Why Should Food Producers Export?
Ask anyone now for a good reason to start exporting and they will probably point to exchange rates presenting fantastic opportunities. True, the €:£ rate has been in a range of around 1.14-1.19 (where it was at over 1.40 not so very long ago. The US $ has also appreciated significantly – and export stats from DEFRA just out tell us the US is now the UK’s 2nd largest food and drink export market. After Ireland, incidentally.
But tactical trading windows are much more relevant for commodities businesses than SMEs with differentiated quality products.
Exchange rates will change over time. And maybe one day some of that ‘gain’ might be reduced by post Brexit tariffs to EU markets. We know we’ll be out of the single market but we don’t yet know what the price of access will be.
The real reasons to export are strategic and will remain the same:
Spreading risk and broadening your customer base for one. People often speak about adding new markets (territories) when they talk about exports. But in our experience – and we have helped several hundred UK food exporters build their business internationally over the last 25 years – it’s much more relevant to talk about acquiring new customers. They might just happen to be based over a short stretch of water.
So say you’re doing business with Waitrose, Ocado, Selfridges, Whole Foods and a range of independents. The next step might be to build your distribution across more Waitrose stores or target another multiple like Sainsburys. But it might also be worth considering an approach to Delhaize in Belgium, Monoprix in France or Albert Heijn in The Netherlands.
The more a business grows in the UK, the more likely it is to depend significantly on a small number of customers. The Top 5 multiple retailers account for around 75% of all grocery retail so the risk of a delisting with one or more of these accounts can really put a business at risk. Better to diversify by adding similar profile accounts in neighbouring markets.
Distribution costs are often not much different from supplying within the UK. Central purchasing is increasingly the norm and many of these customers prefer to deal direct with the end producer (as they do in the UK) rather than with a distributor.
While many of the UK’s biggest retailers are in a process of ‘re-set’, many international retailers are increasingly looking for innovation – especially in areas like healthy snacking, free-from, sugar free drinks, vegetable proteins, chilled convenience, organics, minimal ingredients and clean label – areas in which the UK is seen to be a leader on a European, if not a world level.
We’ve just created a private inspiration show for Delhaize at their Brussels HQ showcasing over 50 producers showcasing innovations from the UK and other markets. The Board buying director was so impressed he insisted the CEO also pay a visit. These were all new concepts they hadn’t yet seen. We’re still hiding our light under a bushel.
And yes that’s just EU markets. But one step at a time. Remember, we export more food and drink to Belgium than all the BRIC markets combined!
Simon Waring is MD of Green Seed Group, an international food and drink sales and marketing consultancy with 11 international offices firstname.lastname@example.org www.greenseedgroup.com