New Routes to the Food and Drink Consumer. Do They Matter to My Business?

The pandemic may have slowed us all down – incarcerated in our homes for months – but it certainly didn’t slow developments in food and drink delivery to consumers. In fact, the reverse, Covid has served to sharply accelerate trends. Over the past 2 years, $15 billion has been ploughed into rapid delivery electronic platform start ups in Europe and North America such as getir, Delivery Hero, GoPuff, Zapp, and Bolt . Within as little as 10 minutes, food and drink items can be delivered to our homes and offices from “dark” mini warehouses (micro-fulfilment centres in the vernacular) at skinny tariffs. Right now, we’re seeing rationalisation in this new sector with the likes of USA venture capital rich GoPuff acquiring Fancy and Dija to give it accelerated entry into the European fast delivery market. How big is this market? Well, it’s moot but the overall European grocery market is measured in trillions not billions and, so, a very small percentage of that total market would be an eye-watering number!

Source Shifted. Oct 2021.

That’s why big supermarkets are peering at these fast delivery small fry, with some apprehension, and are bemused by their current valuations – Berlin-based rapid delivery start up Flink has a current market value of close to $3bn and it was only founded in 2020! How can “traditional” supermarket companies hedge their bets and take a piece of the fast delivery action? Tesco’s approach in the UK is to form a partnership with start up unicorn Gorillas. In the pilot, it’s using spare space in a big Tesco Extra superstore to establish a 2,000 product micro-warehouse from which Gorillas can use as its ”with you in 10 minutes” delivery base.

Stuck gloomily at home, we wanted to eat out but couldn’t but we could “eat out in” using restaurant meal delivery platforms such as Just Eat and Deliveroo in the UK and the major player in the USA DoorDash to deliver our favourite restaurant meals. Again, this development has been threatening for traditional supermarkets, particularly in the USA where grocers have been a tad slow in developing delicious ready meals for their supermarket customers. Now, Instacart, the American company that makes it easy for you to order groceries from your favourite store has launched “Ready Meals Hub” to deliver meals ready to eat/heat from your store of choice within 30 minutes. This is an effort to claw back supermarket sales lost to the restaurant meal delivery platforms. Restaurant delivery app DoorDash senses the competitive threat and its response has been, amongst other things, to increase its investment in German fast delivery Flink, while in the same month investing close to $8 billion on a Finish grocery delivery company to extend its European presence. It beggars’ belief where all the money is coming from!

Flink's Valuation Hits $2.85B In New Financing Round Led By Doordash. Flink  Competes With Gorillas, Picnic, Getir, And Others In Hyper-Competitive  European Grocery Delivery Market - CB Insights Research

Are you keeping up?! Like waiting for a bus, nothing turns up and, then, accelerated by the pandemic, a whole bunch of new routes to the consumer appear. So what? Is it all froth that will disappear when we return “to normal” or, at least, the “new normal”? Well, there’s certainly more choice for consumers on where and how they can buy food and drink. What about investors in unicorn meal kit, restaurant meal delivery, and rapid grocery delivery companies? How sanguine one is depends on the timing of your entry and exit from the investment: the share price of meal kit platform HelloFresh has halved over the past 12 months; and the share price of restaurant delivery app Just Eat has halved in the last 2 months! Mind you, even after a collapse in stock value, both of these companies have market valuations of around $11bn which is close to double that of, say, Sainsbury’s which has been in business for 250 years. From an investment perspective, are you a lion or a mouse?

Just Eat is expanding their business into the grocery deliveries.

If you’re a farmer or food manufacturer does the emergence of these new routes to the food and drink consumer market matter? Unequivocally, yes! Think back a few years, the pervasive concern was about the dominance of a few, powerful supermarkets calling the shots. Now, you’ve got more options, more customers. For some suppliers, you can even go direct to the consumer as they’ve slowly accepted that buying fresh foods online isn’t too frightening! What’s more, the pandemic has made many consumers more enthusiastic about purchasing food with a compelling authentic story, particularly if it’s local.

Artisan producers can sell now in the whole country!

If you’re concerned about the health of our planet are you happy with more purchasing options? If the white delivery vans are electric, it helps peace of mind and one can be close to self-righteously euphoric if a cyclist delivers!

For all food and drink businesses, these developments bring some combinations of challenges and opportunities. Is our modus operandi relevant given the pandemic-accelerated transformation of our commercial and physical environment? Did we have a strategy? Should we change it? We know 2022 is going to be, by any measure difficult – ingredient and food price inflation, crabby shoppers seeking “value”, retail price wars, unexpected climate and political (Ukraine?) events – do we have the resilience? What’s that? The resources, willingness and drive to adapt successfully to the challenges that threaten the function, survival and future success of our business. Spend some time thinking about how your business is placed to cope with what’s coming our way in 2022. It’s better to be in the box seat than the back seat in troubled times!

David and Miguel January 25th, 2022

Posted in Convenience, Online

Heads Up! Some Food Industry Issues to Keep an Eye on this Month.

Every January, two hardy perennials burst into full flower. Here’s a brief botanical review of them both.

Established in 2014, Veganuary is native to the UK but, wind-borne, its seeds have germinated in dozens of countries and has a mission to inspire people to “try vegan”. As “A Movement”, Veganuary carries an implicit health warning for carnivores and livestock producers. Smart marketing is at its core: in January, we’re predisposed to try a healthier diet; plant-based foods are firmly on-trend; trying vegan food for a month gives us a guilt-free opt out after only 4 weeks (“tick, done vegan!”); the promotional material doesn’t focus on killing distressed animals, rather on “saving” cute, cuddly ones; certainly, in the UK, the food media and food retailers of all stripes are supportive – e.g. hard discounter Lidl (not the immediate grocer of choice for the urban élite chattering classes) has “Going Meat-Free in January?” as the strapline of its New Year adverts; and, particularly, post-COP26, it’s consonant with the notion that family food purchase choices can contribute to saving the planet.

Veganuary everywhere!

Vegan and vegetarian diets have market traction in many higher income countries (they’ve never lost it in emerging countries where meat is still a relative luxury food) and the proportion of the population claiming that they follow vegan or vegetarian diets is edging up, albeit slowly. Much of the media hype revolves around consumers eschewing real meat and embracing “fake” meat yet, in the market place, this isn’t the case. In the USA, plant-based meat sales have declined 7 months in a row. Plant-based heavyweight Beyond Meat’s Q3 sales were down 16% year-on-year and its share price as of January 3rd 2022 was one-third of its top value in January 2021. Meat substitute products festoon supermarket shelves but sales of many are floundering. What’s the problem? Shock horror! Many fail to deliver on taste and texture, are increasingly perceived to be “over-processed”, are criticised for being unhealthy, not least because of high salt content, and are expensive relative to “the real thing”. European sales of plant-based meats have been rosier. Beyond Meat has provided the patty for the successful launch in the UK of McDonald’s McPlant burger. The USA could be a harbinger of future demand, although, perish the thought, it may be that our continued strong demand for meat substitutes indicates that European taste buds are less refined than our trans-Atlantic cousins.

Tentative although future demand for fake meat may be, venture capitalists haven’t been shy at throwing money in the direction of prospective plant-based unicorn companies – Impossible Foods is purportedly valued at $7bn, although it’s yet to make a profit. It has raised $2bn of development finance over 2 years, and 10 other plant- and cell-based food companies each raised $100+m in 2021. There may be tears before bed time!

Thumbs down for plant-based foods? Far from it, they have excellent market prospects. Tasty, healthy, convenient, affordable plant-based meal and snack solutions are and always have been on the up. The best of Big Food (e.g. Nestlé, Unilever) are investing heavily in the sector through their own NPD and via acquisition, gobbling up nimble start-up companies. Their major competition will come from private label manufacturers for major grocery retailers – Tesco’s Wicked Kitchen and Marks & Spencer’s Plant Kitchen are in the van. Implications for the meat industry? In higher income countries with current high levels of per capita meat consumption, we’ll slowly eat less meat, particularly beef. Those more comfortably off, however, will eat “better” meat and the definition of “better” will be a topic hotly disputed!

