Dr Roberta Re, food and drink investment analyst for the UK’s Department for International Trade (DIT), on supporting foreign companies to enter the UK through market opportunities
When it comes to expansion plans, it’s not surprising to see many businesses looking at the UK as Europe’s point of entry – even after exiting the EU. The reason for this lies in numbers. The UK is the world’s 6th largest economy with approximately 66.8 million people living in the country. Figures from the Food and Drink Federation (FDF) also paint an attractive landscape to tap into, with businesses adding $42.5 billion to the UK economy annually.
Data from the UK’s Department for International Trade (DIT) published in July revealed a 4% increase on inward foreign direct investment (FDI) projects. The US continues to be the number one source of FDI projects in the UK, with UK-based headquarters the number one choice for key strategic investments. Having the lowest Corporation Tax rate in the G20 is yet another feature making the UK an attractive market.
The UK is Europe’s leading country for foodtech investors, and 2019 marked the tipping point for the country to gain a pole position in this space, as British foodtech firms attracted more venture capital funding than any other European country.
A report by Forward Fooding revealed that in 2019 there were more than 46 start-ups solely in the food delivery space with total funding of about $2.05 billion – significantly more than the few that existed the previous decade.
There are several consumer trends in the UK market, but the top three with the most potential to open business opportunities for US foodtech companies in the UK are:
- Naturally healthy
- Plant-based and alternative protein
- Free-from foods
The concept of naturally healthy is a direct reference to functional foods. The message that a food or food ingredient have a natural and intrinsic health benefit remains one of the most compelling for many people.
Functional foods are defined as those that deliver additional and enhanced benefits beyond their basic nutritional value. The global nutraceutical market size was valued at $382.51 billion in 2019 and is likely to reach $755.9 billion by 2027 expected to expand at a CAGR of 8.3% over the forecast period. Favourable outlook towards nutrition is driving demand and is likely to stimulate the growth of dietary supplements.
The emergence of novel foods is another opportunity to tap into. The European Commission defines this new category as food or drink products that had not been consumed to a significant degree by humans in the EU before 15 May 1997, when the first regulation came into force.
Novel foods can be newly developed ingredients, innovative food, food produced using new technologies and production processes, and food that is or has been traditionally eaten outside of the EU.
An example of this is the consumer interest in the benefits of cannabidiol (CBD) products that is constantly growing. The UK CBD market is already worth $410 million.
Plant-based and alternative protein
The UK is one of the markets leading the way in plant-based products, one of the biggest trends in the foodtech industry last year.
The alternative protein market is estimated to grow by 6.8% by 2022 to $5.47 billion, highlighting investment opportunities. In the UK, 45% of consumers believe that plant-based proteins are healthier than animal protein. Making the UK the world’s leading country for vegan product launches – one-in-four new food products enter this category in 2019.
The demand for pea protein is expected to continue growing, and the UK leads the way in pea protein launches. In 2017, for example, there were 121 new pea protein products in the market.
UK company Quorn Foods is a prime example of the buoyant plant-based category. It has been able to increase its mycoprotein bioavailability to the same levels as animal protein, and sales have increased by 20% in two years to 2018, as demand for vegan food stays strong. As mycoprotein production sales soar, Quorn is planning to build the world’s biggest meat alternative production factory in North Yorkshire.
Restaurants and cafes now offer vegan options. Veggie Pret (green) an entire veggie alternative to the original Pret, provides a vegan versions of your favourite classic Pret recipes, using only plant-based ingredients. Swap Tuna Mayo baguette for a Chuna Mayo (chickpeas), or how about changing up your BLT for a VLT. Increased accessibility demonstrates the opportunities to appeal to a much broader consumer base, not a trend but the norm to be able to find a vegan option. Food-to-go giants including, KFC and McDonald’s have all launched new plant-based options.
Insect-based protein and cell-based meat are two leading categories in the alternative protein space. The edible insects market is expected to grow at a CAGR of 26.5% from 2020 to 2027 to reach $4.63 billion by 2027.
Insect-based snacks are a niche market in the UK, and start-ups such as Eat Grub and GathrFoods have taken advantage of this growing opportunity. In a recent YouGov poll of 2,093 adults, nearly two in five (37%) of respondents said they thought the consumption of insects would increase in the next 10 years, rising to nearly half (48%) among the 18-24-year-old age group.
Cell-based meat addresses three major issues – human health, the environment and animal welfare, all of which are important for consumers, and the UK is among the leading players in the development of meat in the lab.
The University of Bath is paving the way in the UK’s efforts to develop cultured meat, which could be on supermarket shelves within five years.
Free-from foods: The normalisation of avoidance
Market data is also telling us that a quarter of UK households include at least one member with a food allergy or intolerance. Consequently, the demand for free-from food has become a choice for many consumers, not just a need.
Sales trends in retail show that 22% of consumers in the UK are buying gluten-free products, followed by a 19% shopping dairy substitutes while wheat-free is the option of choice for 16% of UK consumers, as well as for lactose-free.
DIT can help your US business expand into the UK with step-by-step support and by connecting you to valuable opportunities. The UK has a sophisticated research and innovation landscape, which the government supports by increasing investment in R&D.
The UK Government has set an ambition for the country to become the most innovative nation in the world and increase its total R&D expenditure to 2.4% of GDP by 2027. And the 2020 Budget set out plans to increase public R&D investment to $30 billion a year by 2024-25.
Specifically,the Government’s UK Research and Innovation offers businesses a range of funding vehicles and opportunities to connect with the UK industry.
Companies can apply for the Innovate UK grants and innovation loans, R&D tax relief, and Patent Box – a scheme designed to encourage companies to keep and commercialise intellectual property in the UK.
The Knowledge Transfer Network and the Knowledge Transfer Partnerships connect businesses with the industry.
Companies can also utilise world-class research infrastructure in the UK, including research institutions and facilities, the Catapult centres, and live funding opportunities and updates from the Research Councils.
Note: Figures expressed in £ (BPS) in the original report were converted into $ (USD) using google convertor on 03.02.21
About the author
Dr Roberta Re has more than 20 years of experience across academia, industry and government. In her role as director of Cambridge Food Science, she provides expert support and knowledge to the global food and beverage sector with market relevant practical solutions throughout a product’s lifecycle, solving scientific, nutrition and regulatory challenges. Re brings these skills to her role as food and drink investment specialist at the UL’s Department for International Trade.
If you are a US company and interested in expanding into the UK, please contact Chika McGary, an officer at the British Consulate General in New York at [email protected].
Date published: 9 February 2021