The food industry has always been an international one; archaeologists have shown that the ancient Romans were able to export their favourite Mediterranean foods as far as Hadrian’s Wall whilst in the 17th Century Samuel Pepys reported eating a meal in which no ingredient had come from within the British Isles.
All stages of the food chain are subject to international competition. This even includes retailing, where competition was once confined to national barriers.
The UK in A Global Context
The UK is one of the world’s largest grocery retail markets, worth around US$156bn in 2005, putting it in 5th place behind the USA, Japan, China and India.
This scale has made the UK a strategically-important market for both manufacturers and retailers, generating investment from many overseas companies.
Top 10 World Grocery Retail Market Values, 2005
| Rank |
Country |
Value |
| 1 |
USA |
US$759bn |
| 2 |
Japan |
US$451bn |
| 3 |
China |
US$277bn |
| 4 |
India |
US$194bn |
| 5 |
UK |
US$156bn |
| 6 |
France |
US$152bn |
| 7 |
Germany |
US$136bn |
| 8 |
Italy |
US$133bn |
| 9 |
Russia |
US$129bn |
| 10 |
Spain |
US$64bn |
Source: IGD Research, 2005
UK Manufacturers
Food, drink and tobacco has been a buoyant sector of UK manufacturing over the last 30 years, increasing output and increasing its share of all UK manufacturing.
Manufacturing Real Output (as index, where Year 2000=100)
| Sector |
1970 |
1979 |
1989 |
2002 |
| All manufacturing |
78.5 |
83.1 |
91.8 |
95.1 |
| Food, drink & tobacco |
76.7 |
88.6 |
94.6 |
101.6 |
| Textiles, leather & footwear |
168.5 |
169.8 |
141.7 |
82.3 |
| Wood products |
93.1 |
114.0 |
124.1 |
101.4 |
| Paper & printing |
73.3 |
78.5 |
93.8 |
99.6 |
| Chemicals |
49.8 |
63.1 |
78.0 |
100.8 |
| Non-metallic minerals |
98.2 |
108.8 |
117.2 |
98.2 |
| Metal products |
134.7 |
114.7 |
110.5 |
93.3 |
| Machinery & equipment |
61.4 |
62.9 |
75.1 |
85.2 |
| Transport equipment |
90.8 |
83.1 |
95.1 |
95.1 |
Source: OECD STAN Database
Share of UK Manufacturing Value-Added, UK Food, Drink and Tobacco Versus Other Selected Sectors
| Sector |
1970 |
1979 |
1989 |
2002 |
| Food, drink & tobacco |
12.8% |
12.5% |
13.1% |
14.1% |
| Textiles, leather & footwear |
10.3% |
8.1% |
6.3% |
4.1% |
| Wood products |
1.7% |
1.6% |
1.7% |
1.6% |
| Paper & printing |
8.3% |
8.8% |
11.3% |
13.3% |
| Chemicals |
13.6% |
18.2% |
17.6% |
17.2% |
| Non-metallic minerals |
3.0% |
3.6% |
4.1% |
3.4% |
| Metal products |
17.7% |
13.8% |
11.9% |
10.3% |
| Machinery & equipment |
20.7% |
20.4% |
20.4% |
20.3% |
| Transport equipment |
9.8% |
10.4% |
10.8% |
11.2% |
Source: OECD STAN Database
UK grocery manufacturers feature amongst the world’s largest, as shown by the study published annually by OC&C Strategy Consultants, which lists the world’s Top 50 Consumer Goods Companies. However, the USA is the country that hosts most of the very biggest players including Kraft, Procter & Gamble, Pepsico and Coca Cola.
UK Companies Within The Top 50 Consumer Goods Companies, 2003 (OC&C Strategy Consultants, latest data available, shows grocery sales only)
- 7th: BAT, US$19.7bn
- 18th: Diageo, US$10.8bn
- 20th: Cadbury’s Schweppes, US$10.5bn
- 36th: Reckitt Benckiser, US$6.1bn
- 38th: Gallaher Group, US$6.0bn
- 43rd: GlaxoSmithKline, US$5.3bn
- 47th: Imperial Tobacco, US$5.1bn
Note also that Unilever, which is an Anglo-Dutch company, features at 3rd in the list.
