BREXIT and beyond UK grocery perspectives

Transcription

1 BREXIT and beyond James Walton Chief Economist June 217 Thinking House, Dublin IGD 217 Page 1

2 Living costs UK economy Wars Propects for next gen Health UK politics Migration Climate change EU or global economy Global politics Social unrest Human rights Unemployment Respondents very or fairly concerned (%) UK citizens have many worries right now 1 How concerned are you about the following..? IGD 217 Source: ShopperVista, IGD Research, June 217 Fieldwork: October 216 Base: 1,7 grocery shoppers Page 2

3 The economic cycle may be turning Overall economic growth slowing House prices falling in some areas Real pay growth slowing, esp in pub sector Retail volume demand slowing, incl online IGD 217 Source: Nationwide / ONS / IGD Research, June 217 Images: Thinkstockphotos Page 3

4 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Growth, last 3m on same 3m yr ago (%) Volume growth in UK grocery stores is slowing Value sales Volume sales IGD 217 Source: ONS, June 217 Page 4

5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 CPI inf, last month on same month yr ago (%) The UK is moving into an inflationary phase All items Food and drink IGD 217 Source: ONS, June 217 Page 5

6 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Exchange rate ( 1 = X) Sterling seems to have stabilised, for now IGD 217 Source: ONS, June 217 Page 6

7 Jan- Jan-2 Jan-4 Jan-6 Jan-8 Jan-1 Jan-12 Jan-14 Jan-16 Producer price (index, Jan 2 = 1) Non-EU imports may be most affected by currency change 25 2 value peaked vs US$ in late 27 early Imported food, from EU Imported food, not from EU IGD 217 Source: ONS, June 217 Page 7

8 UK grocery retail, annual sales growth (%) UK grocery retail, possible growth paths Actual Low growth Mid growth High growth IGD 217 Source: IGD Research, June 217 Page 8

9 UK grocery retail, annual sales ( bn) UK grocery retail, possible growth outcomes Actual Low growth Mid growth High growth IGD 217 Source: IGD Research, June 217 Page 9

10 UK grocery retail, annual sales ( bn) UK grocery retail, growth bridge, mid growth scenario , actual Inflation Population growth Trade-up 222, forecast -.4 IGD 217 Source: IGD Research, June 217 Page 1

11 Food production to supply ratio (%) UK self-reliance is falling over time All food Indigenous-type food IGD 217 Source: Agriculture In The United Kingdom 216, DEFRA, May 217 Page 11

12 UK imports, 216 ( bn) The majority of UK food imports come from the EU EU, 216 Non-EU, 216 Ireland, 216 Imports 27.8bn 11.2bn 3.8bn Exports 1.9bn 7.5bn 3.bn Fruit & veg Meat Beverages Coffee, tea Cereals Other foods Fish, seafood Dairy, eggs Sugar EU Non-EU IGD 217 Source: UK Trade Info, HMRC, June 217 Does not include live animals, animal fodder or tobacco Page 12

13 Possible models for a Post-BREXIT trade deal with the EU Worse Better WTO default Customs union Join EFTA Join EEA IGD 217 Image: Thinkstockphotos Page 13

14 Brexit will mean hard choices on both sides IGD 217 Image: Thinkstockphotos Page 14

15 EU import tariff, 216 (%) Some current EU grocery import tariffs IGD 217 Source: Tariff Download Facility, WTO, June 217 Page 15

16 Average stockholding (days) Average stockholding (days) There are limited stocks of chilled and fresh at retail level Retailer DCs Retailer stores Ambient BWS Chilled / fresh Frozen Hhold Personal care Ambient BWS Chilled / fresh Frozen Hhold Personal care IGD 217 Source: Supply Chain Benchmarks 215 and 216, IGD Research, May 217 Base: 39 respondents, grocery retailers in Europe Page 16

17 Average stockholding (days) Supplier stockholding is similar 6 Supplier distribution Ambient BWS Chilled / fresh Frozen Hhold Personal care IGD 217 Source: Supply Chain Benchmarks 215 and 216, IGD Research, May 217 Base: 113 respondents, grocery suppliers in Europe Page 17

18 Grocery supply chains may need to be re-engineered IGD 217 Image: Thinkstockphotos Page 18

19 UK shoppers see a strategic need for domestic production Britain needs to be more self-sufficient in food and not rely so much on imports Supermarkets should focus more on selling food produced by British farmers Agree Neither Disagree Agree Neither Disagree IGD 217 Source: ShopperVista, IGD Research, June 217 Fieldwork: December 216 Base: 1,7 grocery shoppers Page 19

20 Some UK shoppers seem ready to change their behaviour It is important to buy British food, now that the UK is leaving the UK Attitudes to buying British foods Agree Neither Disagree Will try to buy, will pay more It's not important Will try to buy, if price is same Don't know IGD 217 Source: ShopperVista, IGD Research, June 217 Fieldwork: December 216 Base: 1,7 grocery shoppers Page 2

21 Average farm income, ( s) What might BREXIT do to UK farm profitability Cereals Gen crops Dairy Grazing (lowlands) Grazing (LFA) Pig Poultry Mixed Horticulture All farms Agricultural business Other business Environmental payments BPS IGD 217 Source: Farm Accounts In England , DEFRA, December 216 LFA = Least-favoured area, BPS = Basic payment scheme Page 21

22 Talking points implications for Irish grocery businesses Are your expectations / targets for the UK market realistic, given recent changes? If the UK does not deliver expected performance, what other markets could compensate? Do you know what tariffs may apply to Irish exports to the UK, post-brexit? * What might happen to the price / availability of UK exports to Ireland, post-brexit? * Is your supply chain to UK markets currently BREXIT-proof? If not, can current arrangements be modified to be more effective? Who should lead supply chain transformation if not your company, then who? Why should UK shoppers buy Irish products, post-brexit? IGD 217 * Assuming that the current EU tariff regime applies Page 22