Eversheds’ Annual Food and Drink Conference – key highlights


16 December 2014
Keynote speaker – Challenges in the Food & Drink Industry 

Annus horribilis; the year of the chicken

On Tuesday 2 December, Eversheds hosted its annual Food and Drink conference, which opened with a keynote speech by the hugely affable Adam Leyland, editor of The Grocer. A journalist of over 20 years, Adam is a true authority on issues ranging from food pricing to health and obesity, from shopper behaviour to new product development, as well as the power and reach of supermarkets.

So as the conference opened to a full room of leading consumer businesses, the question on everybody’s lips was just what did Adam make of 2014?

It was, declared Adam, an annus horribilis for the grocer market, with businesses caught up in financial, moral and in some cases criminal disputes. While there were also clear winners, claimed Adam, it was a case of ‘going to hell in a handbasket’.

Amidst increasing pressure on the UK’s largest supermarkets, the UK has seen clear challenges to the market in the rise of the discounter. The growth of German discount chains such as Aldi and Lidl has revolutionised the grocery market and offered what Adam describes as the democratisation of innovation in the food sector. Discounters have gone into growth markets and broadened their ranges, offering some of the most competitive prices, whilst leaving some of the UK’s major players scratching their heads.

If 2013 was the year of the horse, 2014 was the year of the chicken, claimed Adam.

First, because campylobacter dominated the headlines. With increasingly complex food chains, the task of mitigating risk has never been more complex. Conversely, the work of the FSA in naming and shaming retailers has unnecessarily stoked consumer fears and failed to provide industry with practical guidance on how to combat the issue.

At the same time, said Adam, the chickens have come home to roost for many of the major players, as they have been overtaken by a ‘flags on a map’ mentality; with the view that if you don’t open a store in every postcode you are going to be left behind. However, claims Adam, what supermarkets really need to be doing is making clear strides in differentiating themselves from their competitors.

As for what we might see in 2015; Adam predicts that the discounters will continue to grow. It is also likely to be a busy year for Trading Standards as the introduction of complex and confusing new EU regulations on labelling come into force, just 12 days before Christmas. This predicts Adam, will compound industry pressures, placing both a strain on suppliers as well as sole traders not set up to apply complex letter of the law.

 

Competition and Antitrust – recent developments

Over the last two years, competition authorities throughout Europe have placed an ever-increasing focus on the food and drink sector. Elizabeth Coleman, Senior Associate, gave a fascinating insight into competition and antitrust within the sector and provided an interesting update on recent developments.

Competition authorities recognise that as food accounts for approximately 14% of the average household’s expenditure, it is a key area for consumers.  However, the significance of this sector is not limited to its impact on end-customers. EU retail trade in food-related products accounts for approximately €1.05 trillion according to recent figures.

While this is a sector that has been under close scrutiny for some time, companies at different levels of the supply chain continue to raise concerns. As a result, not only are regulators using their competition enforcement powers to tackle anti-competitive behaviour in this sector, but they are also addressing broader issues such as unfair trading practices and launching key studies into innovation, choice and buyer power.

There are an array of food and drink cases being dealt with by competition authorities that are wide and varied; and over the last two years we have seen everything from traditional “smoke-filled room” cartels, anti-competitive information exchange, abuse of dominance, buyer power and resale price maintenance.

Having an effective compliance programme is key to minimising the increased competition law risks.

For further information, please contact: 

Elizabeth Coleman
Senior Associate

Tel: +44 20 7919 4780
elizabethcoleman@eversheds.com

 

Employment – recent updates

The food and drink industry is a large employer of the UK workforce and is impacted by a number of employment issues and changes to employment law. Kate Dodd, Senior Associate, discussed the key issues currently impacting the industry; Holiday Pay, Shared Parental Leave and Equal Pay.

Kate began her insightful presentation with holiday pay; the calculation of which is changing, as the UK’s law moves ever closer to the EU’s position that for a week’s holiday, an employee should receive a ‘normal week’s pay’.

The eagerly awaited judgment from the Employment Appeals Tribunal was handed down recently. Known as the ‘Bear case’, it has established that payments for compulsory overtime should have been taken into account when calculating an employee’s holiday pay. At first, this finding seems as if it will expose employers to a large number of Tribunal claims and cost them more when paying holiday pay. However, what needs to be paid in the future, and what can be claimed as a result of past underpayments, is limited at the moment. Commission payments should also have been taken into account when calculating holiday pay. However, there is still a great deal of uncertainty surrounding what commission, when thought is given to when and why it was paid should be taken into account.

