Autumn 2010

The concept of a ‘rebalanced’ economy has become central to the debate surrounding the fragile recovery of the UK from recession and over the longer term the need to generate faster, sustainable growth. An economy more weighted towards manufacturing and business services and less dependent on public and financial services has drawn widespread support.

Farming and food industries have a vital contribution to make to a rebalancing of the UK economy in terms of creating jobs, adding value and boosting exports but their potential contribution goes further than these traditional economic arguments. The security of food is a basic necessity and looking forward, there is a growing concern regarding the affordability of food.

Global Change

The food industry has undergone a paradigm shift since 2007 with world food prices moving onto a sharply higher plane in a structural shift seen only twice in the past century. The shift is the manifestation of fundamental global changes founded not so much on the growth of the world’s population but more on the increasing proportion of the world’s growing population that is enjoying rising incomes. The affluence that development brings increases demand for better diets including more meat, dairy products and fresh produce. At the same time higher energy prices, water shortages and climatic change threaten for the first time in more than 50 years to constrain the growth of global supply.

Adapt to Benefit

Food and farming companies need to understand and adapt to the new strategic environment to deliver a trinity of benefits: food security, price stability and long term sustainability. Traditionally, food businesses have invested in marketing and operational functions. In our view business leaders need to consider investing in a third core part of their businesses; strategic sourcing of raw materials. Likewise investing in research and development such as new crop varieties, logistics or better stock management or developing innovative supply chain arrangements that encourage greater investment at the farm level can relatively quickly unearth benefits previously overlooked.

The farming and food industries are capable and poised to play an increased role in a rebalanced UK economy and are, in our view, more than capable of rising to the challenge. But this will necessitate a new emphasis on farm level collaboration and strategic supply chain relationships as well as higher levels of investment ranging from fundamental R&D to inter-firm management structures.

Figure 3: A strategic trinity
Figure 6: A spectrum of relationships

Read full article …

Download the full article here