Yoghurt – the opportunity for import displacement

Published 3 August 17

We don’t know what trade barriers might look like in a post-Brexit environment. However, if the WTO tariffs were applied, the rates would vary significantly depending on fat level and flavouring. Currently the largest category for both UK imports (36%) and exports (38%) would see a combined tariff of 8.3% of the value of goods plus a fixed amount of €124/tonne*. 

The UK has had a trade deficit in yoghurt for a number of years, and it reached 126k tonnes in 2016. In other words, we imported 126k tonnes more yoghurt than was exported. France accounted for around 43% of imports (62k tonnes), with Germany (41k tonnes), Ireland and Greece (both around 15k tonnes) being the next largest suppliers.

03.08.17 yoghurt 1

With such a large trade deficit, and the risk of trade barriers post Brexit, there could be an opportunity for the UK to displace imports with home-made alternatives. According to Kantar Worldpanel, UK retail sales of yoghurt over the last 12 months (52 w/e 16 July 2017) were 616k tonnes. Around two thirds of those sales were branded products, a number of which include imported brands such as Activia and Onken. To replace a net trade deficit of 126k tonnes of yoghurt, the UK would need to find 130-150m litres of milk, depending on yoghurt type. The UK would also need significant investment in processing capacity, and a plan for brand development to offer an alternative to the current brand portfolios.

In price terms, displacement might not be cost effective. In 2016 the average price of imported yoghurt was £1,224 per tonne, whereas exports averaged £2,144 per tonne.

03.08.17 yoghurt 2

It is also worth noting that the majority of yoghurt sales in the UK are for flavoured products, sometimes with a need to import the flavouring. The high level of brands, the need for significant processing investment and the challenge of importing some base ingredients, means displacement of imports for yoghurt may be trickier than it appears for cheddar.

As mentioned in the recent article looking at cheddar, there is a range of scenarios that could impact UK agriculture, and with Brexit negotiations just starting, it is still too early to know what deal will be agreed. If WTO or similar tariffs are applied to both UK yoghurt imports and exports, one thing for certain is that the trade balance will change. Regardless of the Brexit trade deal, the key remains cost-effectiveness across the supply chain in order to compete for whatever opportunities arise.

AHDB has published a number of Horizon reports that are available for download. Later this year, AHDB will be exploring in detail the trade prospects for dairy and modelling the impact of different Brexit scenarios on the sector.

 

* WTO tariff for trade code 0403 10 91 – Yoghurt flavoured or containing added fruit, nuts or cocoa, not in powder form and with a milk fat content not exceeding 3%.