Some Reflections on Global Food System Trends

End of the year food blogs, often, focus on trends embraced by the chattering classes, such as Gothic desserts, even more obscure ancient grains, and posit opinions on whether demand for kombucha tea has peaked. However, we thought we’d take the “ground-breaking” FAO 2017 study of global food system trends and pull out some stuff that might be of interest to you whether you are farming, retailing or doing anything in between.

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  1. World Population Growth is Slowing

We’re going to add 2 billion more people to our world over the next 30 years and most of us will be living in cities – that’s handy because it makes them easier to bag with our products and services.  By 2050, India will be the most populated country and China will have got old before it gets rich, with too many grumpy batchelors. Notwithstanding the UK’s wingeing about new entrants, Germany’s population growth rate is double our own. Urbanisation brings sharp falls in fertility rates across the globe – who’s going to do the grunt work? A combination of robots and immigrants?

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  1. Dietary Patterns are Changing

Global meat demand is buoyant and the better part of 90% of anticipated increase in consumption over the next decade will come from Asia. Right now, China woofs 25% of the world’s entire production of soya to feed an increasingly ginormous pork herd, but global meat exports will surge – 5 million tonnes per year into China alone. Counterbalancing meat demand growth in emerging markets will be a slow drift down in per capita consumption in richer countries. Mind you, protein intake will grow, driven by pulses, dairy and complex meat substitutes.

  1. Nutrition and Health

The proportion of the world’s population that is under-nourished is falling, thank goodness, but over-consumption is increasingly pandemic. Under- and over-consumption bring huge avoidable costs to us all. Food culture and history explain astonishing divergences between countries: in Europe, obesity is 3 times higher in the UK than Italy; and it’s 10 times higher in the USA than in Japan! There’s a well-beaten path – first, government departments of health recommend we change our diet and lifestyles. Little happens and the food industry is exhorted to reformulate. Marginal changes arrive but too little, too late. Governments turn to fat and sugar taxes more as a stick to beat industry into accelerated change than to influence significantly consumer behaviour. The health & well-being megatrend is a long-term runner.

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  1. Global Economic Growth, Investment, Trade & Food Prices

Global annual economic growth is projected at 2.7% but it won’t be shared equally around the world. Watch out for hiccups in China, the USA and India – the first two have a disproportional impact on the rest of us, i.e. if they have a sniffle, we catch cold. A slowing China is entirely predictable but don’t forget that a VERY modest 5.2% growth in Chinese GDP is equivalent to adding “Another Germany” every 5 years! When the USA is struggling, China and India account for over 50% of global growth – a frightening reminder that economic performance in these two emerging markets can both make and break us economic minnows. Agricultural commodity prices are expected to remain at relatively low levels which is particularly disappointing for farmers ……

  1. Competition for Natural Resources, Agricultural Productivity and Innovation

…. because of growing scarcities of natural resources which will drive farm input costs higher. FAO anticipate “intense competition for diminishing resources resulting in further land degradation, deforestation and an unsustainable level of use of water resources”. But, there may be some mitigators: peak oil being pushed further back into the future because of alternative sources of both non-renewable and renewable energy; increasingly AI-driven, high tech agriculture bringing a productivity surge to commercial farming; science-based and societally-approved genetic engineering of plants with consumer and producer benefits such as nitrogen-fixing staple crops, drought- and disease-resistant crops, etc.; transformation of business models in farming fuelled by rewarding productivity increases (and other societal benefits) rather than focussing on slowing the rate of agricultural adjustment (e.g. elements of the CAP).

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Unilever and other Big Food using their scale for good.

 

  1. Climate Change, Natural Disasters, Conflicts, Crises & Migration

FFAO separate these into 4 separate, gloomy trend boxes but we lump them into 1. Unequivocally, climate-related disasters are escalating causing huge economic damage, viz. $100 bn. per year between 2004 and 2014 and exacerbated by higher global temperatures and erratic rainfall. For many countries, this will mean greater food insecurity – higher income consumers can cope if a staple or a treat leaps in price. But, it’s a different matter for the lady buying food for her family in The Philippines. More than half her family’s income goes on food and, if the price of rice rockets because of a nasty El Niño, she doesn’t buy less rice, probably she buys more and much less of the little treats she was starting to give her family (e.g. imported beef, dairy products). For exporters, anticipate more volatility when you are business planning.

Here’s another crisis in prospect: in Bangladesh, half of the 165 million people live so close to the water that a combination of rising sea level, more frequent and extreme weather events and add in the tragic influx of Rohingya Muslims from Myanmar, then, Bangladeshis and the world have a massive problem. Because when push comes to shove and their feet get wet, they’ll start walking – and in numbers that will make the more recent North African immigrant flow into Europe look like a Sunday picnic. This is a Bangladeshi issue but a problem that the world will have to solve. Mind you, it’s an ill wind etc…. as we’ll be needing the labour.

  1. Transboundary Pests and Diseases

Global food security is threatened by an alarming increase in the number of outbreaks of pests and diseases in animals and plants. Bird flu is a case in point. Two years ago, there was egg rationing in the USA for goodness sake – a country where they can’t spell rationing, let alone come to terms with food shortages! China’s National Health & Family Planning Board reported 79 human deaths in January, 2017 from Avian Influenza. The worry is that a mutation might allow human to human transfer of AI and that would beget a cataclysmic pandemic. Remember, more than 70% of infectious diseases in humans since 1940 can be traced back to animals.

  1. Food Losses and Waste

There is plenty of food to feed our world of 7.6 billion. It’s not evenly distributed and close to 800 million people end their day hungry. Yet, one-third of all food produced is lost or wasted! In emerging countries, food is mainly lost in the supply chain before it reaches consumers (e.g. spoils in storage, or in-transit). In “our” world, most of the waste is in the home – we buy too much and throw it away. We’ll all get better at this – better supply chain management and infrastructure in emerging countries and, in the Western world,  we’ll be shamed into more sustainable food buying and consuming practices and become savvier about spending our hard-earned money on groceries. Move on to 2050 – Malthus will be proved wrong again as we produce plenty of food for 9 billion consumers. The issue is will we be doing so in a sustainable way?

