The Big Interview

Clive Black on price inflation, the health agenda and Brexit

By Noli Dinkovski

- Last updated on GMT

Clive Black: ‘The big thing for manufacturers is to look at the underlying trends and dynamics’
Clive Black: ‘The big thing for manufacturers is to look at the underlying trends and dynamics’
Shore Capital head of research Clive Black has never been less than forthright in his views on the state of the food industry.

Key points

Talk to a market analyst for any length of time about the current fortunes of the food industry, and before long, the conversation will inevitably turn towards Brexit.

But, while most experts in the field might encourage food firms to prepare for the impact of leaving the EU, Clive Black’s opinion is a little more frank.

“You can scenario plan until the cows come home, but the magnitude of the main issues around Brexit are so great, you can also end up wasting a lot of time contemplating your navel.”

It’s the sort of response you would expect from Black, who has built up a reputation for straight talking in his 15 years as head of research at stockbroker Shore Capital.

Valued and respected by his peers for his analytical insight across the entire food supply chain, Black’s views are more keenly received than ever in what are regarded as uncertain times.

A good thing then, that he isn’t holding back. Expanding on Brexit, Black believes the business community is “sick and tired of the self-aggrandisement”​ that is taking place among politicians at Westminster and Brussels.

“These people live in a bubble, and most people are disinterested in their arguments and disputes,”​ he maintains. “And if Michel Barnier and Theresa May don’t know what the outcome will be – what hope is there for the rest of us?”

Scenario planning (back to top)

While Black acknowledges that some businesses will see value in Brexit scenario planning, he feels those engaged in that work are participating in a largely futile exercise. But that’s not to suggest he believes the outcome of the negotiations are anything less than extremely important.

“What’s going to happen with moving products through the Irish border? Where will the industry get its labour from in the medium term? How are the movement of goods through ports like Dover to be achieved?”​ he asks.

“These are all questions that need answering – but until we know the outline agreement, it’s all a waste of time.”

For Black, Brexit is one element – albeit a significant one – in a “series of moving parts” ​likely to impact on food inflation in the months ahead. Even so, he feels confident that input prices in the UK have peaked, and expects them to ease in the months ahead.

“We’re coming off a relatively sustained period of good harvests, and sterling has strengthened against the dollar. As long as these, and a few other factors, remain stable, we would expect inflation for 2018 to be in the range of 1.5–2.5%, rather 2.5–3.5%.”

From a retailer’s perspective, Black maintains that a small amount of inflation is “demonstrably preferable” to deflation. The key, he suggests, is finding a level that is manageable for shoppers.

“When the market gets to an unmanageable state, it encourages trading down, which is a really powerful lever to destroy value within the supply chain,”​ he argues.

Misguided management (back to top)

Black has long been a critic of how the “misguided management” ​of the big four supermarkets led to the hard discounters gaining significant market share over the past decade.

However, he feels lessons have been learned, and consequently, “there will be an understanding by retailers, where manufacturers can demonstrate that input prices are rising, that there needs to be cost-recovery”.

Equally, Black believes most manufacturers “now understand that they’ve got to show the retailer what they are doing to mitigate those costs, if possible, and prevent price rises”.

He also acknowledges that the practices in place between retailers and manufacturers are now much more collaborative and structured than in recent years.

“But, fundamentally, when prices go up, the input price then follows that mechanism. And when prices come down, the price to the manufacturer falls,”​ he adds.

While speculating over inflation will always involve a degree of crystal-ball gazing, one development that Black believes is here to stay, and manufacturers should pay heed to, is the health and wellbeing agenda.

“There’s been talk about food policy around health for decades. But I think there is now a clear realisation that certain categories of food need to be eaten in moderation,”​ he suggests.

Strategic thinking (back to top)

Black argues that wellbeing should form part of every manufacturer’s strategic thinking – from a sweet maker ensuring its products taste as good as possible with the most beneficial nutrient mix, through to a supplier of fresh produce, an area in which the government is encouraging people to eat more.

“The big thing for manufacturers is to look at the underlying trends and dynamics, and recognise that wellbeing is here to stay, and position themselves for that,”​ he adds.

Government involvement in driving the health and wellbeing agenda may be unavoidable, but there are currently two vital areas of public policy in which Black feels business leaders want to see more public policy.

“The first is access to an educated skilled workforce, including food scientists and engineers, to take their business forward. Second, I think businesses want government, in tandem with our leading universities, to be studying those strategic areas that enable industry to be more effective.”

These are two demands that will be inevitably impacted by Brexit. On this, Black concedes that the government has recognised the importance of primary research in the UK. The bigger issue, as he sees it, is making sure the UK is seen to be a place that’s open-minded, and one in which academics and researchers across the world would want to come.

“For Brexit as a whole, the devil is going to be undoubtedly in the detail. I don’t know how the timeframe is going to pan out, but what there will be is an absolutely enormous workload – to get the processes and documentation in place – if there has to be a change to what we have at the moment.

“Ultimately though, we just have to hope that common sense prevails.”

And few in the food industry would argue against that.

  • The interview was conducted prior to this week’s transition deal agreed by the UK and EU

Dr Clive Black

JOB TITLE:​ Head of research, Shore Capital

AGE:​ 54

DOMESTICS:​ The proud father of Connor, Joshua and Maeve.

CAREER HIGHLIGHTS:​ Black is long-established as one of the UK’s top consumer analysts, and in 2013 he was awarded City A.M. analyst of the year. A year later, he was rated top for retail in the 2014 Thomson Reuters Extel Survey.Black holds a PhD from Queen’s University Belfast, where he was also the 2013 volunteer Alumni of the Year for his thesis on the Northern Ireland food industry.

His career in food started in London with the National Farmers Union, before joining Northern Foods. Black moved into equity research in 1993 with Charterhouse Tilney, going on to become head European retail researcher at ING Financial Markets, and then eventually joining Shore Capital in 2003.

He was an external adviser to the Food Standards Agency from 2011–13. Black is also non-executive director of food surplus supermarket Community Shop.

AWAY FROM WORK:​ When not enjoying his vintage Jaguar XJS V12, Black likes football, rugby, ale and two-tone music.

He is also what he describes as a “very slow” half-marathon runner.

Related topics: People & Skills

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