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The State of the Sector: UK Food & Drink Industry Leaders Review Challenges and Trends for the New Decade

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The United Kingdom’s food and drink industry is the largest manufacturing sector in the country, employing nearly half a million people across 7,000 businesses. Accounting for 19% of the country’s total manufacturing sector, food and drink is incredibly diverse and plays a key role in supporting the British economy – contributing nearly £30 billion in 2018 according to the annual BDO Food and Drink Report. Ensuring the nation’s food security – against challenges like fluctuating political and trade policies, sustainability, increased pressure on resources and consumer health – forces the industry to create bold and innovative solutions, and industry leaders continue to champion new trends in tech, policy and manufacturing that make the sector a global leader.

Photo by Taisiia Shestopal on Unsplash

“Both the opportunities and challenges we face [in the UK food and drink industry] in the next few years are unparalleled,” says Gavin Darby, Former President of the UK’s Food and Drink Federation (FDF) since 2016. “While the market environment in which we operate remains uncertain. We are a resilient and adaptable industry – we know there are huge opportunities available to our sector so we can sell more great British food and drink.

Therefore, it is key that we identify how best to harness our own growth potential.” As the representative voice for the industry, the FDF is tasked with speaking on behalf of a vast, diverse sector that includes global brands alongside UK small businesses; and whose continued focus remains on creating competitive and regulatory framework to drive supportive for food and drink and the UK’s consumers alike. Gavin Darby is one of a handful of leaders championing rising opportunities regarding industry challenges and promoting movements in innovation for food and drink trends into the new decade.

New Challenges Bring Unique Opportunities

Although “resilient and adaptable,” Gavin Darby says the industry has faced the major challenges of a much-postponed Brexit. “The shockwave [from a hard Brexit] would be felt first and foremost in our industry and the impact would be far-reaching,” says the FDF President; and the industry seems to agree: 42% of respondents in the BDO Food and Drink Survey reported Brexit to be the biggest threat to their business. “This was already a major source of uncertainty for our industry a year ago,” says Paul Davies, Head of BDO Food and Drink, “…and if there were hopes that many of Brexit’s unanswered questions would be resolved over the last 12 months, the reality is that we are only now starting to dispel the unknowns.” Hopefully following the UK election, the industry can begin to plan with greater certainty.

While the country’s food and drink sector continues to work with the UK government to ensure a healthy break from the EU, the transition is still unclear and undetermined. The FDF said in a 2019 Manifesto that “manufacturers have already spent tens of millions of pounds preparing for a no-deal exit three times in 12 months,” demanding that government deliver actionable new policies that prioritise the closest possible UK-EU trade and regulatory relationships while ensuring a transition is stable for workers, distribution channels and consumers. Challenges here include trade policy, immigration policy, workers rights and regulatory equivalency – all outlined in the FDF Manifesto with actionable areas of opportunity that the industry hopes to meet the UK government in formulating future policy.

Sustainability

The FDF and Gavin Darby make note that additional challenges around plastic production and waste contribute to the whole global sustainability discussion, but opportunities in these areas arise by way of innovative thinking among industry leaders fueled by consumer demand (see trends: sustainably unwrapped, below).

UK citizens are actively choosing sustainable products in higher numbers every year, increasingly more conscious of their food and drink selections. In 2018, the country spent £8.2 billion on food and drink from ethical sources, including Fairtrade, organic, Rainforest Alliance and Marine Stewardship Council (MSC) certified products, with a forecast reaching nearly £10 billion between 2019-2023. Additionally, the FDF’s Ambition 2025 outlines industry initiatives driving change through emissions, food waste, packaging and transportation through the middle of the next decade in a collaborative pursuit on an international scale.

FDF’s ‘Ambition 2025 – shaping sustainable value chains’ is the next step on our journey to help deliver a sustainable food system into the future. It is a journey that will see our industry continue to take a leading role to further improve resource efficiencies and address the wider sustainability agenda. This will require a coordinated and concerted effort across the supply chain, but it is a challenge that our industry is ready to meet.

Obesity

Much like the other challenges, obesity is an issue not unique to the UK, impacting countries on a global scale. In 2018, the UK government announced a plan to halve childhood obesity numbers by 2030 by way of updates in product labelling, advertising and physical activity initiatives, among others – but industry experts agree that more must be done.

