We’ve worked with John Giles for many years, running many pieces he has written and doing many interviews. You can see some of piece we have run here:
100 Days Post Brexit, What Are The Impacts On The Produce Sector?
Taking Trade To The Next Level: Where Does Peru Go From Here?
New Initiatives in Southern Hemisphere
What Are We Looking Forward To In 2020?
How The Pacific Alliance Could Work For UK
A More Resilient Supply Chain in Europe
Predictions for Europe’s Fresh Produce Sector in 2018?
What Do British Producers Need to Think About Post-Brexit?
What Is Happening Beyond Brexit?
Lessons from Peru and Chile Powerhouses
UK’s Organic Market Presents Opportunities For US
What Does Brexit Mean For The US Fruit Export Sector? What US Exporters Need To Know About The UK Market Europe’s Currency Advantage In Developing New Markets
In thinking about the “Reunion Edition” of The London Produce Show and Conference we needed someone to speak to the challenges facing the UK produce sector.
It wasn’t hard to know who to invite!
We asked Pundit Investigator and Special Projects Editor, Mira Slott, to find out more:
John Giles
Divisional Director
Promar International
(The value chain consulting arm
of Genus plc.)
Q: We’re excited to welcome you back to the London Produce Show, where you’ve engaged participants, whether moderating panels or sharing wisdom through your work in some 60 markets around the world in the fresh produce sector. In addition, your sharp and varied columns in PRODUCE BUSINESS Magazine and ProduceBusinessUK.com over the years have offer valued perspective.
The question you pose for your presentation is both broad and intriguing: Is This UK Horticulture’s Defining Decade?
A: To widen the appeal, I’ll be looking at impacts across the supply chain and horticulture world-wide.
Q: That’s great since you’ll be addressing diversified interests. The London Produce Show and Conference gathers renowned industry thought-leaders, high volume buyers and sellers from across the UK and around the world. And now it will be co-located with IFE, the International Food and Drink Event; and HRC, the Hotel, Restaurant and Catering Show; and as well as other food-related events.
A: Hopefully, it attracts a broad level of interest. I can cover a wide range of topics under this working title, but obvious areas are:
Post-Brexit
Post-COVID
Ukraine
New trade deals
Supermarkets
Labour issues
Use of horti-tech
Q: You’ve got your work cut out for you. For this preview piece, I may need to challenge you to a quick-fire round of questions.
A: I’ve got lots of thoughts swirling around in my head… where do you want to start?
BREXIT
Q: Well, it seems that many of these issues overlap. Should we start with Brexit and see where that takes us…
A: Yes, some of the things I talk about also have implications, not just for people in the UK, but other parts of the world as well. I think agricultural and food is going to go through a defining decade, basically. But we’re seeing a heady cocktail of different things impacting on the UK market at the moment. Some of those are of our own making, and some of them are because of the things happening on the other side of the world.
But when you look at Brexit, we made the decision to leave the European Union. The end result of the referendum was actually quite tight — it was 52% for and 48% against. But we’ve left the EU, so we’ve made our bed, and we have to lie in it now. One of the implications of leaving the EU is the availability of what has been a ready supply of farm and packhouse labor.
I think it has two big impacts really. One is the ready supply of labor that used to come to the UK largely from Eastern Europe, which has sort of rapidly dried up. So, we have to try and find seasonal labor in particular from other parts of the world.
The other thing that we have experienced quite a lot of is what people are calling “trade friction” at the point of entry or point of exit. So what we’re trying to export to the Continent, or, when we’re bringing produce in from the Continent, there’s additional paperwork, administration, and checks being made, there’s been delays in the systems.
That’s an added cost at a time that we don’t want to be adding any cost in the supply chain, because we’re starting to experience inflation in the UK going anywhere between 5% and 10% over the next few months. And probably for 10 years, we’ve had food deflation in the UK, so it’s not something we’re used to at all.
Q: Where are the greatest impacts? Do you have any examples, any quantifications to provide perspective?
A:The UK has never been a massive, large-scale exporter of fruit to the rest of Europe. We’ve always been a net fruit importer from Holland, Spain, Italy and France, in particular. So, there’s obviously been impact at the point of entry coming into the UK.
