What the Covid-19 crisis taught us about food chain resilience and Brexit
"So, has Covid-19 really been a successful trial run for the end of the Brexit transition period? If the food supply chain has been resilient over the past few months can we afford to stop worrying about doing a free trade deal with the EU and about non-tariff barriers? I am afraid not," says Ash Amirahmadi | Credit: Arla
The Covid-19 crisis has tested the UK food supply chain like never before. Despite being placed under significant pressure it has held up remarkably well. So, can we draw any lessons from the past few months as we look to the future outside of the EU?
The stress placed on the nation’s food system, particularly at the start of the pandemic, has given us considerable insights into what consumers want and expect when it comes to essential foods.
During April we built on this knowledge by conducting an in-depth consumer study involving 3,000 people nationwide from across a full range of social backgrounds and political beliefs.
The insights combined from the survey and the experience of Covid-19 have given us a clear picture of what shoppers will expect when shopping for food as the UK leaves the EU.
In the early days of Covid-19 we saw a spike in demand for a number of products in our sector, including fresh and long-life milk, butter and cheese. Consumers demonstrated that they consider these items to be essential.
Consumers have shown very clearly that they expect the food brands they trust to be on the shelves at an affordable price no matter what external circumstances we face.
They also showed that they are loyal to brands they love and trust. Our research found that 70 percent of them purchase the same named items on a regular basis, a fact borne out by the fact that in the past three months was have seen an increase in demand from consumers of 20% for Anchor, 25% for Lurpak and 15% for Cravendale.
So, has Covid-19 really been a successful trial run for the end of the Brexit transition period? If the food supply chain has been resilient over the past few months can we afford to stop worrying about doing a free trade deal with the EU and about non-tariff barriers? I am afraid not.
Any assumption that the food industry response to the Covid-19 crisis shows we can cope easily with a hard exit from the EU misunderstands the degree of integration in the food supply chain that exists between the UK and Europe, and the benefits this brings to consumers.
Taking our sector as an example: one in four British dairy farmers, as part of 9,700 like-minded European dairy farmers, own Arla and have a deep commitment to the future of dairy in the UK.
Whilst the food sector was resilient in the face of Covid-19 this was to a significant extent thanks to the short, agile and responsive import chains that link us to the EU. Only by understanding and acknowledging this reality can we learn the right lessons from the recent crisis
Over the past 15 years, our farmer owners have invested £700million in our sites across Great Britain as part of our strong commitment to grow the UK dairy sector.
But despite the investments made by us and others in the dairy sector, we still import 35.2% of yoghurt, 39.8% of butter and fully 67.3% of all cheese consumed here.
Replacing these imports with British-sourced products will take further investments of hundreds of millions of pounds over many years.
In most cases, UK alternatives will not be available on 1 January 2021 or on 1 July that year, or anytime soon after.
The reality is that we have navigated the recent crisis successfully precisely because of the short, flexible, and well-established import chains we have with our close European neighbours who share our high standards when it comes to farming and food.
When consumers were faced with empty shelves, we were able to bring in products quickly from our European facilities.
This responsiveness would be lost without a free trade deal with our closest neighbours and adding friction to the chain through non-tariff barriers will only increase costs and slow the movement of goods.
For the same reason, it is troubling that there is a gap between consumer expectations and the likely reality after 31 December 2020.
While 69 percent of consumers said they thought the price of food would rise and availability would reduce next year, they expected British products to fill any gaps on the shelves.
But they told us they would not pay more for these products: only 4 percent of people in our poll said they would spend ‘a lot more’ to buy substitutes from the UK, whilst 54 percent said they would not spend more at all.
These expectations do not match up with what we could experience in 2021. Whatever trade relationship is agreed with the EU there will be more friction and added costs.
I am confident the UK food sector will adapt, but it will take time and significant investment across the chain.
It is clear that the trade relationship with the EU is the most important one for the UK food industry.
Consumers will be the ones who will feel the effects of the disruption in the meantime. We all need to be alive to the impact this could have on trust in the food system and in political decision-makers.
So what conclusions can we draw from all of this?
First, that consumers have shown very clearly that they expect the food brands they trust to be on the shelves at an affordable price no matter what external circumstances we face.
Second, whilst the food sector was resilient in the face of Covid-19 this was to a significant extent thanks to the short, agile and responsive import chains that link us to the EU. Only by understanding and acknowledging this reality can we learn the right lessons from the recent crisis.
Third, building on these first two points, it is clear that the trade relationship with the EU is the most important one for the UK food industry.
While I respect both sides’ negotiating positions, a deal which minimises tariffs and friction is the only way to meet the expectations of shoppers.
This should be in the front of the negotiators’ minds as they intensify their talks over the coming weeks.