Despite the best attempts by major British supermarkets to offer cheap food to consumers, the sustained period of deflation in UK food prices is set to come to an end in 2017.

Making the prediction at the NI Food and Drink Association (NIFDA) annual ‘‘appetite for growth’’ conference held in Craigavon last week, Dr Clive Black from investment bank, Shore Capital Markets said that the rising price of commodities such as oil, sugar, milk and pigs would have an impact. Also bringing inflationary pressure is the weakness of sterling against the US dollar and the euro since the Brexit vote in June.

Despite that, the UK retail market remains extremely competitive. Black highlighted how the market changed in 2010 as a result of the last recession which proved to be an important opportunity for the discounters such as Lidl and Aldi. They put price up the agenda, and have grown ever since to the detriment of the likes of Tesco and Asda.

However, Black now expects that growth to start to slow. Given recent currency movements, and their reliance on EU imports, their offering is less price-competitive than before. “They will continue to gain share, but life will be more difficult,” he said.

The other issue for the discounters is the fight back from a number of other major supermarkets. Marks and Spencer is performing strongly, as is the co-op, while the future looks brighter for Morrisons, suggested Black.

Meanwhile, Britain’s largest retailer, Tesco, is starting to see sales growth for the first time in a number of years, having simplified their offering to consumers and cut prices. This could also provide a big challenge to Sainsbury’s said Black.

However, his most negative comments were for Asda, which he said is now in a real dilemma. “Asda is generally cheaper than Morrisons, Tesco and Sainsbury’s, but its stores are boring, their staff unmotivated and their shelves bland,” was his blunt assessment. In the longer term, he expects UK food demand to continue to increase, mainly as a result of UK population growth.

The provenance and safety of food will continue to be important, and in that regard, NI has a fantastic story to tell said Black.

The untold truth around Brexit

Preliminary results of a survey of NIFDA members by tax consultancy firm Deloitte have indicated that future access to the EU market post-Brexit is the biggest issue for the agri-food sector here.

Also high up the local agenda for business is future support to farmers, a soft border to the Republic of Ireland, access to markets and the formation of a new marketing body for NI. On the issue of access to migrant labour, some companies are more exposed than others. On average, 46% of full-time employees are not from the UK, but for some this increases to 60%, while in the meat industry, two thirds of operatives are from outside the UK. It was a point also picked up by Clive Black in his presentation, who maintained that there was one untold truth from the pre-Brexit debate – that many who are currently out of work cannot replace the jobs done by foreign workers as they are “lazy, don’t turn up on time and are simply unemployable”.

On wider issues around Brexit, he expects negotiations on the UK exit from the EU to be difficult, but for businesses that are UK-focused, life will go on, he said.

NIFDA members will have the opportunity to put their Brexit concerns direct to government, with Defra Farm Minister George Eustice due to speak at their annual dinner on 18 October.

Marketing key to growth targets

Putting down a challenge to local agri-food businesses, Dr Geoff Simmons from Queen’s Management School suggested that gathering and acting on market intelligence will be crucial to meeting future growth targets.

“Within the NI agri-food industry, the engagement with market intelligence is very light,” suggested Simmons.

From 2008 to 2011, he was involved in a project which sought to provide Tesco Clubcard data to NI agri-food businesses. That data is analysed by Dunnhumby, a data mining firm now wholly owned by Tesco.

A new £500,000 project is now underway in NI, mainly funded by Invest NI and with partners including Tesco, DAERA, Queen’s Management School and the University of East Anglia.

The project is in two parts, the first being to provide one-to-one engagement with local companies on the marketing information available on shopping habits. The second part of the project will focus on supplying Dunnhumby reports on Tesco data.