Plant Power to the People!

Eating up our vegetables used to be a chore but, now, it’s becoming a lifestyle statement. If we aren’t woofing down courgetti, we’re swigging holier-than-thou kale and spirulina smoothies. So, what’s going on? Two principal things which are inter-linked:

  • we’re not all turning into vegetarians but we (and, particularly, women) are electing to have more plant-based meals and snacks than previously. Why? The deadly dull nut roast and soyburger is dead and, now, we can buy really tasty, colourful, convenient vegetable- and pulse-based foods. What’s more, they are consonant with healthy lifestyles. Brassicas are in vogue – who’d’a’ thunk it!;
  • concomitantly, in many higher income countries, consumers are electing to reduce their meat consumption (particularly red meat). Reasons offered include (in order of importance) – healthier diet, saving money, animal welfare concerns, food safety worries, and saving the environment.

In the retail and eating out sectors, nimble companies, often new start-ups, have been quick to harness the power of plants. Alpro is, perhaps, the doyen – 36 years old and offering 100% plant-based food and drinks which are 100% dairy- and GMO-free. Winner of The Grocer  2016 brand of the year , Alpro beat out classic UK companies such as Warburtons, United Biscuits and Young’s with its on-trend “free from” drinks, yoghurts and desserts made from soy, hazelnut, almond, coconut, rice and oats.

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Take a look at Rawligion in Central London offering a wide range of super premium juices and other drinks. The coffee is ‘cold-brewed” to maintain the “raw” mantra. Incidentally, eating and drinking raw foods isn’t new – in the 19th Century, Reverend Graham, inventor of the Graham cracker and Maximilian Bircher-Benner with his eponymous muesli were early raw food zealots (mind you, both of them were crackers!).

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Prêt-à-Manger has ramped up its range of vegetable-based meals and snacks under the strap line “Not just for Veggies”i

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Additionally, Prêt has opened a completely vegetarian restaurant in Soho, London. Its competitor Leon has banners outside its restaurants espousing “The Power of Plants” to promote its Summer range of vegetable-based meals. What’s next – a veggie Tesco Express?

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Are you a spiralizer? It’s fashionable to be so! Courgetti – spaghetti-style courgettes/zucchini and boodles – noodle-style butternut squash – are much in vogue. These are brilliant new products which have breathed new life into traditional vegetables. And what about cauliflower rice and cous cous? Cauliflower is flying with our favourites being seared cauliflower steaks and cauliflower hummus.

Putting vegetables “centre of the plate” isn’t new, of course, and the myco-protein (a mushroom-like fungus) Quorn has been at it since 1985. Significantly, however, Quorn is merchandised in the meat cabinet. The Cooperative retailer trying to woo repeat custom, have a discount coupon offering “£2 off your next purchase of meat, fish or Quorn”. The meat guys better be on their mettle – the Filipino Corporation Monde Nissin acquired Quorn for US$800+ million in 2015 and, clearly, see that meat substitutes have a big future around the globe. Later this year, look out for the launch in the USA of a plant protein burger from Impossible Foods that will look like, taste like and smell like the burgers we know and love.

When David Hughes was a boy, if he listened carefully outside his front door at Sunday lunchtime, he could hear a chorus from his neighbours of “eat up your vegetables or there’ll be no dessert”! Eating your vegggies, frankly, is passé – now, you’ve got to drink them! You don’t have a NutriBullet or Nutri Ninja blender? Hang your head in shame. Pure juices and smoothie retail sales went backwards in 2015, suffering from the demonization of sugar in many markets. But making smoothies with vegetables and fruit at home is seriously in vogue as consumers perceive that they can control sugar content if they produce the drinks themselves. In fact, you can have a box of smoothie ingredients delivered every week if you want to avoid shopping in the supermarket.

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Mind you, the big retailers can spot a lucrative and healthy trend, too. Asda are merchandising premium “cold pressed” vegetable juices in the Fresh Produce Department (note how the “cold pressed” label for juices leverages the health halo associated with extra virgin olive oil). Marks & Spencer have a fruit & vegetable display to encourage customers’ smoothie-making side! Best of all, Sainsbury’s stole the PR show of the week by having a “Vegetable Butcher” demonstrating in one of its stores how to use produce in a 1,000 different ways.