Lidl’s “veganuary” aisle in UK
One of the new Wicked brand products that Tesco presents for the Veganuary 2022

Bolting is a term applied to vegetables when they prematurely run to seed.  Humans have a tendency to do so, too and are chastised for such every New Year …. and, particularly this year as waist lines expanded after months of working from home accompanied by surreptitious snacking! Our Lock Down promises to eat healthier came to nought in the UK where average weight gain through the pandemic has been 3+kg – 2 out of 3 adults and 1 out of 3 children are overweight or obese and the NHS and tax payer stump up £6bn/year treating weight associated ill health.

The Centre for Food Policy report for the UK Government’s obesity research unit warns that “easy access to and availability of unhealthy food 24 hours a day across the UK makes losing weight difficult for millions who are trying to reduce weight – we eat more because food is easily available and its proximity triggers us to want food more often”. It’s a particular problem for those on low incomes as cheap, unhealthy food is more likely to be promoted in shops and supermarkets. It’s the dark, other side of the coin problem associated with the hyper-competitive UK food retail sector which in most respects deserves applause from consumers for delivering low food prices for food overall, whether it be healthy or unhealthy. Should Tesco be scolded for offering an Aldi Price Match “Hearty Food thin pepperoni pizza for 67p ($0.90)?!

The UK Government has an obesity reduction plan which many view will fail in the face of a perceived junk food culture and where consumers are “bombarded by unhealthy food options”2. Food high in saturated fat, sugar and/or salt and deficient in fibre, protein and other good stuff is broadly defined as junk! Later this year, junk food advertisements will be banned on TV and the cinema (and online) prior to 9pm and promotions such as BOGOFs and aisle end placements of HFSS products will be illegal. Health activists call for fresh fruit & vegetables to be discounted but aren’t they already? Basic fresh produce prices are astonishingly low, just ask any fruit & vegetable producer.

Obesity is as much a pandemic as Covid-19 and removing the problem is as complex. A multitude of factors are key contributors, including: genetics and biology; household income; financial insecurity; deprivation; weight stigma; access to opportunities to be physically active; cultural norms; food prices; portion sizes; food and cooking education; food availability (e.g. food deserts); life experiences; food advertising and promotions; mental health; access to treatment and support.

Global problem although obesity is, its incidence varies hugely – across the OECD countries, 40% of USA adults are obese versus 4% of Japanese adults. In the so-called developed world, food industries should steel themselves for a plethora of government-imposed measures to combat the problem ranging from soft touch bans on food promotions and placement, through mandatory health warning labels on food at retail and in restaurants, to hard-edged taxes on foods high in fat, sugar and salt.

Veganuary will come and go and our promises to reduce our waistlines will evaporate like snow off a dyke. In this first quarter, supply chain disruptions caused by Covid-related labour shortages will cause food industry challenges and irritate pampered consumers. But the global food issue that will dominate the headlines throughout the year will relate to escalating food prices. The FAO Global Food Commodity Price Index for 2021 was 28% above that for 2020 and these food price inflationary pressures have by no means passed through to global retail food prices.

Higher basic food commodity prices are very welcome for farmers but rocketing farm input prices are not! “UK farmers braced for spring fertiliser crunch after prices triple” shrieked The Financial Times, but it’s a global problem and particularly for poor small-scale farmers in the emerging world who produce the majority of the food for their burgeoning population. Fertiliser use will be down causing yields to decline and continued upward pressure on food prices at retail. Container freight rates will remain stickily high for much of the year – we import 40% of our food in the UK! General inflationary pressures abound around the globe – in the UK, household incomes will be under stress as energy prices remain at high levels and tax rates (i.e. National Insurance) increase. Consumers will look to trim their budgets on items on which they have flexibility like food items. Watch out for: full on food retail price wars in many countries; and political turmoil particularly in lower income countries – when staple food prices spike, the huddled masses take to the streets (and even the seeded sour dough and matcha tea brigade get peevish).

We’re set for a rough and tumble, challenging year for those in the food industry and for food consumers. It will require companies and households to be resilient with resilience defined as “the capacity of dynamic systems to adapt successfully to challenges that threaten their function, survival, or future development”. Looking at how largely adeptly the global food system has handled the unwelcome Covid pandemic, we believe the global food industry can cope in spades with what’s coming our way in 2022. Happy New Year!

David and Miguel

January 6th, 2022        

Posted in Uncategorized

Headline News About Food Security and Environmental Impact Present Challenges and Opportunities for the Food Industry

Dr. Food is an inveterate reader of the weekly influential current affairs periodical The Economist. In history, it was always a Saturday morning treat to sit down with the magazine and a coffee and be immersed in the brilliantly written ways of our world. Now, of course, saving the planet and the pocketbook, it’s read online anywhere anytime! Items on food proliferated on the issue for Oct. 2nd. A decade ago, items of news on agriculture and food were exceedingly sparse. It’s a measure of the burgeoning importance of and widespread interest in issues such as food security and the impact of food production on climate change that this journal is increasingly peppered with food-related articles. Here’s a flavour from that week:

  • “Treating beef like coal would make a big dent in greenhouse-gas emissions”! The article has an eye-catching graphic on CO2 emissions (see below) which shows beef far exceeding arable crops, albeit with rice higher than cow’s milk, pork and chicken and, bizarrely, higher than Japan and air travel prompting the whimsical thought that, if “seeking to save the world”, one could keep on flying but give up beef!
  • The finger is pointed at cattle for emitting methane and accounting for two-thirds of beef’s total GGE. More controversially, 27% of emissions are attributed to land-use changes, such as clearing land for grazing and growing feed. Of course, this provokes an incendiary reaction from those producing grass-fed beef, particularly on land that is perfect for pasture and, through improving the quality of the soil, actually increases the capacity for the land to sequester carbon! 

Source: The Economist.

The same edition of The Economist included: a “Leader” on the roles of new technology and government regulation in “New Foods”, sitting alongside other leaders on high profile issues such as political clampdowns on technological behemoths in China (e.g. Alibaba and Ant Group), and an aquacultural review of “seaweed at scale” and its food and carbon sequestration uses. 

The 2021 UN Climate Change Conference (aka COP 26) is on now in Glasgow, Scotland. You can hardly miss it as it’s dominating the media.  COP is the decision-making body responsible for monitoring and reviewing the implementation of the UN Framework Convention on Climate Change whose objective is to “stabilize greenhouse gas concentrations in the atmosphere at a level that will prevent dangerous … global warming”. It’s a big deal and many of the big political and business names are attending. In the previous weeks leading up to the meeting, countries and companies released statements relating to their promises and programmes to reach carbon net zero by 2050 or before. Mars, the privately-held food company, is one example:

  • Mars has pledged fresh climate action to achieve net zero emissions across its full value chain. This isn’t just a Mars commitment. The company has 20,000+ suppliers and together they are promising to eliminate deforestation, transition to 100% renewable energy and much more! The clear implication is that Mars is and will continue to rationalise its supplier base to deliver its promises. Palm oil is a case in point – Mars is sourcing all from those certified by the Roundtable on Sustainable Palm Oil (RSPO) – the number of palm oil mills that it deals with has been slashed from 1,500 to fewer than 100 and their names are in the public record and all are RSPO-certified. In Asia-Pacific, 1 mill has replaced 780 smaller ones reminding us that reaching net zero may not be small business-friendly! Mars is using a combination of satellite mapping to monitor land use and 3rd party validation by the not-for-profit AidEnvironment.
  • Mars is joining the Science-Based Targets Initiative’s (SBTI) “Business Ambition  for 1.5C Pledge” and  the Race to Zero. Its managers should take good note – executive pay will be linked to Mars achieving environmental targets! The corporate focus will be on:
  • Absolute emissions’ reductions across its entire GHG footprint including ALL scope 3 emissions such as business travel, customer emissions, use of sold products and product end-of-life (i.e. disposal and recycling of final product & packaging), and setting 5 year milestones to drive action and track progress;
  • Elimination of deforestation in its supply chain;
  • Challenging its 20,000+ albeit diminishing suppliers to deliver GHG value chain emission reductions;
  • Publishing a full net zero roadmap by 2022 to align with the anticipated SBTI rules on net zero commitments by the end of 2021.

Linking executive pay to achieving environmental targets shows how ingrained these objectives are within the company. The cost of some other companies’ borrowings are linked also to their environmental performance. British grocer Tesco attracted loans of £5bn at the beginning of the year. The interest paid will drop if the company achieves its targets related to Scope 1 and 2 emissions. They aim to be a Net Zero Carbon business in the UK by 2035 (15 years ahead of the UK as a country) and by 2050 for their entire international business.

