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Supermarkets in the UK that source produce from UK-based suppliers will be more resilient in the aftermath of the UK’s European Union referendum result, a new report from Kantar Retail has found.
Retailers who have built good relationships with UK farmers are expected to perform better and be less adversely affected in the immediate aftermath of Brexit than those who source from suppliers based in other EU nations.
Supermarkets are looking to source more food from local suppliers as importing fresh produce from the EU will now be impacted by weaker sterling/euro exchange rates, driving up the price of fresh produce.
It is believed that discount chains Aldi and Lidl are better placed to absorb the increase in food prices and inflation as they have leaner supply chains, a more limited range and greater economies of scale. While, in the case of Tesco, around 50% of its butter and cheese products are currently sourced from milk suppliers in EU markets.
This new report raises hopes that British farmers and local food suppliers will benefit from result, triggering an increase in demand for British produce and, with it, market growth.
However, the devalued pound and growing fears of the UK economy entering a recession means suppliers will need to “double-down on unlocking value from the supply chain” and adapt to changes in consumer behaviour, as shoppers cut back on spending in the face of economic uncertainty.