Business Finance: Charles le Strange Meakin on innovation in the food sector
EAST Anglia has a reputation for being a major contributor to the UK and global food sector. The region has a great tradition of growing produce and cereals, resulting in the clustering of a number of major trading operations.
In addition to a vibrant and well established farming industry, the food processing industry is also incredibly important to the region and one of the biggest employers in East Anglia.
Like the rest of the UK, our food and agriculture sector has not been immune to the global economic pressures. The agricultural commodity pricing has seen competition driving up prices and when you add to that the impact the economic conditions have been having on the price of basic food purchases, the pressures are clear to see.
To combat the consumers’ drive to obtain value for their purchases, supermarkets have been increasing the frequency of their promotions. For food producers, this can be challenging in terms of both production planning, as volumes can be significantly affected by promotions at short notice, and basic pricing where producers have to support the lower promotional pricing offered by the retailer.
Furthermore, with consumers focused on value, retailers have been revamping their own-label product ranges. For food producers able to innovate and lead change in this area, such activities can drive opportunities. However, others will find it challenging to keep pace with product development and the ever tightening cost requirements.
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The long term outlook for the sector however, is encouraging with lots of opportunities for British farming and the food industry. The population is increasing, with greater prosperity in many parts of the world, and all the estimates are that the demand for food is going to keep on rising. I have seen some estimates that a 70% increase in production is going to be necessary by 2050 and our local food sector has a role to play in this. Much of our community here is already ahead of the curve, and we boast many progressive and modern farmers, who focus on efficient, low cost production.
There is no doubt that the food sector is a vital contributor to the local economy. With the challenging economic climate continuing, the key issues faced by the sector are for the medium term and as a result, businesses within this sector must continue to strive towards cost efficiency and innovation, while at the same maintaining sound business foundations among a period of economic uncertainty.
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: : Charles le Strange Meakin is a partner with KPMG in East Anglia, working within the food industry.