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United Kingdom Food and Drink Report Q4 2009
Business Monitor International, Sep 2009, Pages: 89
The United Kingdom Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on the United Kingdom's food and drink industry.
In mid June 2009, new figures published by the Food and Drink Federation (FDF) suggest that UK food and drink exports are increasing at a tremendous rate. The FDF reported that in 2008 exports of food and non-alcoholic drinks increased by 20% in value terms to reach a record GBP9.23bn (US$15.2bn). Indeed, a 20% rise in 2008 far exceeds the recent trend, with growth averaging around 8% between 2001 and 2006. This surge can be partly attributed to the massive devaluation of sterling over the last year, which has made UK exports more competitive in foreign markets and also increased the sterling value of existing contracts.
The UK economy is highly reliant on the service industry and has a fairly small manufacturing base to benefit from the recent devaluations. The country's large and diversified food and drink sector is one exception to this rule and rising exports should help boost economic growth at a time when other industries are struggling. However, it remains to be seen whether this growth can be maintained in 2009, with consumer spending on the wane across Europe and sterling beginning to strengthen. In other encouraging news for the quarter, the UK Tea Council stated that it expects consumption of tea to grow by around 3% in 2009. This would buck the trend of the last 40 years, which has seen sales fall as consumers switch to alternative beverages including coffee and soft drinks. Rising demand is attributed to the product’s health benefits.
However, in the food sector, UK dairy co-operative Dairy Farmers of Britain (DBF) went into receivership in early June after waning consumer demand and its competitors' superior ability to discount exacerbated existing underlying problems. Its demise is likely to represent an opportunity for the rest of the UK's dairy producers and two of the firm's assets have already been snapped up by competitors. However, whether the failure of such an important industry player, which supplies 10% of the UK's liquid milk, is indicative of an industry in decline or can be merely traced to a series of poor management decisions merits discussion.
In the end DBF was unable to compete on price with larger (and technologically superior) rivals and struggled to maintain its contracts with the retail sector. These parts of the dairy sector are likely to continue to come under pressure going forward. Already over 50% of cheese sold in the UK is imported and with producers in lower cost markets, such as Brazil, able to produce bulk standard cheese more cheaply, the lower end of the market is likely to experience further consolidation as European import restrictions are gradually phased out.
However, the largest UK dairy firms, including Robert Wiseman, Dairy Crest and Arla Foods, have already responded to these changes and now represent more formidable competitors than they did a few years ago. Controlling a portfolio of strong brands and with advanced processing facilities, they are in a fairly strong position to respond and take advantage of the opening of the world's dairy markets.
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