The UK Market for Agri-Food and Horticultural Products: opportunities for Dutch SME’s

The UK Market for Agri-Food and
Horticultural Products: opportunities
for Dutch SME’s
1
Report produced on behalf of the Embassy of the Kingdom of the
Netherlands, UK by Promar International.
July 2013

Background
• The Embassy of the Netherlands commissioned leading agri-food consultancy Promar International to
review the UK agri-food and horticultural market.
• The purpose of the research was to identify opportunities in the UK agri-food market for Dutch food and
drink Small and Medium Sized Enterprises (SME’s) (1-5 year time horizon).
• The research was carried out between April and June 2013, consisting of:
– Desk-based analysis of a significant body of published information and data.
– Supplemented by telephone interviews with industry leaders.
• This report documents key analysis, insights and conclusions.
2

Contents
Chapter 1: Executive Summary........................................................................4
Chapter 2: Economic Outlook..........................................................................11
Chapter 4: UK Agriculture.................................................................................26
Chapter 5: UK Food and Drink Manufacturing................................................56
Chapter 6: UK Trade in Food and Drink............................................................66
Chapter 7: UK Food Retail and Food Service Market......................................87
Chapter 8: Opportunities for Dutch Suppliers.................................................135
Chapter 3: UK Agri Food Sector Map...............................................................23
3
Chapter 9: Supporting Information...................................................................151

Chapter 1: Executive Summary
4
Chapter contents:
•Key research findings.
•Key conclusions and opportunities for Dutch SME’s

Executive Summary
• We believe the UK is an attractive market for Dutch businesses for several reasons.
• A large and growing population means there is significant demand for food and drink products:
– In 2012 total household expenditure on food and drink through retail and food service channels was £187*
billion – a figure that has grown by 2.5% per annum since 2008.
– The UK has one of the biggest and most advanced grocery retail markets in Europe. It is more than
twice the size of the retail market in the Netherlands and UK grocery retailers are considered to be some of
the best in the world.
– The food service market in the UK is more than 3.5 times the size of the Netherlands. There are many
leading global businesses as well as a huge variety of cafes, restaurants and bars.
• The agri-food industry in the UK is becoming increasingly globalised:
– This means the UK is becoming more reliant on trade. This is extremely promising as the Netherlands is
the UK’s biggest trading partner accounting for 12% of all food and drink imports in 2012.
– The UK welcomes direct inward investment by foreign businesses. Indeed, in the last decade there
have been several major, high profile investments made by foreign investors in the UK and foreign firms now
occupy major positions in the UK agri-food sector. There is no reason to suggest this trend cannot continue.
5
Includes retail sales of alcoholic drinks

Executive Summary
• The UK agri-food market is also highly competitive and there are no easy opportunities
• The UK is a major food producer focused on supplying the domestic market:
– Dutch businesses must compete against a large, well established and technically proficient agricultural
industry, which supplies two-thirds of the food industry’s domestic requirements.
• Consolidation of the agricultural industry and supply chain integration has created greater alignment between
farmers and the food chain, which (aided by volatile market conditions) has led to the formation of long-term
supply chain relationships between buyers and suppliers in both retail and food service channels. It will be
especially difficult for Dutch businesses to establish a foothold in the market where long-term supply chain
relationships are already in place.
• The current climate supports a pro-British approach to sourcing some commodity items; in particular meat,
seasonal fresh produce, poultry, cereals and milk. In some cases (especially liquid milk) the UK market is
effectively closed to foreign businesses unless they invest directly in the supply chain.
• The demands and specifications of buyers can be extremely challenging, especially for those new to the market:
– Product safety and quality protocols are extremely high and recent events have only increased the
requirements for suppliers to demonstrate transparency and traceability throughout the supply chain.
– Price is important and negotiations can be notoriously difficult but there are also high expectations with
regards to product innovation, marketing requirements, demonstrating sustainability and ethical credentials.
• There are many established global and local players that fiercely defend their market share.
• It can take suppliers a long time and require significant investment to enter the market.
6

Executive Summary
• Overall we believe that suppliers from the Netherlands are in an excellent position.
• Dutch businesses have several key assets which enhance the potential for doing business in the UK:
– Significant potential for innovation at all stages of the value chain. The Dutch agri-food
landscape (i.e. the interaction of universities, R&D centres and businesses) promotes innovation and
knowledge transfer.
– An entrepreneurial and progressive mindset. The Dutch agri-food complex has arguably evolved
at a quicker pace than its European counterparts when it comes to the withdrawal of political
intervention.
– Focussed on supplying international markets. Dutch businesses have historically aligned their
businesses to supply target markets.
– Already a key supplier to the UK market. There is a long history of doing business between Dutch
and UK markets, which facilitates even more engagement.
7

Executive Summary
8
• However, suppliers must also be responsive to a fast changing environment and consider how best
to engage the UK market.
• How things have been done in the past is not necessarily how things should be done in the future.
– How and where consumers purchase food and drink is changing.
– Consumers, heavily influenced by the economic environment, increasingly seek value (price) as well
as values (e.g. ethical considerations).
– Local and global provenance co-exist as local and global issues matter more to consumers.
– There is increased pressure for supply chains to be shorter, more agile, more transparent and based
more on a long-term relationship focus than short-term and transactional.
– Market and economic conditions constantly change the dynamics of the industry.
• There is no reason to suggest that businesses in the Netherlands cannot succeed in the UK market
providing they have a good product / service, a clear strategy, operational plan and the right mentality.

Executive Summary
• We believe there are two broad ways in which Dutch suppliers should approach the UK market.(1)
• The difference is distinguished by whether the business is a volume player in the market or a niche player in the
market.
Volume players
• Volume suppliers to the UK market have benefited from a well functioning wholesale market system on both sides
of the channel.
• This has undoubtedly helped the Netherlands to achieve its current position as the leading non-domestic source of
food supply to the UK market.
• However, the wholesale market model is under threat from buyers that increasingly demand short, transparent and
dedicated producer aligned supply chains and – for some commodities - growing support for British product.
• We believe the wholesale market model will be an opportunity for some but it will not be the preferred route-to-
market the major UK buyers would like to use.
• In our view, this leads to an increasing necessity for Dutch suppliers to ‘get closer’ to the UK market in other
ways; for example:
– By establishing direct-supply relationships with UK buyers.
– By utilising a UK based marketing partner.
– Through direct investment in the UK supply chain (M&A or greenfield investment).
(1) We do not suggest these are by any means the ‘only’ opportunities. Our conclusions are based on
the weight of evidence analysed and the insights obtained through trade interviews.
9

Executive Summary
10
Niche players
• The innovative potential of Dutch suppliers provides an excellent platform for Dutch SME’s to create opportunities
at all stages of the value chain.
• The precise opportunities are potentially endless but we have categorised them in three broad areas as follows:
1. ‘Exporting’ high-tech production and processing technologies and agri-food intellectual capital.
Enabled by significant clusters of R&D organisations in Food Valley and close collaboration between
government, academia and industry.
2. Creating higher value products from standard foodstuffs to provide high value solutions to UK
businesses. For example, functional food ingredients such as enzymes, proteins, flavours, colours and
nutraceuticals.
3. Marketing artisanal and traditional Dutch speciality products on a ‘global provenance’ platform.
Current knowledge and awareness by UK consumers of Dutch specialities (e.g. cheeses, cooked meats,
waffles and so on) is low but, with appropriate marketing, could follow in the footsteps of suppliers from
France, Spain and Italy.

Chapter 2: Economic Outlook
Chapter contents:
•Brief overview of UK economic position.
•Impact of economic environment on UK consumers.
•Industry perspectives.

Economic outlook
• The financial crisis of 2008 caused a deep recession in the UK economy lasting 15 months.
• An initial rebound in 2009/10 gave way to a second recession in 2011 which lasted for 9 months.
• Recent data from the Office for National Statistics shows that the UK narrowly avoided a third recession at
the end of 2012 and beginning of 2013. In fact the economy grew by 0.3% in the first quarter of 2013.
• This recent data has meant more people are cautiously optimistic that the UK economy is on the ‘road to
recovery’.
– GDP growth of up to 1% is forecast for the UK in 2013.
– GDP growth of 2% per annum is forecast from 2014 onwards.
• At the same time as the outlook for Eurozone countries has got worse:
– Economic growth in the Euro area in 2013 will be virtually nil according to the OECD.
– Debt problems in southern Mediterranean countries and the political structure of the EU continues to
prevent recovery.
• In the short term the UK economy looks to be in a better position than Europe.
• We believe this creates immediate opportunities for businesses in the Netherlands to invest in
and/or trade with the UK.
• Once the UK economy is on a path to sustainable growth we believe that the UK economy will
continue to be a fundamentally attractive long term market for businesses in the Netherlands to
invest in and/or trade with.
12

Industry perspective(1)
• “I would expect 2013 to be more or less a carbon copy of 2012. Little or no growth. I think 2014 will feel
like the year of recovery.”
• “I am cautiously optimistic about the economy in 2013.”
• “The sense of optimism is improving. We are clearly not out of the woods yet but we are getting there.”
• “Europe looks to be in a far worse position than the UK. Some of the unemployment data looks terrifying
and Germany is fundamental to keep the whole economy going. I question how sustainable that is.”
• Right now I think the UK is more attractive because it’s outside Europe; our prospects look better and we
are a relatively less risky economy to do business with at the moment.”
13
(1) Trade interviews

Economic outlook
-8
-6
-4
-2
0
2
4
6
2007 2008 2009 2010 2011 2012 2013
UK GDP growth (%)(1)
Quarter-on-quarter
Year-on-year
UK inflation growth (CPI measure (%) (1)
Euro: Sterling Monthly Average Spot
Exchange Rate (2)
0
1
2
3
4
5
6
7
2007 2008 2009 2010 2011 2012 2013
UK Central Bank Interest Rate (%) (2)
0
1
2
3
4
5
6
2007 2008 2009 2010 2011 2012 2013
Bank of England Target
Actual
(1) Office for National Statistics
(2) Bank of England
0.8
0.9
1
1.1
1.2
1.3
1.4
1.5
1.6
2005 2006 2007 2008 2009 2010 2011 2012 2013
14

Regional economy
Map of the UK distorted to reflect
population density(1)
(1) The Daily Telegraph
• The UK population is estimated to be 63.2 million (31 million men and 32.2 million women).
• London is the most highly populated area (circa. 8 million people).
• Other densely populated urban areas include major cities such as Birmingham, Manchester, Leeds, Liverpool,
Newcastle, Glasgow, Bristol, Edinburgh, Cardiff and Belfast
• Average earnings are highest in London (£34,984 p.a.) and the South East (£28,181 p.a.) and lowest in
Wales (£23,617) and the North East (£23,779).
0 10,000 20,000 30,000 40,000
United Kingdom
North East
North West
Yorkshire and The Humber
East Midlands
West Midlands
East
London
South East
South West
Wales
Scotland
Northern Ireland
Average Annual Earnings by Region (£)(2)
London and the South
East has proven to be
more resilient to the
economic environment
than other regions of the
UK.
15

