How UK dairy can smash export barriers

Dairy is a hugely competitive global market. How does the UK compare against international peers? 

MA We have ideal natural dairying conditions, a short supply chain, great farmers and some well-invested creameries. Our domestic food and drink market is one of the most competitive in the world and produces world-beating brands. We can afford to be more ambitious with exports. 

RC The UK is a world leader in terms of quality perception. I always tell my farmers the bureaucracy they curse is actually our best sales tool in India, Asia and the US. In standard bulk commodities such as SMP, bulk butter and 20kg block Cheddars we would be outgunned by the Fonterra New Zealanders and maybe the big US plants that make some of our annual production in a day! However, at the quality end of the market we are more than able to hold our own.

JB We are not currently as export-focused as some of our competitors like Ireland, the Netherlands, New Zealand or the US. That’s why Dairy UK established its Exporters’ Group. 

TJ Our industry produces great quality and often innovative products that can hold their own in the world market. But we still have more than our fair share of less efficient legacy assets and lack manufacturing scale in some big commodities. 

What are the areas/products the UK has a real advantage in and should focus on for export? 

ES Many believe the Union Jack will sell everything, but are people prepared to pay more for the heritage and quality when the world’s purse strings are tight? A great opportunity is speciality cheese but I am not sure it delivers enough volume and margin.

JB There are real opportunities for us to increase the production of specialised commodity products such as milk powders. We must also focus our efforts on new export markets for our cheese.

TJ  With a strong pound, right now that’s a difficult one but we produce some excellent cheeses with great stories that are selling really well in some overseas markets. By value we were the 12th-largest cheese exporter in the world in 2014.

RH In the case of organic, specialist ingredients are a great opportunity as we have a scale and a consolidation in the sector that makes large-scale production viable. Cheddar is also a great opportunity, given the heritage positioning. 

Which markets offer the biggest opportunities for UK dairy exports over the next five years?

RC The temptation is often to go for the big regions with big populations, when there are easy wins. The US is a massive market but it is highly regionalised and there is a lot of processed and cooking type cheese used. But the French are receptive to the complex flavours in vintage Cheddars. Of course we are all excited by the massive opportunities in India and China, and were very optimistic about Russia until the export ban. 

MA In terms of exports in cheese, Europe remains our biggest consumer - Cathedral City, in particular, has seen strong volume growth in Germany, France and Benelux. We are also targeting growth in North America and the emerging markets. We are actively looking at export opportunities for our Frylight brand. It meets worldwide aspirational health trends.

JB We must look to a number of regions including South East Asia, the Middle East, as well as some Latin American countries and the US. 

ES Delamere’s focus is South East Asia and its urbanisation. China offers a great opportunity, as the country will not be self-sufficient in dairy for over 20 years. 

What are the biggest obstacles standing in the way of the UK’s exports ambitions?

MA We need a healthy trading environment and trade agreements that encourage exports to all potential markets. The Russian trade ban remains a barrier. The situation has exacerbated volatility in the global market, particularly in the European cheese market. We must also be supported by an administrative system that does not place undue burdens. At the moment, processes around Export Health Certificates (EHCs) and licences required to export can cause delays.

RH The UK must realise the opportunity is there and be confident to deliver. If UK dairy expansion is to happen, export will have to play a major role. 

ES Unlike Ireland, New Zealand or Holland we are not a nation of born traders. But there is nothing in the way of the UK’s export ambitions.

JB Tariff barriers and non-tariff barriers are some of the biggest hindrances. We need more free-trade agreements for easy access to some of the most interesting markets. A crucial part of the current TTIP negotiations is to remove non-tariff barriers and recognise an equivalence between US and EU quality management procedures.

RC The biggest obstacle within the EU is our strong currency. Other barriers tend to be ‘human factors’ such as establishing paperwork systems for export to regions like South America.

How well equipped is the UK for dairy exports in terms of infrastructure, processing capacity etc? Where is investment needed?

JB We have sound infrastructure with unique and valuable expertise in managing chilled distribution chains, especially in terms of fresh pasteurised milk. This could interest many countries. 

MA The UK sector continually needs to invest in processing facilities to remain globally competitive. The sale of our dairies to Müller-Wiseman will create two businesses that are sustainable, with scale and focus, and investment in capacity will become more attractive.

“We spend too much time focused on the UK market but there is nothing in the way of the UK’s export ambitions”

RH On the mainland, we are well invested in cheese, but lack infrastructure in specialist ingredients. 

ES Larger dairies are well equipped and it is good to see significant investment in powder plants and whey processing. Our traditional plants are more geared to the UK, with fresh and short shelf life the focus of most investments, and the world markets need longer shelf life products.

RC The UK is well positioned in terms of infrastructure; our distribution links are very strong. But our cost base across the industry is not set up to compete in cheap world commodities. For this reason we have to explore premium added-value opportunities or completely restructure.

