Brexit has kept fresh produce traders up at night for almost two years. The official deal, effective since Jan 1, 2021, has now begun to affect British citizens as well. London’s famed fresh produce markets are witnessing a rise in prices that the end consumer can’t help but notice; British households that were overcoming the gloom of social distancing with flowers, are looking for a less indulgent alternative; and Michelin Star restaurants are thinking about reinventing their menus, replacing high-priced ingredients like celeriac with the more affordable turnip.
While little can be said today about how permanent these changes are going to be, fresh produce businesses need to find a way to thrive in both the short and long term. Doing so, I believe, will prepare them well for future disruptions, given the intensity of the challenges they face today. After all, the final negotiations of the Brexit deal took place against the backdrop of the Covid-19 pandemic.
Small mercies for the fresh produce industry
Avoiding a No-Deal Brexit and coming to a Free Trade Agreement (FTA) in December 2020 has played an important role in restoring business and consumer confidence in the UK. And yet, some large retailers halted sales to align and comply with new customs regulations.
The fresh produce industry, on the other hand, has been able to prevent business disruption with the introduction of UK controls in stages. This has helped companies adapt to new border checks and regulations and stay clear of ‘worst-case’ queues and other delays that diminish the value of perishable cargo.
Needless to say, allowing trade across the Channel without duties or quotas, is strengthening industry ties. The British market is ensured of a continuous supply of fresh produce and EU exporters enjoy a competitive edge in the UK. Considering that the EU exports 3.2 million tonnes (nearly half of the UK’s internal demand) of fresh fruit and vegetables annually, the stability of this relationship is welcome news in uncertain times.
The opportunity behind the red tape
It is estimated that the total annual increase in charges for fresh fruit and vegetable exports from the EU to the UK will be close to 55 million Euros.
The lack of a post-deal transition period has raised administrative barriers for fresh food companies who are having to pay HMRC-appointed brokers per invoice to manage post-Brexit paperwork. Importers are ultimately bearing the 3-5% increase in logistics costs (labelling, certification, and inspection) as well. And in an industry that can’t afford delays, additional customs obligations and meticulous regulatory procedures are slowing down deliveries.
What’s more, Brexit is not done.
In April, to enter the UK, most EU fresh fruit and vegetables will require a Phytosanitary certificate that takes up to 48 hours to issue. In July, the introduction of full Sanitary and Phytosanitary (SPS) controls and customs declaration procedures will further impact just-in-time operations.
In light of this growing complexity and uncertainty, it’s prudent to keep an eye out for the challenges the industry is going to face. However, I think it’s equally advisable to see the massive opportunity in managing risk like it’s never been managed before.
Assessing risk in multiple contexts
It’s important to assess risk in the context of both Brexit and the new trends caused by the Covid-19 pandemic. Demand for fruit and vegetables, during the pandemic, has shifted from food service providers like restaurants to retailers. Retail sales of immunity-boosting produce with Vitamin C have risen. Exotic produce has seen a major decline in demand. To minimise retail visits, not only are consumers buying fruit and vegetables with a long shelf-life, they’re more inclined to buy from a retailer that can provide them with everything they need at the click of one button.
In addition, increasing global supply volumes and more concentrated buying have put immense pressure on the margins of fruit and vegetables. As a result, retailers are becoming increasingly picky about product and supply standards.
In response to fluctuating demand and a highly discerning importer, exporters need to take a risk-management approach that reduces human error, improves predictability, and encourages the exchange of information in a reliable, integrated manner. In other words, exporters need to build a supply chain that can endure any disruption and any scrutiny.
The importance of an unbroken cold chain
The UK imports nearly half of its fresh vegetables and the majority of its fruit, primarily from the EU. Moving these ‘essentials’ in peak condition to where they are in demand is vital for business and to ensure that no food goes to waste. Refrigerated cargo companies are therefore looking for logistics solutions that can help them retain the quality of their sensitive cargo throughout the journey as well as meet fluctuating demand in an agile way.
Maersk offers a portfolio of cold chain solutions that help customers meet their logistics objectives. With a vast ocean and inland network, efficient customs services, end-to-end visibility, and more we can simplify and connect supply chains, from origin to destination, enabling them to reach their full potential. In the current environment, our approach is to provide flexibility so that customers can adjust to short-term disruptions, and at the same time work towards long-lasting improvements in resilience.