Stuart McCallum

Written by: Stuart McCallum

Stuart McCallum

Partner, Head of Food and Drink

What’s on the menu for food and drink firms in 2021?

  • February 2021
  • 4 minutes

The strong link between food and drink and hospitality and tourism was undoubtedly shaken in 2020. But the core growth fundamentals in place pre-pandemic will still be there once normal service resumes. Scotland and the wider UK has positioned these sectors as growth catalysts, and the quality of products and experiences will stand them in good stead for 2021. 

With Brexit now agreed, the implications need to be considered, including rules of origin. Red tape and disruptions at borders will undoubtedly increase, so companies need to understand how to navigate new challenges . Export will remain open and ripe for further development, new international markets will be key, and maintaining existing markets, such as the EU, will be crucial.
Here’s how I see the food and drink sector faring in 2021. 

New markets

In 2020, much of the food and drink sector pivoted into different markets and accelerated innovation. High street retailers were the market to be in, and that’s likely to continue. Pre-pandemic, successful companies had a balanced portfolio with sales:

  • internationally;
  • into UK retail; and
  • into UK food services and hospitality sectors.

That remains an ideal scenario, and we can only hope hospitality bounces back later this year and demand starts to rebalance towards that portfolio market approach. 

Online shopping for food and drink products increased significantly in 2020 as people stayed at home. For many, supporting local brands has been important and the direct-to-consumer model allows access to favourite brands and new discoveries. Consumer demand for premium products increased and brought with it a new wave of home dining experiences.

Lockdown continues to limit spending on other retail categories, which has boosted the UK’s premium food and drink market. This demand is likely to continue beyond the pandemic as we continue to work more flexibly. 

Innovation key, but support required 

Everyday food and drink needs will remain front of mind for the consumer with supermarkets  providing a competitive solution for that. But as economic decline increasingly impacts consumers, demand for value will remain strong. Trading up and trying new innovative products will be important for a segment of UK consumers. Branding, sustainability and innovation in the manufacturing process are now key to consumers and will ensure repeat custom. 

The sector is crying out for sustained initiatives to guide businesses through reopening and beyond in 2021. Many have no prospects of opening in the short term, and the Government must come up with new forms of support and extend useful initiatives such as:

  • Eat out to help out;
  • the reduced VAT rate;
  • business rate holidays; and
  • support around paying back CBILs.

The importance of experience

Post-pandemic, consumers will look for experiences that hospitality and tourism across the UK can supply, and quality food and drink will only enhance the overall experience.

The staycation market will be the main focus in the UK for now, but we can only hope that international tourism starts to play a part in recovery later in 2021. Tourism helps to create a virtuous circle where visitor experiences of local food or drink create an international ‘brand ambassador’, who continues to buy British brands when they return home.

December 2020 sales in hospitality were down 80 per cent on the previous year. However, throughout 2020 the food and drink industry maintained supply, innovated in the market, or pivoted to new ones. I fully expect this entrepreneurial flair to continue at an even faster pace in 2021.

Hospitality is hanging on. I hope all will come through in 2021 and reap a consumer harvest as spending and socialising pick up. It has been sorely missed and, post-pandemic, I believe consumers will vote with their feet when it’s safe to do so.

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