In an independent 2019 report addressing policy makers, England’s outgoing chief medical officer Dame Professor Sally Davies notes that the 2030 initiatives, although important, are not enough. Urging the government to provide advanced regulation to address the epidemic, the report notes areas of opportunity that include a rebalance of food prices and additional healthy alternatives, a nationwide update to reformulation initiatives, and updated policy that supports” local and community efforts.

Also in response to the government’s plan, the FDF noted that their “member companies are committing time and resources to deliver the Government’s various reformulation programmes – cutting salt, sugars and calories. In fact, FDF members are selling 57.3 million fewer kilograms of sugar and 1 trillion fewer calories than they were back in 2015 … We agree more needs to be done to tackle obesity, and welcome the report’s clear steer that everyone needs to play their part, including schools, local councils and the NHS. Manufacturers alone will not solve this. We believe money should be put behind specific, targeted measures for those most affected by the burden of obesity.”

The FDF Manifesto also covers the obesity issue in its plea for government coordination, calling for demographic analysis, consumption policies, reformulation programs and investment in funding for smaller businesses; and concludes that change will only truly come once there are coordinated efforts throughout the industry and government initiatives.

There is no silver bullet to tackle obesity. Work by manufacturers alone cannot solve this problem. More is needed to help communities and families most threatened by obesity and diet-related disease. Unless a truly holistic policy is introduced, the Government will not be successful in its ambition.

Food & Drink: A Great National Success Story
The Food and Drink Manufacturers’ Manifesto

UK Food & Drink Trends Heading into 2020

Innovation is the lifeline of a food & consumer business. If a company sells the same products they’ve always sold, then those brands and products are destined to fade away – they all have a lifetime. The companies that innovate and invest in food science or product development and really listen to their consumers thrive. Innovation requires people and money. It’s expensive, and you have to innovate well in advance of seeing the sales or return.

Gavin Darby President, Food & Drink Federation

Health-conscious and tech-savvy consumers are more knowledgeable about their diets than ever before, demanding the industry to keep up with emerging trends. This past October, London’s Future Food-Tech Summit brought together over 500 leaders, senior executives and pioneering innovators from around the globe to share ideas, cultivate high-impact partnerships and push forward new solutions for the industry’s most pressing issues. Ahead of the event, Ashley Pollock, Assistant Manager for Innovation at Ayming, authored a trend report on the topic of change in the food and beverage sector, outlining a few key developments set to impact the industry heading into the next decade.

Disruptive Tech

Tech is transforming the world around us, and research suggests digital tech and big data are already making huge transformations in the ways people shop, cook and eat. According to FDF President Gavin Darby, “an increase in the amount of consumer information that’s available through scanning and the amount of consumer research that is undertaken” is the biggest change the industry has seen in the last decade in food manufacturing. “Barcodes produce a massive amount of data on how consumers shop, when they shop, what they buy and when they stop buying it.”

Digital apps, smart appliances, increased interconnectivity, AI and the internet of things can make the old ways of shopping and cooking obsolete. The emergence of same-day and overnight deliveries, meal-kits and ready-to-eats can now arrive on your doorstep via Amazon, HelloFresh or Deliveroo – a competitive market growing at a fast pace. Whether placing a delivery order via Alexa or auto-replenishment by the fridge, the 55 million smart devices in our homes by 2020 are the future “super” market. Experts even predict diet-tech tools that could place grocery orders based on daily weight and measurements, controlling a caloric intake.

While the ubiquity of grocery drive-ups and curbside shopping is already a new trend for major players around the globe, the grocery store of the future looks more like a scene from a sci-fi fantasy: automatic customer identification, auto-fill for baskets based on shopping preference and data, or virtual retail portals throughout cityscapes to order groceries outside the store; and food companies also follow suit, building digital data and optimising customer interaction at every point of the buying journey.

“The speed of change is so swift,” says Pollock, “that the only prediction we can comfortably make is that, within just a few years, these disruptive technologies will change the food sector in ways that become the everyday, but few of us can currently imagine.”

Sustainability Unwrapped

The durability of plastic packaging enables the industry to protect, preserve and store products in a variety of ways, but the global use of this inexpensive product is proving to have a massive impact on our environment, adversely affecting our wildlife and ecosystems. With more research and public knowledge of the global dangers of plastic, sustainable packaging has become a popular development and a key focus for both businesses and the public.