What is your biggest frustration when you look at the UK and its approach to dairy exports?

JB Opening new markets requires time and resources. We don’t have very efficient mechanisms in place to organise visits for foreign delegations and showcase our strengths. 

ES We are too busy focused on the UK and because of this we are years behind our nearest competitors.

RH We struggle with availability of infrastructure. Our specialist production is increasingly undertaken abroad, and this will continue in the year ahead as our NPD rolls out. I would far rather this production be located in the UK. 

RC  The government latterly has been more supportive in terms of time and adding assistance in regions, but we are still yet to see any support in terms of ‘hard cash’ that many other countries get. Even a bit of tax relief would be nice!

Big exporters like Ireland and the Netherlands receive great support from their governments. Is the UK government doing enough?

RC The big difference is that the others get assistance with show costs and marketing costs in some regions. That will not happen in the UK under current Treasury rules, although we can get very useful relationship and time support from some government departments.

TJ Dairy lags behind other sectors in terms of specialist support. The restructure and renewal of AHDB presents an opportunity to address this - there is a wealth of export expertise on the meat side and an apparent commitment to spread best practice throughout the sectors.

ES Export is a huge focus for the government. Only two weeks ago I was supported by both the PM and secretary of state for business, both promoting Britain around South East Asia, and both highlighting British dairy. 

JB What we need from government is a renewed commitment to cut red tape and facilitate access to new markets. We need more trade agreements with countries with great potential. But we have yet to put in place a productive system for foreign inspection visits. 

RH We have a good working relationship with Defra, and Dairy UK has led initiatives to bring Defra and exporters together. We have responsibility to make our own export success. 

A drop in demand from China has exposed UK dairy producers - exporters and non-exporters - to huge price volatility in recent months. What lessons do we need to learn from this? 

ES As an industry we might find a way to iron out some of the peaks and troughs but price volatility will remain. 

RH No-one is immune from fundamental changes in supply and demand - let’s not forget global supply has increased while demand from the likes of China has fallen. At OMSCO our response has always been diversity - in terms of both product range and geography. 

JB In the long term, we need a collaborative approach throughout the supply chain to develop a toolbox to handle the impact of price volatility, including looking at how to develop futures markets, and investigating whether some form of margin payment protection such as that available in the US is feasible in Europe.

RC There will be volatility, but we have never seen world markets open up in this way for dairy and farming, not since the creation of the Common Market in the 1970s. World populations will grow and they will need to be fed. 

TJ It’s not so much volatility as a period of sustained low global prices. With the unwinding of European market support measures we need to find ways of better communicating what’s happening downstream of farming, and primary producers need to react accordingly.

MA We need to adjust our thinking and ambitions to cope with volatility, which is here to stay. The lack of stability has not just been caused by China - high production of milk globally and the Russian export ban have also contributed.

What lessons can dairy take from other UK food sectors on how to succeed at exports?

JB The beef & lamb sector in the UK is much better equipped for foreign inspection visits. 

“In export it’s even more important to manage relationships better and articulate the added-value point of difference than even in the UK market”

RC Take a successful exporting brand such as Land Rover. It is all about quality and service, combined with that ‘Britishness’ that is so well received in most regions. They realise that in export it’s even more important to manage relationships better and articulate the added value point of difference than even in the UK market. 

ES We can learn some good lessons from the meat industry. AHDB/Eblex have worked hard to promote British meat. The dairy industry needs to have a more national, joined-up approach.

Who in UK dairy currently does exports the best? Who do you admire? 

RC I like the guys at Omsco, an organic co-operative really doing innovative things in building premium markets in the US for cheese and butter.

ES Lye Cross Farm has focused on export for a number of years and have sold their premium Cheddar on its provenance and quality.

TJ I admire Karen Morgan for taking on the role of agriculture and food counsellor in the UK embassy in Beijing - key to us grabbing a larger share of the £39bn Chinese speciality food market.

What’s the one piece of advice you’d give a UK supplier looking to start exporting dairy products?

JB If you have a great product with a great story behind it, make use of the UKTI.

RC Look at the best part of the range that will suit the added-value market, don’t try a ‘throw everything and see what sticks’ approach. Work with a partner such as Wyke to provide a product that can be added on to a range and go into existing regions and existing customers. Export is very much about collaboration - that’s how to control cost and create a bigger impact.

TJ If other UK dairy businesses are doing well in a country then that’s a great place to start.

MA Be realistic. We are competing against other countries with strong milk supply but fewer domestic consumers. These companies have a track record in exporting from which we can learn. Exporting is as much about partnerships as procurement. We are working with Fonterra on branding and marketing infant formula because they are the experts in foreign markets.

ES Be prepared to invest in the short term in order to get medium and long-term gains. Be prepared to play the long game.

RH Don’t listen to those who say it’s too difficult.