The weakness of the pound sterling, and the increase in the costs of imported tuna, has generated a change in products and packaging (Photo: FIS)
Brexit can significantly increase tuna prices
Thursday, August 22, 2019, 06:00 (GMT + 9)
The countdown of the UK departure from the EU will actually begin - the deadline is 11 noon (London time) on October 31, 2019 - and the country is worried that it will face the Brexit without any agreement. Enterprises and consumers are stocking basic goods, such as canned tuna, for fear of lack of food. Moreover, the free movement of goods will be significantly affected when it takes more time for sea and port inspections for imported products into the EU, including foreign tuna suppliers.
The devaluation of the pound
The British pound is affected by this unstable situation, currently the currency is at its lowest level in the past 2 years with GBP / EUR of 1.08 and GBP / USD at 1.21. This is a big boost to British pockets because this shows the value of the pound against the dollar by 18.4% and against the EUR by 15.5% since June 2016 when He voted out of the EU. This has caused importers to spend more money to buy canned tuna.
Anticipating that the pound will fall further as the British time to move closer to the EU raises fears of consumers and buyers. According to a Reuter poll, the value of 1 pound will drop to about 1.14 - 1.20 USD and 0.95 - 0.98 EUR. This will push the pound to the same outlook as December 2008, the time of the global financial crisis, the EUR / GBP exchange rate at the lowest level of all time is 0.9714.
Moreover, Bloomberg said the pound may reach $ 1.10 in October, the rate that has never been seen in 34 years. Bloomberg also said that 30% of the possibility that Brexit will not agree will happen, which will cause the pound to depreciate further.
British people spend more money to buy canned tuna
Reducing the value of the pound, British buyers need to spend more money to buy goods. This is especially true for importing tuna because commercial activities are being done in USD or EUR. Therefore, a ton of tuna will have the highest price with this exchange rate.
UK supermarket tuna shelf ( Photo: Stockfile)
The UK does not own any tuna processing and importing facilities, with the majority of canned tuna shipments imported from outside the EU - mainly from Seychelles, Ghana, Mauritius, Ecuador and the Philippines.
Shipments from Seychelles, Ghana and Mauritius are sold in EUR while other countries sell products in USD to the UK. The average CFR price of canned tuna in 2018 is EUR 4,420 / ton, while Ghana has the highest CFR price outside the EU at EUR 4,750 / ton (equivalent to USD 5,329 / ton). With the devaluation of the pound, it is likely that canned tuna will cost more.
For example, if the price per ton increases by 10%, the price will be at 5,225 EUR / ton, and the pound will decrease by 6%, this will mean that the buyer will pay 16% more for canned tuna products. Most fresh and frozen tuna, mostly imported from Sri Lanka and the Maldives, are often paid by US NK buyers.
Moreover, there is a problem of 24% tax on tuna products imported from exporting countries when the UK leaves the EU.
The two brands John West and Princes, with the largest market share in the UK, have foreign companies that will be affected by the exchange rate. Thai Union (TU), John West's parent company owns large factories in Ghana and Seychelles, while Princes Tuna Mauritius Ltd. mainly supplied to Princes, the second largest brand in the UK.
Shrink the product and the cost of a can of tuna
Some brands of canned tuna and even private brands have reacted to rising prices as the pound weakens. So how can they face this problem? Companies are choosing to shrink, packaged retail food products have reduced in size and weight while corresponding retail prices have not decreased.
According to the statistics of the UK National Statistics Office, 2,529 products are being sold in supermarkets that have been reduced in size or weight for five years from 2012 - 2017. French European Business Administration (INSEAD) indicates consumers are more sensitive to price changes than weight changes.
Because the weakening of sterling makes business difficult, in order to maintain its market share and prevent consumers from switching to other brands or losing customers to companies that are lowering prices, famous brands such as John West and Princes decided to reduce their ranges of canned products and offer new products in plastic containers to avoid these problems.
Source: Nguyen Ha / VASEP