Another recurrent line on the environmental news is the GGE impact of global meat and dairy production on climate change.  The global meat and dairy industries are a soft target – pardon the pun but it’s “Easy Meat” for the “Green” lobby. Who isn’t going to defend the future of our planet and the wellbeing of cute farm animals when we’re told that the livestock and meat industry is causing problems? Particularly when anti-cattle activists are so zealous, passionate and increasingly professional about getting their side of the story across; whereas the pro-meat and dairy protagonists are, often, grumpy and focus on scientific arguments to support their case when most consumers are swayed by their emotions and side with those who seem to understand and share consumer citizen values. Most people prefer simple “facts”, too and, unfortunately, there’s no one global livestock production system and explaining life cycle assessment for meat products from the growing of livestock feed through to the disposal of leftover meat products and packaging, whilst not rocket science, is far from being simple!

Most pro-meat and -dairy groups do need to up their game on convincing consumers about the relevance of their products in the third decade of this century. It’s a VERY tough job and regularly made tougher by news coverage revealing the stark reality of producing farm animals that we then slaughter for our own consumption! You can see why, particularly younger people, might be swayed by vegetarian/vegan arguments and embrace plant-based products which mimic meat and dairy products.

Meat and dairy “bashing” may be fashionable but there’s plenty of initiatives abroad to redress these controversial issues, and find new processes that improve the sustainability of their operations and reduce their environmental impact:

  • Norwegian agri-tech company N2 Applied has been working on an EU-funded trial with Danish international dairy company Arla on its UK “Innovation Farm” using a scientific technique that applies air and electricity to slurry that “traps” methane and ammonia and, via a N2 plasma unit, converts cow manure into “sustainable fertiliser”. The N2 unit can eliminate harmful ammonia emissions (which reduce air quality), eliminate greenhouse gas emissions from methane, and enriches the nutrient content of livestock manure.
  • Earlier this year, Arla shared the output from the 1st year of its landmark Climate Check programme. Manure management was highlighted as one of the 5 main levers that will have a positive effect in supporting farmer cooperative Arla’s commitment to a 30% reduction of on-farm carbon emissions by 2030 and reaching carbon net zero farming by 2050. The challenge is to take these findings and find ways of making them work on a practical and affordable level on-farm.
  • The plasma-treated fertiliser converted from slurry using the N2 unit was independently tested when applied to winter wheat and found to reduce ammonia emissions by 90% compared with untreated slurry. Treated slurry produced on-farm has the potential to reduce the need for chemical fertiliser thereby reducing GGEs. IF N2 units were adopted across the UK dairy herd, they could deliver 17-21% of the UK’s National Farmers Union emission reduction targets for livestock. N2 Applied views that 1 N2 unit, working on a farm with 200 dairy cows, can reduce and remove a total of 183 tonnes of CO2 per year.

Back in 2016, the Brades family farm in Lancashire, UK, launched “The Original Barista Milk” for cafés and coffee chains to differentiate itself from commodity milk and to establish that premium “real milk” was better than the up and coming plant-based milks which were becoming fashionable with coffee drinkers (plant-based milks have a 10% milk market share in the UK).

As the “anti-dairy/milk” lobby switched their arguments for ditching cows’ milk for plant-based substitutes from animal welfare and human health to climate change concerns, so did the Brades family farm focus on reducing the carbon impact of its business. The result was a partnership with biotech startup Mootral which has developed a garlic-based livestock feed pellet that reduces methane output from cows by 30% – the pellets work by disrupting methane-producing enzymes in the cow’s gut.

Mootral is not alone in its methane reducing endeavours, UC Davis in the USA has found that some seaweeds in the cows’ diets can cut methane emissions by 82%. Royal DSM has recently received regulatory approval from Brazilian and Chilean agricultural authorities for its supplement Bovaer which, it is claimed, can cut methane emissions by up to 30% for dairy cows and 90% for feedlot cattle reared for beef. And, serendipitously redolent of Covid solutions, Cargill is trialling a methane-reducing mask for cows (90% of cattle methane emissions come  from the mouth and nostrils), and an anti-methane vaccine is being researched. 

The feeding of additives may work in developed countries where dairy and beef cattle may be fed indoors or fenced in but it’s more challenging in emerging countries with thousands of small-scale livestock producers who largely graze their animals wherever they can find grass. These countries contribute 70% of emissions from ruminant animals worldwide! As their household incomes rise, so will meat and dairy consumption exacerbating emissions’ problems although, agricultural development leading to increased farm sizes and changes in production systems may help.

There’s lots of international initiatives focusing on helping the global dairy industry edge towards a substantially reduced carbon emissions future. Arla and 10 other global dairy companies (e.g. Royal FrieslandCampina, Fonterra, Nestlé, Mars), plus other businesses in the dairy sector launched “Pathways to Dairy Net Zero ” in September just prior to the UN Food Systems Summit. Its focus is on accelerating climate efforts already underway and driving further necessary actions to reduce dairy’s emissions over the next decade.

Some critics of methane reduction products take the view that they’re no more than “greenwashing” and the best solution to reducing methane from cattle is just to eat less meat and dairy!

We’re going to see accelerated change in the global agriculture and food industry over the remainder of this decade. Our industry will be substantially “greener” to the good of the planet and to our businesses as the proportion of consumers rises inexorably who recognise that, through their purchasing decisions, “the power is on their plate”. Diets will change albeit slowly. Heavy meat and dairy eating countries will seek moderation, as others increase consumption of these aspirational foods. New foods will arrive but take ages to become established on our meal tables! “Story” foods will focus on provenance, seasonality, authenticity and the artisan. Working and school week foods will be better versions of what we woof down now – tasty, convenient, affordable and more understanding of evolving 21st century consumer values. All new? No – strikingly similar to our great-grandparents – eat what’s on your plate, don’t waste, respect the food producer, eat what’s in season! With food shopping and eating, there’s heart-warming circularity. We got seriously off track over the past century or so. Or some of us did in higher income countries. But consumers and the industry that feeds them may be slow to change, but they’re not stupid and, now, we seem to be juddering in a better direction for all concerned. 

Posted in Consumer, Credentials, Sustainability

Grocery Shopping Decisions are Becoming More Complex. Help is At Hand: There’s an App for That!

Many consumers have the very best intentions when it comes to buying food for their families – they want the healthy one and, increasingly, the one that’s better for the environment. But, bless us, we want these good attributes if they’re convenient. We thought we’d take a look at some more recent developments that are designed to make the increasingly complex business of shopping easier. 

Nutri-scores and Enviro-scores with traffic lights – red through green – are coming and at pace. That’s got to be good for consumers concerned about their health and the health of the environment and it’s in the same direction that governments are pushing health and climate change policies. But will shoppers understand them and/or will the traffic lights be lost amongst the plethora of marketing and regulatory required information on pack when most shoppers only apportion a few seconds to each grocery purchase? IGD research in the UK indicates that many consumers are confused by nutritional traffic light labels but, one thing is certain, dealing with complex matters relating to nutrition & health and, maybe even more complex issues relating to a product’s environmental/animal welfare/social impact, there’ll be no perfect system. For those consumers who have the time and inclination to check out food and drink products they wish to buy based on their performance on both health  and on tricky social issues, then, “there’s an app for that”! Here’s 4 of the higher profile ones:

  • Yuka – the “mightiest” of European shopping apps which covers 1.5 million products of which 70% are food and drink (the rest are cosmetics) and has 20 million users in 11 countries across Europe. In France, each product is actually given a Yuka enviro-score;
  • Giki – awards product badges, based on data provided by the manufacturer and referenced against 30 subject matter expert partners, such as RSPCA (on animal welfare), RSPO (sustainable palm oil), Fairtrade and the Rainforest Alliance;
  • Setai – carbon emissions are the main concern of this app and users can see how much a product contributes to their daily “carbon budget”. Soon, the app will offer users the chance to offset their purchases through reforestation. In addition, it scores each food product out of 10 on health;
  • Food Switch – developed by the George Institute for Global Health, users can filter by health concerns and get alternatives based on whether reducing salt, fat or sugar is a priority.
What about the reliability of the Yuka application? - Les Petits Plats  d'Arthur
Source Yuka

These apps are performing the role of a “trusted third party” who is not linked to a retailer or a brand at a time when, increasingly, consumers are confused by “green” claims and suspect companies (particularly the bigger ones) of “greenwashing”. As these apps gain traction with consumers, it will certainly push manufacturers to up their game relating to their products’ health and social impacts. They may disagree with the scoring systems used by Yuka et al, but if their products generate glaringly red traffic lights on the apps, it will have a profoundly detrimental impact on sales, at least sales to the app users!