  1. Structural Changes within Economies and the Food System

As we travel the world of food, we note the accelerating pace of change in many markets. When David lived and worked in Africa, one huge constraint to smallholder farming was simply them getting paid for their output – payment was slow and poor via a labyrinthine marketing chain. Then, the mobile phone era arrives – Africa skips the need for a land-based telephone system and becomes a world leader in transferring cash safely via the phone. It’s refreshing to note, for example, Cargill’s “Cocoa Promise”  to small-scale farmers ensuring rapid and fair prices plus extension support to their mutual benefit – a better deal for farmers and a more secure and higher quality source of cocoa for Cargill. The triple bottom line approach to business is a megatrend and essential for “Big Agribusiness and Food” to regain the trust of farmers and consumers worldwide.

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We wonder about the path that grocery retailing will take in some emerging countries. Not necessarily the path of small grocery store (duka) through to large supermarket route characteristic of grocery evolution in our own markets – note the huge attraction of on-line grocery shopping for customers living in global mega-cities in Asia! In short, the evolution of food systems in Western economies is no blueprint  for emerging countries. What we’ve learnt is that, for any business person, it’s good to get out more (and go a little further than Tesco and Pizza Hut). Stay home, stay stupid!

Happy Christmas to any readers who have got this far in our last blog of the year. We’ll talk to you in 2018 and reveal all about Gothic ice cream and kombucha tea!

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Posted in Trends

Big Food: Going, Going, Gone?!

Big food companies haven’t been cracking open the champagne in recent years – in developed markets, sales have been in free-fall, with fast-growing emerging markets saving the day but, still, the overall sales trend has been ominously downwards, and this has been reflected in their share prices. It’s darkly amusing because consumer activist groups still rail against Big Food – Unilever, Nestlé, Kraft, Mondelēz, Danone et al – because, purportedly, they have global consumers in their thrall! But, listen to Emmanuel Faber, Danone’s CEO: “the food industry is going nowhere – because short-sighted companies see only a transactional relationship with consumers, not deeper ones based on values”.

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Rabobank graph with Euromonitor data for the US Market, showing the performance of Big Brands, Small Brands and Private Label in different categories.

What are the problems for Big Food? Well, there’s the one Faber identified above and here’s four more:

  • Consumers have moved on eschewing “over-processed” foods as they seek healthier, fresher, more natural snacks and meals with simpler ingredients. Take breakfast cereals for example, Kellogg’s Frosties, Post’s Fruity Pebbles and Honey Bunches, General Mills’ Cheerios screamed “sugar-drenched” to mums (if not to kids). Start-up companies, generally, run by millennials spotted the slow-footedness of these ponderous dinosaurs and whizzed in with new age products that pleased parents and their offspring. We blame those pesky, difficult-to-please centennial and millennial consumers. They deserve a good spanking but, the trouble is, there are 4 billion of them worldwide;
  • More broadly, consumers have been showing a distinct predilection to trust must less our traditional pillars of society – like big government, the church and, yes, big business (legal but nonetheless dodgy tax avoidance by Starbucks et al hasn’t helped here);
  • Big Food’s major customers – supermarkets – are under extreme pressure as Amazon and Alibaba are in the process of changing how consumers shop for groceries. When Tesco gets squeezed, its suppliers feel the pain. Doubly so, when supermarkets expand their private label offer at the expense of branded products to seek points of differentiation. What’s more, the centre of the store is being squeezed as shoppers flock to the perimeter where more exciting fresh and freshly-prepared foods are sold. No wonder the centre of the store is darkly termed “the morgue”!;
  • And, of course, an extended deflationary period – reflecting declining raw material prices (corn, soy, energy, etc.), over-supply in grocery retail bricks & mortar, households still recovering from the vicissitudes of the GFC hasn’t been helpful. When inflation is rampant, it’s a tad easier to sneak up retail prices than when shoppers expect prices to remain the same or fall.

Like big business in general, Big Food has this recurring nightmare of exiting the top 100 companies in their respective stock markets. The average lifespan of a company in the S&P 500 was 60+ years in the 1950s and, now, it’s less than 20 years. So, CEOs have similar nightmares to football managers in the  UK Premier Football League – viz. the threat of demotion to the lower leagues! To continue the football analogy, food businesses do the same as soccer teams when results turn against them – they change managers! Who’s done this recently? – well, in the last 20 months, 17 CEOs of big food companies have been sacked or “stepped down/retired”, including Kellogg’s, Mondelēz, General Mills, Hershey and, God forbid, even rock solid Nestlé. Particularly for US companies, getting the boss to fall on (usually) his sword is the first move to convince investors that a turnaround is a coming (shackled as they are to “deliver the financial numbers” every quarter). So, being promoted to CEO is akin to being presented with the “Black Spot” in Robert Louis Stevenson’s classic “Treasure Island” – the pirate king is doomed to a tragic end!

