In our previous two articles in this series, we’ve talked about the meat and wholesale market and the impacts of current consumer trends as well as delving into food-fraud and the increased risk of organised crime in this industry. For our final piece, we wanted to focus on regulation and innovation – what has happened, what will be happening and what the implications are for those who have interests in this industry.
As we’ve mentioned before, the meat and wholesale market is one that’s particularly sensitive to the UK leaving the European Union. This is not only due to currency rates and import/export changes, but also because the UK is currently governed by EU regulations as well as our own. For example, we currently have EU regulations in place regarding official feed controls, animal health and microbiological criteria for food.
This upcoming political change, combined with increased pressure on an antiquated system, prompted the Food Standards Agency to publish a paper in July 2017, outlining their plans for change in the sector. Although the FSA was at pains to point out that the paper was not about changing the actual regulations; the focus on improvement has consequences for businesses both in the UK and beyond. Their ‘Regulating our Future’ plan has a three-year strategy, which started in 2017 and aims to deliver a fully functioning operational model by 2020.
Though the model is not yet fully operational, we’re already starting to see the effects ripple down into the industry. Following a joint undercover operation by the Guardian and ITV, an investigation into meat processing factories by the FSA has been fast-forwarded. It has also seen the government pledge to mandate that CCTV be installed in meat-cutting plants – a pledge that, unsurprisingly, has received little opposition from parliament or the public.
While we’re not here to argue the political or social merits of such reforms, increased scrutiny and stricter regulations will almost certainly have an effect on both productivity and wholesale prices within the sector.
Any industry-wide change will require the focus of those affected to shift to deal with the implementation of new regulations. Businesses will likely have fewer resources to improve processes and productivity whilst making regulatory changes.
Stricter regulations will also encourage a higher wholesale price for exports. If it’s harder for a foreign supplier to get their goods into the country, UK businesses will bear the brunt of that through increased costs. Whether this is absorbed by suppliers or passed onto the customer through increased prices, it will have an impact on bottom lines.
One way that this impact could be minimised is through automation within the sector. Historically, the industry has been relatively slow in the uptake of automation, partly due to strict manufacturing and control regulations. But due to changing attitudes towards adopting machines and a demonstrable need for their capabilities, this is starting to change. Increased automation brings multiple benefits, including:
One concern expressed by industries looking to capitalise on automation technology, however, is the lack of a skilled UK workforce capable of maintaining the machinery. Schools, training centres and professional engineering institutions would therefore require more funding to make sure that we’re able to keep up with all aspects of the technology.
Love it or loathe it, there’s no denying that block chain technologies are having a moment and, when paired with automation, it has potential to positively impact the meat and wholesale industry. Digitisation of all elements within the supply chain could make the process more traceable and transparent. For example, a system could be designed to prevent meat moving to the next step in the supply chain if it doesn’t have the correct digital signature.
While this technology can help mitigate supply chain risk, it’s not completely free of risk itself. A lack of standardisation will need to be addressed before this technology starts gaining traction in the market. After all, suppliers will not want to spend all of this time working on becoming more transparent only for their efforts to be undone by scandals relating to a misuse of technology.
Whether or not these technologies and innovations are embraced by the sector, it’s clear to us that the meat and wholesale industry is going to need to work hard to continue the upwards momentum it’s enjoyed in the last two years. Not only is it dealing with a changing political landscape, it also faces changes in consumer behaviours as well as increasingly sophisticated criminal threats.
If price increases are inevitable, there are other ways the industry can continue to make sure meat remains relevant too, including curbing the use of antibiotics, with the ‘raised without antibiotics’ label already attracting a premium price. Another rising trend is that of ‘flexitarian’ products – ones with less meat and higher vegetable content. This has a two-fold benefit, attracting a higher price but also requiring less meat for production. We’re also seeing meat producers move into the snack market, tapping into the high protein trend favoured by consumers.
In our opinion, the opportunities this sector could provide are likely to outweigh the short and long-term challenges it may be facing. However, with a changing industry comes an increasing need for businesses which have interests in it to stay informed. Identifying, understanding and sizing risks within the sector will be key to making the best possible business decisions.
Predictive Analytics can show you promising businesses in this market and give you a head start against your competition. The best bit? The more you use it, the more reliable the results, as you’ll be able to identify whether past predictions have been correct.
This is where we can help. By offering Credit Risk Management, Corporate Fraud and Data Enriching solutions, Graydon can make sure you have a full, real-time picture of the sector and all its movements. You can also point the microscope at your current customers. Our Discontinuation Score predicts how likely it is that each company will still be in play over the course of the next 12 months. With a moving market such as meat and wholesale, this kind of foresight can be invaluable to help you prevent loss and stay one step ahead.