Demographics
People in a non-white ethnic group as a
percentage of all people(1)
• The UK population is ageing. In 2011 16% of the
population was aged 65 and over a figure that is
expected to increase to circa 23% by 2035.
• The median age of the population in 2011 is
circa. 40 years and is increasing.
30.8
18.8 17.6
63.8
65.4 66
5.3
15.9 16.4
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1911 2001 2011
65+
15-64
0-14
Changing age structure of UK
population 1911-2011)(1)
• The UK is an ethnically diverse population. There are concentrations
of ethnic groups in major urban centres such as London,
Birmingham, Leicester and Manchester.
• Indian is the largest non-white ethnic group followed by Pakistani and
Black/African/Caribbean/Black British.
16

Consumer reaction
• UK consumer activity has been heavily influenced by the prevailing economic environment since 2007.
– Household expenditure (all items) has been subdued.
– Unemployment is currently at 7.8% - its highest level for some time.
– Slow growth in average earnings has failed to compensate for rising prices (especially fuel and food). As a
result most households in the UK feel ‘worse off’.
• Although food and drink is less exposed to the effects of recession than other sectors of the economy,
there has been a notable impact on consumer behaviour:
– Consumers are far more conscious of food prices.
– Consumers have been buying less or trading down (i.e. selecting more economical options) for products
such as bread, cereals, red meat, fruit and vegetables (amongst others).
– Promotions, discounts and value for money are important motivating factors for consumers.
– Eating out (e.g. in restaurants) has once again become more of an indulgence or to mark a special occasion
than a regular occurrence.
17

Consumer reaction
• At the same time UK consumers are also more demanding that their food and drink deliver additional benefits and
are still prepared to pay a price premium for them; for example:
– Many (but not all) consumers increasingly expect staple items such as bread, meat, milk, seasonal fruit and
vegetables to be of British origin.
– Many (but not all) consumers increasingly expect food to be produced in a fair and ethical way. Consumers
rely on third party product labels (e.g. FairTrade, Red Tractor, RSPCA Freedom Foods) as evidence of
welfare/sustainability credentials.
– Health and wellness is a key motivating factor for many consumers that seek out products which are low in
salt, fat and sugar, contribute to their daily required intake of 5 portions of fruit and vegetables, are free-from
artificial additives and ingredients, contain functional health ingredients and so on.
– Consumers are increasingly demanding convenience products that fit in with busy time poor lifestyles
(especially for weekday meals), particularly those that are positioned on a health and wellness platform (e.g.
healthy prepared meals, salad pots, fruit juices and smoothies and so on).
• The legacy of the events of recent years appears to be an adjustment in what consumers consider to be
value-for-money.
– Consumers will seek out promotions and discounts for undifferentiated everyday products.
– Consumers are prepared to pay more on products that deliver clear tangible benefits (e.g.
convenience, health).
18

Consumer reaction
-2
-1
0
1
2
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
2012Q1
2012Q2
2012Q3
2012Q4
UK Household Expenditure Growth(%
change, quarterly)(1)
0
2
4
6
8
10
12
2008 2009 2010 2011 2012 2013
European Union
United Kingdom
UK Unemployment (%)(1)
Comparison of Monthly Earnings (EUR)(2)
Growth in earning and prices (%)(1)
0
1
2
3
4
5
6
2007 2008 2009 2010 2011 2012 2013
Earnings Prices
€0
€500
€1,000
€1,500
€2,000
€2,500
€3,000
€3,500
€4,000
Ger Nl It Fr UK Sp
(2) Eurostat (as at 2012)
19

Food retail prices & consumer reaction
0
2
4
6
8
10
12
14
2007 2008 2009 2010 2011 2012 2013
CPI
Food RPI
UK Food Inflation (percentage change on
last year)(1)
%
Bought4.2%less
•Consumers bought 4.2% less food
in 2011 than in 2007, in particular:
•Bread
•Beef
•Lamb
•Fish
•Fruit
•Vegetables
•Potatoes
•Alcoholic drinks
Spent12%more
•Consumers spent 12% more for food in
2011 than in 2007, especially on:
•Butter
•Eggs
•Sugar and preserves
•Chocolate
•Bacon
•Cereals
•Coffee and other hot drinks
•Consumers saved 6.8% by trading
down, especially on:
•Cereals
•Biscuits and cakes
•Lamb
•Pork
•Fish
•Butter
•Eggs
•Tea
20

• “We regularly track consumer behaviour and one of the key things that we see is a re-evaluation of
value for money. Overall the quantity of consumer goods being purchased is falling as consumers
improve their own financial position by paying down debt.”
• “Food prices remain a key issue for shoppers; they are very aware and sensitive to changes.
Shopping behaviours are becoming more polarised – there is growth in the premium and economy
extremes of the market but little to no growth in the middle. I believe that is because the value for
money proposition is more obvious to consumers at the premium and economy extremes of the
market.”
• “We are still seeing double digit growth in our food service sales channels, which is not the rational
response we expected to see. People do not seem to be cutting back on food purchased out of
home and ‘affordable indulgences’.
• We are seeing increased demand for messaging and labelling on menus; for example, dietary
information, sustainability information because consumers are more concerned about how their
food is produced.”
21

• “Consumers are more price conscious and that has led to an increased expectation that
promotions are more common, loyalty has diminished as consumers are prepared to seek out the
best deals and private label products are a bigger feature of the market.”
• “We see a mixture of consumer behaviours. London and the South East is quite different, it’s more
multi-cultural and affluent and people seem to be prepared to experiment more, try new products.
In other parts of the country people are more conservative and less prepared to take risks.”
• “Consumers appear to be a lot more price and issue driven. Price is a symptom of the economic
environment. Issues such as sustainability, waste, provenance, animal welfare, safety are more
important to consumers but as they tend to be informed mostly by the media the level of knowledge
is mostly superficial.”
22

Chapter 3: UK agri-food sector map
Chapter contents:
•Diagrammatical overview of the UK supply chain.
•Brief discussion on key trends.

UK agri-food sector map(1)
UK Consumers
63 million
Total consumer expenditure (retail and food
service channels) £187bn
Consumer spend – food retail £106.4bnConsumer spend – food service £81bn
Food retailers
Gross Value Added - £26.1bn
Employees – 1,246,000
Enterprises – 53,641
Stores – 89,679
Food service outlets
Employees – 1,514,000
Outlets – 431,109 Whoelaslers
Employees – 195,000
Manufacturing (includes everything from primary processing to more complex foods)
Manufacturing sites – 9,340
Agricultural Whoelaslers
Supply industry (incl. Machinery)
Gross Value Added - £407m
Employees – 6,000
Enterprises – 433
Farmers & Primary Producers
Farm holdings – 222,668
Agricultural supply industry (machinery,
fertilizers, pesticides)
Enterprises - 427
Imports
37.6bn (of which)
Highly processed – £13.8bn
Lightly processed £16.8bn
Unprocessed £7.1bn
Exports
£18.2bn(of which)
Highly processed – £10.6bn
Lightly processed £6.9bn
Unprocessed £1.6bn
(1) Defra
24

Key trends
• The key stages of the UK agri-food supply chain include production, processing and manufacturing, wholesaling,
import and export and sales direct to consumers via retail and food service channels.
• The processes within the grocery supply chain are becoming more integrated. Retailers want to work closer with
suppliers so that they can increase flexibility, reduce lead time and increase frequency of deliveries to lower the
amount of stock held.
• Consolidation within the supply chain has also become more widespread. Certainly vertical consolidation has seen
strong growth.
– Retailers for specific product categories are now using their own processing facilities, with direct sourcing
pools.
– Manufacturing facilities will have direct agreed contracts with retailers, and will have to deliver large volumes
at competitive pricing.
• Horizontal consolidation has also occurred, with fewer, but larger processors, and the same is seen with
producers.
• Whilst retailers work directly with suppliers and processors for their products, and will already have established
relationships, smaller chains and independent retailers use wholesalers to buy produce. Price tends to be the main
driver.
25

Chapter 4: UK Agriculture
Chapter contents:
•UK agriculture facts and figures
•Overview of key product sectors (production & self-sufficiency)
•Sector specific summary of the supply chain vertical.
•Key trends analysis.

UK agriculture overview
• Farming defines the national landscape and plays a critical role in supplying two thirds of the UK’s food and drink
manufacturers raw material requirements.
– Land in agricultural use is +17million hectares (~70% of total UK area) and nine times that of the
Netherlands.
– There are 221,000 registered holdings and employs 476,000 workers, which is three times that of the
Netherlands.
– It contributes £8billion gross value added to the UK economy (~2% of total UK output) and twice that of the
Netherlands.
• The UK’s temperate climate and varied geography means that a broad base of commodities can be sustainably
produced; key sectors include livestock ((i.e. meat - beef, lamb, pig and poultry) equivalent to 35% of total
agricultural output), cereals and industrial crops (21% of total output), livestock products (e.g. milk and eggs) (19%
of total output) and vegetable and horticultural products (10% of total output).
• UK self-sufficiency for all food and drink products in 2012 was 62% and varies considerably by sector:
– Self-sufficiency is highest in cereals (105%), milk (102%), beef (89%) and poultry (87%).
– Self-sufficiency is lowest for fruit (12%), vegetables (59%) and pigs (56%).
• UK farming is regarded as technically proficient and globally competitive and plays an important role in managing
the natural environment.
27

Land, labour and holdings
21%
10%
3%
3%
35%
19%
9%
Cereals & industrial crops
Vegetables & horticultural products
Potatoes
Fruit
Other crop products
Livestock
Livestock products
Other
Agricultural land use(1) Land use by farming type(%)(1)
Number of holdings by size (000’s)(1)
Agricultural labour force (000’s)(1)
Ave decline of 3,000 pa
Employeesandowners
(1) Defra: “Agriculture in the United Kingdom: 2012”
28
68%
69%
70%
71%
72%
73%
74%
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
20 000
2005
2006
2007
2008
2009
2010
2011
2012
Utilised
agricultural
area (000
ha)
% of total UK
area
420
440
460
480
500
520
2000 2002 2004 2006 2008 2010 2012
120 104
49
42
37
34
42
42
0
50
100
150
200
250
2005 2012
100 hectares and over
50 to under 100 hectares
20 to under 50 hectares
under 20 hectares

0
5 000
10 000
15 000
20 000
25 000
2007 2008 2009 2010 2011 2012
Gross output (basic prices)
Gross value added (basic prices)
Total income from farming
UK agricultural output and value added
CAGR (07-12) 7%
CAGR (07-11) 7%
CAGR (07-11) 8%
Agricultural accounts UK 07-12 £million(1)
29