Sack the boss, is that the solution to its woes? No, Big Food has other arrows in its turnaround quiver, like:

  • Slashing costs across the business and doing it in a hurry before 3G Capital with Warren Buffet, the “Sage of Omaha” arrive on the scene and peremptorily acquire you and introduce zero-based budgeting (as they have manifestly and successfully done so with KraftHeinz);
  • Do the above but think big, again à la 3G Capital and merge Heinz and Kraft and, what’s more, have a go at adding Unilever into the mix to produce mega-economies of scale that astounded the market in February this year;
  • Reformulate/tweak existing products and accelerate NPD to launch healthier, on-trend products. Normally, this brings a rash of kale, chia, and panoply of gluten-free ingredients, or a link with a celebrity;

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  • Sell under-performing divisions/categories of the business – e.g. the spreads division of Unilever (“I Can’t Believe It’s Not Butter” doesn’t have to believed, it just disappears!). This is the “shrink to success” sub-strategy (unless you’re P&G when the sale over time of its coffee, snacks and pet food businesses was an “exit food for higher margin health, beauty and homecare” strategy);
  • Focus on faster-growing areas of the business. Nestlé comes to mind as it identifies – water, coffee, pet care, infant nutrition as high growth areas, with consumer healthcare a longer-term slow-burner, and accelerated pushes in emerging markets;
  • Buy a big player in a fast-growing area – e.g. Danone’s purchase of White Wave for $10.4 billion, whereby a major dairy-based foods company acquires a plant-based “non-dairy dairy” company with brands such as Alpro, Horizon Organic and Silk soy milk, or Mars and its $9.1 billion purchase of pet care company VCA, Inc. in the USA (the pet care market is growing at twice the rate of consumer foods);
  • Pervasively fashionable with Big Food has been the establishment of venture capital divisions with modest pots of money to buy into start-up companies that have product portfolios with high potential – e.g. Danone’s Manifesto Ventures that has invested in organic baby food start-up Yooji, Michel & Augustin (premium cookies and organic yogurts), Farmers Fridge (salad vending machines) and Accel Foods (a VC accelerator backing, inter alia, a company making tater tots from cauliflower) over the past year. Unilever, Nestlé, Kellogg’s, General Mills, Campbell’s have all been similarly busy with the hope that they’ve picked a Fever Tree start-up phenomenon that can go big time;
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Campbell Soup has just announced they are joining the Plant Based Foods Association, to reinforce their commitment to healthy food and perhaps buying new brands in this area!

  • Announce share buybacks to keep shareholders sweet and activist investors off the corporate back. This is a “capital structure” play that is preferred by the likes of Nestlé – and handy when one has cash but nowhere immediately to spend it on a high return opportunity;
  • Finally, the far-sighted food companies place society’s interests at the centre of their businesses and communicate this effectively to consumers, shareholders and other stakeholders. Unilever and Nestlé do this best. For instance, Nestlé’s use of the Creating Shared Value (CSV) tool: focusing on areas of greatest intersection between its business and society’s concerns – products with a nutrition, health and wellness dimension perform better than junk food in the long term, rural development programmes for farmers ensure long-term ingredient supply (e.g. cocoa) and are liked by consumers who want to know who produces the ingredients for Nestlé’s KitKats, and responsible stewardship and sale of water saves costs, lives and is positive environmentally. Paul Polman, CEO of Unilever, has been a thought leader in this area – the Unilever Sustainable Living Plan is about doubling the size of its business whilst reducing its environmental footprint and increasing its positive social impact (moving towards “net positive”). Emmanuel Faber (see opening paragraph) is onside, too, launching Danone’s “One Planet One Health” signature programme.

So, is it “Big Food, Going, Going, Gone?”! Well, let’s hope it’s Big Food Bad Food heading for oblivion. But, there’s nothing wrong with big companies – they’re not intrinsically bad. They bring scale, resources, technological sophistication, jobs and, when they move in a direction that is consonant with society’s greatest needs, they can be powerful accelerators of positive change. Let’s give Big Food some encouragement and a kick up the backside and may Little Food continue to harry them mercilessly. Whether you’re Big Food or Little Food, however, the principal key to commercial success is to produce tasty products that are irresistible and produced in ways that are in tune with the values of consumers and society at large. What must stick in the craw of Big Food that has got this message is that it’s a long row to hoe! In the meantime, the most profitable companies globally in grocery are the ones pedalling cigarettes and booze. Organic yogurts and chia-coated muesli bars can be yummy but they’re not addictive. C’est la vie – it’s a cruel world!

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Posted in General, Health, Premium, Trends

Red Alert on Red Meat!

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The consumer and food trade media is full of stories about “the end of meat as we know it” and, indeed, we’ve been banging on about “non-meat meats” for months – and for good reason. In the USA, plant-based burger companies Impossible Foods and Beyond Meat (which will be in UK restaurants and on shop shelves in 2018), lab.-grown “clean meat” Memphis Meats, Modern Meadows growing collagen-rich leather from animal cells, egg-mimicking mayo-producer Hampton Creek,  and others have attracted over $1 Billion in start-up finance from the likes of Bill & Melinda Gates, Li Ka-shing, Google’s Larry Page and other Silicon Valley noteables. Their rationale is partly altruistic but, partly, driven by the belief that the agriculture and food industry is due for massive disruption just as, concomitantly, the way that food and groceries arrive in our homes is being transformed via electronic platforms à la Amazon and Alibaba, and recipe kit start-up companies such as Hello Fresh and Blue Apron, with delivery agents Deliveroo and Uber Eats spreading like wild mushrooms across the globe.

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We recognise that there are pundits aplenty who take a cynical dyspeptic view that most of the above are ne’er-do-well Ponzi schemes that are bound to implode. Indeed, many will not make it but, do you doubt Amazon’s ability to change the rules of the grocery retailing game? Getting back to meat, available in 19 countries is 32 year old mycoprotein Quorn, now owned by Monde Nissin of The Philippines. Hardly new on the block, Quorn within the next couple of years will be the first $ Billion meat analogue in our world and it continues to cheekily labelling itself as “Meat-Free Chicken”!

Let’s nail our dietary preferences to the mast” David is a meat and 3 veg. baby boomer – a solid meat supporter although a little girly on portion size; Generation Xer Miguel is Spanish (or he may be – he’s from Barcelona , you know!) and Iberians wallop back way more meat per capita in toto (including seafood) than Brits do and consider vegetarian a term of abuse. Our headline views on meat include the following:

  • We’re at the apex of the species triangle because of meat. Our ability to hunt and eat raw meat, then, control fire to cook it, improve its taste and accelerate digestion rapidly grew the size of our brains. We are brainy because we eat meat – if we hadn’t, the other higher primates would have had us on toast (metaphorically, of course, because they are largely vegetarian). Remember, they’ve got opposable thumbs, too!
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Savvy shoppers can feel cavemen for a day!

