Food and Drink Federation Professional Affiliate Seminar

16th July 2014

UK food & drink manufacturing What is keeping the industry awake at night?

Steve Barnes - Commercial Director

Agenda

• The things keeping the industry awake at night:

Volumes

The rise of the discounter

Disruptive new players and new models

Structural challenges for large customers

Promotional junkies?

Where has the volume gone?

• The UK has a growing population

• And we are used to volumes always rising…..

• But change is afoot and hitting supermarket sales

Trending in: Trending out:

Shopping lists Impulse buying

Buying what we will eat Buying what we might eat

No food waste Throwing food away

Lower calorific intakes Eating what we want

Deflation Inflation

Eating out Eating in

The rise of the discounter

• On current trends:

Aldi will be the UK’s fifth largest food retailer by 2015

Aldi and Lidl combined will be as big as Morrisons

The Big Four under relentless pressure

Aldi growth = combined online growth of Tesco, JS, Asda, Morrisons, Waitrose & Ocado

1992 the previous discounter peak – “we have been here before”

We can glance one of two ways……

Disruptive new players

With the threat of more to come……

&

Structural challenges for large customers

Changing channel mix

• Online and technological change

• Convenience

• The rise of premium

• Some suppliers going it alone…..

Promotional junkies?

• 34% of all FMCG products sold on promotion

• 48% of all branded FMCG products sold on promotion

• The “biggest concern” in trading relationships

• The retailer with the highest % promotional sales is…….

• Promotional innovation will be important

To conclude

• Unprecedented times for the industry

• Pressure comes in many different forms

• Identifying the end game

• Innovating

• Returning to growth

Taking the political temperature

Terry Jones

Director of Communications

Countdown to the General Election

294 days to the election

Reshuffle!

Reshuffle!

Reshuffle!

Its getting hot on health

Warming up

2011 PHRD

2012 AoMRC

2013 PHE

2014 AoS

What’s next?

Its getting hot on health

To what extent would you agree or disagree about each of the following statements about the food and drink industry?

26% 31% 21% 9%

Stricter regulation ofmanufacturers is

essential to reducingobesity

Agree strongly Agree a little

Disagree a little Disagree strongly

Ingredients for Success

Introduction

Why food and drink

manufacturing matters

What food and drink

manufacturing delivers

Our Agenda – key asks for the

next Government

Our Agenda 2015-2020

An industrial partnership

between industry and

Government

Support frameworks for

voluntary action by

industry

Building resilient supply

chains for safe, affordable

and nutritious food

Europe

European elections

EP powers post Lisbon

New Commission in

November

Juncker wants a fair

answer to the British

question

Watch outs – influence,

sustainability

FDF’s Four Pillars

Health and Wellbeing

Overview

Industry initiatives to help consumers follow a

healthy and balanced diet

Barbara Gallani

Director - Regulatory, Science and Health

Food and Drink Federation

Largest UK

Manufacturing sector

400,000+ Employees

£12bn – 77% to Europe

Food

& Drink

Annual £1bn R&D spend

8,500 New Products 2/3rds UK Farm Production

6,000+ Businesses £76.2 bn Turnover

The UK food and drink industry

Public Health Responsibility Deal

Better diets, increased physical

activity and healthier lifestyles;

Encourage people to drink sensibly

and responsibly;

Maintaining a healthier lifestyle in

the workforce.

Calorie reduction pledge

“We will support and enable our customers to eat and drink

fewer calories through actions such as product/ menu

reformulation, reviewing portion sizes, education and

information, and actions to shift the marketing mix towards

lower calorie options. We will monitor and report on our

actions on an annual basis."

The reformulation challenge

Industry considerations when reformulating:

What do our customers want?

What’s the public health context:

What is government policy (UK/EU/Global)?

What’s the scientific evidence?

How does that fit with my portfolio of products?

What are the practical and technical considerations?

Calorie reduction pledge

Calorie reduction pledge

FDF members

commit to a 250kcal

cap on individually

wrapped, single-serve

confectionery item.

Average calorie

reduction 10-15%

Some final thoughts

The UK food and drink manufacturing sector has shown

real leadership in reformulation, innovation and labelling

Voluntary initiatives have been proven to work

Our members will continue to work with others to make it

easier for people to move towards recommended diet

and physical activity levels

Our members see reformulation as part of the solution

but it will not solve obesity on its own

Reformulation to lower sugars forms part of this work,

where it also leads to a reduction in calories

It is important the consumer is provided with clear and

consistent messages

Barbara Gallani

Director – Regulatory, Science and Health

barbara.gallani@fdf.org.uk

www.fdf.org.uk

Sustainability Overview

Peter Andrews

Sustainability Executive

Sustainability overview

Sustainability is fundamental to the food industry

Our members face a multitude of complex sustainability challenges,

regulations, and campaigns

FDF has delivered significant progress in reducing environmental

impacts

But there are challenges ahead where collaboration is needed

Sustainability is fundamental to the food industry

Key Business Challenges:

Dwindling raw materials and rising

raw material costs

Environmental and geo-political

disruptions to supply chains

Changing legislation and regulatory

regimes in response

Key Business Opportunities:

