It might not seem like the best of times to think about entering the UK market, but let’s look at the basic facts that Brexit will not change. The UK has over 65 million people who need to eat and a good portion of the food they require needs to be imported – the rumors you’ve heard about UK weather are all true and this affects the agriculture industry. And, let’s look at the facts that Brexit will change. There are now strict EU import regulations and labeling/ingredient requirements; these will be subject to change in the UK. Currently, EU competitors do not pay import duty on goods to the UK. The United States generally pays from 0 to 25 percent import duty, depending on the product. With very pro-UK/Brexit President Trump now in the White House, many people a ‘sweet-heart’ trade deal will be cut between the two countries. In 2015, the USA exported a record $2.98 billion of agriculture and related products in the UK. The USA in turn imported $887 million of UK products (not including whisky and other distilled spirits which were worth $1.5 billion).
Already during the period of 2011-2015, US beef exports rose 320.6 percent, worth $12.2 million. Poultry meat was up as well along with snack foods – including jerky. Only US pork products showed a decline during this period.
Still, no matter what trade deals are cut, the UK can be a tough market to enter. Only four supermarket chains control over 70 percent of the total market. While from a transport/replenishment system this is great, meaning it is easy for imported products to be widely distributed, in most cities and towns, all four – Tesco, Sainsbury’s, Asda/Wal-Mart, and Morrison’s – are represented in the retail sector, often times just blocks away from each other. Profit margins are tight and suppliers are expected to be the ones who suck it in. Numerous producers have told MPJ that the attitude is from these big players is: “It’s our way or the highway.” In addition, trial listing must give results in a short period of time or the product will be de-listed. Compared to the US, the UK is light-years ahead in online grocery shopping. While convenient for shoppers with limited time, without shoppers wandering up and down aisles, it’s a lot harder to ‘discover’ new products. This makes it tough, even for local British farmers/processors to get in the door.
Some advantages US companies will have in getting into the UK market is that the road has already been cleared. US fast food chains in the UK include: McDonald’s, Burger King, KFC, Subway, Pizza Hut, Domino’s, Papa John’s, and Starbucks. (Taco Bell has made a start and now has 14 restaurants, however, almost all are located outside major cities). Because of this, UK consumers are use to US products and tastes. Indeed, McDonald’s has been running for a limited time ‘Great Tastes of America’, burgers with ‘American’ tastes such as Tex-Mex, New York, Chicago, and Tennessee.
According the US Department of Agriculture, the key influences on UK consumer demands include:
- Slow population growth
- Aging population
- Number of households growing – but smaller
- Growing personal disposable income
- Rise in number of working women
- International consumer tastes
- Reduction in formal meal occasions leading an increase in snacking and “grazing”
If the European Commission holds true to what it has said both before and after the Brexit vote, the days of duty-free products crossing into both sides of the English Channel will be over within two-years.
The fallout will be the UK becoming even more a successful market for those North American companies willing to invest the time and resources to cement contacts and to understand the market. With 18 months being the normal time it takes from initial market survey to the time the product appears on shelves, now would be a perfect time to see if your company can gain from the UK market.