UK agriculture compared to the Netherlands
17,190
1,858
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
Agriculturalland use (000ha)
UK NL
222
83
0
50
100
150
200
250
Number of holdings (000)
UK NL
476
209
0
50
100
150
200
250
300
350
400
450
500
Employment (000)
UK NL
8
4
0
1
2
3
4
5
6
7
8
9
Gross value added (EURbn)
UK NL
30

UK agriculture trends
• The route-to-market for agricultural commodities has become increasingly consolidated.
• Farmers are increasingly aligned to the supply chain with long term supply contracts. Often these are through
business structures such as co-operatives, which may also own processing operations or through marketing
groups which act as an intermediary between the farmer and processor.
• These supply chain relationships sometimes extend to the retailer where they see benefit in securing long-term
supplies or in marketing the provenance of key products such as milk. This arrangement creates a vertically
integrated supply chain model from producer to retailer, which is a barrier to entry to foreign businesses
without direct inward investment.
• Sectors with the highest degree of vertical integration – and therefore represent a major barrier to businesses
in the Netherlands – include:
– Liquid milk. Virtually all retailers have a long term supply contract with farmers via the major milk
processors (Muller/Wiseman, Arla and First Milk).
– Poultry. +70% of poultry consumed (by volume) in the UK flows through a supply chain involving a major
integrator and multiple retailer.
• Other sectors such as pork, beef, fresh produce are also integrated but to a lesser extent (i.e. they may involve
integration of some but not all of the supply chain such as production and processing only) but other supply chain
models are also evident (such as wholesale markets for fresh produce). These chains remain less closed to
opportunities for Dutch traders.
31

• “The underlying and long term trend is of consolidation. In all sectors we see fewer farms but they tend
to be operating on a larger scale.”
• “One of the biggest challenges in the agricultural industry remains farmer succession. We struggle to
recruit enough young farmers into the industry to replace those retiring and exiting the industry. The
average age of a farmer in the UK is 58 which is far higher than other industries.”
• “UK agriculture is benefitting from the global tightening in the balance of supply and demand for
agricultural commodities. It is helping to drive prices up and provides long-term optimism they might
remain at a higher level.”
• “A lot of knowledge is leaving the industry. As older farmers retire and there are fewer younger people
taking over we risk losing valuable farming know-how.”
32

• “Following the ‘Horsegate’ scandal [i.e. Detection of horse meat in products labelled otherwise] we
have seen renewed demand for British agricultural produce, not just in the retail sector but also in
the food service sector from companies such as Greggs and Boots.”
• “We have seen the ‘strategic supply chain’ model in the retail sector start to take hold in the food
service sector. Companies such as KFC are wanting to build closer relationships with suppliers.”
• “The outlook for the agri-food sector in the UK is very positive. The UK is home to world class
farmers and agri-food businesses who are technically proficient and globally competitive. We have
strong domestic markets in sectors such as dairy, grains, pig poultry and beef and food companies
that are interested in local sourcing.”
33

Cereals
Cereals(2): The UK is the fourth largest producer of
cereals and oilseed crops in the EU. 5 million
hectares of land in the UK is used for growing crops
with 80% of this used for production of cereals and
oilseeds. Cereal production in the UK tends to be
focused on the Eastern side of the country. As a
result cereal processing units and stores tend to be
located in the same parts of the country.
Total value of production and prices (1)
£/tonne
£million
(2) Agriculture and Horticulture Development Board
34
85%
90%
95%
100%
105%
110%
115%
0
5 000
10 000
15 000
20 000
25 000
30 000
2007 2008 2009 2010 2011 2012
Vol (000
tonnes)
Productio
n as % of
total
usage
(rhs)
0
50
100
150
200
250
300
350
400
450
0
500
1 000
1 500
2 000
2 500
3 000
3 500
2007 2008 2009 2010 2011 2012
Cereals production £millions
Milling wheat price £ tonne
Malting barley price £tonne
Oilseed rape price £tonnes)
Production (000 tonnes) and self-
sufficiency (1)

Cereals vertical summary
Cereal farming
Maltsters Millers/ flour mills
Starch
manufacturers
Feed
Exports
Imports
Food industry
E.g. manufacturers of baked goods,
breakfast cereals, sauces
Bread, biscuits, cakes, flour,
breakfast cereals, sauces
Brewers &
distillers
Beer and whisky
Merchants/FCBs
Central Storage
Livestock farms
Meat, Dairy, Eggs
Production
Primary Processing
Secondary Processing
Consumption
35

Horticulture: fruit
Horticulture: 200,000 hectares of land is
used to grow horticulture (fruit,
vegetables and ornamentals) in the UK.
The highest concentration of horticultural
production is in Eastern England – with
much of the glasshouse production
occurring in this area. Flower production
again occurs mainly in the East with
another cluster in Cornwall in the West.
Total value of production (£million) and prices
(£/tonne)(1)
(2) Trade interview
36
0%
2%
4%
6%
8%
10%
12%
14%
320
330
340
350
360
370
380
390
400
410
420
430
2007 2008 2009 2010 2011 2012
Vol (000
tonnes)
Production
as % of total
usage (rhs)
0
1000
2000
3000
4000
5000
6000
7000
8000
0
100
200
300
400
500
600
700
2007 2008 2009 2010 2011 2012
Fruit production £millions
Dessert apples
Pears
Raspberries
Stawberries
sufficiency (1)

Horticulture: vegetables
Total value of production (£million)
and prices (£tonne)(1)
£/tonne
£million
0
50
100
150
2007 2008 2009 2010 2011
Total production area (000 ha)(1)
99% open production
1% protected
37
0%
10%
20%
30%
40%
50%
60%
70%
0
500
1 000
1 500
2 000
2 500
3 000
2007 2008 2009 2010 2011 2012
Vol (000
tonnes)
Production
as % of total
usage (rhs)
0
200
400
600
800
1 000
1 200
1 400
0
200
400
600
800
1 000
1 200
1 400
2007 2008 2009 2010 2011 2012
Fresh vegetable production £millions"
cauliflowers
tomatoes
sufficiency (1)

Horticulture: potatoes
38
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
2007 2008 2009 2010 2011 2012
Vol (000
tonnes)
Production
as % of total
usage (rhs)
0
50
100
150
200
250
300
350
0
100
200
300
400
500
600
700
800
2007 2008 2009 2010 2011 2012
Fresh potato production £millions
early potatoes
maincrop potatoes
all potatoes
sufficiency (1)
130
135
140
145
150
2007 2008 2009 2010 2011 2012

Fresh produce vertical summary
Seed merchants, agro-chemicals,
machinery, plant breeders, R&D
UK horticultural farms
200,000ha planted area
Producer groups, Co-Ops, marketing agents
Food servicePYOb/Farm shop/veggie boxes
Multiple retailers
(c.80% by volume)
Wholesalers
Independent retailers
Packing facility
Fresh fruit Fresh Vegetables
Fruit and
Vegetables
imports
39

UK floriculture production by type (000tonnes)(1)
Floriculture
40
The overall value of production
in the ornamental sector
remained static at £1.0 billion in
2012, reflecting slow and
challenging trading conditions
across all market sectors
17
17
18
18
19
19
20
20
2007 2008 2009 2010 2011 2012
Production (£ million) and self-
sufficiency (1)
43%
44%
45%
46%
47%
48%
49%
50%
51%
52%
53%
0
200
400
600
800
1 000
1 200
2007 2008 2009 2010 2011 2012
Total production £million
Production as % of total usage

Floriculture vertical summary
41
UK production (incl. bulbs, cut flowers, foliage, indoor
plants, outdoor plants and trees (c. £1.05bn)
UK exports (mostly
narcissi) £0.47bn
Imports (c.£1.05bn)
NL account for 77%
Wholesale Markets
(e.g. New Covent Garden
Market)
Garden centres &
nurseries
OnlineSupermarkets
Consumers (c. £2.05bn
spend)
Retailers are increasingly
establishing direct sourcing
relationships with growers (UK
and overseas).

Pigs
sufficiency (1)
47%
21%
11%
9%
12%
1 to 9 pigs
10 to 49
50 to 299
300 to 999
1 000 and over
Total 10,900 holdings
UK pig holdings (000’s), by size of holding(1)
42
0%
10%
20%
30%
40%
50%
60%
70%
0
100
200
300
400
500
600
700
800
900
2007 2008 2009 2010 2011 2012
Vol (000
tonnes)
Production
as % of total
usage (rhs)
0
20
40
60
80
100
120
140
160
0
200
400
600
800
1 000
1 200
2007 2008 2009 2010(e) 2011 2012
Total production £millions
Pig price (pence/kg deadweight)

Pig meat vertical summary
Pig marketings
Pig Herd
Live pig imports
Wholesalers, traders, depots
Processors
Retail Fresh/Frozen Retail Processed Food Service
Consumers
Imports
Live pig Exports
Feed, Agrochem, Machinery
Marketing Groups
Abattoirs
Exports
Retail Bacon
43

Poultry
58%25%
17%
1 to 9 999 broilers
10 000 to 99 999
100 000 and over
UK poultry holdings (000’s), by size of holding(1)
44
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2007 2008 2009 2010 2011 2012
Vol (000
tonnes)
Production
as % of total
usage (rhs)
sufficiency (1)
0
20
40
60
80
100
120
140
0
200
400
600
800
1 000
1 200
2007 2008 2009 2010(e) 2011 2012
Prices (average producer prices (pence per kg carcase weight)):

Poultry vertical summary
Company Growing Units
Raise broilers (hens reared for
meat, not eggs)
Marketable broilers
Abattoirs
Processors
Fresh exports (mostly
dark meat)
Wholesalers
Fresh and processed
Imports
Food Service Retailers
Processed Exports
Consumers
Breeding Farms &
Laying Hens
Egg Hatcheries
Contract Broiler
Growers
This aspect of the
chain is typically
integrated by major
players
45

Beef
UK beef holdings (000’s), by size of holding(1)
39%
19%
13%
13%
11%
5%
1 to 9 beef cows
10 to 19
20 to 29
30 to 49
50 to 99
100 and over
46
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
100
200
300
400
500
600
700
800
900
1 000
2007 2008 2009 2010 2011 2012
Vol (000
tonnes)
Production
as % of total
usage (rhs)
0
20
40
60
80
100
120
140
160
180
200
0
500
1 000
1 500
2 000
2 500
3 000
2007 2008 2009 2010(e) 2011 2012
Finished cattle (pence per kg liveweight): All
prime cattle
sufficiency (1)

Beef vertical summary
Feed, Agrochem, Machinery
UK Dairy farms UK Suckler Herd
Store producers Finishers
Live cattle imports
Marketing Groups Auctions
Abattoirs
ProcessorsExports Intervention
Wholesaler
s/traders
Retail Fresh/Frozen Retail Processed Food Service
Consumers
Imports
Home fed beef marketings
Live cattle Exports
47