Kate also discussed Shared Parental Leave, provisions of which came into force on 1 December 2014. The provisions have already become renowned for their complexity, especially in terms of booking leave. Under the new regime Shared Parental Leave allows parents to share 50 weeks of what would have been Statutory Maternity Leave and 37 weeks of what would have been Statutory Maternity Pay. Parents are not obliged to take Shared Parental Leave, however the default position will be that the 50 weeks of maternity leave (39 weeks paid), following the two week period of compulsory maternity leave, will remain in place.  If eligible to take Shared Parental Leave, a mother must opt out of (or “curtail”) her maternity leave, which is set out in the new statutory provisions along with how parents book their Shared Parental Leave.

Equal Pay has also been an employment issue hitting the headlines recently. “Pay Justice”, brought against one of the UK’s supermarkets, claims that women in stores have not been receiving equal pay compared to men working in distribution centres. 19,000 current and ex-employees are said to be contemplating action and the threat seems likely to spread.

Kate concluded that there are a number of actions food and drink businesses should take with regards to changes in employment law, including conducting an audit, and collating evidence of relevant contractual terms with regards to holiday pay; and to review current family HR policies and draft a policy for Shared Parental Leave while cross-referencing BIS Employers’ Technical Guide and Acas Guidance.

For more information please contact:

Kate Dodd
Principal Associate

Tel: +44 161 831 8102

katedodd@eversheds.com

 

Food fraud – A lively panel discussion

Since the horsemeat scandal in 2012, consumers are demanding greater transparency of food sourcing and production. Moderated by Eversheds’ Head of Food and Drink, Parmjit Singh, our expert panel consisting of Adam Leyland, Barbara Gallani, Director of Food Safety and Science at the Food and Drink Federation, and David Young, Head of Eversheds’ Health and Safety Group,they debated the issues surrounding food fraud, food crime and recommendations from the Elliott report.

The panel’s initial reaction to the scandal when the story broke was mixed, from the news not being a surprise to highlighting much needed work at factory levels. Interestingly, the view from the panel was that the UK food and drink industry isn’t necessarily unduly ‘light touch’; the scandal was felt across multiple jurisdictions including Holland, a country seen as a model for food standards.

The panel agreed that food crime is just as important as food safety, and that the two should be addressed hand in hand. Fortunately, no harm came to consumers as a result of horsegate, but the industry suffered huge negative publicity in the wake of the scandal. Allaying consumer concerns will therefore be no mean feat.

Professor Elliott’s eight recommendations should be taken as a package in the campaign against food crime, but who should be leading the campaign – the industry or the FSA? The panel suggested responsibility lies with both and as well as additional bodies such as the national crime unit. A more collaborative approach amongst these parties should therefore be implemented.

The success for the FSA will not just be the number of prosecutions but actually preventing incidents in the first instance. Therein lies the challenge. A cultural shift is needed throughout the industry in order to positively promote honesty and vulnerability, in an era where the mainstream media has criticised those involved in horsegate.

The panel concluded that more legislation is not the answer, but more effective means should be considered such as:

  • self policing by the industry (for example, retailers and manufacturers should ensure they have visibility and control of their supply chains);
  • consumers to take a more active role in using the information available to make informed decisions;
  • information to be collated from the industry; and
  • leadership and resources to be adequately allocated in the fight against food fraud.

Coverage of our lively panel discussion can be found here.

For further information, please contact: 

David Young
Partner

Tel: +44 121 232 1148
davidyoung@eversheds.com

 

Demonstrating the value of in-house legal teams

General Counsel need to react to many different legal demands on a daily basis and at a time when many organisations are demanding more from their in-house legal function, the need to understand the demands placed on in-house teams is vital. Graham Richard, Head of Eversheds’ Consulting, presented a fascinating talk on how in-house teams can demonstrate their value to the wider business.

Results from Eversheds’ study, The Client’s Revolution, show that 75% of GCs believe power has moved from firms to clients and 73% of In-house Counsel have changed or reduced the number of external legal advisors.

