Food retail is the United Kingdom’s largest consumer market. The sector is dominated by supermarkets and superstores (68.3 percent), followed by convenience retailing (20.7 percent), traditional retail (4.4 percent) and alternative channels (6.6 percent).
The large chains compete intensely on price and exert considerable pressure on suppliers to keep costs down.
Discounters have experienced growth during the recession. On-line food shopping is also experiencing high levels of growth.
Getting your product into market
Food distribution is dominated by supermarkets which held a two-thirds market share in 2006. Access to supermarket buyers is very restricted because everyone wants to pitch to them.
The United Kingdom has a very strong private label market, dominated by the major supermarket chains. Private label makes up around 50% of grocery sales and its penetration is usually directly related to the presence of brands and their support level. Alcohol is one of the least penetrated sub sectors (10% own label share), but commodity markets with little product differentiation or branding are now almost exclusively private label.
The food processing sector is fragmented, despite the presence of large multinationals. There are more than 3,000 small businesses which focus on producing high value-added specialty foods.
Regulations
Most food laws have been harmonised with EU law. Where harmonisation is not yet complete, imported products must meet existing United Kingdom requirements.
In addition to the EU regulations there are specific United Kingdom requirements for some categories such as dairy, or any animal-derived products.
All animal food products must come from EU-approved premises and some food and beverage products are subject to import licence restrictions.
Beef, sheep meat and dairy products have quotas while imports of some products, such as cheeses other than cheddar, are prohibited.
Opportunities
- United Kingdom consumer appetite for healthy foods has grown. More consumers are willing to trade up to premium items or products perceived to be healthier.
- The ageing and relatively well-off population wants to defer ageing and seems prepared to pay.
- Significant trends after taste include convenience, value, product safety, provenance), ethical food, and health and wellness considerations.
- Retailers’ private labels is one route worth exploring, especially if you cannot afford branding investment. Retailers can be very loyal to suppliers if they continue to offer innovation and excellent service.
Challenges
- The United Kingdom is already well supplied from around the globe, therefore you need relevant innovation or a unique selling point (USP). Being from New Zealand is no longer a USP.
- The food miles issue is no longer as prominent in the media as it was. However many British companies are pushing the Buy Local stance. Around 34 percent of people expect to be buying more local or regional foods in 2010.
- Food provenance is gaining ground as an issue for both consumers and retailers with particular attention is being paid to animal welfare.