Dairy
32%
14%
22%
15%
17%
1 to 9 dairy cows
10 to 49
50 to 99
100 to 149
150 and over
UK dairy herd (000’s), by size of holding(1)
48
0%
20%
40%
60%
80%
100%
120%
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
2007 2008 2009 2010 2011 2012
Vol (000
tonnes)
Production
as % of total
usage (rhs)
0
5
10
15
20
25
30
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
2007 2008 2009 2010(e) 2011 2012
Prices (average price received by milk
producers, net of delivery charges
(pence per litre)) (f)
sufficiency (1)

Dairy vertical summary
Feed, Agrochem, Machinery UK Dairy farms
Available for human
consumption
On farm waste and stock use
Liquid imports Liquid exports
Liquid milk Manufacture
Doorstep Retail
Consumers
51 Dairies 11 Dairies n/a 6 Dairies 11 Dairies
Cheese Butter
Cream
Condensed SMP
42 Dairies
49

Cross-cutting themes
• Environment. As agriculture accounts for 70% of total land use in the UK its role in managing the environment is
key. It is also a key feature of the CAP (recent negotiations identified three core areas: crop diversification,
ecological focus areas and retention of permanent grassland ) which will continue to have a significant bearing on
farming practices.
• Compliance & legislation. Driven in-part by environment factors as well as pressure to increase supply chain
transparency and accountability there has been a significant increase in the extent of legislative compliance UK
farmers are required to complete. Whilst seen as burdensome it also helps to raise production standards across
the whole of the farming base.
• Profitability. Total Income From Farming (TIFF), which is the governments measure of profitability, indicates that
UK farming is the most profitable periods it has been for over 30 years. However, profitability varies considerably
depending on enterprise size and type (e.g. dairy / livestock / arable / fresh produce etc) as well as natural cycles
and unforeseen events. As the UK agricultural industry is increasingly liberalised profitability is increasingly
affected by global events, in particular the balance of global supply and demand for commodity products
influencing UK prices.
• Confidence and investment. Investment by agricultural enterprises in the UK also varies in line with profitability.
In some sectors, such as pig production, extended periods of poor profitability has left a legacy of under-
investment in assets. Even when profitability levels improve farmers are sometimes reluctant to invest because of
a lack of confidence that profitability can be sustained.
50

Cross-cutting themes
• Succession. The average age of a farmer in the UK is 58 and there is a shortfall of younger people entering the
industry. Business succession is therefore a major issue to many businesses but particularly in family run
generational farms. Rather than family farm being passed on to the next generation it is increasingly likely that
farms will continue to consolidate so that there are fewer, larger farms.
• Supply chain practices. In 2009 the Competition Commission introduced a Grocery Supply Chain Code of
Practice (GSCCOP) to govern practices and policies throughout the supply chain. The code of practice was
introduced following sustained concerns of unfair practices.
• Economic liberalisation and political reform. Ongoing CAP reform and globalisation of markets means that the
UK agriculture industry is increasingly exposed to global developments. For example, global commodity prices
have much more significant bearing on UK commodity prices, changes in natural business cycles, the
development of global supply chains, geopolitical shocks (such as trade restrictions) and so on.
51

• “UK [horticultural] production is highly exposed to the weather because the vast majority of production is
not protected under glass. This makes it difficult to guarantee volume supply at the edges of the growing
season. It also influences consumers. An early sunny spell in March creates instant demand for produce
that is not yet in season.”
• “Food on the move is a key target for us. We target out of home consumption opportunities [such as
lunch] with single serve salad products that are, healthy, easy and convenient to eat.”
• “Safety is much less of a concern in fresh produce supply chains so the decision to source British or
imported produce is more of a commercial or moral decision. Low prices can still open doors in some
parts of the market.”
• “Currently our pre-prepared salads are showing the strongest sales growth. These are premium lines that
retail for £2.50 to £3.00 per item, which is not what we expected to see given the economic environment. I
think that consumers see these as value-for-money because the cost of purchasing all the individual
elements are greater and there is less waste.”
52

• “The UK liquid milk market is effectively closed to foreign suppliers without direct inward investment in
the UK supply chain. It is difficult to envisage a SME entering this market as it is highly concentrated and
capital costs of entry very high.”
• “The big picture indicators for UK dairy are positive. We are close to cost of production prices but that’s
largely due to 2 years of poor weather. We are currently seeing prices pick up and this is leading to
increased confidence.”
• “There are opportunities outside of the cow liquid milk market. Alpro have been successful not just in the
UK market but globally as the appeal for non-dairy sources of milk [e.g. Soy, rice, almond] grows amongst
a group of consumers that perceive them as healthier.”
• “I believe that the major milk processors in the UK will increasingly look to capitalise on milk powder
markets in high growth economies such as the BRICs.”
• “The biggest barrier to entry to the UK liquid milk market is scale.”
53

• “Although the UK is technically self-sufficient in lamb we still import a considerable amount of meat from
New Zealand because UK consumers demand year round supply.”
• “The horse meat scandal has helped UK producers in the short-term at least. We have seen demand for
British beef sustained and people have traded up and purchased more expensive cuts.”
• “One of the biggest challenges to producer profitability [meat sector] is the price of feed...it often means
the difference between a producer making a profit or a loss.”
• “There is a massive opportunity for Dutch growers to get closer to the UK market. Projects such as
Thanet Earth demonstrate that it is possible.”
• “A major challenge for Dutch SME businesses is going to be receiving financial backing.”
• “The fresh vegetables industry is in a period of consolidation. Farming and packaging has become very much a
scale business. It is difficult to compete without scale now because the business is capital hungry on the
production.”
54

• “In some cases producers have invested in processing, packing and distribution facilities and deal
directly with multiple retailers”
• “We have one of the best [pig meat processing] plants in the UK, which is about 10-15% more efficient
than the rest. But if you compare this plant with European ones, particularly in Denmark and Holland we
are only really on a par with their average and a long way behind the best”
• “I think that in the next five years we will see more rationalisation and consolidation across the
processing sector. However, there is also likely to be more investment in new processing facilities,
especially in East Anglia.”
• “The rise in feed [prices] has significantly impacted the profitability of the [poultry] industry because the
price increases at retail have not been sufficient to compensate. This cost pressure will force more
rationalisation and drive more efficiency in the supply chain.”
55

Chapter 5: UK Food and Drink Manufacturing
Chapter contents:
•UK food and drink manufacturing key facts and figures
•Investment examples.
•Procurement strategies.

UK food and drink manufacturing
• Employing 400,000 people, worth £72 billion in total turnover and contributing £19.5 billion in gross value added
food and drink manufacturing is the single biggest manufacturing sector in the UK and is therefore vital to the UK
economy.
• There are approximately 7,000 food and drink manufacturers registered in the UK. There is tremendous variety –
the UK is home to many of the world’s most recognised global FMCG brands as well as many local and regional
players.
– Beverages represents the biggest manufacturing sector worth £16.5 billion.
– Meat and meat products represents the second biggest sector worth £14 billion.
– Bakery (£10 billion) and Dairy (£8 billion) are other major sectors.
– They are also mature sectors and output growth is in the low single digits.
– Although fruit and fresh vegetables processing is a smaller market by comparison (£6 billion), it is a sizeable
high margin opportunity that is growing by as much as 10% per annum.
57

Size and performance
£66,052
£69,673
£72,862
£72,062
£18,309
£18,762
£19,343
£19,476
6,489
6,327
6,380
6,439 0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2008 2009 2010 2011
Total t'over food manufacturing
(£million)
Gross value added (£million)
Number of enterprises
Food manufacture t'over as %
of total UK manufacturing t'over
(rhs)
UK food manufacturing industry(1) CAGR (08-11)
+2.2%
+1.6%
-0.2%
(1) Office for National Statistics, Annual Business Survey
18%
8%
2%
10%
8%
12%
19%
23%
Meat and meat products
Fruit and fresh vegetables
Vegetable and animal fats
Dairy products
Grain mill and starch products
Bakery
Other food
Beverages
UK Food manufacturing turnover by industrial
classification (%)(1)
58

UK manufacturing compared to the Netherlands
(1) Office for National Statistics and CBS (Statistics Netherlands)
6,439
4,195
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
UK NL
Number of enterprises(1)
400
171
0
50
100
150
200
250
300
350
400
450
UK NL
Number of employees (000) (1)
61 59
0
10
20
30
40
50
60
70
UK NL
Gross output EURbn(1)
17
11
0
2
4
6
8
10
12
14
16
18
UK NL
Gross value added EURbn(1)
59

Meat and meat products,
£14,741
Fruit and fresh
vegetables, £5,985
Vegetable/animal oils and
fats, £1,111
Dairy products, £8,386
Grain mill and starch
products, £6,647
Bakery, £9,880
Other food products,
£15,647
Beverages, £18,440
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
-6% -4% -2% 0% 2% 4% 6% 8% 10% 12%
Manufacturing growth by industrial classification(1)
Turnover growth (% p.a.)
GVA as a percentage of turnover
(1) Office for National Statistics, Annual Business Survey & Promar International Calculations.
Other foods includes: sugar; cocoa, chocolate and sugar confectionery; tea and coffee; condiments and seasonings; prepared
meals and other foods not easily classified.
Size of bubble equates to market size £million
60

Foreign investment in UK manufacturing
• In recent years some of the biggest investment in food and drink processing and manufacturing has come from
overseas investors, for example:
– Bright Foods, a Chinese owned firm purchases 60% of leading cereal brand Weetabix in 2012 – remaining 40% held
in private equity firm Lion Capital.
– Tulip (part of Danish Crown group), established in UK since 2003 through acquisition of Hygrade Foods and Flagship
Foods.
– Arla, a Danish owned dairy co-operative with a 26% share of the liquid milk market, present in UK since 2003
– The Muller Group, German owned dairy business established £30m UK operations in 1991 to sustain rapidly growing
demand for its Muller Corner product.
– Bakkavor Group, Icelandic processor made major step in UK by acquiring Geest (Dutch) business in 2005.
– ForFarmers, a Dutch owned feed company that acquired BOCM Pauls for £58million in 2012.
• The recent history of inward investment is evidence of the strategic value investors see in the UK and that the UK
welcomes and protects foreign investment.
• Dutch businesses that are also considering direct investment in the UK should therefore feel positive.
• However, the scale of these investments also indicate the funds required to enter key sectors of the UK market,
which may be a barrier to entry for small and medium sized businesses.
61