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“Plant Power to the People”, we say. But, it’s more than just fruit and vegetables. Protein-rich pulses (e.g. lentils, peas, beans) are having a very strong sales moment, too and, by the by, the UN declared 2016 to be The International Year of Pulses. M&S have launched a high fibre/low fat outdoor-bred pork and bortolli and cannellini bean sausage. Brace yourselves, meat people. You need to up your game or you’ll lose customers in the vegetable and pulse revolution!

 

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Posted in Consumer, Health, Uncategorized

Ensuring “Fairer Play” in Grocery Supply Chains Servicing the Major UK Supermarkets

What did you do, Daddy, in the maelstrom that has been the UK grocery market environment so far this decade?”! Who’d have thought that we would have seen big retailers scrapping for their very survival, manufacturer margins being squeezed inexorably and farmers desperate  as international food commodity prices plummet to decade year lows! When the going gets tough, the tough get going but they also get tetchy and even behave badly! Yet, we all know and research consistently shows that collaborative and longer-term relationships in the supply chain are crucial to enhancing efficiency and encouraging innovation to the benefit of us all, not least, the final consumer.

Commercial tensions are intrinsic to most supply chains but, particularly so, in those which are characterized by great uncertainty – of climate, commodity booms and busts, political vicissitudes (e.g. Russian ban on EU food imports), tectonic shifts in the grocery competitive environment, etc. Fifteen years ago, did you even conceive that the energetic Jack Ma and Alibaba would have three times the market cap of Walmart by the end of 2015? We didn’t and Alibaba is no fairy tale! Perhaps, we are in a watershed moment for the power of the “traditional” supermarkets?

In the UK and other countries, grocery supply chain partners have frequently grizzled at the disproportional market power of monolithic supermarkets. Governments have struggled to develop appropriate policies to temper abuses of power and legislative initiatives have been more focused on protecting the consumer interest than the interests of farmers and other grocery supply chain members. In the UK, however, we do have a Groceries Code Adjudicator who is the first independent adjudicator to oversee the relationships between the major supermarkets and their suppliers. Specifically, the GCA ensures that the 10 largest supermarkets treat their direct suppliers lawfully and fairly, and investigates complaints and arbitrates in disputes.

Hurrah, at last suppliers have an organization in place to ensure fair play in their dealings with the big boys. So, what are the grumpy suppliers doing? Largely keeping shtum! Whispering behind closed doors about despicable supermarket practices but failing to communicate directly and in confidence with the very organization that was established to protect their interests. Right NOW, the GCA is launching its 3rd annual survey of the groceries sector. It’s a brilliant opportunity for you to voice your concerns (or even your plaudits) about dealing with the “Big 10” supermarkets. But, in the parlance of the trade, act now to avoid disappointment! The survey closes on April 29th. If you’re dealing with UK supermarkets from home or abroad, just get on the GCA website and complete the survey. You know it makes sense!

Survey Link: http://www.yougov.com/GCA

Posted in Supply Chain

What Can We Learn from the Spanish about Eating and Selling More Fruit and Vegetables?

We Brits are wimpy consumers of fresh produce relative to our Iberian neighbours – rough and ready data suggests that Spanish families consume double the amount that we do! Why so? History, geography, climate and food culture are hugely influential:

  • Spain has been blessed with an amenable climate for growing fruit and vegetables, whereas it’s been a struggle in the UK, particularly “Up North” and for fruit. Look, sunshine helps and, no surprise, the Costa de Sol is in Andalucia not in Morecambe!;
  • supply availability moulded dietary patterns and consumption behavior – the Southern Spanish woofed down what we came to call “the Mediterranean Diet” – rich in fruit, vegetables and olive oil, whereas up in Scotland, you were more likely to see a Scottish male doing needle point than snacking on a piece of fruit!;
  • in the 19th Century, we moved into towns and cities which were, initially, serviced inadequately by fresh food distributors – packaged and tinned foods were cheaper and more convenient. The Spanish remained peasants and fresh food was just outside their front door. Our incomes improved and we were seduced by vendors of sugary and salty snacks; the poor Spaniards morosely munched on fresh-picked peaches;
  • the “made-by-mamá” main meal is at lunchtime and is only, now, coming under lifestyle pressure in Spain comprising to this day a mountain of fruit and vegetables, including a mandatory salad and, of course, all washed down by fermented grape juice. Seasonal eating isn’t trendy, it’s just what the Spaniards do!;
  • then, the supermarket era emerged at differential speed in the two countries giving us the present retail structure for fresh produce – the established supermarket chains dominate the fresh food scene in the UK (92% retail market share), whereas in Spain, regional players and “old-fashioned” green grocers (often configured in small chains) continue to have a significant share of fresh fruit and vegetable sales to consumers.
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The famous Boquería Market in Barcelona, Spain (Fotograph http://www.aspic.es)

