Saturday, 27 December 2008

Pros and Cons of a Locally Sourced Xmas Dinner

According to a recent report from Farmers Weekly Farmer of the Year John Geldard and Henry Brown of Westley Consulting the local foods market could grow from its current £2.34bn to over £15bn in 10 years.
A growing number of consumers believe that local food is fresher, of better quality, and a good thing because it supports local business. Many, though, think that local food is expensive and difficult to find.
To test the pros and cons of local food shopping we set about making a Christmas Dinner entirely from produce grown and reared within 10 miles of home in mid Warwickshire. Here's what we found.
Sourcing meat was no problem at all. Free range turkey, goose, and duck could be easily purchased direct from the producer's farm. There was a choice of both Limousin and Aberdeen Angus beef, outdoor reared pork, bacon and sausages, and home bred lamb. More intensively reared produce was also available for those choosing that option.
A nearby bakery made their own mince pies and Pudding as well as bread, we bought local Berkswell Cheese, and local free range eggs.
Getting good locally grown vegetables was another story. The local farmer's market was held too early for the veg to still be fresh on Xmas Day, and none of the farm shops sourced from close by. So it was off to the supermarket where nothing was local, but at least the sprouts came from Lincolnshire, the carrots from Notts, and the potatoes from Norfolk. Sadly the mushrooms were Irish, so they had to stay on the shelf.
But what about taste and price? There's no getting away from the fact that these locally sourced products cost more, sometimes alot more, than the supermarket equivalent, and there is a time and hassle factor involved in visiting various different shops. But the quality and taste was far superior. The Kelly Bronze turkey was outstanding as were the bacon and sausages, lamb and Aberdeen Angus beef. The Limousin beef was good too, and certainly better than supermarket beef, even from a premium range. The bakery items and cheese were excellent.
It was a reassuring purchasing experience too, with the ability to talk to the farmers themselves about their rearing methods, and see relaxed stock ambling about in fields or roomy sheds. In a couple of farm shops there was even someone on hand to advise on cuts to choose and how to cook the meat.
To this Christmas cook knowing exactly where the food had come from, and the quality, justified the extra cost and the time involved in sourcing locally.
But this way of shopping is not for everybody. Getting back to the Geldard/Brown report, they reckon that the growth they predict will only happen if local foods are pushed by supermarkets, the mass market catering trade, and the public sector. They are probably right. It would be possible to move local foods from niche to mainstream, and chasing mainstream volumes will suit some producers and growers. The trade off for the farmer is lower margins, and risk of losing control and independence. There would inevitably be a hit to sales in small local stores. And from the consumer's perspective, a very personal and rewarding way of shopping would be lost.
On my shopping travels I asked each producer whether the difficult economy had led to a downturn in business. Most said that sales were holding up fairly well, although there were some signs of consumers trading down, for example from a Kelly Bronze turkey to standard free range,and from steaks and roasts to casseroles and mince. There was also a trend to buying meat to a price rather than a weight.

Thursday, 4 December 2008

Tesco Outgunned by the Competition - Some Reasons Why

So Tesco is getting outgunned by the competition. Third quarter results show their sales up by a miserable 2% compared with Sainsbury up 4.3%, ASDA up 6.9% and Morrisons up 8.1%.

The root cause is customer defection. An analysis by TNS the market research company, shows that in the 12 weeks to November, Tesco lost about £22 million of business to ASDA, a further £10million ALDI and just under £10million to Morrisons . Clearly "every little helps" is not helping enough. Why might this be?

There seem to be three reasons.

First, Tesco has a muddled consumer message compared with competitors. ASDA and Morrisons are known as value supermarkets. ALDI screams rock bottom prices. Sainsbury have stuck with a quality message. Tesco by contrast have responded to the economic downturn by adding a number of discount type products similar to those sold by ALDI and the like, but done little with their main ranges. So in the shopper's mind they are offering neither the cheap prices of an ALDI, or consistent value across everything in store like ASDA and Morrisons. And a slogan like "every little helps" means little to cash strapped consumers keen to hit a budget but reluctant to buy rubbish.

Tesco's prices are too high, and their quality too low. How do we know this? Just read the comments left by shoppers on newspaper articles about Tesco's performance. They tell of huge price hikes, inconsistent prices from week to week, promotions advertised but no product available in store to buy, and inferior fresh products such as bakery and fruit and veg.

And most telling of all, Tesco seems to have forgotten about putting customers first. Customers are outraged at Tesco's arrogant attitude and lack of service.

