Sir, So what will the new world of grocery retail look like when Article 50 is triggered (‘UK food & drink is staring down the barrel of Brexit,’ thegrocer.co.uk, 20 March?).
Grocery retailers will undoubtedly see their profit margins squeezed as their ability to import goods from the EU is hampered by inflationary pressures, higher commodity prices, less favourable tariffs and increased supply chain costs. The former head of Sainsbury’s, Justin King, has warned that under the government’s current Brexit negotiations, supermarket prices could rise 5% over the next year.
The grocers that will fare best are those that have the leanest and most responsive supply chain and they will need to increasingly turn to sourcing more goods locally to ensure they remain competitive. Wiser retailers will leverage this change with shoppers who care about provenance - we see the Co-op doing this well already.
From a brand perspective, manufacturers are faced with a tough choice. In a world where margins are squeezed as shoppers become even more price-sensitive, the question remains: do you batten down the hatches, reduce your marketing spend and try to hold share through price reduction, or do you invest in brand building while the market is depressed to gain share and build your consumer base? Either way, clearly demonstrating the performance and benefits of your brand outweigh the price for the customer are more important than ever.
Sam Knights, director, shopper media agency Threefold