Beyond Brexit: four key challenges for the food and drink sector

By Paul Black, CEO, sales-i

It’s easy to see Brexit as the be-all and end-all for your food and drink business. Indeed, in some respects, it would be silly not to: whatever shape the final deal (or no deal) takes – and regardless of your position on the matter – it will undoubtedly have an impact on the labour force, the kind (and availability) of products, customs, and tariffs paid on imports and exports.

But while it’s important to prepare for Brexit – to the extent that any business can – it’s equally important to understand that, while the status of any deal remains in flux, you cannot effectively prepare for Brexit. Until there’s more information, the best thing to do is focus on the things that you can materially affect.

These four business challenges, for example, remain extremely important – and they haven’t gone away just because the UK is leaving the EU.

1. E-commerce

We’re now at the point where an online sales channel is essential, rather than simply nice to have. Almost every bigger brand has one, and many players from outside the sector (such as Amazon) – have moved into the space. An e-commerce function is expected and demanded by customers, and for good reason: it offers faster time to market, better access to buyer data, and greater efficiency.

But food and drink businesses can’t simply open an online shop and hope for the best: they must actively invest in their digital channels. That means looking for opportunities to showcase their expertise, building trust through online review features, re-examining their USPs and adapting them to a digital landscape.

2. Commoditisation

Food and drink is one of the world’s most heavily commoditised sectors. This problem is only compounded by the fact that many players in this market believe discounting to be the best way to differentiate themselves.

The logic behind this is supposedly sound: price matters to consumers, so lowering them should be a definite win for any business. But practically speaking, it initiates a race to the bottom: smaller players lower their price to compete with the industry’s big beasts – who then undercut them right back. Eventually, the cycle reaches a point where those smaller players are either priced out of the market or survive as discount brands. However, a discount brand can’t rely on customer loyalty: any relationships become purely transactional.

This isn’t a problem that can be fixed easily, and there isn’t any one-size-fits-all solution. The food and drink industry should, however, look to fix its supply chain: in some cases, to consider cutting out unnecessary middle men such as retailers and sell directly to consumers. Otherwise, they should actively seek other ways to innovate, differentiate, and personalise their products.

3. New technology

Thanks to the technological advances of Industry 4.0, food and drink manufacturing is faster and more efficient than ever before. But with this increased effectiveness comes certain pressures – particularly for the operational and logistical side of things. More customers means more orders, more orders means more products need to be moved, and more products means more deliveries.

Companies at every stage of the supply chain should be prepared to deal with these increased levels of activity. This means automating certain back office processes – including data entry, administration, analysis, and reporting – and removing certain legacy systems if they lack the necessary connectivity, mobility, automation, and analytical capability.

In 2018 and beyond, the true mark of a technologically savvy business won’t be the number of fancy, innovative tools it owns – but rather the amount of time it saves on frustrating operational and logistical issues. Making an efficiency out of an inefficiency is the best way to make a meaningful improvement for any business.

When you’re not spending time wastefully, you can spend it productively and strategically.

4. Acquisition and retention

Relationships are the bedrock of any successful business. The nature of supply chains may change and technology may become more sophisticated, but the basics of attracting and keeping your customers will remain relatively intact.

And customer acquisition is less important than you might think. It’s still important, of course, but in heavily competitive times, getting the most out of the customers you already have over the long term should be a priority. Some commentators say that a loyal customer is worth five times more than a new one. It therefore makes sense to start cultivating worthwhile relationships instead of seeking out new ones. If you’re not worth your customers’ time, your customers will start to explore other options – and your competitors will do everything they can to steal their attention.

Brexit is important, but it’s far from the only consideration a food and drink business must take into account. The above four challenges represent long-term issues that remain largely unresolved – and will not simply go away if left untouched.

The UK will leave the European Union, and we will deal with the consequences of leaving thereafter. What will happen before and after that is uncertain. However, food and drink companies are still the masters of their own fates.