I'd also add that resentment about the way they treat suppliers is reaching boiling point. At the moment lack of facts means their alleged practices tend not to hit the headlines. This will change if Tesco is demonstrated to cross the line between tough negotiation and outright intimidation, and the publicity will do them little good.

There are lessons for all businesses from the Tesco story.

Successful businesses have a very clear marketing message, and they stick with it. Their actual product offer is often fine tuned, but they do not stray from their basic core principles. And they never, ever, take their customers for granted.

No one would bet against Tesco which is one of the most succesful businesses in Britain. Despite a slowdown in sales they remain almost twice as big as their nearest competitor, and their discount range is turning over about £1billion, which is nearly the same as ALDI's total sales. But they are not invincible, and if they don't learn the lessons then their performance will struggle.

Tuesday, 25 November 2008

What Tesco Think About Local Foods

Boy, do Tesco tell it like it is.

Alistair Robinson,Senior Buying Manager buyer for the North of England, addressed the Institute of Agricultural Managers conference last week. His topic was "Local Foods Opportunities with Supermarkets".

Here's what Alistair said.

First up, consumers are still hugely enthusiastic about buying local foods, seeing them as fresher, of better quality, and helping to support local businesses and farmers. Tesco's customers want to buy local foods so Tesco is providing them.

Alistair explained what local means to the public. Although more consumers like to buy British, a British label on its own does not mean local. In Scotland and Wales, local means "from my country". In England, local means "from my county". It seems that the more specific a product is about its origin, the more the consumer feels that it will be top quality.

And people want a local option in most of the products they buy. Locally sourced fresh meat and veg, milk and cheeses, cakes and bread, and even ales and beers are all welcomed.

Tesco has seen some stunning local success stories."Black Country Pork Scratchings" from the Midlands outsells the national equivalent by 2 to 1. Yorkshire carrots sell 30% more than standard carrots, Cornish potatoes 12% more, and Warwickshire Spring Onions 5% more than an ordinary spring onion.

But here's the rub.

There's no premium in local foods, according to Tesco. Those great sales figures have been achieved by selling local food at a similar price to the standard variant. Basically, Tesco are looking to make the best use of every inch of shelf space, so all products have to sell at the highest possible volume,so this means in Tesco that they have to be on shelf at a competitive price, AND they have to deliver the same profit margin to Tesco as a standard version.

A brave soul at the conference asked whether, if consumers were so keen to buy local, Tesco should consider taking a lower margin, particularly as the whole point of local is that producers are small and so without economies of scale. Absolutely not said Alistair, for to sell something at a lower margin was a flawed business model, was totally unsustainable, and would only result in lost profit to Tesco, which is just not acceptable.

So there you have it. Tesco are very happy to support local foods as long as their customers want them, and as long as they make as much money for Tesco as anything else. At the first hint that consumers might be less enthusiastic about local foods, Tesco will walk away from them.

All this raises the question of whether its just Tesco local foods that cannot command a premium or the local foods sector in general.

According to a recent note from the IGD, consumers do see local foods as high priced. 61% say that price is a barrier to buying local and 43% think local food is too expensive. The IGD's advice is that local food producers and suppliers should review their promotional strategies, and offer competitively priced products in sectors that offer potential for growth.

If the objective is big volumes, then it seems Tesco have got their local food pricing policy right. The alternative strategy for producers is to stay away from the supermarkets, and target a smaller, niche market, possibly with a "local plus" message, in other words local with an extra consumer benefit.

As for the margin issue, Tesco will squeeze hard, and possibly harder than others. The key is for producers to walk into any deal with their eyes wide open.

Monday, 17 November 2008

Trends at Sainsbury - Justin King Speaks of Consumers, Farmers and Buying British

The conference and lecture season is in full swing and a few days ago Justin King, Chief Executive of Sainsbury spoke at the Royal Agriculture College's annual Bledisloe lecture. Smooth shaven, hair slicked back, immaculately suited and lightly tanned even in November, King could not have presented a greater contrast to last week's profiled speaker, John Torode. But in common with John he delivered an excellent session.

Justin King's main messages were these:

Value is increasingly important to Sainsbury shoppers. Own brand sales are booming due, he feels, to offering outstanding quality at a price well below the branded equivalent. Own brand now account for 51% of all the products they sell. The Basics range is also growing fast. People are cooking more from scratch. In an interesting twinning of the two, he said that free recipe cards, which have been around for three years, had really taken off when they had a value message like "Feed your family for a fiver" and "Love your leftovers".