Avoiding food waste has moved closer to the top of consumers’ agenda during the pandemic.Ten years ago in the UK, discounters gained the favour of an increasing proportion of shoppers vis-à-vis traditional supermarkets. Discounters focused on everyday very low prices, supermarkets looked to drive volume and value through BOGOF (Buy One Get One Free) and “3fers” promotions that led to increased food waste. We’ve moved on since then. In fact, the UK Government is introducing regulations to ban such multi-promotions albeit specifically for “junk food”. Now, there is great pressure along the supply chain both to avoid waste and to save money!

Of course, good retailers have long been assiduous in reducing in-store food waste – it’s a “no-brainer” as dumping unsold food is a double cost (cost to buy and cost to dispose).  Supermarkets often have an effective multi-tiered approach: discount what is slow-moving and edging towards its Best Before date; if it still doesn’t sell, use any of the available Apps that connect your food with consumers avid to get products with a discount, or send it to a Food Bank to help feed the deprived. Distributing through the Too Good To Go App can generate some revenues (and it is widely used by restaurants, especially during pre pandemic times) and as a last resort, give it away via the Olio App, that connects the supermarket with volunteers that will collect the food, upload the details on the Olio App and then give it to those that claim it. The Olio App is gaining traction – its British and American co-founders have just raised £43 million to expand internationally and have a Big Hairy Audacious Goal of attracting 1 billion users to the App by 2030! 

But, in fact, food waste at the retail level is very small compared to waste in the consumer’s home and there are also interesting developments to help consumers reduce waste. The UN’s Sustainable Development Goal (SDG) 12.3 aims, amongst other things, to halve food waste at consumer and retail levels. Being part of the solution will be a high priority for high profile grocery retailers who will come under increasing pressure from government and consumer activists. As importantly, helping consumers reduce food waste builds trust and concomitant loyalty between retailers and their customers. 

Plant Jammer (PJ) is best known for its AI-powered cooking assistant that helps users create recipes from the existing inventory in their fridges and pantries. The idea is to provide consumers with more ways to use all of their at-home food, so less waste goes into landfill. The pandemic has fuelled interest in its use. PJ has just added an “Empty Your Fridge widget” which it is licensing to third parties who can build customised experiences for their own customers – for example, a consumer can simply select the ingredients they have in their fridge and, via the  widget, receive a customised recipe from the licensed third party in return. Users can input preferences and dietary concerns which will be reflected in the recipe. Aldi Sud and RIMI Baltic (owned by Sweden’s major retailer ICA) are among the first major food companies to implement the food waste-fighting widget on their web sites so that their customers can track and manage food waste in their own homes.

Source Plant Jammer

USA supermarket chain Kroger has launched an AI-powered Twitter recipe tool, Chefbot, for helping consumers come up with recipe ideas using leftovers and food items lurking in their fridge! Here’s how it works:

  • Snap – snap a photo of 3 ingredients from fridge/pantry;
  • Tweet – photo to @KrogerChefbot and thousands of possible recipes are scanned to come up with meal ideas!;
  • Cook – within seconds, you’ve got personalised recipe recommendations with instructions.

Chefbot fits in well with Covid-induced cooking behavioural changes and can be very useful in expanding the often limited recipe repertoires of many household meal preparers. A UK environmental charity Hubbub survey shows that 57% of consumers value food more now than in the past, and almost half are more worried about food, not least wasting it, than in pre-Covid times. When you’re home all day, you’re in closer contact with your fridge and its contents!

We’d wager that food waste in the home has increased in many countries as household incomes have increased, cooking skills declined, and principal meal preparers, often women, took employment outside the home. Chefbot and Plant Jammer Apps are designed to give home cooks inspiration and practical cooking tips.

Is grocery shopping simpler now? NO. There’s more products, more channels, more social issues that we must check before purchasing. Is it slave-free? Animal welfare-friendly? What’s  the environmental status? Who produced it and where and how? On top of all this, Brenda is vegan and John is trying to cut out dairy and thinks he’s gluten-intolerant. It’s a nightmare! As a result, we need help and there’s an app for that which might sit pretty with Generation Z app natives but it adds challenges for those who are less digitally adept. Nutritional and environmental apps will have their place but only for a minority of shoppers. We think the front-of-pack nutri- and enviro-scores are more likely to have a significant impact on purchasing behaviour and both these will lead to substantial reformulation of thousands of food and drink products as manufacturers seek to avoid the red traffic light scores for their products. 

The pandemic lockdowns have increased our screen time, so there is no wonder that startups and big companies have seen an opportunity here to be more relevant, especially for younger shoppers. If your digital offers and services are easy to access, helpful and respectful of users’ privacy,  they’re terrific business tools that can build the trust and the longer-term loyalty of your customers.

Posted in Consumer, Health, Trends

Will Work Patterns Have Changed Radically Post-Covid Or Will We Drift Back to Previous Work Behaviours and What’s the Implications for Food Businesses?

In the Northern Hemisphere, Summer is here, our Covid-constrained world is opening up, courtesy of extensive vaccination programmes and notwithstanding the continued ravages of the Delta variant. The feelings of fatigue, wanting to mix with friends and colleagues, travel for work and leisure are palpable. Yet, we can see from the labour shortages in key industries, not least in food, that the pandemic “ain’t over ‘til it’s over” to quote baseball player and American 20th Century philosopher Yogi Berra! As we claw back our lives to some sort of normality, will our work habits have changed irrevocably – specifically, eschewing daily commuting to the office and working much more from home – or will we slip back to pre-pandemic work patterns?

For those who were paid to be at home during the lockdowns and didn’t have to fight for financial survival, there was an element of novelty and opportunity to relearn how to cook and do so from scratch, to eat more healthily and, of course, we could start that exercise programme that had been lounging, gathering dust on our “Must Do” list for years. In 2020, the aroma of banana bread and sourdough loaves pervaded the leafy suburbs from April through to the Autumn. Then, in October, we realised that Covid was with us for the longer haul. Our enthusiasm for jogging, sit ups, and cooking meals “like Mum used to make” waned, Deliveroo, Uber Eats, and Just Eat became more frequent visitors to our homes and waistlines expanded. Survey data for the UK shows that Brits gained, on average, 3kg each, through the 2020/21 pandemic period. 

So, how much of our in-home incarceration will stick? Good USA data suggests that “confident cooks” and “cooking enthusiasts” (those who are gung ho but tentative) expanded their home cooked meal repertoires substantially and accounted for a huge proportion of the incremental Covid period retail purchases of premium meat and seafood as they sought to replicate favourite restaurant meals at home. However, 70+% of households soldiered on with menus having a recurring theme of minced (ground) beef and chicken.

Online grocery shopping is sticking, albeit its rate of increase has slowed relative to the dark days of full lockdown. Working from home (WFH) makes the reception of your online groceries easier – there’s somebody in – and the arrival of Mr. Tesco is even a mini-event to lighten your day! Clearly, WFH is good for the local corner store and it may fuel a renaissance of local artisan bakers and see growth in local coffee shops – good for small businesses and the local community, as well as giving the at home worker an opportunity for light exercise and a chat with fellow workers from different professional backgrounds. It’s not good for the Food-2-Go outlets which are scattered, eerily empty, around the office high rises downtown. 

These are challenging times for the likes of previously very successful chains such as Pret. However, all is not lost. Kantar data for the UK shows that WFH and home schooling explained around 20% of the uplift in lunch and dinner at home occasions during the peak of lockdown. Kantar projects that meal occasions at home in Q1 2022 will be 10% up on the same period in pre-pandemic 2019 – that amounts to a good slug of revenue potentially lost for F-2-G businesses but not enough to sink them. 

