UK food must adopt modern technology to thrive

By Michael Stones contact

- Last updated on GMT

British brands command global appeal, prompting Chinese firm Bright Food to take over Weetabix two years' ago
British brands command global appeal, prompting Chinese firm Bright Food to take over Weetabix two years' ago

Related tags: Supply chain management

The British food industry faces a bright future, provided it can blend overseas technology with the business community’s strong entrepreneurial skills, according to a leading City analyst.

Clive Black, head of research at Shore Capital stockbrokers, told a Chartered Institute of Marketing (CIM) meeting in London last month he was optimistic about the sector’s prospects over the next five years. “If we can blend technology with our innate innovation and entrepreneurship, I think the future is very bright,​he said.

“I am very encouraged because we are an entrepreneurial society and much more effective at food than you might think.

Great traits

It was no surprise that the Chinese food giant Bright Food acquired Weetabix from private equity firm Lion Capital two years’ ago. “We’ve got some fantastic brands,​ said Black. “Britain, as the Olympics showed, is a country of tremendous heritage and we have also got a sense of humour and those are great traits for any food industry.

But to unlock the natural entrepreneurship of the British food industry, managers will need to import process technology he warned. “Where we have a real weakness is in some areas of process technology and technical abilities,​ he said. “A lot of the process technology is based in Europe – particularly in Germany. And technology is going to be a really important differentiator in future.

Meanwhile, the food sector was witnessing a fundamental shift in power from the multiple retailers to food producers. The scale of that shift was revealed by Tesco, the world​s second largest food retailer trading on eight times earnings, compared with the small Welsh agricultural merchant Wynnstay trading on 13 times earnings.

“If we had sat here 10 years’ ago and said that a Welsh agricultural merchant or an own-label food manufacturer would have their shares trading at a material premium to food retailers, you would have been judged clinically insane,​ said Black.

More power in the supply chain

But the changes in commodity markets, plus concentration of food manufacturers, meant there was now much more power in the supply chain than at any time in the past 30–40 years. ​Supply chains are much tighter today, partly because supermarkets have been so demanding, leading to concentration,​ said Black. ​And that’s been reflected in recent stock market supermarket valuations.

Andy Thompson, European director of animal genetics firm Genus, argued that supermarkets could seldom now afford to blacklist major suppliers. ​The balance of power from 10 to 15 years’ ago, when the supermarkets had choices, has shifted,​ he said. ​Those choices have now gone, so they have got to create partnerships whether they like it or not. The whole supply chain is intrinsically embedded and wedded to one another.”

Both were speaking at a seminar organised by the Food, Drink and Agriculture Group of the CIM at New Zealand House on April 8.

Listen to Shore Capital City analyst Dr Clive Black accuse British supermarkets of becoming ​totally and utterly complacent​ in our exclusive podcast recorded at the CIM seminar.

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