Despite tough times though, consumers are not prepared to go back on their principles, rather they want "value, but not at the expense of values". King cited Sainsbury sales of higher welfare chicken, which now account for 33% of all chicken sold compared with 14% in 2006. And sales have accelerated, even as the credit crunch bites harder. Free range egg sales also continue to grow. Apparently animal welfare issues are the second highest in his postbag, the top issue being palm oil and concerns about destruction of the rain forests and the creatures who dwell there.

The premium market continues to grow, but not all bits of it. Fair Trade still sells well, as does food with higher quality ingredients, and higher welfare products. But organic is struggling, in King's view because consumers are increasingly questioning whether the premium charged is justified, and because the sector has "lost sight of its roots", straying away from core basic foods into fringe activities.

Mindful of his audience and its farming connections, Justin King devoted a section of his speech to British farming.

Justin King had a blunt message to farmers. Basically, there are still too many substandard operators who drag the returns down for everyone else. On the plus side, Sainsbury are prepared to pay a premium to farmers who deliver certain standards, this is the case on milk now, and they are working on a similar scheme for beef and sheep.

He feels British farmers are still too production focussed, and not concerned enough about consumers and what they want. Whilst consumers do like to buy British when it represents the best in quality and freshness, they are very happy to buy from abroad, especially from the developing world. In a nutshell, Sainsbury has no intention of confining itself to purchasing only British food.

A few days after the lecture, Sainsbury posted a good set of financial results for the first half of 2008. Recent TNS market research data showed their market share to be holding up pretty well against the onslaught from the cheaper end of the grocery trade, and doing better than Tesco. Sainsbury seems to be steering a sound course through difficult times.

Monday, 3 November 2008

Masterchef's John Torode Talks about Chefs and Farmers

John Torode, restaurant owner, president of the Royal Agricultural Society of England, and co-presenter of BBC's Masterchef, strode on to the stage at last week's English Food and Farming Partnerships conference to deliver a speech entitled "Why chefs care about farmers."

Sporting half an inch of stubble, a black velvet jacket, and scuffed brown boots he came across as the self-proclaimed opinionated Aussie he clearly is. But he's got some interesting comments to make, not least because insight into what makes the catering trade tick is so much more difficult to find compared with grocery where the big players update performance at least twice a year.

Torode runs Smiths of Smithfield in the city of London, and remains convinced that the main reason for his restaurant's success is that he really understands what is important to his customers. He reckons that, despite financial pressures, consumers still care about where their food comes from and how it has been produced, and that this is true for eating out as much as eating at home. In his view animal welfare and food miles come top of the ethical worry list, but that there is also a growing wish to eat more healthily and more simply.

However, he stressed that consumers are no longer prepared to spend silly money on eating out, rather they are searching ever more intensively for quality and consistency, and want to feel that their meal was good value for the price charged.

He talked about the importance of strong brands and building trust in whatever is being offered, feeling that consumers will return time and again to brands they can trust. He also mentioned the importance of telling people about why a particular product is different and special.

Torode talked about his own relationships with farmers. He said he knows them all, having personally scoured the length and breadth of Britain to get farmers willing to supply the quality he requires, and that the farmer's name is printed on the menu.

His one surprise as he set up Smiths was how few farmers could be bothered to work with him, but acknowledges that many can be put off by how complicated and costly it can be to get products to restaurants in the right quantities at the right time, and that one solution is to build a network of several farmers supplying the same area so that costs can be shared.

Perhaps the most striking thing about John Torode's talk is how similar the issues and opportunities are, whichever business you might be in. In the end, success comes from understanding what customers want, strong brands, great quality and asking a fair price for the product on offer.