Recently, PepsiCo announced a new corporate policy embracing work flexibility – led by shifting half of its office staff to working from home permanently. The company notes that employers offering flexible work see a 15% increase in productivity, 31% less absenteeism,10% less staff turnover, and the policy will attract high calibre staff. The “Work that Works” programme will let PepsiCo scale down its real estate footprint by 15%, which it says will lead to less waste and lower energy use. Fifty percent of office staff will work remotely at any time, and that for every 100 employees who work from home twice a week, it will save 70 tonnes of Greenhouse Gas Emissions (GGE). Working from home staff will be able to reserve a workspace or meeting room via a mobile app, while occupancy sensors and integrated meeting technology will assist in scheduling meetings between in-person and virtual groups.

Asda, the UK’s Number 3 grocer (formerly owned by Walmart), has also announced flexible working measures taking a “hybrid” approach: 4,000 of the supermarket chain’s HQ staff can choose to work from home, the office or from space in its shops and depots. Coming to HQ is recommended for training and key meetings.

We are still waiting for more food businesses to clarify publicly what are going to be their work policies as restrictions are eased, but it seems that “flexibility” will be mentioned frequently! McKinsey and Co suggest that finance, management, professional services, education and the information sector have the highest potential for remote working. Deloitte UK agrees and its staff will be able to work wherever they want when Covid restrictions are eased, with no requirement to work a minimum of days per week from the office. Deloitte has conducted research in the USA’s food sector finding that 60% of top management agree with allowing employees to choose working from the office or from home. Although 25% of them were expecting everyone back to their desks once it’s allowed. The expectation is that hours worked remotely in late-2021 and 2022 will be about double that of 2019.

Source: Deloitte USA

Of course, working from home won’t appeal to everyone. Younger workers are more attracted to the office – it’s more social, an opportunity to learn the tricks of the trade from more senior staff and, indeed, to interact directly with line managers to show them how quick, smart and enthusiastic they are! Employees with families may value spending more time at home to give them a better work:life balance (there again, they may be pleased to get away from the maelstrom and grind that can be family life!). Of course, for those working at the coal face in processing plants and retail stores, working from home isn’t a realistic option. What’s more, they’ll resent those working from home in their slippers and feel more like the worker bees having to head out into the rush hour traffic every morning and night.

As we all know, change is inevitable and we’re just experiencing an accelerated period of change. With it comes new opportunities. One result of this in the UK is an explosion of businesses connecting home cooks with hungry diners. The UK Food Standards Agency estimates that 44% of new ventures registered from March 2020 are run from domestic kitchens. New electronic platforms have emerged – All About the Cooks, NoshyCircle, Grubie – taking around 12-15% commission linking domestic chefs with closely located diners. Most domestic cooks will be part-time, work flexible hours and earn a helpful income on the side.

What can we conclude about WFH in the post-Covid era? There’ll be more of it, working location will be substantially more flexible than in the past and it will be disproportionately a benefit on offer to those that, in history, worked from offices – ranging from the “professional classes” to online platform gig workers. It will pull workers and their families from the larger cities seeking better lifestyles and more affordable housing in more rural surroundings. In turn, this will bring pressures on rural-based businesses (many of them in agriculture and food) with employees who, already, face challengingly high house and rental prices fuelled by weekend 2nd home owners. 

Ostensibly, the UK Government has a major policy to “level up opportunities across all parts of the United Kingdom”. The idea is that people and communities that feel they have been left behind get a chance to catch up. In truth, a combination of WFH and pervasive availability of 5G would be a huge boost to accelerating “levelling up”. This is much needed as we recover from the ravages of Covid-19 which has served to polarise household incomes (“haves” and “have nots”) across the UK and in most other countries.

The longer-term impact of the pandemic on the food service industry may be profound. The UK government’s furlough programme gave thousands of restaurant staff a taste of home life and being paid to be there, rather than working the unholy hours that are characteristic of this sector. There are clear signs that many are reluctant to return to restaurant work exacerbating the vacancies that are evident from the aftermath of Brexit (when particularly Eastern European workers exited the UK en masse). Reducing the requirement for labour in restaurants and food service outlets will be a feature of the future and reflected in a focus on automation and reduced complexity menus for many food service businesses. 

Posted in Consumer

Organic Food Sales Surge During the Pandemic and are Part of a “Green Wave” Supported by Governments Across Europe

Consumer concerns about protecting and improving their health and the health of the planet are twin trends that have been accelerated during the pandemic and both have a big significance for the food and drink industry. Our food purchases are being influenced by a desire to have healthier diets and we’re willing to apply cooking skills improved by enforced practice during Lockdown, notwithstanding that scratch cooking fatigue is evident as we limp into the middle of the second year of coping with Covid-19! There is growing awareness that all of us, through such actions as being selective in what we eat, reducing food waste, conserving and recycling resources such as packaging, can be part of the solution rather than the problem relating to climate change and reducing the damage to the global environment.

Indubitably, the halo of dietary and environmental health surrounding organic food has helped drive its popularity in many markets.The organic food market in the USA saw solid growth year after year in the first 2 decades of this century and, then, the pandemic struck and the rate of growth accelerated by a record 12.8% in 2020 to a new high of $56.4bn. Almost 6% of the food sold in the USA last year was certified organic. Pre-Covid, 82% of consumers surveyed bought organic food and drinks at least monthly, 18% weekly and 11% daily, with Millennials the group most likely to purchase.

The top 5 reasons for purchase of organic food in the USA are:

  • safer for me and my family; 
  • to avoid pesticides and other chemicals; 
  • to avoid antibiotics and growth hormones;
  •  to avoid GMOs;
  • and its perceived higher quality.

This is worrisome as it indicates concern about the  safety of “regular” food. The aspiration, not unreasonably, is to eat food that is closer to its natural form and less changed by human manipulations – sentiments that have been reinforced during the pandemic. The label organic is seen as promising “GMO-free” and contributes to the attractiveness of organic food for many as GM products are very far from popular!

US retailers have been quick to promote organic private label products during the pandemic as organic food represents an unique intersection of perceived quality and value and the store brand association with an organic label shines a positive light on the store brand overall (e.g. Kroger’s Simple Truth organic products). Such products are increasingly seen in the centre aisles that house categories further down consumers’ adoption pathway of organic items (i.e. moving along from fresh foods which are core organic lines to canned  food and non-food items). Shoppers see private label organic products being as good quality as branded ones but have the advantage of being lower priced.

In the UK, a surge in demand from locked-down shoppers helped sales of organic food products rise by 13% in 2020, the highest growth level in 15 years. Canned and packaged organic food grew the most (20%), followed by meat, poultry and fish (17%). But, total sales are still only at a modest £2.8bn (<$4bn). On a per capita basis, organic food sales in the UK are one-third of equivalent US sales. In the UK, close to 20% of organic sales from supermarkets were online indicating that younger, higher income shoppers are key customers for organic products. In Germany, the largest organic market in Europe, we have seen a similar picture:  the organic market growing at double speed of the conventional market (22% y-o-y growth in supermarkets) to reach a record 15bn EUR in 2020, and a record share of the market of 6.4%. Poultry, with a 70% growth, and red meat, 55%, were leading the pack.

In the UK, the pandemic has led to a greater appreciation of food, in general, and organic food, in particular, is seen as being sustainably produced, i.e. good for the planet. Effective lobbying by farm groups and consumer activists concerned about future trade deals with powerhouse food exporters such as the USA and Australia has fuelled consumer concerns about “industrial” farming practices. Such practices are perceived to threaten UK food quality and  safety standards should they be given untrammelled, tariff-free access to the British market!

The favourable consumer view of organic food within the EU sits well with some powerful EU politicians, not least the EU Commissioner of Agriculture. As part and parcel of the EU New Green Deal in a post-Covid world, targets have been set to reach 25% of agricultural land under organic farming and 25% of food production by 2030 across its 27 member countries. Currently, 8.5% of the bloc’s agricultural land is farmed organically but there’s considerable variability by country ranging from 0.5% (Malta), to 25+% (Austria). Ex-EU member UK, with 2.6% and Ireland with 1.6% are in the European “naughty corner” for organic land use. Four member states accounted for more than half of all organically farmed land in 2019: Spain (17.1%), France (16.2%); Italy (14.5%); and Germany (9.4%). Together, they had 57.1% of the EU-27 organic area. Sweden has the highest proportion of its cereals and vegetables produced organically – 6.5% and 19.5%, respectively.

