Export opportunities are out there, but where does the UK fit?

Published 21 January 14

In October 2012, DairyCo produced a report designed at exploring the various export opportunities and the way the UK could target some of those, in response to questions from industry. Since the report was published, processors have undertaken a variety of actions in order to target export opportunities.

What’s happened?

Some examples are; Dairy Crest investing in product innovation with whey powders which will likely be exported. Müller Wiseman has built a butter plant with a capacity of 45,000 tonnes allowing them to either displace imports or increase exports. Arla Foods move to join the amba co-op will allow UK farmers milk price to be linked closer to the European and world markets.

First Milk has also set up relationships with the Irish Dairy Board and China, potentially allowing them to become more competitive in the domestic and Chinese markets.

Aside from processors, key industry stakeholders have also been implementing measures. A trade mission to China involving Owen Paterson, MP, Secretary of State for Environment, Food and Rural Affairs and DairyCo has been undertaken to try and get the UK more access to important markets.

The NFU produced a ‘Compete to Grow’ strategy targeting an increase in milk production to allow the UK to become more self-sufficient and reduce the trade deficit. This has been built on by the recently-announced draft “Leading the Way” strategy produced by NFU, DairyCo and DairyUK – for more information please click here. In addition, NFU Scotland has carried out a further strategy (‘Ambition 2025’) to boost Scottish production and trade with the aim of increasing milk production by 50% over the next 10-12 years, while there is a government led action plan also on-going in Wales.

What are the opportunities for exports?

Essentially there are two, volume and value markets.

Volume markets relate to those emerging countries that are becoming more urbanised due to increase in income and population. These markets (BRICS countries) currently demand product choice and lots of it. Supplying these markets requires a substantial amount of milk and facilities to exploit the needs of these markets, mainly in bulk ingredient products i.e. powders.

A number of people associate these markets as the ‘be all and end all’ of export opportunities; however, there are value markets in developed countries that also show strong opportunities.

Developed countries have the ability to choose/adapt their lifestyle depending on a variety of factors, i.e. latest diet trends, celebrity culture, etc. A big part of these lifestyle choices is nutrition and health. These are great opportunities for exporters to target, supplying premium consumer products and specialist ingredients.

In order to be successful in targeting and exploiting these markets exports need a number of things as the table below suggests.

Premium consumer goods

Specialist ingredients

High quality products with strong safety credentials

Track record in supplying ‘solutions’

A marketable premium image and profile

Technical support and value-added services focussed on clients’ product needs

Local sales and marketing capability (direct or via agent)

Differentiated products supported by R&D

Efficient production scale & competitive raw material costs

The UK has a number of strengths which can allow for export opportunities to be taken. However, there are also some weaknesses that may need to be addressed to take full advantage of these chances.

Strengths

Weaknesses

High quality production and processing systems; strong food safety credentials

Low level of awareness of UK as supply source for quality dairy products

Seen by some as leader in animal welfare

Limited established relationships with buyers

Positive image in most markets

Limited preferential access to emerging markets via FTAs

Recognised as ‘home’ of Cheddar and other regional varieties

Lack of ‘scale’ dairy processing

Experienced in supplying FMCG dairy to demanding global retail and foodservice clients

Perception of being a ‘high cost’ producer

Some large, well established global exporters (Glanbia, Volac, Arla)

 

Next steps

It is essential for farmers to speak to their purchaser or farmer representative to discover what business plan the processor has in place and the direction in which they are going. This then should be accompanied with individual ambition and knowledge of the markets to see if the processor is right for the farm business.

For more information and a copy of the full report, please click here.