Demand for agricultural materials
• UK food manufacturers purchase over £50 billion in goods and services per annum:
• Approximately two thirds of manufacturers requirements are supplied by domestic producers with the remaining
balance supplied by importers.
• Many large manufacturers employ sophisticated procurement strategies to sourcing and supply of raw materials.
• Price volatility and continuity of supply has increased the importance of effective procurement.
– In general, manufacturers sourcing strategically important raw materials are under pressure by stakeholders
(such as customers and consumers) to demonstrate transparency and provenance are adopting long term
partnership style relationships with suppliers.
– At the same time, manufacturers also seek opportunities to improve their margins by making the
procurement process more competitive between suppliers and use purchasing tactics such as auctions,
e-tenders and so on to obtain the best price.
• The matrix below is a quick and effective way for suppliers to evaluate their position in relation to buyers in order
to anticipate strategies and tactics buyers are most likely to employ.
62

Identifying procurement strategies
Leverage
•Short term relationship
•Focus on price
negotiation
•Highly competitive
•Deal only with buyer
Transactional
•Minimal (no) contact
•Automated processes
•Contact with junior staff
Strategic
•Long-term partnership
•High level of contact &
communication
•Personal relationships
•Deal with senior staff
Security
•Off and on relationship
•Contact high but
infrequent e.g. agreeing
specifications
Low High
Low
High
Buyer spend*
Market difficulty**
Where you are supplying a
strategically vital ingredient
where there are little/no
available alternatives. For
example, a rare breed/variety
that the retailer is known for
selling.
Where you are supplying an
undifferentiated product and
competing against many other
suppliers and it is a high
spend item for the customer;
for example bread-making
flour for a bakery.
undifferentiated product, there
are other suppliers in the
market and it is a low spend
item (e.g. salt).
ingredient to a detailed
specification or where an
element of risk is involved
(e.g. shellfish) but the
customers overall spend is
low and infrequent.
*Determined by value of spend and/or percentage contribution to customer costs of production
**How easy/difficult it is for the customer to obtain ingredient/material from other suppliers and/or extent of
technical specification required.
63

Demand for speciality ingredients
• Speciality food ingredients (flavours, flavour enhancers, preservatives, sweeteners, colours, enzymes,
hydrocolloids, acidulants, antioxidants etc) are in high demand by UK food manufacturers.
• Speciality ingredients typically represent a small proportion of overall costs of production but have the potential to
add significant value to the product; for example:
– Salt reduction solutions (especially in meat, bread and cheese) to help achieve industry-wide salt reduction
targets set by government.
– Natural, non-caloric sweeteners (such as Steviol Glycosides extracted from the leaf of the Stevia plant and
Monk Fruit) enable drinks manufacturers to reduce sugar levels in response to consumer demand and
industry pressure groups.
– ‘Natural’ food additives such as colours, flavours, sweeteners and preservatives to support a widespread
trend in positioning food and drink products as ‘natural’ or ‘free-from artificial additives.’
• Fruits, vegetables, herbs, leaves feature as the raw material source for artificial additives e.g.
Anthocyanins are found in a wide range of fruits, flowers and vegetables and have a red to purple
colour that can be used in a wide range of products such as confectionery, jellies, jam, soft drinks.
– Ingredients such as beta-glucans, calcium, vitamins, plant stanol esters, pro and pre-biotics etc that provide
functional benefits to heart, bone, digestive health etc. The UK market for functional products is worth an
estimated +£700M with annual growth of +5%.
64

Speciality ingredients create value not cost
65
57%
18% 17%
4%
3%
Dried milk
Sugar
Vegetable fat
Functional systems
Flavour
Ice cream cost structure (1)
(1) Danisco
• Functional ingredients provide benefits that are closely aligned
with consumer benefits and therefore create value.
• In the ice cream example (opposite) the value adding ingredients are
the flavour and functional systems (e.g. emulsifiers that may be used to
stabilise a low fat ice cream).
• Milk, sugar and fat account for 93% of costs of production but do not
necessarily add value (i.e. these are ingredients consumers would
expect to see and therefore do not attribute a higher value to them).
• Functional ingredients solutions are derived from sustained investment
in R&D and core competencies in technical and scientific disciplines
such as food technology and biosciences.
• The Dutch agri-food industry is extremely well placed to capitalise
on these opportunities.
• Significant R&D expertise
• Agri-food landscape promotes close working relationships
between academia, R&D centres (TNO, NIZO, Food Valley) and
business.
• Extremely high educational standards (esp. in universities).
• A progressive and innovative mindset.

Chapter 6: UK Trade in Food and Drink
Chapter contents:
•UK food and drink trade key facts and figures
•Sector specific analysis of position of the Netherlands.

Trade overview
• UK self-sufficiency in food and drink was 62% in 2012 (underlying trend of long term decline).
• The UK is a net importer of food and drink. In 2012 the UK’s trade gap (value of exports minus cost of imports)
was -£18.1 billion.
• The UK is particularly reliant on imported fruit and vegetables and meat, which account for 22% and 15% of total
imports respectively.
• The Netherlands is the single biggest source of food imports to the UK ahead of France, Ireland, Germany
and Spain. In 2012 the UK imported £4.6billion worth of food from the Netherlands, which is equivalent to 12.2%
of total UK imports.
• Key products the UK imports from the Netherlands include (amongst others):
– Poultry (145,000 tonnes equivalent to 38% of total poultry imports. The Netherlands is the UK’s single
biggest source of imported poultry).
– Bacon and ham (116,000 tonnes equivalent to 37% of total bacon and ham imports. The Netherlands is the
UK’s second biggest source of imported bacon and ham).
– Vegetables (600,000 tonnes equivalent to 32% of total vegetable imports. The Netherlands is the UK’s
second biggest source of imported vegetables).
– Pork (64,500 tonnes equivalent to 18% of total pork imports. The Netherlands is the UK’s second biggest
source of imported pork).
67

£4,568
£4,363
£3,501
£3,287
£2,329
£2,072
£1,947
£1,452
£1,032
£1,031
0 1000 2000 3000 4000 5000
Netherlands
France
Irish Republic
Germany
Spain
Italy
Belgium
Denmark
U.S.A.
Poland
Trade
UK Food Self-Sufficiency(1) UK Balance of Trade in Food and Drink(1)
£million
UK Imports by country of despatch(1)
£million
12% of UK total
22%
15%
13%8%
7%
7%
7%
7%
6%
5%
3%
Fruit and Veg
Meat
Drink
Coffee, tea, etc.
Dairy
Fish
Cereals
Misc.
Oils
Animal feed
Sugar
UK Imports by commodity type (%) (1)
(1) HM Revenue and Customs
68
-13,248
-13,583
-14,351
-15,419
-16,521
-17,014
-17,370
-20,158
-20,346
-18,748
-18,646
-18,179
-£25,000
-£20,000
-£15,000
-£10,000
-£5,000
£0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
0
10
20
30
40
50
60
70
80
90
2000 2002 2004 2006 2008 2010 2012
% of all food
% of indigenous type food

Trade balance – fruit
69
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Fresh fruit Imports
Fresh fruit Exports
000tonnes
Total imports and exports 2002-2012(1)
The UK is a major net importer of
fruit and currently imports 3.4
million tonnes.
Exports have grown since 2004
but still represent 3% of imports.

16
9
8
77
6
5
4
4
34
Spain
South Africa
Costa Rica
Colombia
Netherlands
Dom Republic
France
Brazil
Ecuador
Others
Importer share - fruit
6%
5% 5% 5% 5%
6%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
2005 2006 2007 2008 2009 2010
Spain Costa Rica South Africa
Colombia Netherlands
UK Fruit imports (% of total) by country of
despatch – Provisional 2012(1)
Share of UK fruit imports by country of despatch
(top 5 countries only) (1)
Equivalent to circa 5% of total
domestic demand.
70

Trade balance - vegetables
71
0
500
1,000
1,500
2,000
2,500
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Fresh vegetables Imports
Fresh vegetables Exports
000tonnes
The UK increasingly has a trade
deficit in fresh vegetables.
Despite a slight decline in 2009/10
imports have continued to rise in
2011/12. The UK currently
imports +2 million tonnes per year.

39
31
4
4
2
20
Spain
Netherlands
France
Poland
Irish Republic
Others
Importer share - vegetables
Share of UK vegetable imports by country of
despatch (top 5 countries only) (1)
32%
31% 31% 30%
31% 32%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
2005
2006
2007
2008
2009
2010
Spain Netherlands France Poland Irish Republic
domestic demand.
72
UK Vegetable imports (% of total) by country
of despatch – Provisional 2012(1)

Trade in seed potatoes
73
54%
46%
68%
60%
58%
63%
0%
10%
20%
30%
40%
50%
60%
70%
80%
2007 2008 2009 2010 2011 2012
NL Belgium France
Germany Ireland Others
UK seed potato imports by country of
despatch, 000 tonnes(1)
Share of UK vegetable imports by country of
- 5,000 10,000 15,000 20,000
NL
France
Belgium
Germany
Ireland
Average annual seed potato imports are
circa. 25 million tonnes. The majority of
which come from the Netherlands. Dutch
seed imports account for ~4% of total UK
seed potato supply(2).
(1) United Nations
(2) British Potato Council

Trade in flowers and plants
-1200
-1000
-800
-600
-400
-200
0
200
Bulbs
Cutflowers
Foliage
Indoorplants
Outdoorplants
Trees
Other
Total
Import Export
UK imports and exports of plants and flowers,
£million (2012)(1)
77
9
6 1
1 6
The Netherlands Kenya
Colombia South Africa
Spain ROW
Origin of flower and plant imports (%)(2)
(1) Defra
74
The Netherlands has a dominant position
accounting for over three quarters of cut
flower imports. Cut flowers from other
destinations are also likely to have passed
through the Netherlands flower auction
markets at some stage.
Daffodils are the only main UK export.

Trade balance – poultry meat
75
0
50
100
150
200
250
300
350
400
450
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Poultrymeat Imports
Poultrymeat Exports
000tonnes
The UK has a long-run trade
deficit in poultry meat. 2011 was a
record year for poultry meat
imports; therefore the fall off in
2012 does not necessarily mark a
period of decline.

46
12
8
7
27
Netherlands
Poland
Germany
Irish Republic
Others
Importer shares in poultry meat(1)
Share of UK poultry meat imports by country of
39%
43%
45% 45%
47%
38%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
2005 2006 2007 2008 2009 2010
Netherlands Irish Republic
Poland Germany
Belgium-Luxembourg
(1) Poultry meat: includes fresh, chilled or frozen carcase meat, cuts and offal (inc.
liver).
domestic demand.
76
UK poultry meat imports (% of total) by
country of despatch – Provisional 2012(1)

Trade balance – poultry meat products
77
0
50
100
150
200
250
300
350
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Poultry meat products Imports
Poultry meat products Exports
000tonnes
Imports of poultry meat products
(including (prepared, salted,
cooked poultry meat) have more
than doubled in the 10 years to
2012.
Exports have also increased in
this time but equivalent in volume
to 15% of imports.