But, because we’re brainy (or, at least, brainier than most chimpanzees), social and emotional we’ve got some issues we have to handle with meat and, in particular, with red meat which are both real and perceptual:

  • Most humans have got this unfortunate penchant that if we really like doing something and we’ve got the economic wherewithal to do it, we tend to do it to excess (Americans excel at this). This underpins growing concerns that as the global population increases and incomes grow commensurately, the so-called “emerging world” will gollop down “developed country” portions of meat and, then, we’ll run out of land, and bugger up the environment growing crops to feed to animals that convert them inefficiently. Grain-fed beef is a particular target in this regard. But no livestock species is spared. Brazilian rain forests can be felled to turn into pasture or into farm land that can grow corn and soybeans whether this be fed to cattle, pigs, poultry, or fish for that matter. Cutting to the chase, carbon sequestration is and will be increasingly a big issue for the livestock and meat industry;
  • Focussing on red meat, cattle and sheep are brilliant at converting grass into absolutely yummy meat (and dairy products) for our tables. This is fabulous because humans are particularly poor at digesting cellulose and gaining any nutrition from it – and if we could, who’d want a fescue sandwich? But, the real bummer is that our much-loved ruminants produce huge amounts of carbon dioxide, methane and nitrous oxide whilst catering for our red meat and dairy product preferences. All the scientific evidence shows that these greenhouse gasses are significant contributors to global warming which is bad for all of us (with the possible exception of self-interested Canadian Prairie farmers – nobody farms North of them, you know).
  • Animal welfare is a large and growing concern and for sound reasons. This is by no means to belittle the huge issues under this complex canopy, but the level of consumer concern is linked to the size of the animal at slaughter – ruminants en route to red meat for our tables such as doe-eyed cattle and gambolling lambs are a particular target of concern for consumers, mind you so are monogastric pigs (curse that anthropomorphic Babe).
  •  We’re living longer but not necessarily healthier and meat gets a bad rap in some quarters. Two years ago, WHO identified red meat as being probably carcinogenic and processed meats as being definitely so. Clap trap? Our view is that homo sapiens was probably not programmed genetically to shovel down 100+ kg. of meat per person per year. Governments who, in many countries, carry the can via taxpayers for the cost of the nation’s health, are increasingly signalling that we should eat 500 grms. of red meat per week not 500 grms. for dinner! This pressure will continue inexorably.

So, where are we? Meat industry folk have got a lot of issues on their plate to address; whereas ironically, in rich countries, consumers will have less meat on their plate! The impact of the above issues, the growing interest in plant-based proteins, flexitarian diets et al will all chip away at meat volume purchases per capita in our markets. But, Hallelujah – consumers with money are signalling that they might wish to eat less meat but, certainly, they want to eat better meats. Thus, the opportunity and challenge to work out what consumers value in their meat products and are willing to pay more for.

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A good start would be for us to recognise that millennial and centennial consumers (and there are 4 billion of them worldwide) don’t awake with the driving ambition to have red meat today. Soylent devotees apart (you know, the meal in a bottle folk), most consumers expect the food industry to come up with tasty, affordable and quintessentially convenient meal and snack solutions and NOT problems. Yet, the antediluvian “half shoulder knuckle on” lamb product still lurks in the freezer bins of most supermarkets – acknowledged only by poor pensioners and dog lovers and eschewed by anyone under the age of 40 as they recoil from the apocalyptic sight that puts them in mind of an axe murder. We’re astonished that some retailers still display fresh meat by species – i.e. the beef/pork/chicken/lamb sections – and not by usage/occasion – e.g. meal in under 10 mins./special friends coming/for the kids sections. But don’t start Miguel ranting on about the British foible of having special dumb meals for children. “What’s wrong with giving them smaller portions of whatever the adults are having”, he says. You know those quirky Mediterraneans!

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British Retalier J Sainsbury’s catering for all: those who want to cook or can’t afford, pick the ingredients, those who don’t want to cook or are poor on time, pick the ready meal stew-in-30-minutes-no-fuss pack!

Whilst increasing protein intake is seriously on-trend with many consumers, there’s much more than red meat in their protein selection set. Remember, too, that the 3 meals a day approach to feeding the body and social soul is fragmenting. Mini-meals and snacks are the order of the day. Red meat snacks? Ah, the renaissance of jerky. Miguel was at a fish conference in Dublin last week and dashing through the airport he noticed the protein-on-the-go product below. A snip at £3.59 per 25 grm. pack. Do the maths and rejoice in the commercial anticipation of opportunities for brain-building, story-packed red meat! Red Alert on Red Meat? Beef and Lamb have their issues, but let’s celebrate that they are premium products and ensure that consumers are happy to pay more for them.

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Posted in Fresh Products, Trends

“Alexa: Turn Off the Lights when the Last Shoppers Abandon Supermarket Aisles 4 to 12”!

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It’s Winter 2030 and shrivelled, desiccated traditional supermarket companies fall like Autumn leaves from the NYSE and LSEs of our world. In only a dozen years, grocery shopping has disappeared as a drudge activity. We still shop but on our own terms and the angst associated with shopping trolley and car park rage has evaporated. Children giggle at our knees as we explain old-fashioned words to them such as groceries and ingredients and are as bemused as we were when our parents told us of escutcheons and liberty bodices. Visiting a supermarket for our basic household needs seems quaint like when we used to queue up to request our own money from supercilious bank clerks in pre-ATM days.

What do you think –  nonsense; pipe dream? Well, last year in South Korea, grocery sales via e-commerce increased by 41% year-on-year and supermarket & hypermarket sales declined by 7%. In the UK, we saw a similar but more subdued pattern and, along with Japan and China, we are in the front ranks of on-line grocery sales developments.