The more traditional retail environment in Spain encourages shoppers to purchase fresh produce. Spanish supermarkets account for 70% of fresh produce retail sales but on every street, small shops fight ferociously with them for market share and can purchase a wide range of produce via vibrant (by UK standards) wholesale markets and can be competitive not least by discounting their own labour costs. You see the same in many Asian countries where the “wet markets” hold on tenaciously to market share for fresh foods, particularly fruit and vegetables.

What can we learn from the Spanish grocers? In short, they’re better at retail theatre and customer service:

  • first, there’s less pre-packaged produce. Now, we pre-pack for good reason – some shoppers want to nip in and out of the shop without the inconvenience of individual produce selection. OK, but quality retailers the world over can orchestrate a symphony with loose fruits and vegetables that demand to be purchased!;
  • second, knowledge of the product is higher in Spain for both the customer and the vendor – this provides the small grocer with a competitive edge and forces supermarkets to respond with staff who can talk with customers about quality, seasonality, new products, etc. Ours do their best but, largely, they’re there to stack shelves and keep the place tidy. In Spain, there is often an assistant who weighs and bags produce and is there, in person, to tell the story of the food, and is looking for customers who might want help with selection. In some stores, the outdoor market ambience can be created by the greengrocer shouting out special offers;
  • we’ve improved enormously in the UK on celebrating the seasonality of produce but we’re still a long way behind the Spanish. Talking to UK college students about Spring cabbage, we noted that most thought the principal attribute of the product was that it was intrinsically bouncy! There’s a push to have the first of the season ahead of competitors – a dangerous game as the result can be the triumph of hope over experience as the long awaited peach is crunchy and tasteless. Mind you, it’s one of life’s commercial conundrums that when produce is at its very best and in peak season – juicy, aromatic, etc. – we tend to give it away!

Mercadona has been Spain’s most successful supermarket grocer in recent years and has upped the ante on fresh foods. Its President, Juan Roig said “we made the mistake of thinking we could sell produce as if they were ambient goods and squeeze costs in the store. Big mistake – focusing on customer service, provenance, seasonality and better displays of loose products has worked brilliantly for us”. In the Fresh Produce Department, there are few brands, tastes vary with the season, appearances may flatter the product (looks lovely, tastes like cardboard) and, in the UK, notwithstanding the tsunami of TV cookery programmes, shopper knowledge of  the product is substantially less than in Spain. Bite the bullet, invest more in staff training and bring the excitement  of the Iberian fruit and vegetable market to Glasgow and Gillingham.

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Mercadona’s new fresh produce section (Source Mercadona)

This post first appeared in Produce Business UK as part of their Spain Sourcing Spotlight Series.

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Fictional Farms: Dangerous Brand Territory for High Profile Food Retailers?

It’s fashionable to be disparaging about Tesco as it struggles to regain market dominance in the UK and sheds overseas holdings like leaves in Autumn. But, it continues to be one of the most innovative grocers in the world. Notwithstanding the trade’s schadenfreude associated with its current problems, the sincerest form of flattery is imitation and Tesco initiatives have been and still are copied by retailers around the globe, not least in private label.

Tesco’s founder, “Slasher” Jack Cohen, built a grocery business piling it high and selling it cheap. But it was commercializing a three tier “Good, Better, Best” private label offer that helped propel the company to international stardom. Tesco finest* is a hugely successful premium brand in the UK. Other initiatives, like its venture brands, such as Chokablok confectionery (exclusive to Tesco and, often, competing with premium fmcg products), and tertiary brands as a defensive ploy against the hard discounters (launched in September 2008) have seen only mixed success – food doing rather better than non-food skus. Most recently, and controversially, Tesco has introduced a range of faux brands largely as substitutes for its entry level Everyday Value fresh produce and meats. Why the kerfuffle in the press? Well, the faux brand names have a distinctive and very British bucolic ring to them – Rosedene Farms, Nightingale Farms, Boswell Farms, Woodside Farms – get the picture! But the farms are fictional and the fresh products under their umbrella are from a wide range of countries, not just the UK. This sticks in the craw of British farmers, food evangelists, journalists and some consumers.

