Locals overtake organics

Attempts at regional branding and differentiation in the UK go back 40-odd years, and in some cases even more. Welsh lamb was first promoted in the UK as a speciality food product in the late 10950's and over the intervening period the Scottish and Irish food sectors have played on the localised nature of their food production and processing sectors. Other products such as top fruit as well as soft fruit have always had strong connotations with certain parts of the UK. And this sort of development is not the preserve of the UK agri food sector: other countries such as France and Denmark have always promoted their agri food sectors around the identity of the source of supply.

The definition of local foods varies from organisation to organisation, but in most cases it is seen as a product that has been produced by smaller scale producers and is being marketed on a more local basis, or is playing to a particular regional image. Cumberland sausages, Lincolnshire vegetables, Welsh Dairy products and Scottish Beef as well as Kent'ish produced soft fruit are all good examples. At the moment, the size of the local food market in the UK is estimated to be about £4 billion per annum, which makes it about 4% of the overall UK food market. It is growing at a rate of between 5 and 10% per annum. While this presents the basis of a future opportunity, it has to be put in context against other areas of the food market such as the food service sector and conventional food products, which are worth about £30 and £80 billion respectively. However, the regional food market is already considerably larger than the organic sector, which has just topped the £1 billion mark and some industry observers are already predicting it is beginning to signs of slowing growth rates.

It is clear the leading supermarkets have identified the area of localised foods as being a future area of growth, in the same way they did with the organic sector. Some producers have expressed caution regarding the desire of major retailers to increase the procurement of local food products, but when you have the world's biggest good retailer openly stating that it wants to increase procurement of UK food products in key areas such as fruit, vegetables, dairy and meat by over £100 million per annum, this has to present the basis of a sizeable market opportunity. Fresh fruit suppliers need to decide what they are going to do about this challenge and act accordingly. Why are retailers so interested in what might appear to be such a small market? There are a number of reasons, which taken on their own, might fuel the cautious attitude some producers have shown, but when taken together create a strong argument.

The major retailers are aware that many areas of their food business are flat in terms of future growth; when they see an area of growth they go for it, and see it as an opportunity to add both volume and value growth to their overall business.

They see a strong interest amongst some (but certainly not all) consumers in where fruit and other foods have been produced, how it has been produced, how it arrived in store and who produced it. Retailers love to see themselves as being responsive to consumer demand and this desire is accentuated by the breakdown of the mass middle market on which they have built the bedrock of their business over the last twenty years.

Supermarkets love to differentiate themselves from their competition: this is very difficult to do in many of their standard food lines, but the regional good sector presents a real opportunity to do this.

Economics: in some cases it makes sense to procure produce from local supply sources rather than bring it in from other parts of the UK, the rest of Europe or even the other side of the world. Supermarkets are aware of the economics of food supply and are always looking to simplify supply chains if at all possible.

Government support: landmark reports such as the Curry Commission offer strong support to the development of more localised food supply chains and there are many (perhaps too many) public sector organisations all looking to encourage the development of local food supply projects. In the area of public sector procurement, strong emphasis is being given to the procurement of local food supply, although this is often easier said than done.

Politics: Supermarkets are very aware of the politics of the day. They know that it makes sense to be seen to actively support local UK fruit farmers.

And not least, it is now written into their corporate plans: when it is set out in tablets of stone, then something has to happen and resources will be allocated accordingly to make it happen. Most of the major retailers now have dedicated teams in place to procure locally produced fruit and veg and work more closely with regionally based suppliers.

However to take advantage of the local fruit supply market, producers will have to meet exacting standards. Retailers will not accept produce that is not of the highest quality. They will want to work with suppliers who can play within the commercial and technical discipline that they operate in. They will want to work with suppliers who can demonstrate adherence to management control systems such as HACCP and ISA and have signed up to environmental schemes such as LEAF. They will want to develop relationships with suppliers who share their vision of food retailing in the future and can contribute to this in a constructive and profitable fashion.

The organic fruit market received a significant shot in the arm when the major retailers decided to come on board. Local fruit demand could well receive the same boost and see the market driven forward, at the same time SME local producers should recognise that retailers have demanded the same sort of technical and commercial service from organic suppliers and they expect the same from localised food suppliers too.

Do you get a premium for being "local"? The answer to this is "not always". What you do get a premium for is being totally professional in all that you do, whichever route to market you are following.

In summary: The "local" fruit market in the UK is set to grow, but anyone operating in this market needs to be aware of the overall size of the market and how and why it is set to grow. Fruit suppliers have to understand the market if they are really to take advantage of what is happening in the UK. To be successful, the standard rules apply: be good, be professional in all that you do and understand customer needs. Business size and scale then need to be adjusted accordingly. Working with others in the supply chain will be a prerequisite and this is an area where many in the UK food supply chain have struggled in the past. Overcoming this barrier will be critical if success is to be achieve and suppliers must look forward rather than raking over the past.

John Giles, divisional director, Promar International. Promar International is a leading agri food consultancy working across the value chain, and a subsidiary of Genus plc.

Winter 2004