A progressively competitive and cost- conscious UK retail sector is making it increasingly difficult for manufacturers to achieve organic growth. The number of retailers operating in the market is consolidating and the number of suppliers in each account is declining, alongside a gentle squeeze on profit margins. So how do you broaden your business base in these difficult conditions?
Exploring international opportunities can present new customers, providing your approach is right. There are a host of overseas retailers who continually look to the UK for innovation and to spot the next big trends. Exports of British food and drink are showing steady signs of recovery, despite 2004 figures dipping slightly to £9.7bn. A strong upturn at the end of the year looks certain to continue throughout 2005, with the market predicted to break the £10bn barrier for the first time in a decade.
It’s time for the British to change their mindset and overcome the challenge of the Channel. The hurdle to a successful international strategy is often more mental than physical. Once you’ve conquered the fear of a stretch of water, Europe opens up as a series of potential new customers.
Depending on where your production base is situated, delivering food and drink to Dunkirk can often be quicker and easier than to Dundee.
The basics remain the same, in particular giving proper attention to physical distribution, so logistics need not become an issue. However, key advice is to measure market requirements and be prepared to treat potential new international customers with the same respect as your UK accounts.
Farne Salmon and Trout, a recent Food from Britain Export Award winner, is a prime example of a company succeeding in the international marketplace by following the right approach.
A decline in export sales led it to examine its products, distribution and relationship with overseas retailers, and it set about providing solutions to reinvigorate its international customer base.
Alongside product developments and resolving logistical issues, Farne firmly believes its success is down to attitude. “Farne’s customers all have the same importance and are treated with the same attention on technical, operational and commercial matters,” says Julia Stryj, export manager. “We are not a UK company that is
exporting to Europe, we are a European company operating in its home market.”
As for specific sectors, own label offers one of the biggest opportunities in terms of development for UK manufacturers. The mature own-label market in the UK stabilised in 2003 at 38% but across Europe the sector continues to show double-digit growth. Recent qualitative research by Food from Britain among 20 different retailers, including Delhaize, Monoprix, Carrefour and Albert Heijn, has shown European buyers have a very positive view of UK suppliers in terms of innovation, concept development, added value and account management.
However, competition is fierce in the own-label sector, particularly from suppliers in the accession states, and it seems that despite the demand for UK product expertise, many have never received a visit from a British supplier. Having experienced the growth of such a sophisticated own- label market in the UK, suppliers are extremely well placed to take advantage of these opportunities internationally. European retailers are now following the UK model with an increasingly segmented offer, using own label as an opportunity to differentiate their positioning from the competition.
With the right approach and information, creating business through international markets can be a low-cost way of spreading business risk and laying the fundamentals for future growth. Suppliers should recognise the skills they have acquired in meeting the needs of a tough UK market and apply them with Continental customers. They are crying out for your expertise!