But I think, by far, the biggest impact has been the labor shortages we’ve seen, not only at farm-level, but in pack houses around the UK. And towards the end of last year, we started seeing shortages of truck drivers and increasing fuel prices, and for horticultural businesses, the labour costs are the single biggest cost they face. They’re about, on average, between 40% and 50% of the overall cost of production. So, that’s a big problem to have.
Then on top of that, we’re now seeing this huge inflationary pressure, which is affecting the cost of everything else, so the cost of packaging, transport, fertilizers and so on… other agrichemicals that are being used in horticulture businesses, distribution costs, energy costs, for produce that’s kept in cool storage, the electricity costs, they’re all racing away Not just in the UK but in other parts of the world.
Energy costs in particular were drifting up gently for most of last year, but I think in the UK, we took our eye off the ball. We were too busy focused on Brexit and COVID; and then, suddenly, there’s a massive explosion of price increases in September, where energy costs went through the roof.
Q: Right. There’s been a lot of turmoil with Brexit, while the UK is not alone in grappling with the pandemic…
A: I don’t know whether we’re the only people who took our eye off the ball, but I think in the UK it was an incredible shock. In the build up to, and since Brexit and now in the pandemic, we’ve been questioning our food security in the UK. One of the rationales for leaving the EU would have been that it will increase our self-sufficiency, and therefore, we would be more food secure. That’s proved not really to be the case. We are probably more food insecure than we have been for a generation In the build up to, and since Brexit and now in the pandemic — think of the last oil crisis in 1973, for those of you who can remember it.
I think there’s a combination of factors that go towards this level of food insecurity at the moment. One is the labor situation; one is trade friction at the border; one is increasing energy prices, and the cost of everything else.
The number of horticulture producers in the UK has been going down for a long time. This is nothing new, you know, but the exit from the industry could be accelerated by what we’re seeing now.
CLOSER LOOK AT HORTICULTURE
Q: Okay. For those unfamiliar, where are the key horticulture producers in the UK, what areas are struggling most, which products are having the most difficulties?
A: Horticulture activity takes place around the UK, but there are some strongholds, so you’ve got an area called Kent in the Southeast of England; Cornwall, Worcester, Lincolnshire, Shropshire, parts of Lancashire, parts of Scotland, along the south coast of England, and East Anglia.
So, there are pockets of horticultural activity all over the UK, but those are the powerhouses, where it’s really very, very strong.
Historically, we’ve produced a wide range of produce, top fruit, soft fruit, and a little bit of stone fruit. But also vegetables, brassicas, potatoes, carrots, tomatoes, cucumbers — there’s a vibrant industry in the UK for growing of all these products.
I think to some extent, it doesn’t matter whether you’re in Kent or Lincolnshire… They could be seen as being next door to each other. But in the UK, compared to the US, we think that 200 miles is a long way! And Scotland is over 250 miles away. But I think this isn’t an issue for any one single part of the UK, and it’s not an issue for any one single crop sector.
In a worst-case scenario, if this carries on, horticulture producers may… well, they’ve got several options, they could stop producing altogether. They could produce less. They could end up with crops that they have to sell at distressed prices. The other thing they can do, but it doesn’t happen overnight of course, is have the appetite for investing in automation. The need for mitigating against this wide range of factors that are impacting on the sector has probably never been higher. As they say, necessity is the mother of invention.
Q: It can require some risk/benefit analysis with big costs upfront before seeing the return on investment…
A: We’ve been looking at the opportunity for automated planting, picking and packing systems in the UK for some time, and we sort of decided not to go down that route, not least because there’s always been this ready supply of labor, and making the decision is not an easy one. I think, however, people are looking at it more seriously now than ever before. But making the decision to do that is not an easy one, and it can be expensive in the short term.
Then there are other implications as well. Some of these farms can employ a thousand people. The general thinking is that automation will create different, new types of jobs, and probably higher skilled jobs, and therefore, higher wage jobs. But you might have a lot of people who find themselves out of a job. Some of those people might be on temporary contracts and seasonal workers from Eastern Europe, and there’s lots of Ukrainians and Russians working in the UK, or there has been… you might end up saying, well, we don’t need them.
