U.K.: competition is keen in this mature market

AgExporter, August, 1995

The United Kingdom ranked No. 9 among 1994's top export markets for U.S. consumer-oriented products. To find out more about U.S. export opportunities to this historically rich country, AgExporter Magazine spoke with Lloyd Harbert, who was the U.S. agricultural trade officer in London during 1992-94, to discuss future U.S. sales prospects.

AgExporter: What kind of market for U.S. consumer-oriented products is the United Kingdom?

Harbert: With its long history of global trading due to its island nation status, the United Kingdom is an important market for U.S. consumer-oriented products, with $400 million in U.S. consumer-oriented sales for fiscal year 1994.

U.K. consumers are very open to a diversity of consumer-oriented products available from all corners of the world at any time of the year. Also influencing this openness is the fact that U.K. consumers vacation outside of their own country, oftentimes visiting the United States, where language is not a barrier. When they return home, they want to eat the foods they've discovered on their travels.

That's why sales of U.S. fresh and processed fruits and vegetables, fruit juices, wines and snack foods, to name a few categories, have done so well in the United Kingdom.

In addition to foreign travel, membership in the European Union (EU) and a diverse immigrant population have led to a well-developed restaurant sector where a variety of foods can be found - from French to Chinese, from Italian to Thai and from Greek to Indian. Many fast-food restaurants found in the United States also are prevalent.

While not as diverse as the restaurant sector, traditional pubs are still a mainstay. Pub food is inexpensive and most city dwellers have small apartments or townhouses with very small kitchens and refrigerators, but no freezers. For these reasons, pubs linger on.

The lack of refrigerator and storage space also accounts for the fact that food discounters and super stores have not done so well. Another reason is that the major multiple chain supermarkets dominate the grocery market, accounting for 75 percent of all retail grocery sales. The two leading supermarkets, Sainsbury and Tesco, together control more than one-third of the market.

AgExporter: Can you expand further on the role of the major multiple chain supermarkets in the United Kingdom?

Harbert: Certainly. Interestingly, most of the major multiple supermarkets have identified their store-brand products as the mark of quality. This is the opposite of supermarkets in the United States, where store-brand products are cheaper and sometimes viewed as lower quality. In the United Kingdom, store-brand products account for about one-third of all grocery sales.

In addition, currently three of the major multiples either are affiliated with or wholly or partially own U.S. supermarket chains. This means that the opportunity exists for a buyer from one of these major multiples to see a product produced in the United States and bring it to the United Kingdom under one of the multiple's store-brand labels.

This situation is beneficial to U.S. agricultural exporters. It will allow U.S. manufacturers of highly packaged and processed food products to continue to supply the U.K. market, which is becoming increasingly difficult to enter because of everything from U.K. labeling requirements to emerging EU packaging requirements.

This situation also will compensate for the limited ability of U.S. branded products to make it on the shelf of one of the major multiples. Only U.S. brands with international recognition have succeeded in overcoming the U.K. consumer's dedication to store-brand products.

Therefore, the consumer-oriented product categories, where we've seen some of the most dramatic growth, won't necessarily be adversely affected by these factors.

AgExporter: What categories are you referring to and how did these products create a niche for themselves?

Harbert: Well, as I mentioned earlier, U.S. fresh and processed fruits and vegetables, fruit juices, wines and snack foods, to name a few, have done very well in the U.K. market.

For example, U.S. wine exports to the United Kingdom have increased seven-fold over the past eight years. Initially, U.S. wine exporters started from a very small base. Through the marketing efforts of several wine groups, including the California Wine Institute, U.K. consumers became more aware of the superior quality of U.S. wines, resulting in sales reaching $39.4 million in 1994.

However, U.S. wines are finding it more and more difficult to compete in the United Kingdom for several reasons. First, U.S. wines are facing heavy subsidization from other EU countries, making it difficult to displace EU wines. Second, U.S. wines are facing growing competition from lower priced wines from Chile, Australia, South Africa and many of the East European countries.

In recognition of this, several U.S. wineries are pricing their wines more competitively with good success. They've been able to establish themselves in this price category, have increased volume by selling their wines to the major multiple supermarket chains and have made little change in the labels, making the wines very recognizable to U.K. consumers.