The roll out of the COVID vaccination program in the United Kingdom has largely been regarded as a success, with almost 90 percent of the adult population having been “jabbed”, but the system that alerts people as to whether they have been in contact with someone who has been carrying an infection – done by an app alert system – has caused huge issues.
The so called “pingdemic” has seen hundreds of thousands of people forced to self-isolate – when maybe they didn’t need to – for up to 10 days at a time. But over the weekend, British authorities backed off a vaccine passport program which would have required them for entry into crowded events.
The self-isolation system has seen fresh produce companies struggle at times to staff packinghouse operations as well as be able to carry out a full range of distribution services. The issue of labor in the horticultural sector is nothing new, of course, and certainly not unique to the UK.
It has been talked about for some 15 – 20 years (maybe even more), but we have relied on a ready supply of relatively cheap migrant labor to deal with this.
The situation post Brexit appears to have fundamentally changed. Interest in robotic planting and picking technology has, as a result, probably never been higher.
Beyond this, there is now also a structural shortage of lorry drivers to physically move fresh produce around the UK. Antisocial hours and low pay have been cited as other reasons behind this shortage.
At the point of sale…
At the same time, large private equity firms have been targeting UK supermarkets, which they view as undervalued and attractive due to their large property portfolios.
As an example, in the last few months, Morrisons – one of the so-called Big 4 retailers in the UK – has been subject to a takeover bid by a U.S. based private equity-backed consortium.
The initial offer has been recently increased to £6.7 billion following speculation of a rival offer. Morrisons is the UK’s fourth largest supermarket chain, with nearly 500 outlets across the UK and more than 110,000 staff.
What now are the chances of copycat bids for the other two large UK supermarket chains, Tesco and J Sainsbury?
Industry analysts suggest that Tesco might be simply too big for a private equity raider – its current market capitalization is nearly £18 billion, nearly three times the size of the Morrisons deal. And at Sainsbury’s there is a potential blocking shareholder in the shape of Qatar Holdings, which still owns 15 percent of the chain. If the Qataris can be brought on side though, Sainsbury’s could, perhaps, become a takeover target.
The Russians are coming
At the other end of the market, the Russian discount chain, Mere, has announced plans to open over 300 stores in the UK within the next eight to ten years. They have said it will undercut Lidl and Aldi by 20 – 30 percent. The first four UK stores will open this year mainly in the north of England.
Discounters help set the pace
Lidl, which employs nearly 26,000 staff in the UK, will invest £1.3 billion this year and next with a plan to open about 50 more new stores in 2021 to add to the 800 it already operates.
The company also plans to install 300 electric car charging points in its car parks by 2022 and is installing solar panels on new freehold stores.
Aldi has also confirmed plans to open more than 450 new stores in the UK – and as such has released a “wish list” of locations for the expansion. In total, the chain says it wants to open more than 400 new shops in England, 30 in Wales and 20 in Scotland.
What does this all add up to?
So, what does this all mean for produce suppliers?
Several things stand out:
• the supply chain has been put under huge pressure over the summer months – at times, it has shown how resilient the UK supply chain has become, but at other times, how fragile it can be;
• the UK market, despite all its challenges – still looks an attractive market with U.S., German and Russian companies all looking to invest;
• interest in horti -tech products, technologies and services has never been higher, but the proof will, as always, still be in the pudding; and
• concerns over environmental and sustainability issues are intensifying, with ambitious targets across the supply chain to reduce carbon emissions.
It will be interesting to see what comes out of the COP 26 annual UN climate change conference to be held in Scotland in November
One thing is for sure – the summer of 2021 is one we won’t forget in a hurry.
Produce companies both in the UK – and the U.S. who supply the UK – will need to be more resilient and better prepared for what looks to be changing market, regulatory and environmental landscape, than ever before.
The roll out of the COVID vaccination program in the United Kingdom has largely been regarded as a success, with almost 90 percent of the adult population having been “jabbed”, but the system that alerts people as to whether they have been in contact with someone who has been carrying an infection – done by an app alert system – has caused huge issues.