46
11
10
7
26
Thailand
Netherlands
Irish Republic
Brazil
Others
Importer shares in poultry meat products(1)
Share of UK poultry meat products imports by
country of despatch (top 5 countries only) (2)
15% 14% 14%
16%
12%
8%
0%
10%
20%
30%
40%
50%
60%
2005 2006 2007 2008 2009 2010
Thailand Irish Republic Brazil
Netherlands Germany
(1) Poultry meat products: includes prepared, preserved, salted or cooked poultrymeat and offal
(inc. liver).
Consumer concerns over food
safety may threaten poultry meat
imports from Thailand, possibly
to the advantage of the NL
78
UK poultry meat product imports (% of total)
by country of despatch – Provisional 2012(1)

Trade balance - pork
79
0
50
100
150
200
250
300
350
400
450
500
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Pork Imports Pork Exports
000tonnes
There has been a gradual
decline in the volume of fresh
pork imports since a peak of
462,000 tonnes in 2007.
In 2012 the UK imported
349,000 tonnes.
At the same time exports have
been gradually increasing and
reached their highest level in
2012 -154,000 tonnes.

29
19
14
11
27
Denmark
Germany
Netherlands
Irish Republic
Others
Importer shares in pork(1)
Share of UK pork imports by country of despatch
(top 5 countries only) (2)
(1) includes carcase meat and cuts, both bone-in and boneless.
12% 13% 12% 11%
15%
18%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
2005 2006 2007 2008 2009 2010
Denmark Netherlands
Belgium-Luxembourg Germany
Irish Republic
Unbalanced consumer
demand for loin meat creates
supply deficit and import
requirement. UK
exports/processes surplus
cuts such as shoulder and
leg.
80
UK pork imports (% of total) by country of
despatch – Provisional 2012(1)

Trade balance – bacon and ham
81
0
50
100
150
200
250
300
350
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Bacon and ham Imports
Bacon and ham Exports
000tonnes
The UK has a long-standing trade
deficit in bacon and ham products
although recently imports have
been falling and currently stand at
257,000 tonnes – its lowest level
in over a decade.

41
41
12
3 3
Denmark
Netherlands
Germany
Irish Republic
Others
Importer shares in bacon and ham
Share of UK bacon and ham imports by country of
50%
45%
49%
44%
37% 37%
0%
10%
20%
30%
40%
50%
60%
2005 2006 2007 2008 2009 2010
Denmark Netherlands Germany Italy France
Bacon is an everyday item for
British consumers and highly
price sensitive. UK bacon is
sold at a substantial premium.
82
UK bacon and ham imports (% of total) by

Trade balance – beef and veal
83
0
50
100
150
200
250
300
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Beef and veal Imports
Beef and veal Exports
000tonnes
Beef exports have been rising
since 2005 because of the lifting
of an export ban (exports prior to
2005 were beef and veal of non-
UK origin).
Beef and veal imports have been
fairly stable since 2005, the
majority of which originates in
Ireland.

68
9
5
3
15
Irish Republic
Netherlands
Germany
Poland
Others
Importer shares in beef and veal
Share of UK beef and veal imports by country of
5% 5%
6% 7% 7% 6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
2005 2006 2007 2008 2009 2010
Irish Republic Netherlands Uruguay
Germany Namibia
In contrast to Europe veal has
limited appeal to the UK market.
It is more likely to be sold
through specialist independent
butchers and food service
channels.
84
UK beef and veal imports (% of total) by

Trade balance in wheat
85
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Wheat, unmilled Imports
Wheat, unmilled Exports
000tonnes
Wheat is one of the few products
where the UK consistently runs a
trade surplus. The reversal of this
trend in 2012 was caused by
extremely adverse weather in the
summer of 2012 prompting record
level of imports.

32
26
10
9
23
Spain
Netherlands
USA
Portugal
Others
Importer shares in wheat(2)
Share of wheat imports by country of despatch (top
6 countries only) (1)
2%
4%
1%
2%
1%
3%
0%
5%
10%
15%
20%
25%
30%
35%
40%
2005 2006 2007 2008 2009 2010
Canada Germany France
U.S.A. Irish Republic Netherlands
(2) Bread making wheat
86
UK unmilled wheat imports (% of total) by

Chapter 7: Retail and Food Service Market
Chapter contents:
•UK retail and food service market key facts and figures
•Category specific market analysis, trends and opportunities.

Grocery retail market
• With a population of 63million, household expenditure on food and non-alcoholic drink worth £88.5billion and
growing by +4% p.a. the UK is one of the most attractive grocery retail markets in Europe.
• Over +95% of food and drink purchased for consumption in the home is sold through a supermarket chain; the
remaining share of the market is accounted for by independent retailers (such as butchers or farmers markets).
• Four supermarket chains account for 76% of the market.
– Tesco is the market leader with a 29.9% share.
– Asda, part of the Wal Mart group has a 17.5% share
– Sainsbury’s has a 16.9% share
– Morrisons, following acquisition of Safeway group in 2007 has an 11.5% share.
• Collectively, the ‘Big 4’ have grown their share of the market by 8.1% since 2010 at the expense of small
independent and convenience stores.
• Recently, premium retailer Waitrose and discount stores Aldi and Lidl posted record collective market share figures
of 4.9% and 6.4% respectively. Aldi and Lidl have benefitted from their position as a cheaper option for shoppers,
whilst Waitrose has been successful by re-positioning themselves from being expensive to value-for-money.
• These recent successes aside, it is still the four leading retailers Tesco, Asda, Sainsbury’s and Morrisons
that exert considerable influence over the UK food and drink industry and shape opportunities and
challenges for suppliers.
88

Food service market
• The ‘Food service market’ defines food and drink consumed out of the home. It includes food and drink consumed
in public sector organisations (e.g. hospitals, schools etc) as well as private sector organisations (e.g. bars,
restaurant, hotels etc).
• UK consumer expenditure on food eaten out of the home in 2012 was £51.8billion, which is 3.5 times that of the
Netherlands. In the five years to 2012 expenditure grew by 3% p.a.
• The UK foodservice market is highly fragmented. In 2012 there were 168,000 foodservice units, of these, 72%
were independently ran.
• The foodservice market is highly mature, with many outlets established for a number of years. Recent years have
seen the decline in foodservice sales and the sector become more competitive, with consumers cutting back on
their spending.
• With a decline in sales, operators have had to concentrate on what the consumer is demanding so to gain sales.
Areas of success have been;
– Health and wellness
– Convenience – home delivery and take away
– Ethical sourcing
– Innovation
• Large food service chains, such as McDonalds have consolidated their supply chain, and now have direct links
with farmers. Other larger food service businesses have contracts with suppliers for their produce.
• Smaller, or independent retailers will often use wholesalers for their produce of work with suppliers for the more
expensive products e.g. meat. For high end restaurants the sourcing of the product and the story behind it is more
important, however this tends to be the case for the main element of the dish, e.g. meat.
89

Food service supply chain (simplified)
90
Consumers
Profit sector Cost sector
Restaurant
(e.g.
Traditional
‘sit down’
restaurant)
Quick
service
restaurant
(e.g. Fast
food)
Pubs
(e.g.
Traditional
pubs)
Hotels
Leisure
(e.g. Sports
clubs)
Staff
catering
(e.g. In the
work place)
Health
education
services
(e.g.
Schools,
hospitals)
Food service operator (Compass, Sodexo &
Aramark are the major players in the market)
Delivered wholesale
(Brake Bros. and 3663 are
the major players)
Wholesale / Cash &
Carry (click here to
see list)
Manufacturer / producer / supplier
NB: Distribution channels in the food service market can be complex. Manufacturers/suppliers can have direct supply
relationships with the outlets (e.g. Restaurant) or supply through a food service operator (i.e. A contract caterer that prepares and
serves the meal); through a wholesale / cash and carry business or through a delivered wholesale business (this is the same as a
wholesale but they physically deliver the goods as well).

Food retail & food service market value
UK Household Food Expenditure (Food and
Non-Alcoholic Drink) £millions(1)
UK Expenditure Food Eaten Out £millions(1)
CAGR 07-12: 3%
CAGR 07-12: 4%
91
0%
1%
2%
3%
4%
5%
6%
£0
£10,000
£20,000
£30,000
£40,000
£50,000
£60,000
£70,000
£80,000
£90,000
£100,000
2007 2008 2009 2010 2011 2012
Household Food Annual % change
-4%
-2%
0%
2%
4%
6%
8%
10%
£0
£10,000
£20,000
£30,000
£40,000
£50,000
£60,000
2007 2008 2009 2010 2011 2012
Food eaten out Annual % change

UK food retail & food service compared to the
Netherlands
63
17
0
10
20
30
40
50
60
70
UK NL
Population (millions)(1)
Consumer retail spend on food and
drink (EURbn)(2,3)
Consumer food service spend on
food and drink (EURbn) (2,3)
Per capita spend on food and drink
through all channels (EUR p.a.) (2,3)
(1) Office for National Statistics and CBS (Statistics Netherlands)
(2) Defra
(3) Agricultural Economic Report 2012, LEI Wageningen 92
88
40
0
20
40
60
80
100
UK NL
51
13
0
10
20
30
40
50
60
UK NL
2,206
2,352
2,100
2,150
2,200
2,250
2,300
2,350
2,400
UK NL

UK country variations in food and drink
expenditure
26.32
25.4
24.15
24.28
2.97
3.38
2.79
2.99
11.01
8.72
7.35
8.49
4.11
3.2
2.7
3.09
0 5 10 15 20 25 30 35 40 45 50
N Ireland Total £44.40
Scotland Total £40.69
Wales Total £37.05
England Total £38.85
H'hold food & drink ex. alcohol H'hold alcoholic drinks
Eating out food & drink ex alcohol Eating out alcoholic drinks
Country variations in average food and drink expenditure £ per
person, per week(1)
Population: 53 million
Population: 3.1 million
93

Regional differences – food retail
25.45
27.32
25.52
27.23
26.84
28.59
27.6
30.33
29.14
27.84
23
24
25
26
27
28
29
30
31
NorthEast
NorthWest
Yorkshire&theHumber
EastMidlands
WestMidlands
East
London
SouthEast
SouthWest
Englandave
Regional variations in average household food and
drink expenditure £ per person, per week(1)
UK ‘big 4’ supermarket density (Tesco,
Sainsbury’s, Asda and Morrisons only, 2010)(2)
94
(2) Ordnance Survey

Regional differences – food service
5,375
15,185
11,580
9,545
11,400
13,095
23,805
20,955
13,940
7,300
12,030
4,075
0 5,000 10,000 15,000 20,000 25,000
North East
North West
Yorkshire and The Humber
East Midlands
West Midlands
East
London
South East
South West
Wales
Scotland
Northern Ireland
Number of food and beverage service businesses, by
region(1)
(1) Office for National Statistics (based on VAT registrations and PAYE data)
Regional variations in average out of home food and
drink expenditure £ per person, per week(1)
11.13
10.87
11.24
10.66
10.52
11.55
13.48
13.44
12.56
11.93
0
2
4
6
8
10
12
14
16
NorthEast
NorthWest
Yorkshire&the
Humber
EastMidlands
WestMidlands
EastMidlands
London
SouthEast
SouthWest
Englandave.
95

