Food manufacturers urged to think global as half-year export figures show strong growth

With continued consolidation in the UK retail sector, Britain’s “UK-centric” food manufacturers are being urged to widen their outlook to overseas markets as a means for growth in 2006. This call comes at a time when the UK food and drink export market is experiencing strong growth to both established and emerging markets, up 3.1% to £4.65 billion in January to June 2005 (half year) according to the latest figures announced today (4th November 2005) by market development consultancy, Food from Britain (FFB).

The food and drink export market has made a dramatic recovery over the last three years, bouncing back from nearly a decade of decline to its highest levels since 1996. But according to FFB a large number of food and drink manufacturers are making a strategic mistake by ignoring these international opportunities that could potentially harm the industry’s long-term growth and profitability.

“Although the UK has a £10 billion food and drink export market, we significantly lag behind other European nations such as France and Germany who export twice as much,” said FFB’s Chief Executive, David McNair. “With the reputation of world-class innovators, the UK food and drink industry needs to shed its “island” mentality and become more competitive on the world stage. Until this happens, we are unlikely to maximise opportunities overseas and significantly grow our exports beyond the current £10 billion barrier.”

Despite this warning, the 2005 half-year export figures issued by FFB do offer a glimmer of hope to UK manufacturers. Markets closer to home performed the strongest with the EU region up 3.6% to £3.06 billion. Ireland continues to be our number one overseas market, surging ahead with a growth of 6% in the first six months of the year, while Spain bounced back from a disappointing 2004 with an increase of 12%.

The successful integration of the new member states to the EU now also seem to be paying dividends to the UK’s food and drink manufacturers, with exports up 13% to £90 million overall to these countries. Latvia and Poland were the star performers, up 85% and 51% respectively, albeit off a small base, while other markets showing positive signs in the first half of the year were the Czech Republic (up 14%) and Slovakia (up 17%).

Exports also started to recover to non-EU markets, significantly contributing to the overall growth to the half-year according to FFB. The area finished 2% up on the same period in 2004, with the Asia Oceania markets leading the way with a 16% increase. The Middle East also recorded strong growth of 10%, while the North American market dropped slightly by 3%.

Sales of alcohol, and especially Scotch Whisky, continue to drive exports and this product category grew by 1% to June 2005, representing more than a quarter of all exports. There was also good news for the UK’s farmers as fresh meat exports showed strong signs of recovery, up 16% to £254 million. In addition, sales of prepared meats continue to climb (up 15%) to end the half-year at £65 million, while beef starts to make in-roads from a small base, up 36% to £12 million.

Other product categories performing well include cheese, up 12% to £103 million; beer, up 15% to £166 million; fresh fruit, up 28% to £51 million; and soft drinks, up 20% to £94 million.

David McNair continues: “As these figures illustrate, there are now more opportunities than ever for UK food and drink manufacturers across the world in all product categories. With this country’s trade deficit continuing to widen and UK retail margins getting increasingly smaller, UK companies literally cannot afford to ignore the business benefits of spreading risk when trading in this increasingly global marketplace.”