But then, if you take a thousand people out of the local economy, what they spend in the shops, what they spend on food in supermarkets… they won’t go to the local pub on a Friday night. Suddenly, there’s a thousand people taken out of the local economy. That has all sorts of impacts on the overall prosperity of that community.
Q: What is the cause and effect?
A: What we would refer to as an unintended consequence. So, on one level, investing in automation looks like the answer to what is an increasingly serious problem. But by doing that, it creates problems in other parts of the economy. All these areas I talk about are essentially rural farming areas.
THE RETAIL PERSPECTIVE
Q: Can we discuss this from a retail perspective?
A: Well, the retailers aren’t immune from what’s going on at all. The issue of labor goes across the whole supply chain, whether you’re in farming or packing or distributing or in retail. And supermarkets have to pay for petrol for their trucks; they have to pay for electricity for their stores; they have to pay for packaging… so, all these things are affecting companies across the supply chain, and to a greater or lesser extent, the supermarkets themselves.
Consumers are being exposed to that as well. We’re paying more for our electricity and gas…it’s a part of a public debate that’s going on in the UK about this huge inflationary pressure we’re facing in the UK. And supermarkets are often seen as key players in this. The top supermarket in the UK accounts for 75% of food sales. So, they have a big role to play in controlling inflation, and what they do in terms of pricing strategies does impact on the overall inflationary pressure in the UK.
Q: Can you talk more about the UK retail environment and its impact on sales and pricing… traditional supermarket concentration, influx of discounters, inroads with Amazon Fresh, etc.
A: We’ve had supermarket concentration in the UK — or the concentration of buying power of the supermarkets in the UK that has been going on for 20 years. So, this is nothing new. The biggest supermarket in the UK is Tesco, and they have some 28% of the market. And then you’ve got Sainsbury’s ASDA and Morrison’s…
The big change in the UK over the past five, six, seven years is the growth of the discounters, Aldi and Lidl. And then also the growth of online shopping, which during the pandemic saw huge increases. Online shopping in the UK went through the roof. There’s quite a lot of evidence to suggest that not everybody’s going to carry on online shopping, but there’s also quite a lot of people who have decided that they don’t need to go to a supermarket on a Saturday morning, they can do it online, and get it anytime of the night or day, and it turns up like magic.
So, if you look at the major supermarkets in the UK, they are put under pressure by the growth of the discounters who’ve completely changed the face of UK retailing, and then, online shopping.
Q: But online shopping occurs with the supermarkets as well, right?
A: Yes, most of the main supermarkets have their online shopping facility now, but there are the others, what they call the disruptors like Amazon Fresh coming in the market.
In the UK, I am not sure we are going to consume any more fruits and vegetables. We’re just going to buy them in different ways.
Q: So, you are of the school that consumption is going to stay pretty much status quo…
A: We’ve been trying to boost consumption in the UK through various schemes. There’s been many industry, and even government, schemes to try to boost consumption. The 5 A Day campaign could be the most classic. We’ve had some success, but the World Health Organization recommends the level of consumption for a well-balanced diet. We’re well below that in the UK.
Q: It’s an issue in the US as well, and throughout Europe as evidenced by the latest consumption reports…
A: Yes, we’re not the only ones, but we still don’t eat enough fruit and vegetable in the UK. There was a National Food Strategy report for the government that came out towards the end of last year, done by Henry Dimbleby — Dimbleby comes from a very long line of famous journalists, and he’s also an entrepreneur in the food sector.
He was asked by the government to write what should be the national food strategy. One of the things he talked about was that, basically, in view of the climate change pressures we’re facing, meat and dairy consumption should be reduced and a plant-based diet, including fruits and vegetables and nuts and pulses — we should be eating more of those products.
So part of the official government policy has been, and is now being reinforced by Dimbleby, that we should be eating more fruits and vegetables. Most industries in the UK would give their right arm for government reporting to buy more of our products.
Q: This independent report involves sweeping recommendations from taxing sugar and salt to investing a billion dollars in innovation to create a better food system…
A: Well, what we’re very good at in the UK is writing important reports and holding enquiries with lots of recommendations, and then forgetting to implement them. For the Dimbleby report, the official response of the government to this document is still awaited. And they’ve probably got a few other things on their mind at the moment.