The organic food production and consumption component of the EU’s Green Deal has the intention of “restoring balance in our relationship with nature”. The plan has 23  actions structured around 3 axes: boosting consumption – through helping consumers make informed choices; increasing production; and improving the sustainability of the sector.

Is this just a nebulous plan which will be blithely ignored by commercial farmers? NO – it comes with financial support for growers! The 2020 total  EU budget was €168bn, of which 35% (€59bn) was destined for agriculture, rural development and fisheries. Further, there’s significant “green” political support in some EU countries (e.g. the German Green Party is mainstream).

Digging into the agricultural statistics, more than three-quarters of “farms” in the EU are less than 10ha (in fact, the majority are <5ha – little more than gardens!) so the splash of agricultural support money will reach a lot of voters. But farm numbers are declining sharply – between 2005 and 2016, falling from 14.5m to 10.3m. Over this period, more than one third of livestock and poultry holdings disappeared in France, Germany and the Netherlands. The EU Agriculture Commissioner (Janusz Wojciechowski) is bound and determined to halt the decline: “the European food sector in the past was based on small farms, and it should be in the future as well”. A mental picture of King Canute sitting on his throne at the seaside attempting to turn back the oncoming tide comes to mind! 

On financial support to the EU farm sector, the stark reality is  that 80% of direct subsidies go to just 20% of the larger-scale farmers which incenses the green lobby. Providing some degree of mollification, CAP reforms are being introduced to encourage farmers to leave more space for wildlife, adopt organic standards for livestock, with the intent of using less chemical fertiliser and pesticides, and to nurture healthy soils. The Commissioner believes that “Small farms can ensure food security for EU citizens and deliver environmental benefits”. Over the past 25 years, farmland birds and insect numbers have plummeted. His view is that food exports are important but not as much as producing EU food for EU consumers. Implicit in his arguments is that smaller-scale producers are more likely to be environmentally friendly than the larger-scale. Environmental campaigners remain hugely sceptical of any significant change to the CAP, let alone radical change, arguing that funds will continue to flow to the biggest, most polluting farms with barely any “green strings” attached.

Now, having exited the EU, the UK or, at least, England, is taking a different tack. It’s withdrawing over time the direct farm payment subsidy and replacing this with “public payment for public goods”, essentially paying farmers via the Environmental Land Management Scheme (ELMS) for providing citizens/taxpayers with environmental and social goods and services on-farm. International competitors may shrug and say “Ah, just another set of disguised farm subsidies”!

A new radical UK government initiative being proposed is to pay older English farmers to retire thereby attracting new, younger entrants into the industry. It’s proposed farmers could be paid up to £100,000 ($140K) if they rent out, sell or give away land they own, or if they surrender a tenancy. The rationale is that older farmers are more likely to be resistant to changing production systems to be more environmentally friendly whereas younger farmers may be more open to new “green” methods. In contrast to the EU vision, this approach may well accelerate the exit of small, uneconomic farms from food production, particularly given that the average age of UK farmers is 59. Don’t stand in the doorway, there may be a rush!

The direction of EU and UK agricultural policy is increasingly and, in most respects, encouragingly “green” – with the focus on environmental and animal welfare aspects. This may increase costs albeit whilst adding social benefits. The accepted wisdom is that EU/UK food products will be of “higher quality” and, therefore, must be protected from lower cost competitors who are producing food of “lower quality”. This will seriously complicate the completion of trade agreements with international food exporting countries such as the USA, Brazil and New Zealand – often, in international trade negotiations, agreement on agricultural and food items become the tail that wags the dog ensuring that the speed of completion of comprehensive trade deals are glacial. 

The deal with Australia seems to be close to “done and dusted” leaving many UK farmers incandescent with rage. In truth and fact, the “Aussie Deal” will have very limited immediate or even medium-term impact on UK producers but their concerns are that this agreement is “the thin edge of the wedge” opening the gates for a veritable flood of chlorinated American and Brazilian chicken and red meat “doused in hormones”! This story will run and run. The longer-term implications are that the EU and the UK may well build a protective “green wall” around its borders and this will have strong consumer support. However, EU and UK food exporters will likely have to face “tit for tat” rebuffals from those countries that are not well pleased with their food exports being labelled substandard! The result may please many Europeans – viz., an increase in food self-sufficiency in the EU and the UK – but not, perhaps, classical economists who promote the advantages of international trade and comparative advantage!   

Posted in Credentials, Health, Sustainability, Trends

Is Big Food and Grocery fast becoming “Little Goody Two-Shoes” on ESG matters? Lobbying the EU and Brazil!

A group of 40 influential European food industry companies, including major retailers Ahold Delhaize, Aldi, Lidl, Migros, Sainsbury’s, Tesco and some of the big names in UK’s meat sector like Moy Park, Hilton Food Group and Cranswick  have  written an open letter on the protection of the Amazon to the National Congress of Brazil advising them that if measures are introduced in Brazil that undermine the protection of the Amazon rainforest region they will “have no choice but to reconsider our support and use of the Brazilian agricultural commodity supply chain”. In short, the food businesses are threatening to stop sourcing food products from Brazil. The letter specifically addresses the issue that Brazil’s legislature is considering introducing a bill to legalise the private occupation of public land in the Amazon region. The group believes such legislation would accelerate deforestation. The bill is being considered just months after Brazil pledged to end illegal logging.

The level of deforestation in the Amazon is reported as being the highest since 2008 – 175,000ha has been logged or burned in 2021 so far. Most of the cleared land is destined to grow soy and graze cattle for beef exports. The UK Coop grocery retail group said “it is imperative that the proposed legislation isn’t given any airtime by the Brazilian government”.

Is this just an idle threat or posturing to curry favour with green activists in Europe? Back in May 19th, 2020, essentially the same group of food companies, via an open letter, threatened to boycott Brazil over the same issues, although the link was made in their arguments that biodiversity is a vital factor in safeguarding against diseases like coronavirus that pass from animals to humans. The letter concluded: “We want to continue to source from and invest in Brazil and help ensure that protecting the Amazon can be economically productive for all. We urge the Brazilian government to reconsider its stance and hope to continue working with partners in Brazil to demonstrate that economic development and environmental protection are not mutually exclusive”.

Clearly, the world’s largest meat company, Brazil’s JBS, is nervous about how its customers might view “Beef from Brazil” as being unacceptable. Back in September 2020, JBS launched an “anti-deforestation plan” to ensure by 2025 that cows it purchases are not raised on deforested land, financed by a $45m fund with more money to come, and using a blockchain-driven “green” platform. The company has considerable ground to make up as it has been accused of “cattle laundering” – switching cattle from black-listed ranches to ones with a clean environmental bill of health.

Marfrig, JBS’s principal Brazilian and global competitor, is equally active in announcing its commitment to deliver a deforestation-free supply chain and has ambitions to reach net zero emissions by 2030 using, inter alia, extensive regenerative agriculture practices.

Close to half of China’s imports of beef come from Brazil and 70% of Brazilian beef imports to China are from the Amazon region where deforestation risks are highest. Using TRASE, a date-based supply chain tool, these risks can be quantified and influential Chinese trading houses, if minded, can place pressure on Brazilian beef exporters to require that they minimise the environmental and social risks associated with beef destined for China. 

It’s unusual for Big Food to stick its head above the parapet and place pressure on governments to up their standards relating to environmental and social policies and regulations relating to food production. However, the practice is becoming more common as social issues are increasingly taken into account by consumers when buying food. Big Food players, including Nestlé, Unilever, Mondelēz International, Ferrero and Aldi, have written a joint letter to European Members of Parliament asking that they pass legislation to phase out eggs produced from caged hens. The letter states that “Companies moving away from eggs from caged hens have paved the way for changing how EU farmed animals are kept. Cage-free systems are widespread, economically viable and provide better living conditions for hens”. The  signees called for support of poultry farmers during the transition.

The European Commission banned battery-caged eggs in 2012. Why would Big Food wish to push the legislators into better bird welfare regulations? After all, Unilever (amongst others) has already committed to eliminate caged eggs from its supply chains by 2025. For Nestlé, it’s simply “the right thing to do” and switching to cage-free eggs is “a central part of our strategy on improving animal welfare”. 