UK Retailers Overseas
Tesco is by far, the most international of UK based grocery retailers and now operates in thirteen markets outside the UK, being market leader in six of these.
Overall, Tesco is the world’s sixth-largest grocery retailer by turnover.
| Rank |
Retailer |
Turnover |
| 1 |
Wal-Mart (USA) |
$256,329 |
| 2 |
Carrefour (France) |
$79,625 |
| 3 |
Ahold (Netherlands) |
$63,337 |
| 4 |
Metro Group (Germany) |
$60,510 |
| 5 |
Kroger (USA) |
$53,791 |
| 6 |
Tesco (UK) |
$50,336 |
| 7 |
Costco (USA) |
$48,107 |
| 8 |
Rewe (Germany) |
$44,260 |
| 9 |
Aldi (Germany) |
$39,798 |
| 10 |
Intermarche (France) |
$36.206 |
Source: IGD
The next UK retailer in the list is Sainsbury’s at 22, with Wm Morrisons at 23. Note that Asda is part of the Wal-Mart group.
IGD has also developed a Global Retailing Index, which weighs up other factors alongside turnover, such as the number of countries operated in. According to this index, Tesco is now the third ‘most global’ retailer.
Other UK grocery retailers with international operations include Boots and M&S.
Top 10 Global Grocery Retailers, from the IGD Global Retail Index, February 2005
| Position |
Retailer |
Score |
| 1 |
Carrrfour |
87 |
| 2 |
Wal-Mart |
82 |
| 3 |
Tesco |
71 |
| 4 |
Ahold |
69 |
| 5 |
Metro |
68 |
| 6 |
Auchan (France) |
58 |
| 7= |
Casino (France) |
56 |
| 7= |
Ito Yokado (Japan) |
56 |
| 9= |
Aldi |
53 |
Exports
The UK is a net importer of foodstuffs but both imports and exports are rising quickly, reflecting the growth in world trade. According to Food From Britain exports of food and drink were £10.1bn in 2003, up 11% on the previous year.
The biggest single category in 2003 was drinks, which accounted for £3.5bn and of this, the majority was whisky, which as a prestigious high-value flagship export, achieved sales of £3.0bn.
Food exports consist primarily of added-value (i.e. processed) items, which are less subject to the impact of world market fluctuations, weather and currency issues than commodity crops. This is also an area in which UK manufacturers are able to leverage their expertise in innovation and brand development.
To provide some context, total UK exports of goods and services in 2003 were £243bn, and so food and drink accounted for 4.0% of all UK exports.
Imports of food and drink were worth £22.1bn over 2003, with key product categories including fruit & vegetables, drinks and meat.
How Competitive is UK Manufacturing?
Processing is perhaps the most economically vulnerable part of the grocery supply chain, since most processed goods could readily be imported from overseas.
The UK has some structural disadvantages relative to many competing nations; for example, both labour costs and especially land prices are relatively high.
However, these disadvantages are balanced by a number of advantages. The chart below, drawn from data provided by Crafts, shows that the UK enjoys a competitive edge in terms of technology and proximity to a large and wealthy consumer market, when compared with emerging rivals in Eastern Europe.
UK Competitiveness versus selected rivals
The UK’s competitiveness in added value food, drink and tobacco products has remained strong over the last thirty years. UK manufacturers are particularly competitive in the production of high-value, branded luxury goods such as alcohol, tobacco and chocolate. For more basic commodities, which tend to be purchased mainly on price, the UK has lost market share.
This mirrors other high-tech industries such as pharmaceuticals and aero-engineering which have also done well. By comparison, commodity and low-tech industries have seen a decline, as production shifts to lower-cost centres overseas.
UK Revealed Competitive Advantage
Food and drink is insulated to some extent from the forces of global competition because some products are fragile, bulky, spoil easily or have some other characteristics that make them difficult to transport.