The moot question is why has it taken so long to get to our current baby step stage in on-line grocery shopping? After all, the internet has been up and running for close to 50 years and the world wide web is a robust millennial of 26 years. Home delivery of groceries  was the norm decades ago: David’s mum had the Hughes family’s red meat, fish, fruit and vegetables, dry groceries, milk, lemonade and coal all delivered. She had no time to shop during the week because she was teaching infants Monday to Friday. A quick phone call to the butcher and he was more than likely to recommend what meat she should have for Sunday lunch (“I’ve got a lovely leg of lamb for you this week Mrs. Hughes” – he’d know what she could afford, what she’d bought last week and, importantly, what he’d got to sell!). The relationship was based on mutual trust – something which is in relatively short supply for many customers particularly when it comes to the quality of fresh foods.

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Trust is so important for Sicilian housewives that they even send their husbands to the market to buy fresh fish!

What about in Spain? On-line grocery sales are growing but from a lower base than in the UK. Traditional independent retailers still account for around 50% of fresh food sales value. Miguel recalls that, for his grandparents, open markets were popular as in France. Women were the primary shoppers and, typically, were not working outside the home. Shopping had a strong social element – an opportunity to catch up on what was happening locally. For special occasions such as Christmas, El Corte Inglés might beckon offering Harrods-like goodies for the family. For Miguel’s working mum, food shopping for the family might be sneaked in during the lunch break and emerging supermarkets would be chosen for packaged and processed foods as outdoor and central markets became dowdy. Frankly, now, in Spain or the UK drudge grocery shopping has little social value for most shoppers (bar older pensioners seeking “free” coffee in Waitrose and a gossip!).

Way back in 1989, Peapod was launched in the USA as an on-line grocery ordering and delivery company (owned by Ahold Delhaize since 2001). Like many start-ups it struggled but has survived. Retail pundits predicted its demise largely on their view  that consumers would not pay to have their groceries delivered and the supermarket sector was so competitive and low margin that such interlopers could not survive. What time has shown us is that some consumers unequivocally will pay for such a service. Clearly, retail businesses have to keep in touch on price with competitors, particularly for a range of KVIs. But, the opportunity cost of time is not the same for all shoppers. How much do you value your time? The convenience trend is unstoppable – consumers and, particularly, younger ones want products that are convenient to buy, prepare, consume, and dispose of. Did you/are you reading your children “Charlie and the Chocolate Factory”? Remember Veruca Salt, well, she wanted Wonka’s Golden Ticket NOW – Veruca is a Millennial to a T!

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There are plenty of options in UK if you want your food to be delivered home.

What the pundits completely misread was the creativity of the grocery/restaurant meal delivery sector à la “You’ll never make any money out of delivering low margin groceries” – well, tell that to Quiqup, Convibo, Deliveroo, Uber Eats, beelivery in London. And we take delight in noting that Sainsbury’s groceries can be delivered within the hour in 2017 by a boy on a bike, as they did in 1917! Some will go bust, but a super-efficient last mile delivery service is emerging. Tesco recognises that “the man in the Tesco van” can be its front line ambassador like the milkman of yore (with all the accompanying smutty jokes). Check out FoodKick, Instacart, etc. in the USA. Will consumers pay for quick service? Of course they will – depending on occasion, location, income and age of shopper.

On-line grocery (to use the archaic term) delivery is with us and will explode. Bye bye traditional supermarkets – like tumbleweeds blown out of town and into oblivion? Don’t hold your breath – they still represent just under 50% of total UK grocery spend. But, look up and around – Amazon and Alexa, Tesco in the UK and Walmart in the USA with Google: voice-activated replenishment is coming towards us like a tsunami and in its wake automatic replenishment – those centre of the store basic items will soon be long gone from the supermarket and bricks and mortar retailers better have smaller stores or more interesting products and services in their stead. Does that mean the traditional supermarket can rest on its laurels as a trusted fresh food provider? Not so, as food retail and food service converge at an accelerated rate (what’s the difference in offer between food service Pret and retail M&S Food to Go?), watch out for the nimble food-to-go specialists with snack and meal solutions delivered wherever and whenever you want them.

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Expect rapid change in the grocery retailing business. If providers are to capture full “baskets”, then, the battle must be won on fresh foods. Those that gain the trust of the shopper will prevail. Mind you, they’ll have to show excellence in execution and a comprehensive range of click and brick shopping options. Clearly, keeping in touch with competitors on price is crucial but never underestimate the value that many consumers put on their own time. For many, they’re often short of money but they’re always short of time! Automatic replenishment of the routine purchases will be pervasive. Alexa, turn off the lights as the last shoppers leave supermarket aisles 4 through 12!

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New range of Sushi in the food to go section of Marks & Spencer. Ready to challenge the specialists and the supermarkets that prepare the product within the store.

 

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Posted in Online, Uncategorized

What is Your Story for Millennials?

Do you know that close to half of all eating occasions in the UK and the USA comprise one person eating alone – a morose male tucking into a “Sad Bastard Ready Meal for One” comes to mind. But, that’s not so, we’re all too busy and, anyway, in most major urban centres of higher income countries 35% or more of households are singletons – Oslo tops the league with 60% of households being solo and helps explain why they are the highest per capita consumers of individual pizzas in the world! But, not in family-friendly Asia you say?: well, in 2000 less than 50% of 25-29 year old Singaporeans were single and, now, 70+% have that status. It’s no different in 21st Century urban China.