Is Big Food fast becoming “Little Goody Two-Shoes” on animal welfare and environmental matters? Yes although it’s with a big dollop of self-interest! Increasingly, society expects big companies to show leadership and “do the right thing”. However, if doing so raises costs (e.g. for free range rather than caged eggs, or sourcing soya and meat from higher cost countries than, say, Brazil), then, it is disadvantaged in the marketplace if other players, perhaps minor brands, do not follow, and consumers just don’t notice! In such cases, big businesses may prefer formal government regulation, even more than informal industry agreements to a standard that can’t be penalised if some firms elect not to follow the agreement. Also, it’s just smart for companies to keep their fingers to the wind and to anticipate food industry changes that will be driven by upcoming government policy changes. Right now, one can observe governments becoming much more active on healthy food regulations – moving from trying to nudge  their citizens towards healthier diets and exercise regimes towards harsher regulation – e.g. on fat/sugar/salt content, and advertising “junk” food to children. Better to make the changes before forced to by regulation and harvest the “healthy product halos”!  

Big Food is stuck “between a rock and a hard place” as it has to decide on which social issues it might not bend. To continue with another egg example: should Big Food’s eggs be free range and free of male chick culling (the common practice of slaughtering day-old male chicks that are bred for egg production and, unfortunately for them, turn out to be the wrong gender for egg-laying!)? In this case, consumers or consumer activists will set the agenda.

In short, food companies should at least keep abreast of the social issues that consumers consider important when buying food. Being only a follower on such issues can be damaging for corporate reputations.

Posted in Credentials, Sustainability

Competition is Hotting Up in Restaurant Meal and Grocery Delivery – What’s Your Point of Differentiation?

As consumers in some countries are allowed out “on a long leash”, they’ll be heading for restaurants. So, is that the end of accelerated Covid-induced growth for the meal delivery  and, indeed, grocery delivery companies? Likely not as there continues to be apprehension about close social contacts and the delivery companies have done a good job getting food to us whenever and wherever we want it. Immediate delivery comes at a price and that won’t suit every household. As we enter our second Covid year, the income differences between the “Haves” and Have Nots” will become increasingly clear. 

Investors have taken a more dyspeptic view of the meal delivery sector. Deliveroo’s stock market debut in London (March 31st) was an unappetising flop when shares in the company slumped by 26% on the first day of trading, cutting its market value from £7.6bn to £5.6bn and by late-April, its market cap. was a miserly £4.4bn. Deliveroo is active across Europe, the Gulf States, Hong Kong and Singapore, and Australia and New Zealand. Investors had been spooked by a February decision of the UK’s High Court to consider Uber drivers as employees and not self-employed which is considered a considerable set back for companies in the “gig economy”. Further, analysts view that: competition in its major markets (e.g. in UK – jousting with Just Eat and Uber Eats) is harsh, notwithstanding that Deliveroo revenues increased sharply in 2020 (Covid-driven) and the company is testing complementary service options, such as rapid delivery of groceries with Sainsbury’s (mind you, so is UberEats!); and they were wary of the extra voting rights that Deliveroo’s founder and CEO, Will Shu, has linked to his own personal share ownership.

Not everyone thinks that the food delivery market is too crowded. Getir, Turkish pioneer of ultrafast grocery delivery, has just completed a $300m funding round, only 2 months after netting $128m in a previous round and has achieved “Unicorn” status – with a current valuation of $2.6bn. The latest capital injection is to fuel its exponential growth in Turkey, and the UK (entered very successfully in January, 2021), and its anticipated entry into Germany, France and The Netherlands (in the next few months). Getir is an ultrafast delivery pioneer revolutionising last-mile delivery with its 10 minute grocery delivery proposition. Getir delivers a selection of 1,500 everyday items to its customers 7 days a week day and night. Its founder is the founder of Turkey’s leading Taxi App. 

Competition is hotting up in meal and grocery delivery around the world, not least in Asia where having a meal delivered to the home is a much more common practice than in Europe.

  • There’s 2 massive deals about in SE Asia this month: in Indonesia, Tokopedia and Go-Jek are combining to form GoTo in a $18bn merger to create a mega online shopping, ride hailing, food delivery, card payment company; and Singapore-based Grab (who bought out Uber in SE Asia) which offers even more comprehensive online services than Indonesia’s GoTo is about to announce a $40bn IPO
  • Food ordering platform Swiggy from India has launched a “Health Hub” aimed at making eating healthy food convenient as a means of differentiating itself from the competition. This hub offers over 9,000 healthy dishes from 700 restaurants in its home city Chennai and is extending its services in other major Indian cities.
  • In the USA, goPuff is expanding its quick delivery offer of 2,500 grocery products, with a capital injection of $1.5bn from the venture capital markets.
  • DoorDash, the restaurant meal delivery platform market leader in the USA (50% market share) is on the acquisition trail purchasing salad-making robotics company Chowbotics. DoorDash had its IPO in December 2020 and has a market capitalisation of $47bn and, like  all its competitors (e.g. Uber Eats, Just Eat), it’s yet to turn a profit (but, stretching its legs in Australia this month  opening up a grocery retail delivery platform for IGA stores, focussing particularly on delivering last minute items that were forgotten in the main shop). 
  • Chowbotics will operate independently with DoorDash and will help restaurant clients expand their offerings. It’s compatible, too, with restaurant customers’ ghost kitchen models. The company was founded in 2014 with fresh food robot Sally the star! It can create custom salads, grain and poké bowls, parfaits, cereals and snacks all within a small space. The robot salad vendor is popular in universities, hospitals and grocery stores. 
  • Vending machines are clearly moving on from just delivering a chocolate bar, bag of chips and a can of Coke. In Singapore, machines are popping up that can dispense $30 premium chili crab meals for 2, wagyu beef, sashimi salmon and salmon steaks. Check out busy shopping areas in Japan to see vending machine technology at a higher level.

In food service and food retail, the labour component can both make you and break you! You can see polarisation in the market: high service, high touch, high cost for artisanal eating/food occasions; automation and no humans in sight for Grab & Go! Here’s 3 recent examples of the latter:

  • From Latvia, RoboEatz creates both hot and cold food producing a meal every 30 seconds only requiring a human to refill the ingredient hopper. This “Robo-Chef” is about to be trialled on home territory and in the USA this quarter – providing contactless cooking and pick up. The RoboEatz Ark 03 is a 18sq.m. standalone kiosk featuring an articulating arm, 110 fresh ingredients, an induction cooker and storage points for pickup (see video). Online grocer Ocado from the UK sees merit in a “Robo-Chef” and has invested in Karakuri, a RoboEatz  competitor;
  • Less fancy, but unusual in selling fresh prepared salads and in a fast food chain, is Farmer’s Fridge (which has Danone as an investment partner), linking with doughnut titan Dunkin’. It’s an intriguing partnership – balancing naughty indulgent fried snacks with guilt-free fresh vegetable contributions to the customer’s 5-a-Day! It moves food vending machines on from confectionery and salty snacks to healthier fare.

We’ve come a long way in a short time from when a “takeaway” meant nipping down to the restaurant on the corner and picking up a pizza or having a boy on a scooter deliver it. For the delivery platforms, the principles are basically the same but their access to and use of customer information is at a stratospheric level. It’s the use of this information which drives their astonishingly high market values. The short term challenge for these platforms, especially delivery, is to expand customer numbers without leaking money at an unsustainable rate! 19th Century American philosopher Ralph Waldo Emerson famously said “Build a better mousetrap and the world will beat a path to your door”! For 21st Century consumers, Waldo’s pithy saying is half right . Nowadays, you’ve got to build a better mousetrap and beat a path to your customer’s door!

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Posted in Convenience, Foodservice, Online

Anti-Obesity Activists and Government Put Pressure on Tesco to Promote Sales of Healthy Food Products

Our experiences with the coronavirus pandemic has heightened awareness of the link between personal health and diet. The food industry is under increasing pressure to be part of the solution, not part of the problem! But, getting consumers to change their entrenched eating behaviours is more difficult than meets the eye. Ask governmental departments of health around the world who have tried to nudge us into healthier habits and largely failed! 

