Food and Drink Federation Professional Affiliate Seminar 16 th July 2014
UK food & drink manufacturing What is keeping the industry awake at night? Steve Barnes - Commercial Director
Agenda • The things keeping the industry awake at night: Volumes The rise of the discounter Disruptive new players and new models Structural challenges for large customers Promotional junkies?
Where has the volume gone? • The UK has a growing population • And we are used to volumes always rising….. • But change is afoot and hitting supermarket sales Trending in: Trending out: Shopping lists Impulse buying Buying what we will eat Buying what we might eat No food waste Throwing food away Lower calorific intakes Eating what we want Deflation Inflation Eating out Eating in
The rise of the discounter • On current trends: Aldi will be the UK’s fifth largest food retailer by 2015 Aldi and Lidl combined will be as big as Morrisons The Big Four under relentless pressure Aldi growth = combined online growth of Tesco, JS, Asda, Morrisons, Waitrose & Ocado 1992 the previous discounter peak – “we have been here before” We can glance one of two ways……
Disruptive new players & With the threat of more to come……
Structural challenges for large customers
Changing channel mix • Online and technological change • Convenience • The rise of premium • Some suppliers going it alone…..
Promotional junkies? • 34% of all FMCG products sold on promotion • 48% of all branded FMCG products sold on promotion • The “biggest concern” in trading relationships • The retailer with the highest % promotional sales is……. • Promotional innovation will be important
To conclude • Unprecedented times for the industry • Pressure comes in many different forms • Identifying the end game • Innovating • Returning to growth
Taking the political temperature Terry Jones Director of Communications
Countdown to the General Election 294 days to the election
Reshuffle!
Reshuffle!
Reshuffle!
Its getting hot on health Warming up 2011 PHRD 2012 AoMRC 2013 PHE 2014 AoS What’s next?
Its getting hot on health To what extent would you agree or disagree about each of the following statements about the food and drink industry? Stricter regulation of manufacturers is 26% 31% 21% 9% essential to reducing obesity Agree strongly Agree a little Disagree a little Disagree strongly
Ingredients for Success Introduction Why food and drink manufacturing matters What food and drink manufacturing delivers Our Agenda – key asks for the next Government
Our Agenda 2015-2020 An industrial partnership between industry and Government Support frameworks for voluntary action by industry Building resilient supply chains for safe, affordable and nutritious food
Europe European elections EP powers post Lisbon New Commission in November Juncker wants a fair answer to the British question Watch outs – influence, sustainability
FDF’s Four Pillars
Health and Wellbeing Overview Industry initiatives to help consumers follow a healthy and balanced diet Barbara Gallani Director - Regulatory, Science and Health Food and Drink Federation
The UK food and drink industry Food & Drink 6,000+ Businesses Largest UK £12bn – 77% to Europe £76.2 bn Turnover Manufacturing sector Annual £1bn R&D spend 400,000+ Employees 2/3 rds UK Farm Production 8,500 New Products
Public Health Responsibility Deal Better diets, increased physical activity and healthier lifestyles; Encourage people to drink sensibly and responsibly; Maintaining a healthier lifestyle in the workforce.
Calorie reduction pledge “We will support and enable our customers to eat and drink fewer calories through actions such as product/ menu reformulation, reviewing portion sizes, education and information, and actions to shift the marketing mix towards lower calorie options. We will monitor and report on our actions on an annual basis."
The reformulation challenge Industry considerations when reformulating: What do our customers want? What’s the public health context: What is government policy (UK/EU/Global)? What’s the scientific evidence? How does that fit with my portfolio of products? What are the practical and technical considerations?
Calorie reduction pledge
Calorie reduction pledge FDF members commit to a 250kcal cap on individually wrapped, single-serve confectionery item. Average calorie reduction 10-15%
Some final thoughts The UK food and drink manufacturing sector has shown real leadership in reformulation, innovation and labelling Voluntary initiatives have been proven to work Our members will continue to work with others to make it easier for people to move towards recommended diet and physical activity levels Our members see reformulation as part of the solution but it will not solve obesity on its own Reformulation to lower sugars forms part of this work, where it also leads to a reduction in calories It is important the consumer is provided with clear and consistent messages
Barbara Gallani Director – Regulatory, Science and Health barbara.gallani@fdf.org.uk www.fdf.org.uk
Sustainability Overview Peter Andrews Sustainability Executive
Sustainability overview Sustainability is fundamental to the food industry Our members face a multitude of complex sustainability challenges, regulations, and campaigns FDF has delivered significant progress in reducing environmental impacts But there are challenges ahead where collaboration is needed
Sustainability is fundamental to the food industry World Economic Forum: Global Risks 2014 Ten Global Risks of Highest Concern Key Business Challenges: Global Risk Dwindling raw materials and rising 1 Fiscal crises in key economies raw material costs 2 Structurally high Environmental and geo-political unemployment/underemployment disruptions to supply chains 3 Water crises Changing legislation and regulatory 4 Severe income disparity regimes in response 5 Failure of climate change mitigation and adaptation Key Business Opportunities: 6 Greater incidence of extreme weather Secure supply events (e.g. floods, storms, fires) Competitive advantage 7 Global governance failure Improve trust around products/brands 8 Food crises 9 Failure of a major financial mechanism/institution 10 Profound political and social instability
Multitude of complex sustainability challenges, regulations and campaigns Water Energy costs Water Climate market & security abstraction Change Low carbon reform Climate reform Agreements roadmap change Natural Mandatory adaptation capital energy awareness audits CLIMATE WATER & Recycling & CHANGE & NATURAL FDM BREF recovery ENERGY CAPITAL review targets FDF’s Medium Deposits & PACKAGING ENV Sustainability Combustion PRN system & WASTE REGULATION Work Plant Dir. Env Surplus food CONSUMER SUSTAINABLE Permitting redistribution COMMS SOURCING Regulations Fresher for ISO 14001 Longer review campaign Product Commodity Supplier EU PEF & OEF Sustainability tool specifications methodology Forum
Sustainable Discussion European Union Climate Change ‘Energy Tax Consumption 20% emission by 2020 Act 2008: Directive’ Production 20% Renewables Carbon Budgets 20% Energy Efficiency 34% 2018 -2022 2030 Framework 4 th Budget 50% 2025 80% 2050 2050 Roadmap F Gas Regs Ozone Regs Energy Energy Saving Efficiency Opportunity Directive Scheme Climate Change Levy EU Emissions Climate Change Trading Scheme Phase 3 2013 - 2020 Agreements 2013 -2023 Environmental UK Food and Drink IED - Energy Permitting Manufacturer CRC Efficiency Regulation Energy Efficiency Phase 2 2014 – 2019 ROCs Feed in Tariffs FiT CfD GHG Corporate Reporting Renewable Heat DECC/BIS Incentive 2050 Roadmap Carbon Price Electricity Demand Support Green Deal Reduction Start April 2013 SMEs Green Investment Energy Efficiency EII Support EMR Bank Strategy Energy Bill
How do we help members with Sustainability Policy & Legislation Advocacy Targets: Cut CO2 emissions Reduce waste Optimise packaging Cut water use Reduce transport impact Guidance: Carbon Management Sustainable Sourcing Water Management
Challenges ahead Showcasing the industry’s good practice Raising awareness of key issues, particularly amongst SMEs - e.g. Natural Capital Accessing funding/support/research to help businesses implement innovative technologies and processes to reduce environmental impacts Moving to a more sustainable food system Peter Andrews, Sustainability Executive, peter.andrews@fdf.org.uk
Food Safety and Science Overview Kerina Cheesman Food Safety and Groups Manager
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