 

What is Tesco up to?: doing what comes natural to retailers worldwide – simply copying its competitors (it’s in their genes!) – in this case, the hard discounters Aldi and Lidl. These two have used fictional farm names for years for their fresh foods and received nary a hint of criticism: exclusive faux brand names such as Ashwood Farms, Birchwood Farms, Broad Oak Farms and Strathvale Farms litter their fresh produce and meat aisles around the English-speaking world (e.g. Aldi uses its Broad Oak Farms label in the USA and Australia, too).

Originally making their names from selling ambient and frozen foods at hugely attractive discount prices, these scallywag retailers turned their attention to fresh foods with considerable success. Kantar UK data shows that both Aldi and Lidl over-index on fresh fruit and vegetable sales. Aldi’s Super 6 fruit and vegetable weekly offer has been spectacularly successful. Tesco is saying to its present and lapsed customers “you don’t have to go to Aldi and Lidl for jaw-droppingly low-priced quality fruit and veg., we’ve got it here”!

 

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Aldi’s Woodfarm and Ashfield, and Lidl’s Oakland fresh products brands.

First of all, why does Tesco take stick from the press and not Aldi and Lidl? If you’re Number 1 in any market, then, it comes with the territory. You’re the nut on the coconut shy – just ask the likes of McDonalds! Secondly, was it a smart move? No – tending towards dumb! If, as Tesco does, you make a song and dance about supporting British farmers, then, you sell pork products from Holland and produce from Morocco and Senegal under a brand name reeking of Britishness, then, you get what you deserve! Tesco quite clearly mark on the packs the country of origin of the produce. But that misses the point – what harassed shoppers see on the shelves are comforting British rural images and the clearly marked “Produce of Spain” is lost in the cacophony of background shopping noise and activity!

Only 3 years ago, Tesco’s CEO was apologizing for his company’s contribution to the “Horsegate” scandal. Now, faux brands are nowhere near in the same league, but in an era where transparency and traceability for food products are top of mind, retailers must tread very carefully. A loss of integrity translates very quickly into loss of trust and fewer customers.  Asda, also hemorrhaging sales from the hard discounter fresh food onslaught, has been more circumspect and opted for “Grower’s Selection” as its label on discount produce, replacing the dull-sounding grocery entry level Smart Price. The anonymous “Grower” has proved more acceptable to the press and British farmers but the new label hasn’t translated into sky-rocketing sales for Asda.

Private label is one of the most important components in the “Differentiation Mix” that grocers can use to confer character to their offer. It’s very difficult to express your point of difference from competitors with ubiquitously available products such as Coca-Cola. Tesco has been and still is world class in private label. We know it’s extremely tough at the grocery retail coalface, but Tesco should be leading not copying when it comes to this vital area of retail competition.

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Posted in Credentials, Private Label, Uncategorized

Mind the Gap ….. in the UK Grocery Market!

You’ve got to keep on your toes in the UK grocery retail industry – sneak a weekend away in Berlin on the back of your trip to Fruit Logistica and, on your return, another hard discounter has popped out of the undergrowth to nibble the nether regions of mainline supermarkets. Tesco’s Dave Lewis must be muttering “enough already” as he lowers himself gently on to his bed of nails! This time, it’s Sir Stelios Haji-Ioannou, the easyJet entrepreneur launching a trial easyFoodstore on a God-forsaken industrial estate just off the North Circular in West London.

Has Stelios spotted a gap in the market? His frank communications team say that easyFoodstore targets food consumers who are poor, likely on benefits and have, as the economists say, a very low opportunity cost of their time. Opening just 3 weeks ago, the trial store got huge publicity from the media. The shopping experience was described as “Soviet era” – stark “easy-orange” shelving, with 76 ambient products all priced at 25p ($0.35) for the opening month of February. When we visited, there was a queue with an hour’s wait to get into the store – later, the queue snaked around the corner and wait time extended to 5 hours! The store was sold out by lunchtime and closed for re-stocking in 2 of the first 5 days of opening. There are no fmcg “A” brands, just Euroshopper and Best-in private label brands available via Cash & Carry merchants.

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Does this über-hard discount concept have longer-term commercial legs? Many in the grocery trade think that it’s a characteristically-clever PR stunt from Stelios, which will expand to maybe a dozen stores and, then, wither away. But the very low income, benefit-assisted, time rich income poor end of the market isn’t Scotch mist – it’s grown substantially through 8 years of economic hard times and we’d be astonished if easyFoodstore shops weren’t spotted very soon in the big cities of Northern England and over the border in West Scotland.