Getting consumers to choose the “healthy product option” can be initiated by grocers and/or manufacturers. Why?: because it’s the socially-responsible thing to do and gives them a healthy image edge in the marketplace; or to anticipate a change in the regulatory framework – e.g. manufacturers reducing sugar content in soft drinks prior to the government introducing a sugar tax. The former is preferable for a company as it helps in improving image on health, rather than being seen as reluctantly reducing sugar content with unseemly haste immediately prior to the introduction of reduced sugar regulations! Then, as Tesco recently found out, pressure for a company to have healthier food products can come from activist shareholders. 

Tesco is the leader in the UK grocery market, with a 27% market share. Any change  implemented in the Tesco offer or commercial strategy can have an impact on all British food shoppers and, of course, on Tesco’s competitors! In early-February, Tesco came under pressure from “anti-obesity activists” from ShareAction to set itself public targets to sell healthier foods. One month later, Tesco has pledged to lift the proportion of healthy products from 58% of total and quadruple sales of plant-based alternatives to meat by 2025 (for health and cutting carbon impact reasons). The definition of “healthy” uses a Department of Health nutrient profiling model that categorises foods according to levels of fat, sugar and salt.

ShareAction assembles and orchestrates private shareholders to buy 1 share each in the companies it targets and this gives it the power under English Company Law to force a company to put a resolution to all shareholders – in this case one on selling more healthy products. Seven substantial institutional investors supported this initiative, too. This is the first action on health taken by ShareAction who’ve used this approach before on climate change (e.g. with HSBC). It’s in line with the UK Government’s intent to reduce obesity of which the first step is to place restrictions on the advertising and promotion of high fat, sugar and salt products (aka “junk food”) by April, 2022.

Tesco is also promising to make products healthier through: reformulation – e.g. increasing the percentage of ready meals that contain at least one of the recommended 5-a-Day to 66% by 2025 (currently, 50%, up from 26% in 2018); increasing the number of promotions on healthy products; offering healthy alternatives to family favourites at the same price; and the launch of new super healthy product ranges.

Tesco has substantial latitude in determining the “healthiness” of its product mix because of the high proportion of Tesco label products (50% of total) and, currently, it has particular influence on the national diet because of Lock Down in the food service sector, leading Britons to buy most of their food from supermarkets. The retailer points out that it was already on the road to providing a healthier food offer, as identified in its Tesco Little Helps Plan, which it will use annually to present progress against its targets. The Plan is focused on serving customers with affordable, healthy, sustainable products that are planet-friendly and nudging them towards healthier diets. In part, this increasing emphasis on health is a defensive move – Marks & Spencer and Sainsbury’s (2 major competitors) have been particularly active promoting themselves on healthy foods over the past 12 months.

If the action of activist shareholders isn’t enough, the food industry in the UK and many other countries is nervously bracing itself for much more rigorous action by governments to accelerate healthier eating by their citizens. The move from “nudging” to taxing and introducing legislation on food merchandising activity – e.g. banning “Buy 1 Get 1 Free”, aisle end/check out placement for confectionery and salty snacks, advertising to children of “unhealthy” products, scary “tobacco-type”, front-of-pack labelling on fat/sugar/salt – is coming soon. This harder core government action was on the way prior to the pandemic to fight the obesity crisis but, now, it’s “Covid-fuelled” as the daily death toll shows us the additional risk to unhealthy (particularly diabetic) citizens of the virus. Pre-Covid, there was significant push back in liberal democracies  to perceived “nanny state” interventions. As the costs to the taxpayer of financing national health systems increases and becomes more transparent, governments will become bolder and more forthright in intervening in food markets to influence the direction of national diets.

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Nestlé, Number 1 in the Global Food Industry, 150+ Years Old and Continues to Show the Ability to Change with the Times

If you’re interested in the global agrifood industry, then, it’s useful to keep tabs on what Nestlé is up to! At $93bn (2019), its annual sales make it far and away the biggest food & drink company in the world and its market capitalisation (value in the eyes of the market) is close to $300bn. Number 2 and far behind in the global league table is PepsiCo, with sales of $67bn and market cap. of $200bn.

Nestlé is on the news recently! In late-2020, the company acquired Freshly a US subscription-based fresh-prepared meal delivery service for $1bn (it had taken a minor share in 2017), and last week they snapped up UK recipe kit business Simply Cook, a similar business. Nestlé is on a mission!, as it continues to grow rapidly its home delivery business in the wake of Covid era.

We’ve mentioned that “Big Food” took a good bashing during the 2015-2019 period, only seeing sales recover oddly enough during the pandemic as “locked-in” consumers rushed to buy previously out of fashion comfort foods with trusted brand names. Kraft Heinz is a classic case in point. Kraft & Heinz were put together by majority owners 3G Capital and Berkshire Hathaway in 2015. Analysts liked the zero-based budgeting approach and focus on slashing costs but its products looked increasingly old-fashioned. Its current share price is one-third of the high point in early-2017.

How has Nestlé performed during the torrid 2015-20 period for “Big Food”? Better than most! In 2018, USA investor activists targeted Nestlé intent on waking up the sleeping Swiss giant! Well aware of the slow rate of sales growth in developed economy fmcg markets, Nestlé’s Board acted out of both previous practice and character in hiring a new CEO who (a) was not from within the company and (b) who had a non-food and non-fmcg background. Since early-2017 to late-2020, Nestlé’s share price has risen by around 40%. Its focus on “at home” products, rather than food service has been helpful during the pandemic.

Under Mark Schneider’s (the new CEO) leadership, the company has taken a middle ground of setting more challenging profit margin targets and undertaking needed reorganisation within the company. He re-established the need  to grow the “top line”, i.e. sales. Organic sales growth at Nestlé had fallen from 7.5% p.a. in 2011 to 2.4% in 2017, slowed down by food price deflation, changing middle class diets in Europe and North America, and sluggish growth in emerging markets where young consumers are spending more money on digital products than on confectionery! Initiatives taken over the past 2 years include:

  • Increasing speed to market for new products. Nestlé was looking slow-footed relative to startup brands who had strong social media and e-commerce skills. Schneider’s view was that taking 3 years to launch a new car was acceptable but not for a chocolate bar! Garden Gourmet plant-based burgers were launched in Europe in 2019 and the improved “Sensational” burger in 2020. Nestlé Purina offered an allergy-busting cat food. As mentioned in last week’s “NPD and more” nugget, a R&D Accelerator has been established for dairy and plant-based dairy products;
  • Transformative deals were negotiated such as the licensing of Starbucks coffee for sale in any retail outlet apart from a Starbucks café;
  • An aggressive acquisition strategy, such as adding businesses to its nutritional health division and, in late-2020, paying $1.5bn  for startup Freshly, an American home delivered healthy meal business, and recently acquiring SimplyCook and a majority stake at Mindful Chef in the UK. Underperforming and/or slow growing businesses have been sold – such as its American ice cream brands in late-2019, and selling the majority portion of its European packaged meat business to a Spanish specialist meat company;
  • Increasing its share of premium products in the overall Nestlé portfolio (e.g. the “super  snobbish” “flat white over ice” Nespresso pods) and pinned its flag to the mast of plant-based foods as a driver of future sales growth;
  • Making a substantial statement about its concerns and  actions on sustainability issues – apportioning a budget of $3.5bn to combat climate change, including $1.3bn to work with farmers on regenerative agriculture, pledging to make all packaging recyclable or reusable by 2025 (Nespresso pods by 2022);
  • Rejigging its China portfolio (next to the USA, China is Nestlé’s 2nd biggest market) by concentrating on infant nutrition, coffee, confectionery and pet care and selling its canned food business (Yinlu).

“Big Food” has taken a bashing but Big doesn’t have to be Bad. Scale brings access to huge resources and, when guided by astute senior management, ensures a 150 year old company’s products and services meet the needs and wants of 21st Century consumers.  

Iconic staircase at Nestlé Headquarters. Vevey. Image Source Domink Gehl.

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About the authors
Prof David Hughes: Around the world, David speaks to senior agribusiness and food industry managers about global food industry developments that are and will affect their businesses and industry. Energetic, engaging, humorous and insightful, David gains the very highest evaluations at seminars, conferences and Board level discussions in every continent he visits. Miguel Flavián: works for several Spanish organisations and companies to help them to learn from the developments of the British grocery market and improve their business back home.