Exporting Free From in the Brexit Era

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1 Exporting Free From in the Brexit Era Hamish Renton - Managing Director HRA Food & Drink

2 Our Perspective Over 14 years experience in Free From category - personal & professional. 8 years on the board of St Ivel & Milk Link (Arla) as MD/Marketing Director and 6 years in Retail in Senior Management roles at Tesco and Argos. Our business is all about Free From Chair the Allergy Show conference, write/blog for Food Matters Live, Bakery & Snacks, Dairy Innovation. HRA Food & Drink is in it s 7 th year and we are a team of 6 FMCG professionals. Specialist agency working for UK, EU & Global clients. President of the International Food Marketing Alliance. Judge for the Grocer Gold Awards.

3 Our Free From offer COMMERCIAL & MARKETING STRATEGY EXPORTING FROM & TO THE UK MARKET RESEARCH Finding a distributor & agent Mergers & Acquisitions Marketing Strategy Branding & Brand Activation Business turnarounds & plans Event planning Export Planning Channel choice Route to market Commercial partnerships Category Analysis Sales consulting Focus groups In-depth interviews Taste tests Market reports Desk research In-store intercepts Quantitative

4 What do we mean by Free From? Traditionally gluten-free, lactose-free, dairy free Constantly evolving new hot topics include Vegan, Allergen Free A question: where do new developments like Sugar Free sit? Or nut free? What about Vegan? Technically Free From perhaps, but is it really in the same consumer space or need? Perhaps we need to move to the term Speciality Diets but that comes with baggage, too close to Fad diets?

5 Brexit: The Options Hard Brexit Would likely see us leaving the full market and customs union Britain would have full control over its borders, laws and trade deals Soft Brexit UK would maintain a close relationship with the EU, and would keep single market access Goods and services would still be traded with the EU on a tariff free basis UK would remain within customs union Unclear what would happen to trade with non-eu nations tariff free trade with these and the EU is unlikely UK would likely fall back on WTO rules for trade with EU Trade with non-eu nations such as the USA, Canada, Australia, New Zealand and South Africa would likely increase

6 EU Export markets Sweden- 1 in 10 avoid gluten. NPD In baked snacks in particular. France - sleeping giant in free from? Growth has been slow but is increasing. Gluten free bread has struggled with bakery culture Germany is the 2 nd largest and 2nd fastest growing gluten free market in Europe. Russia size of gluten free market doubled since Italy is the biggest European market for gluten free. Has one of the highest rates of gluten intolerance (1% vs. 0.2% in Germany). Czech Republic sales are increasing from a small base

7 Exporting outside of Europe Canada $900m*, having experienced healthy growth for the last 5 years. USA The market is booming, worth $8.4bn* - worldwide it is the largest market by value. India a growing market particularly in Lactose Free over 80% of the population are intolerant *Euromonitor South Africa the market is in its infancy, but major expansion is predicted. Australia saw a sales increase of 9% in 2016* New Zealand consumers spent over $50m on gluten free products in 2015 alone.

8 Exporting Free From trends & opportunities These trends affect all global Grocery categories, but are particularly prominent within Free From: Health Free From Clean Eating Fitness High Protein Less Sugar Natural/unprocessed Health, Free From, Organic, Fair Trade Provenance Innovative, exotic ingredients Retailers premium lines Premium Convenience On-The-Go foods Packaging innovation Quick recipes Shorter cooking times

9 What our clients say about exporting To attract new consumers and increase demand for your product. To spread risk: you are less vulnerable to changes in your own market and less dependent on a small number of consumers. To increase your sales: new customers and increased demand increase sales opportunities. Increased competitiveness: increased exposure to international best practice, ideas, insights and alternative ways of doing business. To increase profits: the potential to target markets where your own products can command greater profit margins. Extended product life cycle: products towards the end of their life cycle in one market may find a new lease of life elsewhere. Size Economies of Scale: a good way to drive production to a level that delivers economies of scale. Greater credibility: exporting abroad is a good way to show quality and reputation.

10 Choosing your export Route to Market AGENT DISTRIBUTOR DIRECT SELL CONSULTANTS

11 Our view on Agents Agents generally introduce you or your product to a prospective customer, and charge a commission on a successful sale. Most will conclude the sales negotiation on your behalf. They rarely take title to the goods, so the ultimate deal is between you and the retail customer. You will generally need to organise the supply chain yourself. WHEN AGENTS WORK When you have your own logistics solution in place/can organise one When you don t have much knowledge of your target market, want to mitigate a language barrier or have multiple targets When you can manage taxes and tariffs yourself When you can look after all other marketing and brand-building WHEN AGENTS DON T WORK When you need someone to manage logistics/taxes/tariffs for you When you aren t happy paying on commission If you have in-country research, contacts and language skills yourself If you are uncomfortable having your sales in somebody else s hands.

12 Our view on Distributors Distributors sell and market the products, and also manage the logistics You sell the product to the distributor at a given price They manage all taxes and tariffs you indirectly pay either via retainer or agreed percentage. The distributor sells and markets the product to their existing customers as they see fit, and retains all financial risk WHEN DISTRIBUTORS WORK If you want to manage cash-flow easily you are paid on delivery When you don t want to incur any premises costs for warehousing, logistics or a sales team When you don t have much knowledge of your target market, want to mitigate a language barrier or have multiple targets WHEN DISTRIBUTORS DON T WORK When you have your own costeffective logistics solution When you don t want to sell the product at a given price If you are uncomfortable having your sales in somebody else's hands

13 Our view on Direct Sell Direct sell is where you directly manage the sales process, often via a dedicated sales professional or team Complete direct selling is where you handle all aspects of the exporting process research, sales, documentation, taxes, logistics Favoured by many large, multinational consumer goods companies WHEN DIRECT SELL WORKS When you have your own dedicated sales manager or sales team When you want to maximise profits by eliminating intermediaries You have in-country research, contacts and language skills yourself You want a fully integrated marketing and sales effort WHEN DIRECT SELL DOESN T WORK When you don t have the resources a sales team and/or logistics When you want to target more countries at once than you have resources for When you don t have the research, contacts or language resources yourself

14 Supported Direct Sell This is where you want to keep a large handle on the sales process yourself.but don t quite have the resources or research into the target country We do a lot of this type of work for small and medium clients. We agree upfront who will handle the different aspects of the exporting process research, sales, documentation, taxes, logistics The idea is to upskill the client so that, over time, they can take on all of the aspects WHEN THIS WORKS You feel able to cover off certain markets but are less comfortable with others When you want to grow internal capability and experience When you want to grow faster than your in house resources allow WHEN THIS DOESN T WORK You don t want to get too engaged in a particular market. Changes in the team frustrating skills transfer Lack of openness to new ways of working or reluctance to take advice onboard Don t have a dog and then bark yourself

15 One last thing a Free preview copy of Gluten Free UK Market Report 2017/2018 Valuable insight into: What s driving the market The key trends and how to leverage to your advantage The competitive landscape by category The future of the Gluten Free Market Labelling regulations you need to know How best to leverage all of this for YOUR brand to succeed on the website as a free download.

16 Thanks for listening Let us know if you re interested in any of the following services: COMMERCIAL & MARKETING STRATEGY EXPORTING MARKET RESEARCH If you d like a copy of these slides feel free to leave me a card or contact me on: hamish@food-and-drink.marketing +44 (0)