In the ‘50s, the world consumed 5 million tonnes of plastic, a figure which has skyrocketed to 230 million tonnes today; and in Europe, 37% of plastics used for packaging. Criticism from policy makers and environmentalists has resulted in retailers and suppliers to make innovative solutions and adhere to new packaging guidelines. “Given the urgency of the plastics problem – and potential advantage for manufacturers who manage to beat the addiction – companies are seriously considering all possible alternatives and the focus on innovative alternatives is intensifying,” says Pollock.

Refillable coffee cups and reusable water bottles are the new norm, touted by celebrities and influencers, and the coming year will see a major shift towards zero-plastic packaging. Simultaneously, the market for developing new, environmentally responsible packaging materials is on the rise, and biodegradable is already a frontrunner for the shift. Edible packaging, Pollock says, is technically feasible according to scientists, but further research and development is required. Research in biodegradable, edible, biofilm and lamination technologies are leading plastic-alternative research going into the new decade. “We expect 2019 to see extensive trialing of plastic-free retailing and testing of new, alternative materials and packaging formats, with the onus on biodegradability and sustainability. Zero plastic is still some way off, but the world will welcome real progress toward plastic- free food and drink packaging,” says Pollock.

Animal Alternatives

Environmental impact of mass animal farming is also prompting updates in consumer habits. There are several reasons for this trend, like protecting animals, saving the environment and general health concerns. As increasing numbers of people explore alternative proteins, disruptive businesses exploring vegan options are gaining investment opportunities, and the sector is seeing many meat alternatives match the rate of innovation as with traditional ingredients. M&A in the sector is bringing exciting new opportunities, like the Rebel Kitchen / Nurture Brands merger in October, adding new plant-based products from Nurture to the dairy alternatives produced by Rebel Kitchen. “We see the whole plant- based movement as a massive opportunity and all three brands will play their part in the categories they sit within … [and] we are seeing many opportunities in the export market.”

According to market research specialists Nielsen and SPINS, the total plant-based food market is worth more than £3.15 billion today, including plant-based meat, dairy-free milks and cheese and fully vegan options. Caroline Bushnell, Senior Marketing Manager at The Good Food Institute, adds that plant-based milk now accounts for 13% of total milk sales, growing significantly, adding that plant-based meat is expected to follow a similar trajectory.

Pollock added in her report that “technology is now serving up the first course, and scientists are working on other recipes that could massively disrupt the farming and food industries. It seems that many of us already have an appetite for change. Those numbers will grow – how much depends on the scalability of these disruptive producers of animal-free proteins and the spread of the new, more mindful consumerism.”

Less is More

The BDO Food and Drink report urges businesses to explore new trends in healthier alternatives with a simple challenge to “Make it be as good as it tastes,” adding, “Today’s consumers are stressed and worried. Give them reasons to feel cheerful. Rather than guilty pleasures, how about healthy pleasures —products that provide nutritional, physical or emotional benefits?”

As Pollock explains, “less is more” is not about the end of indulgences or delicious excess, rather it’s a “widening realisation” that treats the consumer with products that are just as good in health and wellbeing as they are in taste. The trend is driven by two key themes: removing unhealthy ingredients like preservatives and adding more of what’s good for health and wellbeing. By reducing chemicals, processing, additives, trans-fats, sugar, salt, alcohol and allergens like gluten, while adding healthy and functional foods and drinks like whole, fresh fruits and vegetables, good fats, added nutrients, fiber and probiotics – the impact on the industry is rising. Policy plays a part here, too, through taxes on sweetened beverages and alcohol and tighter regulations on food labelling (see opportunities: obesity, above).

Personalised Nutrition

Aligned with innovation in the tech sector, personalised initiatives in health and nutrition give new rise to wearable devices and apps that can relay stats on everything from exercise and eating habits to possible markers for disease – all readily available to the consumer, empowering us to live healthier and prevent illnesses. Biohacking takes this a step further, adopting a systems-thinking approach to biology – and as people continue learning to see their food in this way, producers will need to meet consumers’ new needs. “The healthy eating and self-improvement movements are set to enter a new, potentially revolutionary phase with the advent of neuro-nutrition, biohacking and personalisation – Silicon Valley thinking applied to the food sector,” says Pollock’s Ayming report, concluding that “…the longer-term trend in nutrition – no doubt with the biohackers to the fore – will be towards hyper-personalised diets comprising functional food recommendations based on scientific testing. In the meantime, a growing proportion of food and drink purchases will be determined by the brain rather than the gut.”

Learn more about Gavin Darby:
https://www.crunchbase.com/person/gavin-darby

 
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