 

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Stelios Haji-Iannou wants to offer food honestly priced to British people.

The challenge in retailing is to fill in gaps in the mental maps of shoppers’ needs. Stelios believes there is a gap between food banks (free or, at least, subsidized food for households on benefits) and hard discounters. Aldi and Lidl have earned their low price credentials and, now, are expanding premium own label to attract a higher income shopper and reward  existing shoppers wanting a treat. Look, Miguel bought his haunch of jamón Ibérico from Lidl at Christmas for an attractive price of £99.99! The austere easy-orange shops may well appeal to beleaguered shoppers who view Aldi, Lidl and even Poundland as beyond their means. We wouldn’t be surprised if Stelios capitalized on this Robin Hood-esque “friend of the poor” market position and to use end production runs, safe but slightly damaged, close to use-by-date products, etc. as exclusive offers to those who can prove their on-benefit status. In an era of savvy shoppers and bashing plutocratic bankers, there is more likely to be a “Badge of Honour” than a “Badge of Shame” associated with being a family reliant on state benefits and, as a result, shoppers can enter the orange portals of easyFoodstore with their heads held high!

Market growth in grocery is exceedingly challenging and who’d have thought that the likes of Asda/Walmart would be celebrating that its current dark days of sales downturns are close to over. The company is still losing market share – that’s a reason to celebrate?! In mature grocery markets where big supermarkets have the majority share, any new company entering, however small it may be, will nibble away at their toes and ensure that grocery retail Price Wars will remain pervasive. When Stelios launched easyJet in 1995, the established airlines (not least British Airways) dismissed it as a minor irritant. Now, easyJet has a higher Market Cap. than any of them! We don’t believe easyFoodstore is going to rock the retail boat significantly, but it will contribute in some small way to the likes of Tesco’s Dave Lewis sharpening his retail price pencil through the remainder of the decade.

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Posted in Discount

McDonald’s: from Extra Value Meal to The Signature Collection (Do You Want Gluten-Free, King Edward Fries With That?!)

Our blog is largely about what’s happening in the world of supermarkets, but we are curious about anything to do with the business of food and drink! So, we’re interested in food service: in the USA, so-called “away-from-home’ expenditure on food and drink has just overtaken “at-home” and we’re edging in the same direction in the UK. Supermarkets and food service outlets both compete for the indelicately termed “share of stomach/throat” and, increasingly, food retail and food service are converging. Initially, it was supermarkets (led by Marks & Spencer) that ripped into traditional café and restaurant territory by offering sandwiches and snacks for lunch and ready meals for dinner – e.g. the “Dine in for 2 for £10” and, reflecting demographic trends (one person households are 56% of total in London), the “sad sack meal for 1”! But, now, it’s more than Indian and pizza restaurants that will deliver – in the USA, the likes of Amazon Prime Now, grubHub and Uber EATS are providing lightening fast home delivery links with your favourite restaurants.

Just as we have seen monolithic Walmart and fumbling Tesco struggle through turbulent economic times, so has the world’s largest fast food chain McDonald’s. Mainstream supermarkets have been squeezed between the hard discounters at the “value” end of the market and premium retailers at the other. It’s been pretty much the same in the fast food business: particularly in the USA, McDonald’s got caught in the middle between uncomplicated value-priced “homestyle” burger competitors like In-N-Out Burger and premium-priced fast casual outlets, such as Chipotle, smashburger, Shake Shack, and Five Guys much-loved by the millennial generation.

Like the grocers, McDonald’s has had to convince customers that it is very affordable (the McD’s Saver cheese burger is £0.99 and its American equivalent $0.99 [£0.65]); then, there’s the regular ¼ pounder with cheese (£2.69) but, for a more special occasion, mouth-wateringly premium items are available (e.g. the brioche bun Signature Collection burger at £4.69 [$6.80]). Note the similarity with UK retail’s “Good, Better, Best” tiering. Now, while Tesco and Sainsbury’s with their finest* and Taste the Difference premium ranges have seen success even through difficult financial times, it is moot whether McDonald’s can do so. UK retailers have had 15+ years to establish their premium product credentials and, arguably, finest* and TTD are the UK’s Number 1 and 2 largest premium food brands. For McDonald’s, the move to match smaller, swift-footed, premium burger chains in the UK – such as new entrant Honest Burgers, Byron, Meat Liquor, and more established Gourmet Burger Kitchen – is more challenging, as indeed is the case back home in the USA.