I think we are the world champions at writing these sorts of documents. Whenever there’s a problem, not just in agriculture and food, but any part of the economy, we have a commission, an inquiry, a government report, and we’re great at doing that, and it takes a long time.
The publication of Dimbleby’s report was delayed because of COVID, but we’re fantastic at producing reports saying what all the problems are, but we’re much less good at actually doing anything about it at the end of the day.
I’ll tell you of a country that is really good at doing that sort of thing …. our colleagues in Ireland.
Q: That’s interesting.
A: When they write a report, they get together and say, okay, what are we going to do, and then they get on and do it. We can learn a lot from them.
UKRAINE SITUATION
Q: More urgently, I was hoping you could talk about this frightening situation with the Russian invasion of Ukraine.
A: Yes. Since Russia first invaded Ukraine, we’re getting more worried about what Putin’s real intentions are. I think people are desperately upset, we see this played out on the news in front of us, haven’t we, in our own living rooms?
From London to Ukraine in an airplane is about three or four hours. I’m not saying if it’s far away from home, we’re not interested or not concerned, but this is a war in Europe, which we haven’t had for 75 years.
Q: From your vantage point, what are some of the repercussions that could happen? what are some of the dangers…?
A: I think at a personal level, I’m as concerned as the next person about how this might escalate. And from a business point of view, the company I work for, our parent company, we’ve got businesses in both Russia and the Ukraine.
Q: Oh my, what is happening with those businesses? What is your parent company doing?
A: They are livestock breeding businesses. So, mainly pigs, beef and dairy.
Q: Have you stopped operations in Ukraine or in Russia?
A: The operations carry on, but in difficult circumstances. We are supporting our colleagues and our customers in any way we can at the moment.
I think the other thing we know is that, again, in the UK, in the horticulture sector, where we started, most of the firms in the UK employ Ukrainian labor and Russian labor on a seasonal basis, or six-monthly basis. And so, there are now problems with the availability.
We’ve seen through Brexit, the East Europeans, such as Poles, Hungarians, Romanians… returned home. They’ve been replaced to some extent by Russians and Ukrainians. And now, there’s a problem with the availability of that labor — can Ukrainians get to the UK? Do they want to go back home and be with their friends and family or even fight for their country? What do you do with a farm where you’ve got Russians and Ukrainians working on it together?
SUSTAINABILITY
Q: Do we dare talk about sustainability in all this? There are so many different issues going on, and sometimes people say, well, maybe that is going to be put on hold, but in fact isn’t the sustainability agenda integral?
A: It will be tempting to think, okay, we’ve got all these other things going on — Brexit, COVID, Ukraine, Russia, what have you. In my view though, we cannot afford to ignore the sustainability agenda, and actually it might become even more important as a result of these things, which COVID showed in the UK.
With the challenges that are being set and the targets that need to be met, we should be increasing the efforts on sustainability.
Q: Sustainability encompasses many different things, some refer to the three legs or pillars of sustainability — social, environmental, economic, or people, planet, and profits…
A: Yes, sustainability is a wonderfully big word, isn’t it? Sustainability in horticulture can be anything from reducing pesticide usage on crops, selling more local supply, localized supply chains. It can be the whole question of water usage. It can be recycling of packaging. It can be responsible employment of labor. It can be reducing airfreighted produce. It can be using renewable energy. It can cover all these things and more. Growing on a more seasonal basis, possibly. Reducing food waste in the supply chain. I think we are partly there, but we still need to be doing better.
In the UK, occasionally, we console ourselves that we seem to be slightly ahead in terms of meeting the targets that have been set by the United Nations sustainability goals. If we are doing better than others but it doesn’t mean for one minute that we should take our foot off the pedal. In some cases, we should be helping other people to show them what we’ve done and how we’ve done it, and the impact it’s having.
Q: Right. There is the low hanging fruit or the steps that can reduce energy costs, water use, increase efficiencies, for instance, that are more sustainable, and you’re also helping your business from an economic standpoint. The social side, ethical sourcing, etc., may be harder to quantify financially, at least initially…
A: This is always a challenge of course, but there is lots of evidence, even if you don’t see an instant impact, that companies and industries that invest in sustainability end up being more profitable, because they are reducing the use of expensive inputs.
