'Persuading people back into high value products is a huge challenge'

Food promotion is a high stakes and expensive game. It has however never been more important, as the industry seeks to recover from consumer actions in response to food price inflation at levels not seen for decades.

What became known as trading down became the norm as consumers struggled to keep some control over their weekly spending at the supermarket. Out went premium products and brands; in came value and own label lines. This trend went beyond that. Out went expensive products and in came cheaper alternatives.

This hit sales of high value red meat in particular, which lost out to poultry. Other premium products that suffered included organics, where a slow but steady growth in sales dipped sharply.

This changed the food market over a matter of months. One of the victims was profitability. The impact was immediate, with processor and retailer margins coming under pressure, which inevitably translated into unfair pressure on farm gate prices.

This reflects an old adage of the motor industry that big profits come from big cars. In food, profits come from adding value to create premium products that have shelf and taste appeal and bigger margins. Food price inflation delivered the opposite impact and changing consumer habits back is a major challenge.

The incentive to spend less is still there. Food price inflation may have eased from its peak, but it and overall inflation are still creating a cost of living crisis. People remain squeezed between rising prices and largely static incomes.

They have also gotten used to seeking out value and moving away from decades when food was so cheap in real terms that waste was not an issue. Persuading people back into high value products is a huge challenge. It means overcoming a perception that what they are now buying is equally wholesome tasty and a lot cheaper.

Until that happens pressure on processor and retailer margins will continue and farmers will remain the losers at the end of the food chain.

It is against this background that the EU has announced its food promotion budget for 2024 and the amount of cash set to be splashed is impressive.

Brussels is planning to spend £160 million, split just about 5/50 between home markets in Europe and exports. The export push is being justified by the strength of EU exports, which are successful and growing, helping to maintain the position of the European bloc as the world's biggest trader in food and agricultural products.

At home, there is pressure to help rebuild the market and profits after the impact of Covid, followed by food price inflation and the changes both brought. The European Commission is also going for a new streamlined approach, with a short window for applications and a speedy tick box approval process to get money flowing into projects by the middle of the year.

Predictably there are the usual green drivers in place for food promotion campaigns. There will be cash to promote organic food and the EU organic logo.

This confirms that Brussels is continuing to try to push water up a hill to meet its unrealistic target of 30% of land being organic by 2030. There will also be a push towards what is deemed more healthy products, although it is hard to see how this fits in with rebalancing the market towards often indulgent premium products and wine, both hit hard by inflation.

Successful projects will be 80% funded by Brussels and with the application window open from January to May many groups will be spending their Christmas break working on applications.

Export markets to be targeted include those where the EU is already successful, including China, the United States, Japan, and ironically, despite Brexit, the UK which remains its biggest and most successful export market. Underpinning these campaigns will be a wider corporate identity, based around culinary heritage in Europe and individual member states.

In the past the EU stressed a simple message to overseas consumers - 'Enjoy...it's from Europe'. This mix of a European and national identities worked well to grow export markets and what Brussels wants now is more of the same.

Sadly the UK faces the same challenges to rebuild food markets and margins, but the government does not appear to recognise the economic potential of food, even if it had cash to splash from an economy failing to deliver any growth.