By Andy Richardson,

Chair,

Food & Drink Wales Industry Board

 

It’s been a privilege to Chair the Food & Drink Wales Industry Board since 2015 and it’s given me a unique insight into our inspiring food and drink industry.

Over the coming months I will be turning my attention to a range of issues currently facing the industry in a series of articles exclusively for Business News Wales.

Firstly, a little bit about the role of the Food & Drink Wales Industry Board. The role of the board is to provide an independent voice, insight and oversight to Welsh Government policy. By acting as a two-way strategic conduit between government and the industry, we provide strategic advice on key priorities which are intended to realise the full potential of the industry in Wales.

As most readers are probably aware the food and drink industry has recently faced significant supply chain challenges, and the signs are that this is unlikely to improve in the short to medium term. If dealing with the effects of Brexit and the COVID-19 pandemic were not enough, then the recent developments in Ukraine have conspired to create a perfect storm of disruption. In context, we should never forget that the supply chain disruption that is affecting our industry bears into insignificance when you consider the human cost the war is having on our friends in Ukraine.

My feeling is that Brexit, Covid and the crisis in Ukraine will have a long-term effect on the business models of our food and drink companies as they increasingly move away from the ‘just-in-time’ supply chain system, whereby goods and raw materials are moved within very tight deadlines, to a far more structured and resilient approach.

This isn’t necessarily a negative development in the longer term and could provide plenty of new opportunities, particularly for SMEs in Wales.

If there is one thing that recent global events have shown it is that longer, more globalised, supply chains are far more susceptible to disruption due to factors that are out of our control. Consequently, we could be witnessing the start of a shift to more localised supply chains or to supply chains that focus on key trusted international partners, which on the whole, are far less risky and logistically easier to manage.

Looking at specific areas of concern, rising transport costs will continue to be a huge challenge. Also, with the UK phasing out Russian energy imports this will have a knock on effect on a whole range of sectors, including the cost and availability of fertiliser. Underlining the vulnerability of global supply chains the head of one of the largest fertiliser companies in the world, Yara International, recently described the war in Ukraine as “a catastrophe on top of a catastrophe.”

To name but a few, other sectors likely to be impacted by the situation in Ukraine, and subsequent sanctions on Russia, include the availability of white fish affecting small fish processors, along with supplies of wheat and sunflower oil.

While Brexit has undoubtedly had an impact on supply chains, we are now beginning to see the development of a new world order where the influence of the EU – while obviously remaining extremely important – may diminish over time as a proportion of our export business, as new free trade agreements are secured with trade partners from across the globe.

New opportunities lie ahead and our success in these new markets will be driven by identifying those where we have a competitive advantage, while understanding and assuming long-term defensive positions to help protect certain industries in the future.

Crucially, many of these new free trade agreements will have a specific focus on innovation, sustainability and digital trade and it is these areas where I believe we need to focus not just in Wales, but for the rest of the UK. These are areas where the Welsh Government and the industry have worked extremely hard in recent years and are areas of strength that we can build on to our advantage.

In conclusion, the crisis in Ukraine has delivered a sobering reminder of the need for a better understanding of how our supply chains work. Geo-political issues have changed the landscape forever with the result being that we may now be moving to a far more localised and structured approach, or one that focuses on trusted international trading partners that minimises exposure to external influences. While there will undoubtedly be some short term pain and disruption, I’m confident there will also be plenty of opportunities ahead for Welsh companies to capitalise on the changing landscape.

My message is clear – our route to success will be to focus on those markets where we have competitive advantage, leverage our ability to innovate, focus on our sustainability credentials and adopt world leading digital trade.