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Lighter Pizza for One from Pizza Express

Official statistics on household size are no indication of actual household food eating behaviour, particularly when it comes to millennials. Students and early stage professionals may live together but they certainly don’t eat together at home. Sharing the rent is an economic necessity but, invariably, they have a fridge shelf each and, because of frenetic work and social schedules, pass like ships in the night. Those pesky millennials, why don’t they shut up and get a life? Well, by 2025, there will be 2+ billion of them and will account for over 50% of the global work force. They’re voluble, opinionated, impatient and seem to be obsessed by taking pictures of the food they are eating and crowing about it to their friends. But they are our future core customers – and some of them will elect to produce children. Baby boomers, pampered by the state when the state had money, comfortably off with index-linked pensions and the mortgage paid are disproportionately holders of the nation’s net worth, but their purchasing habits, if not actually set in stone, are very difficult to shift.

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Shoppers at the store checking their mobile phone? Maybe they are not comparing prices but checking remotely their fridge to see if they are running out of almond milk!!! Picture: Samsung.

Allow an indulgence and a vignette of no statistical significance. David was in Australia last week and talking to a daughter of an old friend. She’s 30, single, a teacher and shares an apartment with a colleague. They never eat together. In the morning, it’s out of bed and off to the nearby fruit & veg. store to buy a customised  smoothie for brekky (tick – that’s 4 of her 5-a-day done) and pop next door to buy a sandwich or salad for lunch. Cookies in the staff room for an indulgent, naughty snack. Evening meal? Depends: maybe a takeaway if pushed for time (50%), out with friends, or home for a pasta-based meal prepared at the weekend to cater for such exigencies! Her preference is not to shop in one of the big stores (Woolies or Coles) but to use local outlets who know her and her requirements. She’d buy more organics if she had more income but needs must! Think of young professionals you know, sound familiar?

Let’s not forget about the Generation Xers – exhausted parents as some of them are. These are the lot born between the early-60’s and 80’s. Do they sit down for breakfast and evening meal with father serving at table? Well, no! In the USA (and the UK is close behind), 26% of households with children have a single parent – up from 9% in 1960. Even if they had a full parental set, the notion of “the family” all eating the same meal is passé: God dammit, Brenda is vegetarian this term, David is out at soccer practice, mum is on the FODMAP diet (don’t know about it? You soon will!), and father is gluten intolerant.

Often we’re asked about our view on the globalisation of food and, particularly, the perception that American fast food has an insidious hegemony worldwide. Let’s dismiss this forthwith – urban consumers want food fast around the globe and, increasingly, burgers and pizza apart, Asian food styles are most prominent – any one for sushi, stir fry, noodles? However, the globalising phenomenon is the convergence of values and attitudes of millennial consumers: educated 20 to 35 year olds from Asia, Europe, North and South America, Africa and Australasia have much more in common with each other than they do with the generation before them.

Here’s Kantar’s take on ASEAN (Asian emerging countries bar India, Pakistan and China) food trends:

  • Functional consumption – health & wellbeing driving salad bars, healthy meal kit deliveries, cold-pressed juices in Malaysia, Vietnam, Thailand. But, simmering concerns over food safety and food chain integrity;
  • Mini-foods – indulgent foods in small sizes to reduce guilt such as mini fizzy drinks, ice cream, chips/crisps;
  • Food as fashion to bolster image with international brands having strong currency, particularly from Korea and Japan;
  • Street fusion – traditional. modern and international mixed such as traditional Indonesian martabak pancake with Nutella and mozzarella toppings;

 

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Back and forth influences: martabak pancake with Nutella and Matcha Latte!

  • Food trucks for goodness sake (surely, Asia was the home of street food?) in Malaysia and Vietnam, with English high tea being seen as cool!;
  • Food on demand – we want it NOW using digital hand held phone technology and instant delivery;
  • Café society prospers at the expense of old-fashioned boozing – it’s a wifi-driven world where one can connect in comfort (for the recently pubescent, there’s Hello Kitty and Pokémon cafés);

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Some Seoul cafés attract die-hard wifi-thirsty urbanites by offering a bit of animal socialisation without the pains of having pets at home.

  • Consumers ask more of the industry in terms of social responsibility, worker and animal welfare, environment, and care of the local economy;
  • And all of the above is mega-digital – it’s astonishing and worrisome how much time Thai, Malaysian and Filipino consumers spend glued to their phones (even by Western standards).

With some exceptions, the above seem consonant with trends prevalent in Western countries for millennials. Now, clearly, in emerging ASEAN countries, the above can be sampled by a relatively small proportion of 20 to 35 year olds simply on income grounds, but that doesn’t mean that a much greater group can aspire to such because they’re all linked in to Facebook, Instagram, Snapchat, Pinterest or their own equivalent.

What’s it all mean for us in the food industry? Who knows! But it would be handy if, during a very difficult period for many food companies worldwide, we understood how to relate to this pesky millennial lot. Can we answer key questions such as:

  • Do you share my values, particularly as they relate to social issues?;
  • Are you listening to me and how quickly can I contact you at a level where I can get action?;
  • Can you excite me and my taste buds and help me impress my friends?;
  • What’s your story about your company, ingredients, product, the “moment” when we’re enjoying your food and the company of our family and friends?;
  • How are you helping me and my family improve our health and wellbeing (without making it too much effort!);
  • Can I access you NOW, not this afternoon or tomorrow, but NOW!

Being in the food industry is a tough gig! Why didn’t we choose to be in something addictive like liquor, tobacco or other soft drugs?! Well, one reason is that eating and drinking isn’t going out of fashion. The trick is to work out what, when and how we’ll be feeding the body and elevating the soul and that’s the challenge and the huge opportunity.

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The wonderful story of avocado: they wanted to take pictures of their breakfast and they raised the sales of avocado by 30%! Picture: theamyacker.

 

Posted in Consumer, Trends, Uncategorized

What if ……… Amazon Bought Sainsbury’s?!