There are some people who say, well, it doesn’t really matter what we do in the UK. So, in the “little old UK”, we could do whatever we want, we won’t really shift the outcome, it’s only impactful if the US and India and China and other big economies around the world reduce their carbon emissions significantly.
We hosted the COP26 Conference in Scotland just towards the end of last year. We are trying to show leadership on these issues. It’s a huge meeting of all countries in the world, discussing over two or three weeks the issue of the environment and sustainability.
You can’t be asking countries like the United States, like India, like China to be making improvements in their sustainability and carbon emissions if you don’t do it yourself.
Q: Is the main issue with this conference more with livestock, big ag, other industries, etc., as compared to fresh fruits and vegetables?
A: We are involved in this debate as our parent company is a global beef and dairy genetics business. Livestock farming often gets a certain level of adverse attention, particularly from the NGO community, in some parts of North America, the Oceania countries, Europe, and Brazil.
Most responsible livestock companies, though, are bending over backwards to find ways of mitigating methane emissions and climate change. And so, in respect to our business, our parent company’s business starts with breeding animals that produce meat and dairy products on a more sustainable basis. In this respect, Genus became a founder member of the Greener Cattle Initiative announced at COP26 to conduct research into ways of reducing methane from cattle.
It certainly though doesn’t absolve horticulture from saying “it’s nothing to do with us… we are not the bad guys, we are the good guys,”
Horticulture has a major role to play all around the world. Fruit and vegetable production can use lots of water. The industry employs lots of seasonal labor around the world. They use chemical inputs, pesticides, herbicides, insecticides, and are big users of packaging and freight. There’s no point in looking over the fence at dairy and beef farms and saying, well, you’re the problem. First, they aren’t, and secondly, it’s a dangerous position to take the moral high ground.
In our view, everybody — every horticultural farmer, livestock farmer, dairy farmer, cereal farmer… food processor, retailer, and the consumer — has a role to play.
Q: Got it. Connecting this back to the National Food Strategy report for the UK government, telling consumers to increase consumption of fruits and vegetables, and reduce consumption of products like beef and salt/sugar-laden items, that might not be the most profitable strategy for retailers. What does that mean for these other industries if you’re trying to switch?
A: Okay, this brings up some a lot of questions. Should we reduce our meat and dairy consumption, replace it with fruits, vegetables, nuts and pulses?. We might be right. But what is more environmentally damaging? Producing grass-fed beef in Southwest England or Wales, or air freighting vegetables from East Africa every night into the UK, or blueberries from Peru — as opposed to eating local food? There are no easy answers here. There is a lot of evidence to suggest too that meat and dairy products can contribute to a healthy and balanced diet.
So, which is best? I think we’ve got a lot of livestock and dairy farmers in the UK who would say, actually, we’re doing less damage, we’re actually doing better for the environment than you guys are who are air-freighting off-season berries in from Central America.
Q: Right. In some cases, local produce is not an option. But then you also could be helping impoverished farmers in Africa, and that could be social sustainability… In addition, also looking at the full lifecycle of a product through the supply chain can provide unexpected results on what is more sustainable…
A: Well, again, these issues are incredibly complex, and that’s why we need some clear thinking on them. There are some people in the UK market that say air-freighting vegetables from East Africa every night in an airplane is not a good use of the planet’s scarce resources. Yet that’s how lots of farmers in Africa make their living.
Q: Right, and then you also need to look at how they’re farming. Maybe they’re using energy from the sun and that’s more sustainable than the alternative…
A: These issues are complicated and require some good discussion…
LONDON PRODUCE SHOW
Q: That’s a nice segue to the London Produce Show, where executives from different parts of the supply chain and innovative thought leaders will join together in one place.
A: We’ve all been locked up for the past two years. We haven’t been able to go to this sort of event, or we’ve chosen not to because we had concerns about COVID. So, the last time the London Produce Show was taking place was three years ago now. I think people in the UK are ready to start going to these sorts of things again, with the appropriate precautions in place.