Monday, 20 October 2008

Unthinking Consumerism - R.I.P

It looks as if the days of "I want what I want when I want it" are over, even for the relatively affluent, and even when it comes to food which still only accounts for about 10% of UK consumer expenditure. Shoppers are planning more carefully, shopping more wisely, and weighing up the quality/price equation more thoughtfully.
Consider what we know.
Latest research from the Institute of Grocery Distribution (The Credit Crunch-Adapting to Change) shows that 16% more of us are planning meals, 13% more are cooking smaller portions, and 6% more are cooking with leftovers. Indeed the research found that 59% are actively economising.
We also know that shoppers are seeking bargains. The ALDI phenomenon is well documented, as is the growth in shoppers visiting Morrisons and ASDA. Tesco is now promoting itself as the UK's biggest discounter, which makes sense given that it is still 10 times the size of ALDI. Sainsbury claims a growth of 30% in their Basics range and a big uptake in their own label products which sell about 20% cheaper than the equivalent brand. Waitrose says that 30% more products are being bought on promotion. Certainly in the red meat market there is ample evidence of careful buying, with less being bought on each shopping trip, and much more thought being given to the relative price of the various meats. For example lamb, which has seen a huge drop in sales this year, has suddenly bounced back because it has become much closer in price to beef.
It does look though as if consumers have not turned their backs completely on premium tier foods. Sainsbury's Taste the Difference range is growing, albeit modestly, and is still 3 to 4 times the size of its Basics range. Waitrose says that it As Good as Eating Out products have grown by 40%, and that it is "still selling alot of organic".
Which leads to the often raised question of whether ethics have gone out of the window in favour of cheapness. Joanne Denney Finch of IGD, presenting their research findings said ethical purchasing is still important, and that that 79% of people are "still engaged in purchasing some type of ethical product", be it organic, Fair Trade or local produce. And it seems as if as many people as ever are visiting farmers markets. My guess would be that there is still a core of committed people who feel strongly about a particular issue, and continue to buy, but that fringe purchasers who were perhaps following a trend rather than a principle have dropped out completely.
What all this points to is that consumers are being much more thoughtful about how they buy food. Now it's "two stop shopping" for value instead of one stop for convenience. Its being much more canny about promotional offers. And its being much more marketing savvy. Consumers are twigging that the salmon in a store's best range is actually the same as in the basic product, but it's just uniformly presented, and so costs up to 50% more. The label on the premium mince might be classier, but it's still mince. The cooking apples, carrots and parsnips in the cheaper range might be all sorts of odd sizes, but they still taste the same as the more expensive version.
I can't see people reverting to unthinking consumerism any time soon. Yesterday's worry about petrol prices might have abated now that it's below a £ a litre, and the banks seem a bit less wobbly, but today the spectre of unemployment looms, and tomorrow it will be something else.
In this more discerning climate the winners will be those who truly understand what is important to consumers, and offer great quality at a price which consumers think is worth paying.

Sunday, 12 October 2008

Why Do EU Consumers Reject Cloned Food?

The recent European Commission report about consumers giving the thumbs down to cloned food has been widely reported. What has received less coverage are the reasons for concerns, and whether the UK feels any differently from other EU countries.
Overall, 58% of EU consumers felt that cloning animals for food was never justifiable. Austria, Sweden, Germany, Latvia, Lithuania and Luxembourg were most opposed. Italy, France ,the Netherlands and Finland came next with over 60% saying that cloning for food was never justifiable. The equivalent UK figure was 45%. Generally women were more opposed than men, as were older people and country dwellers.
Regardless of country, the biggest issue in consumers minds is that not enough is known about the long term health and safety aspects of cloned food. 84% of EU consumers agreed with this statement, with the UK, possibly scarred by memories of BSE and CJD, coming in a bit higher with 87% agreeing.
There is also strong agreement that animal cloning for food is not just a technical issue, rather that it could be seen as unacceptable on ethical grounds. The EU average here was 75%, the same figure as for the UK.
67% of EU consumers agree that that cloning for food production is not acceptable because it treats animals as commodities rather than creatures with feelings. The figure for the UK was slightly lower with 62% agreeing.
Another problem with cloned food is that consumers cannot see how it would benefit them. Rather they felt that the food industry would be the main beneficiary (86% agreeing in the EU, 90% in the UK), and that farmers would also benefit (45% across the EU, 60% in the UK). This echoes what happened on GM foods where there was an underlying unease which was never offset by consumers being given a really good reason why GM was a good thing. The best benefit that consumers could see for cloned food was if it was demonstrated that cloning might be a solution to world hunger. Few saw health/nutrition as a benefit that would justify cloning, and even fewer an economic benefit.
The acid test of course is whether consumers are prepared to buy cloned food. Whilst marginally more prepared to buy food from an animal where just one parent is a clone, there is still a great deal of resistance, even if a trusted source says cloned food is fine. Across the 27 EU countries, 41% said they were not likely to buy cloned food at all, and 21% were somewhat unlikely to buy. The corresponding figures for the UK were 34% and 19%.
Regardless of whether they were pro or anti cloned food, a huge majority (83% EU average, 81% in the UK) said that cloned food would need to be clearly labelled.
Overall, therefore, this huge study of over 25,000 people across 27 countries indicates that EU consumers are very worried about the idea of cloned food. The findings echo other research both in the UK and abroad, and show pretty conclusively, regardless of where people might stand on cloning from ethical, health or safety perspectives, that as of today cloning for food is not a commercial runner.