The so called “pingdemic” has seen hundreds of thousands of people forced to self-isolate – when maybe they didn’t need to – for up to 10 days at a time. But over the weekend, British authorities backed off a vaccine passport program which would have required them for entry into crowded events.
The self-isolation system has seen fresh produce companies struggle at times to staff packinghouse operations as well as be able to carry out a full range of distribution services. The issue of labor in the horticultural sector is nothing new, of course, and certainly not unique to the UK.
It has been talked about for some 15 – 20 years (maybe even more), but we have relied on a ready supply of relatively cheap migrant labor to deal with this.
The situation post Brexit appears to have fundamentally changed. Interest in robotic planting and picking technology has, as a result, probably never been higher.
Beyond this, there is now also a structural shortage of lorry drivers to physically move fresh produce around the UK. Antisocial hours and low pay have been cited as other reasons behind this shortage.
At the point of sale…
At the same time, large private equity firms have been targeting UK supermarkets, which they view as undervalued and attractive due to their large property portfolios.
As an example, in the last few months, Morrisons – one of the so-called Big 4 retailers in the UK – has been subject to a takeover bid by a U.S. based private equity-backed consortium.
The initial offer has been recently increased to £6.7 billion following speculation of a rival offer. Morrisons is the UK’s fourth largest supermarket chain, with nearly 500 outlets across the UK and more than 110,000 staff.
What now are the chances of copycat bids for the other two large UK supermarket chains, Tesco and J Sainsbury?
Industry analysts suggest that Tesco might be simply too big for a private equity raider – its current market capitalization is nearly £18 billion, nearly three times the size of the Morrisons deal. And at Sainsbury’s there is a potential blocking shareholder in the shape of Qatar Holdings, which still owns 15 percent of the chain. If the Qataris can be brought on side though, Sainsbury’s could, perhaps, become a takeover target.
The Russians are coming
At the other end of the market, the Russian discount chain, Mere, has announced plans to open over 300 stores in the UK within the next eight to ten years. They have said it will undercut Lidl and Aldi by 20 – 30 percent. The first four UK stores will open this year mainly in the north of England.
Discounters help set the pace
Lidl, which employs nearly 26,000 staff in the UK, will invest £1.3 billion this year and next with a plan to open about 50 more new stores in 2021 to add to the 800 it already operates.
The company also plans to install 300 electric car charging points in its car parks by 2022 and is installing solar panels on new freehold stores.
Aldi has also confirmed plans to open more than 450 new stores in the UK – and as such has released a “wish list” of locations for the expansion. In total, the chain says it wants to open more than 400 new shops in England, 30 in Wales and 20 in Scotland.
What does this all add up to?
So, what does this all mean for produce suppliers?
Several things stand out:
• the supply chain has been put under huge pressure over the summer months – at times, it has shown how resilient the UK supply chain has become, but at other times, how fragile it can be;
• the UK market, despite all its challenges – still looks an attractive market with U.S., German and Russian companies all looking to invest;
• interest in horti -tech products, technologies and services has never been higher, but the proof will, as always, still be in the pudding; and
• concerns over environmental and sustainability issues are intensifying, with ambitious targets across the supply chain to reduce carbon emissions.
It will be interesting to see what comes out of the COP 26 annual UN climate change conference to be held in Scotland in November
One thing is for sure – the summer of 2021 is one we won’t forget in a hurry.
Produce companies both in the UK – and the U.S. who supply the UK – will need to be more resilient and better prepared for what looks to be changing market, regulatory and environmental landscape, than ever before.
John Giles is a Divisional Director with Promar International, the consulting arm of Genus plc. He has worked on fresh produce assignment in some 60 markets around the world, including the EU, US, NZ, SA, Chile, Peru, India, China and the Gulf region. He is the current President of the Chartered Institute of Marketing’s Food & Agricultural Group and the Chair of the annual City Food Lecture.
