From extreme weather rocking supply chains to rollercoaster economics and plenty of geopolitical turbulence, the last 12 months have held myriad challenges for markets, makers and consumers alike.
So, what’s on the horizon heading into 2025?
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The bad news is that commentators forecast Donald Trump may well go through with threats to impose new baseline tariffs on foreign imports into the US when he is sworn in as President in January.
The good news though is that, though it could be damaging for EMEA food and drink, it wouldn’t be disastrous, say experts.
“The evolving US trade deal discussions are poised to generate significant attention, particularly with the potential imposition of 20% tariffs on imports, as suggested by Donald Trump,” says Peter Hatfield, director at commercial, supply chain and operations consultancy 4C Associates. But “while this may cause uncertainty for trade between the UK, Europe, and the US, its material impact on the food and drinks sector is likely to be limited”.
This environment may also open new opportunities, particularly as the US focuses on levelling the playing field with China
Peter Hatfield, director at commercial, supply chain and operations consultancy 4C Associates
That’s because, though agri-food exports to the US from Europe have increased steadily since 2013, reaching €27bn in 2023, according to the European Commission, they still make up only 12% of total agri-food exports from Europe (at €228.6 billion) with the UK market worth nearly double that (22%, €51.3 billion).
In addition, the bulk of food and drink exports to the US are higher-margin products, such as meat, alcohol and confectionery that can more readily absorb some cost increases.
That’s also the case for the UK market, points out George Hyde, international trade policy manager at the Food and Drink Federation (FDF). “For example, last year we sent £2.4 billion in food exports to the US, and over two-thirds of that was whiskey, salmon and gin, so the impact would be concentrated in very small sub-sectors of our sector.”
Trump’s trade tariffs likely to be enforced
In fact, with Trump saving the most punitive tariffs for China, Canada and Mexico, “this environment may also open new opportunities, particularly as the US focuses on levelling the playing field with China”, says Hatfield. “This strategy might pressure UK and European markets to align with US standards or policies, creating potential gaps in supply chains that UK and European businesses could exploit to enhance trade.”
Unfortunately, that doesn’t mean trade for the EMEA region isn’t facing its fair share of challenges heading into 2025, points out Hyde.
Perhaps the biggest pain point set to remain is EU-UK trade, with the Border Target Operating Model (BTOM) that first came into force via a phased rollout from August 2023 creating added friction and cost for manufacturers exporting into the UK from Europe.
The framework, which sets out safety and security controls, saw new checks added on animal and plant products from April 2024, and – crucially – there are plans to extend these to fresh produce in July 2025. “My concern is that in 2025 we’ll see more friction before we see improvements,” says Hyde.
Tensions between Brussels and Beijing also remain high, following the decision by the EU to launch an investigation into Chinese-made EV imports, triggering a retaliatory probe into European pork and dairy by China as well as barriers to brandy imports. With no end to the spat – in October, the EU narrowly approved a proposal to increase tariffs on Chinese-built EVs to as much as 45.3% – 2025 could see tensions heighten further.
A lot of these issues around economic volatility are here to stay to an extent
George Hyde, international trade policy manager at the Food and Drink Federation
Economic headwinds are also set to remain turbulent in 2025.
Though some financial pressures could ease – with inflation in the OECD set to slow from 5.4% in 2024 to 3.8% in 2025 – many core costs for food and drink manufacturers in the EMEA region will remain high.
“We’re not seeing much more confidence in the next year for a variety of reasons,” says Hyde. “One of which is around energy prices, which have been rising since the start of 2024. Similarly, the price of agricultural commodities has been rising since March – they’re at their highest level in 18 months at the moment.”
In fact, of the five commodities tracked by the UN’s Food and Agriculture Organization (FAO), four saw price rises in November, with vegetable oils (+7.3%) leading the way at a two-year high, followed by sugar (+2.6%), dairy (+1.9%) and cereals (+0.9%). Meat was the only exception as weak demand for pork pushed down prices by 0.3%.
“A lot of these issues around economic volatility are here to stay to an extent,” says Hyde.
Food and drink economics for 2025
And it’s likely manufacturers will have little choice but to pass on cost rises to consumers. A report by the Institute of Grocery Distribution (IGD) in December, forecast UK food prices would rise by 4.9% in 2025 – taking cumulative increases to 40% since 2020. This echoes an estimate by Statista that online food prices in Europe are likely to increase by 3.3% in the next 12 months.
It’s no wonder that, against this backdrop, consumer spending is to remain cautious in 2025.
“While global geopolitical movements may feel distant from our daily lives, their implications – such as potential impacts on energy prices or the price of goods we buy – trickle down and contribute to a sense of unease,” says consultant Fiona Fitzpatrick.
“This is further compounded by growing concerns about surpassing the 1.5°C increase in global warming and what this means for the planet and daily life in 10 years’ time, making the world feel markedly different as we enter the second half of the 2020s.”
“Some families may feel that the full effects of recent changes – be they economic, political, or environmental – have yet to be realised,” she adds. “This creates a creeping feeling of uncertainty as they wonder what could come next.
There is growing love for ‘little luxuries’ – small, affordable pleasures that brighten the day without breaking the bank
Basak Oker, marketing and CSI director Europe at Givaudan Taste & Wellbeing
“In this context, consumers are likely to approach 2025 with more caution, reducing discretionary spending on a weekly or monthly basis, and prioritising savings and value-oriented spending while delaying significant purchases or investments other than the things that they deem necessary to enjoy life until they perceive greater stability.”
There could be an upside for food and drink here though, as consumers postpone large purchases in favour of small treats.
“There is growing love for ‘little luxuries’ – small, affordable pleasures that brighten the day without breaking the bank,” says Basak Oker, marketing and CSI director Europe at Givaudan Taste & Wellbeing.
“It’s all about finding that sweet spot between treating oneself and staying mindful of the budget. Consumers are looking for special treats that still offer moments of delight and escapism.”
Which could provide a glimmer of hope in what is set to be another tough year for EMEA food and drink.