Secure supply

Competitive advantage

Improve trust around products/brands

Global Risk

1 Fiscal crises in key economies

2 Structurally high unemployment/underemployment

3 Water crises

4 Severe income disparity

5 Failure of climate change mitigation and adaptation

6 Greater incidence of extreme weather events (e.g. floods, storms, fires)

7 Global governance failure

8 Food crises

9 Failure of a major financial mechanism/institution

10 Profound political and social instability

World Economic Forum: Global Risks 2014

Ten Global Risks of Highest Concern

Multitude of complex sustainability

challenges, regulations and campaigns

FDF’s Sustainability

Work

CLIMATE CHANGE &

ENERGY

ENV REGULATION

SUSTAINABLE SOURCING

WATER & NATURAL CAPITAL

PACKAGING & WASTE

CONSUMER COMMS

Climate Change

Agreements

Energy costs & security

Mandatory energy audits

FDM BREF review

Medium Combustion

Plant Dir.

Env Permitting

Regulations

Supplier specifications

ISO 14001 review

Commodity tool

Water market reform

Water abstraction

reform

Natural capital

awareness

Recycling & recovery targets

Deposits & PRN system

Surplus food redistribution

Fresher for Longer

campaign

EU PEF & OEF methodology

Product Sustainability

Forum

Low carbon roadmap Climate

change adaptation

Renewable Heat

Incentive

Green Deal

SMEs

GHG Corporate

Reporting

Green Investment

Bank Energy Efficiency

Strategy

DECC/BIS

2050 Roadmap

UK Food and Drink

Manufacturer

European Union

20% emission by 2020

20% Renewables

20% Energy Efficiency

2030 Framework

2050 Roadmap

Climate Change

Act 2008:

Carbon Budgets 34% 2018 -2022

4th Budget 50% 2025

80% 2050

F Gas Regs

Ozone Regs

Discussion

‘Energy Tax

Directive’

EU Emissions

Trading Scheme Phase 3 2013 - 2020

Energy

Efficiency

Directive

Sustainable

Consumption

Production

IED - Energy

Efficiency

Climate Change

Agreements 2013 -2023

Climate Change

Levy

CRC Phase 2 2014 – 2019

Environmental

Permitting

Regulation

Energy Efficiency

Energy Saving

Opportunity

Scheme

Carbon Price

Support

Start April 2013

ROCs

FiT CfD Feed in Tariffs

EMR

Energy Bill

EII Support

Electricity

Demand

Reduction

How do we help members with

Sustainability

Targets:

Cut CO2 emissions

Reduce waste

Optimise packaging

Cut water use

Reduce transport impact

Guidance:

Carbon Management

Sustainable Sourcing

Water Management

Policy & Legislation

Advocacy

Challenges ahead

Showcasing the industry’s good practice

Raising awareness of key issues, particularly amongst SMEs

- e.g. Natural Capital

Accessing funding/support/research to help businesses implement

innovative technologies and processes to reduce environmental

impacts

Moving to a more sustainable food system

Peter Andrews, Sustainability Executive, peter.andrews@fdf.org.uk

Food Safety and Science Overview

Kerina Cheesman

Food Safety and Groups Manager

FDF’s Food Safety and Science Objectives

For the food and drink manufacturing industry to be able to operate

in a legislative and policy framework which is proportionate and

evidence-based

For stakeholders, including government and consumers, to trust the

UK food and drink industry and have confidence in the safety and

authenticity of its products

Representing, promoting and

safeguarding members’ interests

Constructively influencing the regulatory and policy environment to

ensure:

proportionate and evidence-based legislation and voluntary initiatives

coupled with effective and pragmatic enforcement

Working in partnership with Government to improve confidence in the

safety and authenticity of food

Supporting an independent FSA and the proper resourcing of its work on

food safety and the enforcement of food law

Networking with stakeholders, including FoodDrinkEurope

Monitoring and evaluating scientific and regulatory developments and

keeping members updated

Incident Prevention and Management

Aims:

Assist members and regulators in the prevention of incidents, including

horizon scanning for emerging issues

Promote the proportionate handling of food safety and food authenticity

incidents

Coordinate an effective industry response to any incidents

How?

Working with members

Liaising with other stakeholders

Engaging with FSA and Defra on emerging issues and food authenticity

Government Review of the Integrity and

Assurance of Food Supply Networks

A wide-ranging independent review commissioned by Government

FDF has responded by:

Providing evidence and input to the Review

Publishing our Food Authenticity Guide

Engaging with FSA, Defra and stakeholders to build on existing

intelligence sharing activity to help to prevent future incidents

Food Information to Consumers

EU legislation governing the labelling of products and the provision of

information to consumers has recently been overhauled

FDF has been active in seeking:

Proportionality and clarity in the legislation

Clear guidance on points of interpretation

Pragmatic enforcement, including transitional arrangements

Consistency across Europe

Breadth of FDF Food Safety and Science Activity

Allergens: Consumer communication

Animal Feed: FDF ‘Food to Feed’ guidance

Food Contact Materials: Best practice guidance

Food Hygiene: Working to minimise public health incidents

Food Ingredients: Input to EU additives assessments

Residues and Contaminants: Mitigation tools

New Technologies: Genetic Modification, Novel Foods, Nanotechnology

FDF’s Food Safety and Science: Summary

Consistent theme of our activity is to facilitate and foster:

A proportionate and evidence-based legislative and policy framework

Trust in the UK food and drink industry and confidence in the safety and

authenticity of its products

Competitiveness Overview

Caroline Keohane

Competitiveness Policy Manager

Vision: Industry to grow by 20% by 2020

Exports and Trade

• Grow food and drink exports year-on-year

• Increase the number of companies exporting for the first time

• Access to raw materials at competitive prices

Skills and Employment

• Industry can attract and develop talent

• Continue to promote our industry as career of first choice

• A flexible and safe workforce

R&D and Innovation

• The UK is seen as an attractive place for food & drink companies to invest in innovation

• Public R&D funding reflects the needs of food & drink manufacturing

Supply Chain

• A fair and balanced food supply chain particularly for SMEs who have less bargaining power.

Competitiveness Steering Group

Role: Oversees policy areas and actions directly linked to FDF's vision for

20% sustainable growth by 2020

Chair: Fiona Kendrick (Chief Executive – Nestlé UK)

Members:

Apetito Ltd Mondelēz International

Cargill plc Nestle UK Ltd

Devro Scotland Ltd PepsiCo UK & Ireland

General Mills UK Ltd Premier Foods Plc

KP Snacks Tate & Lyle Sugars

Mars Chocolate UK Thorntons Plc

Exports and Trade

Challenges

Only 1 in 10 agri-food companies exporting

Difficulty in identifying opportunities abroad

Perception of complexity involved in exporting

Access to sufficient supply of ingredients at competitive prices

Solutions

Joint gov / industry UK Food and Drink International Action Plan

Open to Export

UKTI / FDF networking events

Research to benchmark UK export support versus competitors

EU Free Trade Agreements

Skills and Employment

Challenges

Ageing workforce

Higher level, technical skills gaps

Perception of careers in our industry

Solutions

Graduate Excellence: MEng Food Engineering degree

Apprenticeship Trailblazers

Women In STEM Pledge

See Inside Manufacturing

Taste Success: A Future in Food careers campaign

Flexible working regulations - zero hour contracts; shared parental leave

Occupational health & safety pledge

Research, Development & Innovation

Challenges

Tackling environmental and health challenges using innovation

Bridging the gap between basic and applied research

Complex regulatory and funding landscape

Solutions

Top 10 pre-competitive (collaborative) research priorities – product &

process innovation

Centre of Excellence for Food Engineering

Supply Chain

Challenges

Transfer of excessive risk and unexpected costs by grocery retailers to

suppliers

Unfair supply chain practices

Solutions

UK Groceries Code Adjudicator and Groceries Supply Code of Practice

EU (voluntary) Supply Chain initiative

Introducing FDF Commercial Services

Nicki Hunt

Marketing & Commercial Services Manager

NEW ACTIVITIES FOR FDF COMMERCIAL

Building contacts

Brand visibility

Suite of commercial activity

MARKETING REACH

Now extends to:

Database of 11,000 quality contacts

High and increasing brand recognition

Trusted brand

WHAT OUR MEMBERS SAY

“I receive hundreds of marketing emails each

week. I delete almost of all them but when I see

something from FDF, I’m very likely to open it as

it’s usually of interest.”

FDF HEADLINE EVENTS

2014 FDF AWARDS

- Evening dinner and awards ceremony

- Targeting 450 guests

- 8 main sponsors

- Reception sponsorship still available

FDF HEADLINE EVENTS

FDF PRESIDENT’S DINNER

- Largest event in 2014 at The Dorchester

- Targeting 500 for 30 April 2015,

Marriott Grosvenor Square

- Invitees including all Excom members

and industry stakeholders

FORTHCOMING EVENTS

- Food & Drink Federation Awards – 18 September 2014, The Brewery

- Sustainability convention – 21 October 2014, British Museum

- Crisis Management – November 2014

- President’s Dinner 30 April 2015, Grosvenor Square Marriott

- Start up food and drink event – early 2015

AND

- Introductory Training Courses – October 2014 and dates throughout

2015

COMMERCIAL OFFERS

Speaker slots

Exhibitor space

Breakfast briefings

Literature in delegate packs

Marketing material

WHY FDF EVENTS?

Ability to reach top FDM member companies at the

event and through marketing

Plus growing start-ups

Align your brand with high quality events delivering

industry expertise

Excellent opportunities to network and showcase your

brand

WHAT OUR DELEGATES SAY

‘Brilliant and inspiring day with expert talks. Well done.’

Understanding the Food Information Regulation, Sept 2013

‘Really good event which showcased the good practices very well’

FDF Awards, November 2013

‘Well organised, very good panel, very practical’

Crisis Management event, March 2014

‘A great night and I would not hesitate supporting any future FDF

events’

FDF President’s Dinner , April 2014

Food and Drink Federation Professional Affiliate Seminar

16th July 2014