Golden opportunity for SMEs as export demand increases

According to a new report published by Santander UK and the Food and Drink Federation (FDF), business confidence among food and drink manufacturers has fallen to record lows in the second quarter of 2020, with COVID-19, uncertainty over Brexit and closure of services all playing a part in the drop. Despite this, the data has also uncovered exciting untapped opportunities, with manufacturers ranking increased demand and access to new UK preferential trade agreements as key opportunities for business growth and recovery in the remainder of the year.

UK food and drink exports are recognised globally for their quality, provenance, and heritage, making them an appealing export to the rest of the world. “Sales of UK food and drink were worth over £23 billion in 2019,” says Ian Wright, chief executive of the FDF. “While that figure is certain to fall for this year, there are still plenty of opportunities in foreign markets for UK food and drink manufacturers to seize what remains of this year as we look to 2021.”

Andrew Williams, head of the Food & Drink Manufacturing Sector of Santander Corporate & Commercial Banking agrees: “As the short-term impacts begin to settle, UK food and drink businesses have already recognised that increasing export sales is a potential route to recovery and offers growth and diversification benefits too. There is much to be optimistic about and a real sense that as a sector we are striving towards a positive future.”

The promising export markets
Three particular market regions were highlighted in the report for such opportunities: the United Arab Emirates and wider Gulf region, China, and the US and Canada.

Exports to Canada, the UK’s third-largest non-EU preferential trade partner, have grown by 5.7% so far in 2020, led by exports of gin, beef and salmon, the report said. Meanwhile, China has seen rapid growth in demand as consumers continue to perceive UK products to be safe and high-quality, with a sense of heritage. Beef and pork exports have risen by over £60 million so far this year, compared to the same period the year before.

In the UAE and the Gulf, the COVID-19 crisis has seen an increase in expected sales from retail – up to 90% from 70% in 2019. The increasing focus on healthier lifestyles in the region has seen increased demand for organic, functional foods and nutritionally-rich products.

The UK’s food producers haven’t been put off by the challenges of the coronavirus – in some cases, they’ve even been helped by it. Olly Hiscocks, founder of Olly’s Olives, said: “Export has always been a key target of ours and we have not allowed the current environment to halt our efforts. With a push towards Zoom meetings, speaking to buyers abroad has been easier and ultimately, if anything, has assisted in our push. In doing so, we have secured distribution agreements for the Middle East and Australia, and have also increased the volume going out to Europe.”

Anushi Desai, co-founder of Plant Pops, Stefania Pellegrino, founder of Purely Plantain Chips and Paul Rostand, founder of The Great British Biscotti Co, all say that they have seen a rise in interest from foreign retail chains and import companies despite COVID – particularly in the Middle East and China.

“We live in an age where The British Craft Food movement is growing like never before, a foodie renaissance born from an insatiable craving for best-in-class ingredients, ongoing innovation and recipe integrity,” explains Paul. “As an ambitious specialist bakery in Dorset, we’re proud to respond to the growing clamour for our region/nation’s unrivalled artisanal biscuit prowess.”

Drinks are seeing an export boom, too. Exports of UK wine doubled from 2018 to 2019 to around 550,000 bottles, according to WineGB and the Department for International Trade, with Norway, the US, Canada and Australia being the four biggest destinations. Not only that, but Japan is also now one of the fastest-growing markets for UK wines, accounting for 6% of exports by volume in 2019. These statistics only prove how important it is to identify and overcome trade barriers and capitalise on these golden opportunities.

The long-term view
Simon Waring, managing director of Green Seed UK, an international sales and marketing consultancy, warned that despite the opportunities, the markets identified by the FDF and Santader report still have their challenges.

For example, many exporters have been hit by US tariffs or fluctuating exchange rates. “Brands need to take a long-term view when thinking about exports. When thinking about the US it’s easy (and misguided) to think that given its size the market could likely offer business potentially many times the size of one’s UK business.

“The reality is that it takes time to navigate the complex supply channels, usually requiring a region-by-region approach and by seeding in the right locations before building scale,” Simon says.

He advises businesses to focus on the market that offers the best opportunities for their brand rather than selecting markets where there is a preferential trade agreement – or the possibility of one. “Having a clear point of difference, a range aligned with local trends, and commercials which work in the marketplace are what count.”