Friday, 26 September 2008

What Makes a Brand? The Aberdeen-Angus Experience

Two news clippings caught my eye last week. One, in the Times, told us that French gastronomes have selected Aberdeen-Angus beef for La Bocuse d'Or, apparently the world's most prestigious cooking competition. The director of the competition said "We need to have very great quality for our competitors and Aberdeen-Angus is a dream product". It's difficult to imagine a higher accolade. The other clipping announced that the Aberdeen-Angus Cattle Society has appointed a brand development manager whose task is to "enhance the society's current press, pr, and marketing programme", and grow brand awareness and market share.

Marketing textbooks define a brand as a distinctive product offering, differentiated from its competitors. And what is so good about strong brands is that their specialness means they generally command premium prices, which in turn leads to higher profits.

Aberdeen-Angus is a great example of branding. It is a recognised, top quality, premium priced product from farm to fork.

Headlines such as "Record 30,000 guineas hit for AA female at Perth" (October 2007), and an even more eye popping 32,000 guineas paid for Penguin Mr. Elevate in February indicate that fine AA breeding stock regularly commands very high prices in the auction ring.

When it comes to selling the finished animal, beef processors are willing pay a premium, and at the final, and probably most important stage in the chain, those shops and restaurants who sell Aberdeen-Angus always charge more for it because consumers feel that when they buy Aberdeen-Angus they are buying the best.

There are many branding lessons to be learnt from the Aberdeen-Angus story. If branding is all about distinctiveness, then Aberdeen-Angus gets off to a flying start with its instantly recognisable black-coated cattle.

To that can be added its distinctive marbled meat, it's taste and tender texture. The meat's excellent eating qualities are not just in the imagination but have been confirmed in blind product taste tests. (See DEFRA report Is0102)

Branding is also about having a good reputation, and Aberdeen-Angus meat enjoys a reputation which has been built over decades, and is still being reinforced by stores such as Waitrose and Marks and Spencer who feature it in their shops, and restaurants such as Burger King with their heavily advertised Angus burger.

Finally, the strength of the brand means that it can be sold for that bit more. Both Marks and Waitrose sell their Aberdeen-Angus meat at a premium to the rest of their range, and the Angus sells at 50p more than the standard Whopper. And premiums are always useful.


There are of course some downsides to farming the Aberdeen-Angus breed. They tend to finish lighter than continental cattle, and can run to fat. Both can reduce the return that finishing farmers get for their stock. A trade off has to be made between these issues and any price premiums achieved.

Friday, 12 September 2008

Food Buying Habits - How, When, and Why Did It All Change?

Food shopping habits have changed. Consumers are changing where they shop, how they shop, and what they buy.

Morrisons, home of low prices, and Waitrose at the premium end of the scale, both published half year results a couple of days ago. Morrisons grew like for like sales by 7.6%, (like for like meaning sales in stores open at least a year), and profits by 19%. Waitrose grew sales by 2.5%, a third of the rate of Morrisons, were forced to cut some prices to compete and hold market share, and saw profits fall by 8%. ALDI, viewed as having the cheapest prices of the lot, is now said to be growing sales at about 30% versus last year. A confident statement from ASDA a few weeks ago indicated that they are doing just fine because they offer really low prices. And Sainsbury and the once the once invulnerable Tesco are losing out.

Consumers are changing what they buy. We know that organic sales are struggling, reportedly down 20% in August versus last year, that meat consumption is down 5% according to the latest figures published on the British Pig Executive website, and DairyCo says that milk consumption is down. Consumers are also buying more products in retailer's Value ranges. Morrisons showed a chart at their results presentation illustrating that across the whole of the grocery trade Value ranges were growing at about 8% in the spring, but have now rocketed to a growth of nearly 30%. By contrast Premium ranges growth has fallen from a high of 15% in March 08 to around 3% in August.

Other startling changes are happening. Sainsbury tell us that between July and August sales of tupperware containers have grown by 36%, and sandwich bags by 35%, as more people take sandwiches to work instead of buying ready made.