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Warm, woozy weather and we’ve been  saturated with Wimbledon, Lions, cricket and more. Pass the Pimm’s, please! But, global food industry developments have had their moments, too and not least Amazon’s purchase of Whole Foods Market. We chuckled no doubt as you did at the spoof exchange between Jeff Bezos and Amazon Echo’s Alexa: [JB] “buy me something from Whole Foods, Alexa”; [A] “buying Whole Foods, Jeff”; JB “oops, ah … oh, go on, then”! It’s hardly fanciful when one considers that Amazon has a market cap. of close to $500 billion and Whole Foods was snapped up with small change for $13 billion.

Amazon has been experimenting with bricks & mortar grocery stores, albeit with its own twist – Amazon Go the store without a till or checkout staff. But surely, it’s impressive share price growth reflects the market rewarding Amazon for its disruptive technology and not having to invest in hugely expensive retail store infrastructure?

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Last Year, back in Little Britain, Sainsbury’s purchased Home Retail Group owner of Argos online and catalogue seller of general merchandise. Its rationale was to boost sales growth, improve its delivery networks and sell their products to each other’s customers. This rings true for the Amazon-WFM deal, too. Particularly for fresh foods, being close to customers is essential to be cost effective in distribution and maintain quality of perishable products. Equally important for Amazon if it wishes to have a competitive fresh food platform, it must have strong relationships with fresh food suppliers and this Whole Foods can deliver. Like traditional grocery retailers, Amazon knows that excelling in fresh foods wins customer trust and loyalty and provides a huge opportunity to build a strong private label presence which is, increasingly, the only way that major retailers can differentiate themselves from the competition – Wickedly Prime is the first tentative steps in Amazon doing exactly this and, frankly, the initiative looks like a baby step! Mind you, Whole Foods hasn’t earned its spurs in private label either – the 365 everyday value products, designed to fit the millennial-friendly new Whole Foods 365 store format is OK without generating gushing revues.

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Picture: L.A. Times.

Taking the longer view, we believe that traditional super/hypermarkets have lost the battle for most shelf stable (even basic frozen) groceries. Routine purchases with little emotional involvement will become the bailiwick of online providers. The field of battle is focused at the point where “fuelies” are transmogrified into “foodies”. It’s happening right now – shoppers and consumers are increasingly interested in food experiences. The National Restaurant Association (NRA but not the gun one!) put it nicely “menu trends today are shifting from ingredient-based items to concept-based ideas mirroring how consumers tend to adapt their activities to their overall lifestyle philosophies” (e.g. “let’s have a local/sustainable meal”, rather than “let’s have beef for dinner”!). Now, clearly, this approach isn’t for every household (it depends on income, household composition, day/time in the week, i.e. relaxed time or frenetic time), etc. Sometimes foodies will want to shop physically and touch the products and talk to knowledgeable vendors but other times the smart phone will do as an intermediary. Just look how traditional supermarkets are reconfiguring their stores – as a supplier, you don’t want your product to be in the middle aisles, the morgue as it is known, because shopper interest is focused on the periphery or the special gondolas where there are fresh foods, interesting prepared snacks, mini-meals and meal solutions, and exotic international foods that will give you “food cred” around the office water cooler.

Now, whether Amazon can make it in fresh foods is a moot point. But, the company has a track record of investing for the long-term and Amazonians are not over-awed by big name grocery incumbents such as Walmart. Amazon Fresh shows intent and is pushing in multi-directions – it’s just filed a meal kit trademark for its own label in the USA to compete directly with Blue Apron (the largest meal kit operator in the USA) and Germany’s HelloFresh which is active in the UK. The strap line for Amazon is “We do the prep., you be the Chef”! Successful or not, Amazon will do damage while it is trying to establish a financially viable fresh food platform. Any implications for us in Little Britain as we fret about Brexit and gaze forlornly at our navels? Well, we think so!

First of all, why bother with our little island? Well, two reasons for starters:

  • Amazon are already making an online grocery play here with Amazon Fresh – which gives Amazon Prime customers paying £79/year (free next day delivery of non-food items) the opportunity to pay another £7 month for unlimited same day delivery of fresh and frozen foods for baskets over £40. Amazon uses its partnership with Morrisons to supply Morrisons own brand products at prices competitive with the other major retailers’ value brands;
  • And the UK is, along with China and South Korea, a leader in online grocery shopping. With a 6.5% share of the grocery market and sales in excess of £10 billion, online has traction and, although growth is slowing, it’s optimistic but not unreasonable to expect a 10% share by 2025 (say £20 billion sales). For online grocery, we are well ahead of the US and will remain so and there’s lots of learnings for Amazon that can be applied in the slower growth American market.

 

Next steps for Amazon in fresh foods in the UK?: continue to learn from its Amazon Fresh Now experience and the partnership with Morrisons; observe the extent of the damage that the discounters place on the big four retailers – IGD forecast that Aldi/Lidl may increase their combined market share of groceries to 14+% over the next 5 year and the incremental 4% will come out of the hide of the Big 4 (although robust price inflation may ease the pain for them, their share prices will be under pressure); and don’t be completely surprised if Jeff Bezos asks Alexa to buy Sainsbury’s!

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Why buy another bricks & mortar retailer, you may ask, and if Amazon is so whimsical why not buy its current grocery partner Morrisons?: Here’s why:

  • Sainsbury’s have made a decent fist of online grocery delivery and there’s much for Amazon to learn from them about selling perishables.
  • Sainsbury’s have an excellent supply base for fresh foods and have good in-house technical staff who understand the challenges of retailing perishable food.
  • Sainsbury’s can teach Amazon and Whole Foods a thing or two about delivering a successful private label programme.
  • Sainsbury’s have a customer base that is more online friendly than Morrisons, with geographical strength in the richer South of the country and an excellent crop of millennial shoppers edging into familyhood – younger two person household shoppers are key online grocery customers for frequent small basket purchases and families with young children are disproportionately into the larger weekly online shop .

