The food and drink sector has faced a number of challenges over the last few years both in the UK and globally.
The IOE&IT Daily Update here rounds up some of the current issues faced by businesses in the sector, with IOE&IT academy trade and customs specialist Matt Vick providing insights.
Inflation slowing
Last week’s inflation figures heralded a continued fall in the rate of food prices inflation.
The Guardian reported a drop to 12.7% in the four weeks leading up to 6 August, the fifth consecutive month inflation in the sector fell. Reductions in the rate of inflations were recorded across almost all major food types, except for yoghurt, fish and sugar.
Vick cites a strengthening in the value of Pound Sterling and businesses’ increasing ability to find alternative sources of goods that have been impacted by Russia’s war in Ukraine as reasons for the fall.
Good news from the Black Sea
A Ukrainian grain ship – The Joseph Schulte – left the port of Odesa on Thursday (17 August), carrying 30,000 tonnes of cargo, including food products.
This is the first departure from the port in over a month, following the breakdown of the Black Sea grain deal with Russia, which guaranteed the safe passage of Ukrainian food exports from Odesa and two other Southern ports.
While the departure is welcome news, Vick highlighted that there’s been an ongoing pattern of Russia blocking Ukrainian shipments, even during periods of consensus about the deal.
“Until the black sea ports, like Odesa, are properly secured, and unless they militarise the shipping lane, I think this will keep happening.
“Restricting trade is such a vital tool for Russia. It's one of the country’s main levers of control, along with gas and oil exports. It's one of the few bargaining chips Russia has.”
Droughts cause global shipping concerns
Unprecedented drought conditions are causing concerns across key global supply chain shipping routes, as we reported last week. From the Panama Canal to the Danube River, warmer climate conditions are reducing water levels, limiting the volume of ships and the amount of goods they can safely carry.
Vick believes these developments could accelerate onshoring and nearshoring trends established during the Covid-19 pandemic, with greater home investment in industries such as solar panels, electric vehicle batteries and semiconductors.
“For various reasons, environmental and political, a lot of countries are starting to look at crucial resources and materials and think: ‘Okay, how can we improve supply chain security,’ and generally speaking, that means onshoring production.
“If that trend continues, we'll be less reliant on international networks, but we are still relying on them as of now. We don't currently have the skilled workforce to just transition those industries here and now, so this is something that will take decades to correct.”
British wine o’clock
Vick also highlighted a positive British onshoring trend: the growth of British wine.
Classic British summer weather favoured British wine producers, who anticipate a bumper harvest, the Guardian reported last Friday (11 August). While a disappointing washout for many, rainy July presented perfect growing conditions for the grapes that are needed to produce white, red and sparkling wine.
This is a huge boost for the nascent British wine industry, with production already up one third on 2021 figures, according to WineGB. Exporting has also increased, taking up a 7% share of sales, compared to 4% last year.
Border Target Operating Model delays
iNews reported that the Border Target Operating Model (BTOM), which will introduce new checks on goods imported from the EU, is set for another delay. The checks will largely affect sanitary and phytosanitary (SPS) products, requiring the EU exporter to provide more documentation to assure the safety of their products.
Originally scheduled for implementation from 31 October, it’s being rumoured that the delay will push the SPS checks back until 2024.
Vick notes that while some EU traders have welcomed the delays, British exporters will see the introduction of checks as important for restoring a level playing field with their EU competitors. He said:
“The EU has had full SPS controls from the start,” said Vick. “It's much easier for an EU company to sell food products in the UK than it is for UK companies to get food products into the EU.”
Special interest group
To receive more insight into food and drink trade news and insights, IOE&IT members can join the new Special Interest Group (SIG) which will be dedicated to the sector.
The new SIG will be launched with an online event at 10.00am on Wednesday 20 September. An expert panel will include IOE&IT SPS and trade experts Laura Williams and Hamish Mackay.
The focal issue of the event will be the new BTOM rules.