All in all, it seems that beleaguered Brits are leaving no stone unturned in an effort to spend less. The interesting thing though, is that although the credit crunch started almost a year ago with the Northern Rock wobble, the big changes in what and where people buy only started in the spring. Going back to Waitrose as an example, they were sailing along quite nicely until early summer.

Why the drop since then? Because that's when consumer confidence started to plummet,worn away by headlines about food price inflation, spikes in oil prices, mortgage worries, and warnings of rising energy bills Another chart from Morrisons shows that in March, consumers confidence levels were down by 18%, in August they were down by 40%. Or to put it another way, nearly half the country thinks things are going to get worse, much worse. If they are that worried, it's no wonder people are changing behaviour, battening down the hatches, and bracing themselves for what might be around the next corner.

What is clear though, is that doom mongers who say they always knew that all people want is cheap food are wrong. Despite the belt tightening, Premium sales are still growing albeit at a slower rate than previously. It does not look either as if shoppers are ditching ethical principles altogether. Waitrose says that consumers are still supporting welfare friendly food but choosing free range rather than organic to save some money. ASDA says its sales of organic produce have grown by 25%, and Morrisons reported that their sales of both Fair Trade and organic sales are growing.

As ever, it does seem as if those who offer good quality combined with good value (which is not the same thing as price) will ride out the storm, ready for an upturn in confidence.

Sunday, 24 August 2008

Farm Shops - The Good, the OK, and the Truly Terrible

There's been an explosion in the number of farm shops opened recently. FARMA, (National Farmers' Retail and Markets Association) reckons there are now over 1000 in total, and a recent article in the Telegraph suggested that the number is 1796, having increased by 15% in the last twelve months. In Scotland a survey by the Scottish Agricultural Organisation Society found that sales through farm shops are growing by 15-20% per annum, that numbers here increased by 15% in the last year, and that there are now 120 in total north of the border. Signs advertising farm shops seem to be springing up by the side of the road on an almost weekly basis. A survey for DEFRA, published November 2007, says that 12% of people shop at least once a month at a farm shop or farmers' market, compared with 8% doing their grocery shop over the internet, and 31% buying from specialist shops such as butchers and greengrocers.

The reasons for farmers diversifying into activities like farm shops are easy to understand, as they search for ways of earning more for their produce. Research about why consumers are visiting farm shops range from the urge to support local businesses and farmers, to a wish to be very sure about the treatment of animals and a health worry about what exactly goes into their food. There is also a theory that they want to find something a bit different from usual supermarket produce. With the current pressure on expenditure though , it could be that people are now prepared to trade their finer feelings for cheap prices and savings on petrol by doing just one supermarket shop.

So over the weekend I began a series of visits around Warwicks, Worcestershire, and Herefordshire to discover what is going in the farm shop market. And what started as an exploration of how they are faring ended in crushing disappointment at the quality of the shopping experience.

Often the basics of cleanliness and tidyness were lacking - dirty shelves, dirty fridges, dirty floors, dirty windows. Sadly, one outlet, trying very hard with its range of products which included home made ready meals, and meat and poultry reared on the farm, had not thought to cut back the weeds and nettles which surrounded the shop, or to water their drooping hanging baskets, giving an impression of total neglect.

Product quality was often a disgrace. Who wants to have travelled miles to find mouldy strawberries, wilting leeks, yellowing cabbage, cauliflower with black spots, carrots caked in dried mud, and badly vacuum packed meat lying in a pool of blood.

The range of products was often poor, even at this time of year when a vast variety of produce is available in maximum abundance. Few had made the effort to source local food. No consumer is going to return if the shop sells what can be got at a supermarket, often of better quality and cheaper.

Hardly surprising therefore that 8 out of the 10 shops I visited had no other customers and one had just one other.

There is though a shining beacon showing how farm shops can be attractive places to shop.I stumbled on Hillers Farm shop just outside Alcester. It was full of people laden with with overflowing baskets and even trolleys. Yes, it is big. It offers meat, fish, dairy, bakery, a cheese counter, wine, and fruit and veg. What makes it work though could be applied to any shop whether big or small. The quality of produce is outstanding, as is the variety. Indigeneous British fruit and veg is sourced either from the farm itself or, from farms literally just up the road.The origin of the food is clearly labelled either Hillers, or the name of the farmer and his exact location like "just next door", or "3 miles up the road". There is wide variety. Fruit ranged from redcurrants to rasperries, strawberries, blackberries,and apples, all from nearby.There are exotic lettuces, and different types of tomatoes. The cheese counter had local cheeses, and the bakery a range of different breads. The meat and chicken were all local, mostly packed in tray and film. The shop was spotless, the staff welcoming, knowledgable, and in clean uniforms.