Key components of a successful legal team include: a clear strategy, key metrics and technology.

Graham advised health checks are a useful tool to ensure strategies are clearly defined and communicated; that there is buy-in from the teams and wider business, including senior management; the team is aligned to the wider business; and strategies are regularly reviewed and progress measured.

Compliance scorecards to review subjects from anti-bribery, product compliance to employment and investigations can also be effective measures when used in conjunction with other metrics, such as spend by month and by matter, external vs. internal spend, or the number of law firms being used.

Graham concluded that General Counsel are in control. There is currently a time of great change in the legal sector and it is a time for teams to seize the opportunities and make the most of their position by focusing on key components and measures to demonstrate value.

For further information, please contact: 

Graham Richardson
Partner

Tel:+44 292 047 7392
grahamrichardson@eversheds.com

 

Emerging markets – a focus on Africa  

Economic growth in Africa remains strong with growth of 5% in 2013. At least a third of countries in the region are growing at 6% and more, and African countries are now routinely among the fastest-growing. Consumer and agriculture industries alone have an estimated revenue of $1.8 trillion by 2020.

Chris Halliday, Partner at Eversheds, highlighted the opportunities in Africa available to food and drink companies and commented on the challenges businesses may face.

Poverty is still prevalent in Africa, however the growth of the middle class offers food and drink businesses scope to expand. Agriculture and manufacturing are key sectors for the country so food dominates, but there is also potential for movement up the food curve to FMCG; informal outlets are beginning to be replaced by supermarkets and shopping centres are providing additional opportunities.

Businesses looking to expand in to Africa should consider the multiple legal systems within the country as different regions are governed by different principles; as well as corruption due to the different forms of anti-corruption legal framework initiatives such as regional, international and local initiatives. They will also need to review existing host state investment legislation and make use of regional investment protection mechanisms such as UEMOA or CEMAC or other regional investment treaties in order to protect their investments.

Protecting IP rights is also key and organisations should understand rules of the regional organisations; African Intellectual Property Organization (AIPO) and African Regional Intellectual Property Organization (ARIPO).

Litigation ought to be avoided as there are variable national interpretations. Instead arbitration is preferred for commercial and confidential settlements and the development of arbitration is becoming a trend.

There are relatively high tax rates and unpredictable implementation within Africa. Businesses must think about financials such as global tax structure and existing tax treaties should be checked when structuring investments.

Chris concluded that Africa is a region on everyone’s agenda. As outlined there are a number of considerations regarding this emerging market and it’s therefore highly important for organisations to seek legal advise when entering Africa.

For further information, please contact: 

Chris Halliday
Partner

Tel: +44 207 919 4814
chrishalliday@eversheds.com

 

The future of technology – 3D manufacturing  

3D printing is heralded as the catalyst for the next industrial revolution; with the global 3D manufacturing market projected to be worth €4.5 billion in 2018 and increase to €7.7 billion by 2023. 3D manufacturing is therefore going to have a significant impact on food and drink businesses. Simon Jones, Partner at Eversheds, outlined the 3D manufacturing process, what it means for the food and drink industry and the challenges businesses will face.

Put simply, 3D printing is a process of making three dimensional solid objects from a digital file. A vast range of materials such as plastic, composite materials and even food can be used in the production of objects.

Through 3D printing, products will be more easily designed in the shape needed without waste, and a larger variety of materials can be used in the process. Additionally, 3D printing is likely to create significant opportunities for food manufacturing companies to develop completely new product ranges which can be sold to consumers.

With this new process comes challenges. Businesses should consider IP rights as they will become increasingly important in this digital manufacturing process; many of the shapes will be capable of registered design or trade mark protection. Recipes and surface decorations will also need to be considered for protection, and we could see new markets develop.

As the UK is leading the way with research, 3D printing is likely to have a revolutionary impact on the traditional manufacturing process. UK food and drink businesses therefore need to ensure they give careful consideration to the impact of this technical development, to maximise the opportunities it will present and equally, to ensure they address its challenges.

For further information, please contact: 

Simon Jones
Partner

Tel: +44 113 200 4049
simonjones@eversheds.com

Parmjit Singh
Parmjit Singh, Partner
e: ParmjitSingh@eversheds.com
t: +44 121 232 1410
m: +44 776 895 4246