Regional variation
• On the whole there is little distinction in food consumption patterns between the regions.
• One of the major reasons for this is the national distribution network of the major supermarkets which account for
the majority of food and drink purchased in the UK whose local adaptation of product lines is fairly limited.
• Many of the major food service companies operating in the UK also tend to standardise their menus.
• That said, some regional differences do exist:
– There is a higher concentration of food service establishments in London and the South East. Average
earnings are also higher in these areas and eating out is more commonplace than in other areas of the UK.
– Ethnic and religious influences on food consumption patterns are more pronounced in major urban areas
with diverse population ethnicities (e.g. London, Birmingham, Manchester, Leeds).
– London stands out as the only region in the UK that could be described as ‘distinctly different’ to
the rest of the UK.
– Some companies are reportedly implementing organisational structures to serve London as a distinct
market.
96

Food retail
Retail Expenditure Share % (14 April 2013) (1)
“Pressure on household budgets is undoubtedly driving some of the
growth at the discounters, but messages about quality are starting to
resonate. Lidl announced this week that it will increase its fresh meat
and poultry floorspace by 50% within the year, and Aldi’s new
‘convenience’ store in Kilburn is a departure from its traditional edge-
of-town offering. These changes are likely to appeal to a new and
different group of shoppers which will bolster the performance of the
discounters even further.(1)”
(1) Kantar Worldpanel
(2) Trade Interviews
2.7
3.1
2.1
0.2
-1
0
1
1.3
-9.4
-15 -10 -5 0 5
Tesco
Asda
Sainsbury's
Morrisons
Co-Op
M&S
Waitrose
Hard discounters
Others
Changes in retailer share of the grocery market (2010 – 2013) %
With the exception of the Co-Op all retailers have
increased their market share at the expense of ‘other’
supermarkets, made up of independent retailers and
symbol groups. Asda, Tesco and Sainsbury’s have
benefitted. So too has Waitrose and the hard
discounters both of which have increased their share.
97
Retailer profiles can be
found in Chapter 9:
Supporting Information

• “Growth in the grocery retail market has come mainly from the premium and budget end of the market.
The middle ground is being squeezed and is highly pressured. It appears that the value for money
proposition is strong at the premium and budget market but less clear in the middle.”
• “Growth is coming from convenience store formats and online sales, larger supermarket stores are faring
less well. This is clear when you look at retailers such as Morrison and the Co-Operative that are not
exposed to online or convenience store formats performing less well.”
• “There’s a competitive and consumer element to consider in the polarisation of the retail market.
Necessity is a major driver; consumers generally aspire to shop in more stores that are perceived to be
more premium so as confidence improves they will look to trade up not down. Other retailers will also
look to regain market share and use powerful tools and mechanics such as promotions to attract
consumers. In time I expect this issue will settle down.”
• “We have seen a resurgence in small, independent retail stores that have exciting and new concepts such
as Cook and Laverstoke Park. These tend to be at the premium end of the market and located in affluent
areas (e.g. London, Harrogate in the North) where there is a strong food culture.”
98

• “We are starting to see retailers segment the UK retail market geographically to isolate London as its own
market supported by a management structure purely focussed on this market. This is quite exciting,
suppliers can really capitalise on this if they are quick to react.”
• “Online is an exciting development in the UK grocery retail market. It’s not a simple case of what’s in-
store is also on-line; the supply chain cycle is shorter and products (e.g. especially packaging) needs to
be carefully adapted. Online brings suppliers from the Netherlands closer to the UK, products could be
packaged and shipped from the Netherlands to the UK with relative ease.”
• “The retailers are extremely good at what they do. They are capable of creating an extremely good
environment to showcase our [fresh produce] products ensuring it’s fresh, displayed well and they
respond well to consumers. Ultimately they are able to grow category sales, which benefits us
financially.”
99

• “Our retail customers are extremely demanding, we have to operate to tight deadlines, usually 2 weeks is
a maximum to deal with any issues and questions they need solving. We are also expected to provide a
lot of technical and R&D support and we have therefore needed to invest heavily in this area.”
• “Retailers say they understand the pressure on suppliers but do not engage in dialogue with them. They
are only concerned with shareholders and are resistant to change.”
• “The UK is much more sophisticated than other European/World markets. For example, processing
standards much higher, many more accreditations, sophisticated retailers, tiered branding, sourcing &
supply chains. A brand is “not just a crest” like in many other countries – it must have ethics, CSR,
genuine point of difference, has to mean something.”
• “Price is important but becoming less of a way to achieve competitive advantage. In an era when price
matching is so prevalent buyers look to other ways of differentiating their category. This opens up
potential discussions on how suppliers can add value in other ways, such as through improved
sustainability. These are good ways to position yourself as supplier.”
100

Category dynamics(1)
(1) Various sources incl. Mintel, Kantar, Defra
*Flowers and plants consumption per capita in £ not kg
Bread & Bread
products, £3.8
Butter & Yellow fats,
1.5
Cheese, £2.5
Desserts, £1.5
Ice Cream, £1.1
Processed Meat, £6.8
Ready Meals
(inc pizza), 3.8
Yoghurt, £1.8
Red Meat
(beef, pork, lamb),
£3.7
Vegetables, £5.0
Fruit, £3.8
Potatoes, £1.1
Salad, £1.7
Milk, £3.2
Poultry, £4.0
Flowers and plants, £2
-10
0
10
20
30
40
50
60
70
-3 -2 -1 0 1 2 3 4 5
Consumption
per capita, per
annum (kg) *
Volume growth/decline (y-o-y%)
Bubble size varies according
to market size (£bn)
101

Category dynamics
Product Trend* Driver >5 years
Poultry Increasing -Perceived as value for money
-Positive health perceptions
-Sustained market growth.
-”Nations favourite protein”
-Welfare, safety and traceability essential.
Red meat Decreasing -Perceived as expensive & indulgent
-Negative health perceptions
-Steady decline.
-Changes in demand by cut (less premium
cuts)
-Special occasion protein.
Fresh vegetables Increasing -Convenience: growth in processed
‘ready to cook’ vegetables.
-Heavy category promotions
-Convenience: pre-packed portions
-British when in season
Fresh fruit Increasing -Convenience: growth in processed
snacking fruit.
-Heavy category promotions
Processed meats Increasing -Convenience
-Increased product innovation
-Sustained growth.
-Improved profile of frozen foods.
*Volume consumption
102

Category dynamics
Ready meals Increasing -Convenience
-Quality improvements (own label)
-Increased product innovation
-Improvements to health profile
-High growth.
-Increased innovation.
-Labelling transparency.
-Own label products dominate brands
Salad Increasing -Growth in salad bowls
-Heavy category promotion.
-Product innovation (e.g. leaf varieties)
Milk Decreasing -People drinking less milk.
-Dietary changes.
-More functional milk innovation
-Niche markets (soy, rice milk) on the
rise.
Yoghurt Increasing -Product format innovation (e.g. pouring
yoghurt, pouches).
-Strong health positioning (e.g. digestive
health).
-More ‘occasion’ driven product innovation
(e.g. breakfast, dessert yoghurts)
-Sustained market growth.
-Indirect health claims.
-Packaging/format innovation.
103
*Volume consumption

Category dynamics
Cheese Increasing -Category innovation driven by
convenience (e.g. snacking).
-Improved health profile (e.g. low fat)
for everyday consumption.
-Appeal of speciality cheese
(occasional consumption), artisanal
producers
-Processed cheese growth via NPD
(convenience & health important).
-Speciality cheese growth via product
innovation, category promotion.
Bread & bread
products
Decreasing -Fall in white bread consumption.
-Sensitivity to price changes.
-Increased consumption of ‘healthy
breads’.
-Further decline in white bread sales.
-More ‘healthy breads’.
Ice Cream Decreasing -Decline of everyday consumption but
increase in occasional indulgence
-Continued shift from everyday to
indulgent consumption.
Butter & yellow fats Decreasing -Increased use of cooking oils over
fats on health grounds.
-Further decline of use as cooking
ingredient.
-Use as spread driven by NPD.
104
*Volume consumption

Innovation examples: flavoured milk
Product name Frijj Milkshake
Company Dairy Crest
Price (£) 1.25
Size 471ml
Product description Frijj is a fresh milkshake product
which is said to be ‘thick and
smooth’. The range contains
several flavours such as vanilla,
chocolate, banana etc
Positioning claims Low fat, free-from artificial
colouring and flavourings, fresh,
high in calcium
Ingredients Skimmed Milk (76%), Whole Milk
(18%), Sugar, Buttermilk Powder,
Modified Maize Starch, Strawberry
Flavouring, Stabilisers
(Carrageenan, Guar Gum), Colour
(Beetroot Red).
Analysis
Dairy Crest has
invested in the Frijj
brand to create a much
fresher and healthier
image and emphasise
health driven benefits
such as fat content,
calcium levels,
absence of artificial
colours and flavours.
The product still retains
a sense of fun
(appealing to a younger
market) as well as
capturing the food-to-
go market.

Innovation examples: lactose-free milk
Product name Lacto-Free
Company Arla
Price (£) 1.29
Size 1litre
Product description Lactose free*, pasteurised semi
skimmed filtered dairy drink. Part
of a lactose-free range of products
that also includes cream and
cheese.
Positioning claims Lactose free*
Ingredients Semi Skimmed Milk, Lactase
Enzyme
Analysis
Lactose and gluten free
product have
significantly increased
in popularity in recent
years owing to
consumer perceptions
that they are ‘healthier’
than conventional
varieties (regardless of
a diagnosed allergy).
The ‘free-from’ market
continues to grow
rapidly and several
major companies
(including Arla) have
entered this market.
*We make every effort possible to ensure that Lactofree dairy drink contains no lactose. We carry out rigorous scientific
testing using the most accurate UKAS-accredited tests available which enable us to detect lactose at the trace level of
0.03%. At this detection level our tests show that there is no lactose present in Lactofree. Please refer to
www.lactofree.co.uk for more information. Not suitable for milk allergy sufferers.

Innovation examples: extra filtered milk
Product name Cravendale Milk
Company Arla
Price (£) 1.98
Size 2litre
Product description Pasteurised, homogenised, semi-
skimmed, fresh filtered milk
Positioning claims Stays fresh for 7 days
Red Tractor (Assured Food
Standards) , Recyclable Materials
Ingredients Semi-skimmedmilk
Analysis
The filtration process
that keeps milk ‘fresher
for longer’ is designed
to fit in with busy
consumer lifestyles
(less frequent trips to
local shops) and to
minimise waste.
The product has been
supported with heavy
marketing and stands
out as most milk is sold
unbranded.