The shop visits don't tell us whether the current financial climate is impacting farm shop turnover, although the Hillers experience would suggest that the best ones are holding up. What the visits do say is that some people are cynically exploiting consumers' favourable attitudes to farmers by flinging up a sign saying farm shop, and then selling rubbish products . This does farmers and farming no good whatsoever at a time when public support is vital.

Monday, 11 August 2008

A Shift to Thrift - Organic Sales Well Down, Red Meat Not Far Behind

Whether its Gordon Brown telling us not to waste food, a general belt tightening in an effort to pay the bills, or more questioning of the value of what we buy, there is a definite change in consumer buying habits.

A well publicised example of the shift to thrift comes in the shape of Tesco's decision to reduce the price of many organic lines. Their press release quotes TNS saying that demand for organic produce across all retailers has dropped by 8.1% in the last three months. Tesco says that many people would like to buy organic but won't pay the premium. So it has cut the price of new potatoes and carrots by 20%, broccoli and asparagus by 25%,avocados by 13%, mixed peppers by 12%, leeks by 11% and courgettes by 5%.

Next, red meat. In the 12 weeks to June 15th, according to TNS figures published by the British Pig Executive, volume sales of beef, lamb and pork dropped by 4.7% in volume compared with last year. What seems to be happening is that fewer people are buying red meat on a regular basis, and those that do buy are buying smaller amounts. Worst hit is lamb, down 12%, followed by beef down 4% and pork down 1%. Lamb of course is the most expensive red meat, and pork the cheapest on a per kilo basis. Sausages are the only red meat product showing any growth, and then by only 1%. The shift to thrift is clear in the type of cuts bought, with a marked trend to minced and stewing beef and lamb, pork belly, and pork shoulder. On the other hand, sales of roasting joints are well down, and even convenient cuts like chops and steaks are selling less than last year.

The shift is happening in even the smartest places. Waitrose have reported a 55% increase in sales of free range chicken legs and thighs, compared with 10% for significantly dearer chicken breasts.

On dairy, the figures are less startling. DairyCo data for the year to July 2008 shows that liquid milk sales have started to fall back gradually, and are now at their lowest since September 2007. Its unlikely that people are using less milk, rather that they are being careful on date codes and throwing less away. All growth has gone from organic milk, possibly as consumers question the premium paid, and sales are now drifting slowly down.

On a brighter note, total cheese sales are up by 1%, but odd things are happening. The super-premium cheddar cheeses are forging ahead. At the other end of the scale, supermarkets' value cheddars are also growing. There is a trend to buying brands rather than own label cheeses, probably because the price difference between the two is now an average of 14p per kilo when a year ago it was 29p.

Some of the changes in what consumers buy are predictable, the drop in some organic sales for example, and the switch to brands when there is not much price difference with own label, and the move to buying cheaper cuts of meat.

But a nearly 5% decline in total red meat sales is alarming, and is the direct result of major price hikes in shops.

The next few months will be tricky for livestock. Consumer demand is falling, we are heading into a period of heavy supply, and seemingly the euro is weakening which could dampen export sales. As ever, supermarkets will be forcing the pace. The red meat market is important for them, and they will be evaluating their strategies carefully. Will they lower prices in their stores to boost sales, or keep prices up? Tesco's milk price reduction today probably shows the way. Prices will come down. But who will ultimately fund the fall? Hopefully the number crunchers at the NFU, DEFRA, EBLEX, BPEX and the livestock associations are keeping close tabs on the percentage of retail price going into farmgate prices. And will complain long and loudly if farmers are getting a worse deal.

Thursday, 31 July 2008

A Shopping Trip to ALDI

To ALDI, and a look at what all the excitement is about. Latest figures from research company Taylor Nelson Sofres say that discount stores in general and ALDI in particular are growing sales at a great rate as cash strapped shoppers flock to take advantage of their low prices.

German owned ALDI is the biggest of the discounters with a market share of 2.9%, which compares with 31% for Tesco, 17% for ASDA, 16% for Sainsbury, and 11% for Morrisons. Whilst relatively small their sales have grown by 19.5% in the 12 weeks to July 13th, compared with a total grocery market growth of 7.3%. ALDI says its success is due to always selling at very low prices, something they are able to do, according to their UK head of buying Tony Baines, because "we have a low cost base, and take lower profit margins" (than the major multiples).