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The Signature Collection, the Premium range at McDonalds UK

Within the McDonald’s empire, Australia is often the market where the company tries out new concepts, not least at the premium end where it has dabbled for 10 years or more – Macca’s (Australians can and do shorten every word) Mighty Angus comes to mind and, most recently, the “Create Your Taste’ offer whereby customers can design their own burger online, download their order to the phone and place the order at the nearest Macca’s outlet.  McCafé has worked well in many markets and, in the UK, sells more cups of coffee than Costa Coffee the largest coffee chain. Table service is coming to a McDonald’s near you in 2016. All this should help legitimize McDonald’s presence in more premium snacks and meals.  But, it certainly accelerates the evolution and increases the complexity of the fast food model established by Ray Kroc 60+ years ago –  quick delivery of burgers, fries and milkshakes the new model ain’t! That’s one reason why in the UK, McDonald’s are hoping that the “All Day Breakfast’ initiative which has been launched in the USA, and has been credited with improving dismal sales’ performance there, will not have to be rolled out in Blighty! Store operators are desperate to simplify the offer not further complicate it!

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McDonald’s allowed customers in Australia to tailor their food.

Back to the comparison with UK retail, Tesco has been busily experimenting with and, then, ditching food service concepts such as “In Food We Trust”, hot classic British meals with provenance, a Tesco Express burrito bar, and an USA-inspired sandwich shop (Fred’s Food Construction). Its Harris + Hoole coffee shop may have more legs, although the family restaurant Giraffe looks shaky. Waitrose, Marks & Spencer and Whole Foods have made a decent fist of cafés and in-store eateries, perhaps not surprisingly given their superior performance to mainline grocery chains on customer service. But, in general, grocery retailers struggle with servicing seated customers – their hot food smacks of school meals and the dining ambience redolent of the school canteen!

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Fred’s Food Construction. Tesco’s attempt to lure City workers at lunch time.

Other similarities between Big Grocery and Big Fast Food? Both are closing stores in mature markets (e.g. Walmart and McDonald’s in the USA). Both are being more selective in their expansion in emerging markets – slowing economic growth in China not only constrains expansion in China itself but, also, in neighboring Asian economies. Both are finding that local Asian companies are difficult to beat on their home turf (e.g. the Philippino fast food company Jollibee and Korean firm Lotteria ably compete with McD’s in Asia). But the lure of Asia is compelling for McDonald’s: there’s one McD’s outlet per 22,000 people in the USA (54,000 in the UK); but only 1 per 1.5 million consumers in Indonesia!

McDonald’s and Tesco are both struggling in an extraordinarily competitive world to remain relevant to their customers and to maintain and build trust in their respective brands. Arguably, McDonald’s has done a much better job on trust. It was lily white during the Horsegate debâcle which damaged Tesco badly. Constantly under the microscope on its procurement practices and supply chain integrity, it has scored particularly well on transparency brilliantly using youtube to explain how chicken nuggets are made and where the eggs for McMuffins are produced. On sustainable seafood procurement, it’s been years ahead of the major retailers with MSC accredited filet-o-fish. McDonald’s has been leaking customers for 3 years but its most recent sales results are more encouraging – perhaps surprisingly, its share price is close to a 5 year high. Tesco’s declining sales may have bottomed out – however, its share price is close to a 5 year low! Go long on one and short the other? But which way around?!

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Posted in Foodservice, Private Label

Fresh Victims of the Price War: Why Commodity Fruit and Vegetables are Going Bananas!

It’s tough out there in the grocery retail trenches and commodity fruit and veg. is slap-bang in the firing line like so much cannon fodder. We blame bananas and milk ably aided and abetted by the hard discounters! We’re training shoppers to believe that KVIs (known value items) are “free goods” like air and water!

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Aldi Super 6: promotions on fresh products to attract shoppers.

 

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89p per four pints of milk! Cheaper than water!