Innovation examples: Danone Activia
Product name Activia
Company Danone
Price (£) 1.84
Size 4X125g
Product description Strawberry flavoured yoghurt, which is
said to be ‘deliciously creamy’
Positioning claims Contains Bifidus ActiRegularis, suitable
for vegetarians, recyclable packaging
Ingredients Yogurt with Bifidus ActiRegularis®
(Whole Milk, Skimmed Milk Powder,
Cream, Yogurt Cultures), Strawberry
(10%), Sugar (8.3%), Stabilisers
(Modified Maize Starch, Pectin, Guar
Gum), Colours (Anthocyanins, Beta-
Carotene), Acidity Regulators (Citric
Acid, Calcium Citrate, Sodium Citrate),
Flavouring.
Analysis
Activia has successfully repositioned its
message in light of European health claims
legislation on ‘functional health claims’. Despite
being unable to make digestive health claims the
brand and products still have mass appeal with
the UK market on the basis of ‘softer’ health
claims messaging and use of imagery.

Innovation examples: Dairylea Dunkers
Product name Dairylea Dunkers
Company Kraft Foods
Price (£) 1.12
Size 4X47g
Product description Cheese dip with breadsticks
designed as a lunchbox/snack item
primarily aimed at children.
Positioning claims Free-from artificial colours, flavours,
preservatives, convenience, suitable
for vegetarians
Ingredients Cheese Dip: Skimmed Milk (Water,
Skimmed Milk Powder*) (58%), Cheese
(16%), Whey Powder (from Milk), Butter,
Milk Proteins, Concentrated Natural Lemon
Juice (from fresh lemons), Stabiliser
(Sodium Carbonate)**, Citrus Fibre, Salt,
White Breadsticks: Wheat Flour, Vegetable
Fat, Wheat Dextrin (5.5%), Barley Malt
Extract, Yeast, Wheat Germ (1%), Salt,
*Spray Dried, **To hold all the ingredients
together.
Analysis
A good example of a
product that aims to
increase out of home
cheese consumption.
Positioned as a
children's lunchbox
item. The product is
supported by health
driven marketing claims
in particular the
absence of artificial
colours, flavours and
preservatives.

Innovation examples: Cathedral City
Product name Cathedral City Cheddar
Company Dairy Crest
Price (£) 2.55
Size 200g
Product description Cheddar cheese available in various
line extensions said to be the
“nations favourite cheddar brand”
Positioning claims “The nations favourite cheddar
brand”
Ingredients Reclosable stay fresh packaging
Analysis
Mass market cheddar cheese (like liquid milk) is largely
undifferentiated and therefore heavily dominated by
sales of retailer own label products.
Dairy Crest have been able to create a brand with
significant mass market appeal.

Innovation examples: processed meat
Product name Mattessons Fridge Raiders
Company Kerry Foods
Price (£) 1.49
Size 3X25g
Product description Roast flavour chopped and shaped
chicken breast with added starch
Positioning claims High protein, children, convenience
Ingredients Chicken Breast (91%), Vegetable Oil, Roast
Seasoning (Salt, Yeast Extract, Garlic
Powder, Onion Powder, Sage, Flavourings),
Rusk (Wheat), Tapioca Starch, Dextrose
Analysis
Mattesons Fridge
Raiders have
capitalised on a
number of key trends
such as snacking and
convenience to
increase the popularity
of their meat snacks
range.
Mattessons has also
countered possible
consumer concerns by
highlighting the high
meat content of the
product.

Innovation examples: prepared meals
Product name Innocent Veg Pot
Company Innocent
Price (£) 3.99
Size 390g
Product description A hearty stew of sweet potatoes, beans,
red peppers and smoky paprika.
It's a delicious meal of fresh veg, tasty
sauce, rice and herbs - giving you 3
portions of veg in every pot. With no
colourings, flavourings or nasty things you
wouldn't add yourself.
Positioning claims 5-a-day, natural product, convenience, recyclable materials
Ingredients Cooked Brown Rice (17%) [Water, Brown Rice], Tomato, Water, Carrot, Pinto
Beans, Red Kidney Beans, Onion, Sweet Potato (5%), Potato, Red Pepper (4%),
Sweetcorn, Spinach, Vegetable Oil, Red Chilli (0.8%), Cornflour, Lemon Juice,
Garlic, Sea Salt, Cajun Seasoning [Spices, Herbs, Mustard Seed, Salt, Sugar],
Smoked Paprika (0.2%), Green Chilli Purée, Coriander, Black Pepper.
Analysis
Innocent are a well
known and loved juice
brand in the UK and
have diversified by
launching ‘veg pots’ – a
prepared vegetable
meal which can be
paired with meat or fish
(or eaten on its own)
with a range of
flavours.
The product embodies
several trends
including; natural,
healthy, 5-a-day
message, convenience,
recyclable materials.

Product name Charlie Bighams Cottage Pie
Company Charlie Bigham
Price (£) 7.00
Size 650g
Product description Tender pieces of British beef slow cooked with red wine and fresh thyme then topped with our
handmade creamy mashed potato
Positioning claims Premium, convenience, provenance
Ingredients Cottage Pie Filling (53%), Creamy Mashed Potatoes, Cheese and Herb Topping, Cottage Pie Filling is
made from: Fresh Beef (39%), Fresh Onions, Fresh Carrots, Fresh Celery, Red Wine, Beef Stock,
Worcestershire Sauce, Wheat Flour, Sunflower Oil, Molasses, Tomato Purée, Fresh Garlic Purée, Fresh
Thyme, Salt, Fresh Bay Leaf, Black Pepper, Ground Star Anise, Ground Cloves, Creamy Mashed Potatoes
are made from: Potato, Single Cream, Butter, Free Range Pasteurised Egg Yolk, Salt, Cheese and Herb
Topping is made from: Cheddar Cheese, Fresh Parsley, Black Pepper, Fresh Thyme, Beef Stock is made
from: Beef Bones and Meat, Water, Salt, Worcestershire Sauce is made from: Malt Vinegar (from Barley),
Spirit Vinegar, Molasses, Sugar, Salt, Anchovies, Tamarind Extract, Onions, Garlic, Spices, Flavouring.
Innovation examples: prepared meals
Analysis
Charlie Bighams meals retail at a significantly higher price point than other prepared meals (circa £7 compared to circa.
£5) yet continue to perform well in the market because of the clear positioning and high quality.

Innovation examples: prepared vegetables
Product name Sainsbury's Ready To Roast
Mediterranean Vegetables Drizzled With
Olive Oil 400g
Company J Sainsbury’s
Price (£) 2.00
Size 400g
Product description A mix of red onion, courgette, peppers,
tomatoes, olive oil, garlic and basil
Positioning claims Convenience, fresh
Ingredients Red Onion (29%); Courgette (20%); Red Pepper
(19%); Yellow Pepper (18%); Cherry Tomatoes
(11%); Olive Oil (2%); Garlic Purée (1%); Basil.
Analysis
Basic processing of vegetables provides
consumers with instant meal options that require
very little preparation in the home. The variety of
vegetables per portion is a key selling point as
consumers would otherwise have to purchase a
larger number of individual items if they were to
prepare it themselves which potentially increases
costs and waste.

Innovation examples: prepared fruit
Product name Sainsburys Classic Fruit Salad
Price (£) 2.00
Size 320g
Product description Prepared and ready to eat
pineapple, Apple, Orange,
Strawberry & Grape
Positioning claims Convenience, fresh
Ingredients Pineapple (29%); Apples (27%); Oranges
(21%); Strawberry (13%); Grape (11%).
Analysis
Prepared fruit is increasingly popular as a snacking
item and/or meal portion (e.g. as a lunch time item).
Convenience and variety is a key selling point to
consumers. Such products tend to retail at a relatively
high price point (e.g. £2+).

Innovation examples: prepared salad
Product name Sainsbury's Pomodorino Tomato Side Salad
Bowl, Taste the Difference
Price (£) 2.50
Size 175g
Product description Mix of baby salad leaves and salad
vegetables with baby pomodorino tomatoes, a
sachet of balsamic dressing and a sachet of
Parmigiano Reggiano
Positioning claims Convenience, premium, fresh
Ingredients Pomodorino Baby Plum Tomato (31%); Salad Leaves;
Cucumber; Balsamic Dressing (11%); Parmigiano
Reggiano Cheese (from Cows' Milk) (6%); Chive;
Parsley.Salad Leaves contains: Green Batavia, Red
Cos Lettuce, Wild Rocket.Balsamic Dressing contains:
Balsamic Vinegar (30%) (Wine Vinegar, Grape Must),
Water, Extra Virgin Olive Oil (16%), Sugar, Rapeseed
Oil, Dijon Mustard (Water, Mustard Seed, Spirit
Vinegar, Salt), Molasses, Cornflour, Salt, Black Pepper
Analysis
Prepared salads offer similar benefits to
consumers as prepared vegetables and fruit;
namely variety, low wastage, convenience.
Products typically contain a dressing either in
a sachet or small plastic tub.

The importance of innovation
• Continual innovation is extremely important in the UK market.
• Circa 12,000 food and drink products are launched every year in the UK including:
– New products
– New varieties
– Line extensions
– New packaging types / materials
– Promotional / seasonal (short life) products
• In particular retail buyers are looking to source products that are different and add value to the category and that
continue to innovate once in the market.
• Innovation is relevant throughout the entire value chain; and could include for example:
– New consumer products and concepts (e.g. Dutch speciality cheeses / meats etc)
– New sustainable packaging solutions
– Production solutions that improve quality, adds variety, reduces waste, improves sustainability, reduces cost
and so on
– Technical manufacturing solutions that help to reduce or remove, for example, salt, fat and sugar, artificial
additives and ingredients or add functional health benefits.
• Products that are genuinely innovative are much more likely to succeed in the UK.
117

Trends – online shopping
• Internet access in the UK is around 85%, this is lower than the Netherlands where it is 94%, but still higher than
many other European countries.
• Shoppers are now accessing the internet on a much more frequent basis, and through many different forms of
technology. In terms of what consumers are buying when using the internet, grocery and food shopping is ranked
8th.
• On-line grocery shopping in the UK was worth £5.9 billion in 2011, it is forecast to be worth £11.2 billion by
2016 (an increase of 89%). On-line retailing is the fastest growing type of grocery retailing in the UK, e.g.
ahead of hypermarkets and discounters.
• 17% of people in the UK use the internet to purchase groceries, a figure that is expected to rise to 44% by 2016.
• The average frequency of on-line shopping is 1.4 times per month. The number of customers using in every
fortnight or more, currently stands at around 29%, this is down from 36% in 2009. Shoppers are using on-line
grocery shopping for special occasions, with 35% using it every 2-3 months.
118

The UK Market for Agri-Food and Horticultural Products: opportunities for Dutch SME’s

The UK Market for Agri-Food and Horticultural Products: opportunities for Dutch SME’s

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