It’s a great opportunity to see the people we haven’t seen for two or three years maybe, perhaps you’ve only seen them on a Zoom call — we are, by nature, sociable people. Talking to people on Zoom and Teams is fine of course and the way we have done things for the past 2 years, but meeting people face-to-face is even better. You’re probably going to meet some old friends — and make some new ones.
These supply chain issues are complex to get our heads around. The seminar program and speaker program you have in place is one way of starting to address them.
We all need to be better informed individually and collectively regarding sustainability priorities, what’s going to happen to Ukraine, what’s going to happen to distribution in the UK, and labor costs.
The other reason to attend is to do a bit of business, and we all want extra business.
Q: To conclude, we’ve covered a lot… is there anything I’ve been remiss in not asking you or that you feel would be important to highlight in this overview preview piece?
A: What I might say is in the UK, and maybe in other parts of the world, we sometimes say agriculture and horticulture is due to a series of supply chain shocks at a tipping point. That might have been in the 1970s with the Gulf Oil Crisis. It might have been in 2008 when we had the Global Financial Crisis. It might have been when we had a War in the Gulf. In might have been in the UK, when we had problems with foot-and-mouth and BSE livestock diseases. In the last 2 years we have had COVID. In the UK we have had Brexit but there have been knock on impacts to the rest of the world too as a result.
So, when we say, “agriculture is at a bit of a tipping point now,” everyone sort of nods their head and says, “yeah, you’re right, things are going to change.” Then we go back to carry on doing things largely as they were.
I think now, you could say this really is a make-your-mind-up time. We haven’t got just one or two things happening around the world. We’ve got geopolitical instability; we’ve got soaring energy prices; we’ve got labor problems; we’ve got Brexit problems; we’ve got trade problems; we’ve got agri-tech challenges… There’s simply too many things to ignore.
The title of my presentation at the LPS is: “Will this be horticulture’s defining decade?” I think we are at a tipping point in the evolution of agricultural farming and food systems, and if we don’t do anything about it, I don’t think we’re going to get away with it this time. We might regret it.
For me, everything ultimately comes down to climate change and greenhouse emissions, but now you throw in all these other things we’re talking about. And we are only two years into the decade. When you look at the assembled evidence, we’re going to go through a very turbulent five, six, seven, eight years.
And of course, for some of the best prepared and best informed companies in the supply chain, this will produce a good deal of opportunity to do things differently than in the past. It’s going to be a tremendously challenging and exiting time, for the produce sector, not just in the UK but in other parts of the world, even if a bit scary too.
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One of the key issues we face is how to deal with multiple concerns. In the US, the very first official action of President Biden was to kill the Keystone Pipeline, which was designed to bring oil from Canada down to the US.
We have many pipelines in the US, so those seeking to prevent Keystone from opening were not so much in opposition to this particular pipeline, but to the idea of our nation continuing as an oil-dependent economy. The political bodies that pushed President Biden to act would not be happy with any oil pipeline in the US.
In Germany, they have been closing down nuclear power plants making the country more dependent on Russian oil and gas.
These decisions can be defended based on all kinds of concerns, such as environmental issues. Yet they all have implications that need to be considered, and it is not clear our political systems do a very good job in this area.
One could argue that Russia’s entire effort in Ukraine has been paid for by the increase in oil prices during the Biden administration. Yet, there was virtually no discussion of the likely increase of Russian strength caused by greater dependence on Russian oil and gas.
And, of course, if the consequence of the effort leads to a nuclear effort, well who knows what the environmental consequences might be?
This is a big issue and a current one. But all decisions have multiple effects. John Giles begins this survey thinking about things, like if we mechanize harvesting what happens to the towns that depend on the business of serving harvest labor? If grocery delivery expands, what happens to the economic viability of physical shops? So much more.
So this presentation is an opportunity to think broad and think deep… to find ways to use this transformational moment to leap ahead as an industry.
We hope you will join John Giles in his presentation at The London Produce Show and Conference. We hope you will join us as we seek ways to move the industry forward.
You can register to attend the event here.
You can inquire about exhibiting and sponsorship opportunities here.
We look forward to seeing you at the ExCeL center in London for the rebirth of the London Produce Show and Conference!