So what’s the story? Fresh produce positively shrieks goodness – all-natural, no nasties, chock-full of nutrients, fibre, and antioxidants that Jamie Oliver and governments exhort us to eat more of and we give it away! Kantar Worldpanel calculates that ferocious retail competition ripped £570 million (810 million USD) out of the UK fruit and vegetable retail market in 2015.Were we compensated with higher volumes of sales at these low low prices? Well, not by much and, in fact, in most categories it was the higher-priced value-added items (e.g. trimmed, snack pots, ready-to-eat) that saw sales tick up. Households are eating less commodity produce and the nation does not race to the supermarket for more white cabbage when prices halve. Savvy shoppers know that great deals on fresh foods can result in over-purchasing, lettuce lingering in the fridge and guilt-laden waste.

But not only is fresh produce vital for our health, it’s also vital for retailers in establishing their credentials on fresh food quality overall. – after all, it’s the first department shoppers see when they enter the store (not chocolates or sparkling wine). So why is it so tough for produce?:

  • products such as bananas, apples, onions, broccoli are routine, frequently purchased items that shoppers have some idea about their price. Thus, retailers’ notion of the KVI and their sharp focus on price of these items explaining why bog standard bananas are 68p a kg. (1 USD) and iceberg lettuce 50p a head across the High Street (and milk cheaper than bottled water);
  • produce is generally not branded (and when it is, often, there’s no discernible visible difference between branded and own label). In a static market environment, retailers can and do squeeze suppliers. Yet, the few outstanding branded produce items – e.g. Pink Lady, Florette, Tenderstem – have shown excellent resilience in the face of harsh market pressure;

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Tenderstem and Pink Lady: making sure shoppers know where the differences are.

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Florette: they keep their position because they launch continuously relevant new products to the markets.

  • produce categories are often poorly category-managed – e.g. a wall of seemingly identical citrus varieties, a bewildering range of onions with confusing price points – where product differences are not explained so, to save time, shoppers simply select the cheapest on offer;
  • frequently, the produce item being purchased is creating a meal problem for the shopper and not a meal solution. Think of poor mum – “I must buy fruit and veg. or I’m not a good mum. But, I’m short of time and how can I sneak it into the children’s food? Give me convenient, stealth vegetables”!;
  • fresh fruit and vegetables may have a substantial health and well-being halo, but market experience shows that convenience (to prepare/consume, etc.) trumps health every time.

How can you escape the margin pain of being a KVI?:

  • if persevering with the commodity (e.g. iceberg lettuce), dominate the category and, through scale, good management and technology ensure that you are the lowest cost and most efficient producer (Shropshire’s et al come to mind);
  • go better than bog standard and seek varieties with interesting features/attributes for consumers (e.g. on premium taste, colour, shape). Look how the tomato category has evolved – no longer just the perfectly round, perfectly red, perfectly tasteless Dutch wasserbombe. Now, you have to go to Night School to make some sense of what’s on offer!;
  • seek exclusivity of ownership of a variety with unique attributes, e.g. note the success of Driscoll’s Maravilla raspberry, but accept that competitive offers will soon emerge as breeders seek to copy success;
  • tell stories and add provenance – offer fruit and vegetables with adjectives! Remember, an apple is a noun and that smacks of commodity price pressure. The margin is in the adjective -e.g. an exclusive adjective such as Pink Lady or Wilberforce Farms, and/or new season, chemical-free (we like our fresh produce free!);
  • work exclusively with Waitrose or M&S with specialty products such as white plums from Eastern Europe or sweeter than sweet French pears under the “Buyer’s Selection” banner (although, do advise the Buyer not to add the strap line “selected for flavour” (what else would you select for, shelf life!);
  • add value through convenience to your product – consumers aren’t lazy just short of time to prepare and consume. Can you produce a snack version?;
  • plug into the health and well-being trend and ALWAYS remind consumers that it’s “One of Your 5-a-Day”. It’s still only January, so are you keeping up with your New Year’s resolution to eat more healthily?;
  • does my product fit into an emerging consumer trend? Can you spiralize it (e.g. carrots, courgettes)? Can you juice it? “Daddy, why would you have ever eaten greens when you could have juiced them?!”. For fresh pulses (beans, peas, etc.), shout about their protein content – plant protein is seriously on-trend.

We know the 2016 grocery retailing environment is going to be every bit as tough as in 2015.We don’t see a “Morrison’s Carrots for Farmers” movement coming to save the day! Commodity fruit and veg was, is and will remain very hard work. Your reward is more likely to be in the next life! Do have a successful 2016 and Happy New Year from David and Miguel.

Waitrose Pears 01

 

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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.