain or gain share in a market where the Big Four’s dominance is fading.
More than anything, the UK’s decision to leave the European Union (EU) had instant implications for the food and drink industry. The biggest of these was a weaker pound. The Sterling’s depreciation makes British products more attractive to international markets. However, it also puts pressure on businesses that rely on imported raw materials.
The increasing cost of food is affecting UK inflation levels and costs are beginning to be passed on to consumers. Consumers have largely avoided price rises in recent years, in fact, market researcher Kantar Worldpanel reported grocery price deflation was the norm from September 2014 to December 2016.
Now it is over. Consumers are likely to see steadily higher prices at the checkout.
Many businesses are also worried about Brexit’s effect on the workforce. The proportion of European workers is higher in food and drink than in any other manufacturing industry. About one in four employees are non-UK EU nationals.
Are we about to see a labour exodus that the food and drink industry can ill afford? This could well be the case, but with change comes opportunity. The British food and drink industry is famously innovative and is particularly good at exploiting new niches.
It is clear that the commercial landscape has changed, but the industry is rising to the challenge and expects to deliver growth from innovation in new product development and process automation.
We would like to thank all respondents to the BDO food and drink survey 2017 whose views have informed our report and also those who have contributed to the report.
We hope you find this report interesting.