Why Is Our Share Of Exports To The US So Low?
Exports to the US – capitalising on our heritage.
Around 5% of the US trade with the UK is Food and beverages and in conversation with many of our exporters, it’s a surprisingly low number given the positives of doing business ‘across the pond’. UK products have traditionally enjoyed a high reputation for quality and UK brands, tastes and packaging all translate readily from the UK to the US market.
Many US food processors source raw materials and intermediates from outside the US to add provenance to their product and the UK has authenticity, history and provenance in spades. For now, the dollars strength against sterling has added to the attractiveness of the US market as an export destination as has the health and buoyancy of the US economy.
However it is fair to say that the US is also top of many emerging markets export wish list, so that means low cost competitors its certainly a competitive place to trade once you are there. Key food and drink categories have a high degree of integration with their retail supply chains and there are domestic US champions in every category – meaning UK brands need to fight to get to the table.
In addition, there is also a swirling mix of protectionism which is currently emanating from the Whitehouse as President Trump looks to correct the ongoing US trade deficit, which many economists see as unsustainable. The ongoing endemic government debt complicates matters with federal austerity measures growing, unemployment concerns and a backdrop of uncertainty.
Outside of this, US consumers have a preference for US products and it can be challenging to move consumers on from this to experiment more. On balance, it’s a very attractive market.
The bald facts are that it classically takes just 5 days, the completion of 5 (admittedly not very user friendly) documents and around £1,400 (ambient) and £1,900 (chilled) to ship a container of food and drink to the USA. That’s a reasonable cost of entry when set against the potential retail premiums on offer stateside.
There are a variety of trade shows which provide an obvious entry route – at the top end there are the two ‘Fancy food’ exhibitions and the Expo (both East and West coast) and there are also specific US and the SIAL franchise shows. In addition, almost all of the categories have their own ‘vertical’ shows and trade fairs where the whole industry will gather for a few days of bargaining and trading.
Looking forward, the proposed free trade deal between the UK and the US could offer encouragement for UK exporters and a way to free volumes from the limitations of the current EU quota systems that are in place for certain key categories. However, its unlikely that any FTA will function as the current NAFTA agreement so exporters are likely to see a general improvement in the terms of trade but we will have to wait for the specifics.
And of course there will be the corollary of more open access to the US market which is UK firms experiencing more US competition in their domestic, UK market. US food and drink companies have been servicing a domestic market of 330m, five times larger than their UK counterparts so they would have economies of scale on their side as well as lower regulatory burdens.
Just flick through the coverage of ‘chlorinated chicken’ to get a flavour of that debate. The prospect of a FTA will broadly be welcomed by UK food and drink firms and on balance rightly so. However, lets not be naïve it will very much cut both ways and will usher in more competition. As my grandfather used to say “you get ‘owt for ‘nowt’.
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