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  • Sainsbury’s has 600 supermarkets and 800 convenience stores (and may have much more if it swallows Nisa) giving it a great platform to distribute groceries to nearby located well-heeled consumers.
  • Sainsbury’s comes with heritage – it’s been around for close to 150 years.
  • At current share values, Sainsbury’s has a market cap. of around $7 billion – pop in a purchase premium of 20% and Amazon could mop up JS for a modest $8.5 billion – peppercorn monies we’d say! Mind you, Amazon would have to cosy up to the Qatar Investment Authority (largest shareholder), the Sainsbury family and, of course, the UK Competition and Markets Authority.
  •  In the UK, Sainsbury and Amazon combined would make a very powerful multi-channel retailer and longer-term success will be earned by the retailer that can service the customer best wherever and whenever the customer demands.

That’s enough for this blog, do you think the Pimm’s has gone to our heads? Do enjoy your Summer holidays. Miguel is off to Spain and David, as ever, is on one of his talking tours in Asia and the Antipodes. Adiós!

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Posted in Fresh Products, Online, Uncategorized

In Food Marketing, Savour Those Adjectives!

It’s not so much a point of principle, more one of maintaining standards, but we simply won’t countenance eating a bacon sandwich unless the pig concerned has been privately educated. Needless-to-say, that’s why we plump for Waitrose 1 Free Range, Air Dried, Beech Smoked back bacon. Born and schooled in Norfolk, the Waitrose Hampshire breed pigs are whisked to Suffolk where they are  humanely dispatched, Hand Cured (redolent of Pip’s upbringing in Great Expectations) and, thence, transported to the retail store for sale (on offer) at 200 grm./6 rashers for £2 (equivalent to £10/kg.).

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This is an exquisite use of adjectival marketing: bacon is the noun and nouns are essential but not carriers of great profit; free range/beech smoked/ air dried/hand cured are adjectives impregnated with margin that smell as delicious to the vendor as the bacon does to the consumer! Add a few more adjectives – such as organic, non-GM feed, Saddleback rare breed, as Helen Browning’s branded bacon does and one enters stratospheric pricing territory, viz. £4.29 for 184 grm./6 rashers (£23.32/kg.). Mind you, as Helen proudly advises her customers, the bacon is made from “probably the best pigs in the world”, particularly we assume if they are washed down with a Carlsberg beer!

So, is this all frippery and of interest only to the moneyed classes? Not so, there is pervasive consumer interest in the provenance of food and the steps it takes to reach the family table and for two broad reasons: first, it’s about food safety and food integrity – opportunistic, indeed, illegal behaviour gave us the likes of “Horsegate” and other food frauds and precipitated a sharp decline in consumer trust surrounding the food chain; and, secondly, when we are in “foodie” rather than “fuellie” mode, we particularly value the stories intrinsic to and wrapped around our food. But, there’s a problem with such adjectives as hand cured, free range, even organic – they are pretty difficult to see or taste and, so, we take them on trust. They are credence attributes and they carry a premium price. Thus, the need to have transparent supply chains that consumers can monitor to convince them that what they are buying is what it promises on the pack. Recent developments, such as blockchain technology, and the emergence of firms which can scientifically prove the origin of products are testament to this high level of consumer concern.

We’ve talked in earlier blogs about the commercial pressures that “Big Food” is under and one of its manifestations – i.e. slimming down their portfolios in mature markets; e.g. Unilever looking to exit spreads, Nestlé looking for a buyer for elements of its USA confectionery business, Procter & Gamble getting out of food altogether. FMCG companies have used brands to appeal to a broad cross-section of the marketplace and, in doing so, missed focussing on the perceived to be niche but premium end of the market. This has been the hunting ground of idealistic start-ups determined to bring better tasting, simply processed, more sustainable food and drink to attentive, particularly younger consumers. These “young gun” companies understand that the pesky millennial consumer wants value (competitive price) but, also, social values –

and they want the products they buy and the companies that make them to share their values. Mind you, not all these start-ups are the bailiwick of the young. We note 56 year old Mr. Clooney and two friends launched the super premium tequila brand Casamigos (“House of Friends”) in 2013 and it has just been snapped up by Diageo for a cool $1 billion. That’s a lot of dosh for a start-up cactus juice company!

Getting back to pig products, are you craving bacon but a little stretched for cash as the end of the salary month approaches? Tipping your cap to the common man and Jeremy Corbyn? Why not seek a little help from Tesco? The controversial faux brand Woodside Farms (exclusively for Tesco) has smoked back bacon at a regular price of £1.20 per 300 grm. pack (£4/kg.) – tastily-priced indeed, notwithstanding that the pigs clearly went to a comprehensive! Mind you, Woodside Farms bacon is short on adjectives and a tad obfuscatory on provenance. The scoundrels – the pigs weren’t even schooled in England – “using pork from the EU”, although the bacon is “produced in the UK”. Nothing illegal here, but just a bit shabby for a world class retailer like Tesco to mimic the hard discounters that have been running our grocery market leader ragged. Woodside Farms sounds pretty British to us, whereas the pigs’ home Houtkant Landbouwbedrijf doesn’t (Dutch literal translation of Woodside Farms)!

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We are amused by the hoops companies have to jump through on food safety matters. So, back to the Woodside Farms bacon instructions:

  • Cooking Precautions: not suitable for cooking from frozen.
  • Freezing Guidelines: suitable for home freezing. Ideally freeze as soon as possible after purchase.
  • Defrosting: defrost thoroughly in the fridge before use.

Just as well, we consumers have all the time in the world to peruse the instructions. À propos the verbiage on many food packages, well, we’ve read shorter books. Could be worse, though. There’s four official languages in Switzerland! But for the above, “Bacon: can be frozen but thaw carefully before cooking” might save a bit of space. Anyway, do enjoy your bacon sandwich and savour those adjectives because you paid for them.

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Those who read the labels deserve to have a break and some fun! Sainsbury’s entry price range is always ready for a joke, without adjectives!

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Posted in Consumer, Fresh Products, Private Label, Uncategorized

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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.