So what is it like shopping there?

Immediately you can see why their cost base is low. Trolleys are chained, and have to be purchased, with money refunded when they are returned. So no extra staff are required to collect them up. The aisles are narrow, all the better to pack more in to a limited space, saving on building and maintainance costs Products are left in their outer boxes on shelves, not taken out of the box and displayed individually, so again fewer staff are needed. There are far fewer checkouts, so far fewer staff are required to man them. Yet you don't queue for long. They whip you through very fast. First, because you are not allowed to hold things up by packing at the checkout, instead, you unload your products on to the belt, they are scanned, and you put them straight back into the trolley. Second because the belts are about twice as long as conventional belts, so there's no waiting to unload the trolley. And finally, although I have no evidence for this, the staff could be paid on the speed of scanning the goods, which went through the checkout like lightening.

What about the products?

ALDI stocks just 11 well known brands. The rest of their goods have got brand names, but ones few will have heard of. So ALDI is not paying typical national brand prices for their packaged products. Most of the fresh produce is sold under a little known name, the meat and chicken for example is called "Ashfield" . In just a few instances, ALDI puts its own name on fresh produce, something they want to do more of apparently to create a better quality image.

The range of goods on offer is very limited, which means less cash tied up in stock. But the basics are there.

What about price and quality?

Prices varied. 500kg of British beef mince was £2.29p compared with £2.25p at Tesco and £2.20p at ASDA. But sirloin steak, also British, was £14.68p per kilo compared with £15.47p at the big chains, strawberries were £1.69p compared with £1.99p, and new potatoes, on special offer, were 69p per kilo compared with £1.38p.

Taste wise, the strawberries, mince, steak, and tomatoes were as good as any other supermarket's, the potatoes better than a recent Sainsbury purchase.

Will ALDI become the new face of grocery shopping? It certainly offers good value on some products, which, for those on a very strict budget, could be most welcome. However, the limited range, lack of brands to which many are very loyal, and the feeling that, whether grappling with the chained trolleys to being hustled through the checkout, it is an even bleaker shopping experience than at other supermarkets, makes me think that many will shop there once but not go back. Added to this the big supermarkets have started major price wars which will make them more competitive with ALDI and its fellow discounters, at least some of the time. Discount shopping won't go away, but its probably not going to dramatically change the UK shopping world.

Tuesday, 22 July 2008

Jargon Busting - What is "Provenance"?

Its amazing how jargon creeps into business language. "Provenance" is a classic example. No food discussion passes without reference to provenance. Farmers are regularly told that having provenance is big market opportunity, and that people are more interested in provenance than ever before. And yet, according to a piece of research on the topic published by DairyCo( 63% 0f consumers questioned in a survey replied "don't know" which asked what the term provenance meant to them.Indeed an informal poll in my local pub showed 90% not knowing what the word meant. So an easy lesson is never to use it when selling to the general public.

Which is not to rubbish the idea of provenance, defined by the Oxford English Dictionary as "The source and origin of a product, it's history and pedigree". Many consumers do care about where their food comes from.

The DairyCo research offers a good guide to the type of consumers most interested in the origins of their food, and what particular aspects of food production concern them most, or appeal to them most. Whilst it is mostly about dairy products, the findings apply just as much to meat, eggs, fruit and vegetables as cheese or milk.

Much of the research builds on what is already known. It tells us that the consumers most likely to be worried about where their food comes from are older, richer, and well informed about food matters. The positive things they value are freshness, high quality, excellent taste, naturalness, tradition. In rural areas, supporting local farmers, local businesses, and the community are of great interest, and organic seems to be most valued in towns and cities. The issues that most worry consumers are connected with health and food safety, as well as ethical issues. So traceability,transparency, additives, pesticides, animal welfare, food production methods and food miles are all relevant. The research also confirms the increase in sales of local foods.

Where the research does shed more light is in the following areas:

1. Selling on a local foods message is not the only way to benefit from consumers' interest in how and where their food is produced.Concern about food is more to do with a consumer way of thinking than location. Indeed the research warns that a local message can be confusing because some consumers see local as within a 10 mile or so radius whereas others, particularly Scots and the Welsh, see local as from their country.

2. If deciding to sell in a small radius of the farm, it is not enough just to say you are local, the product must be accompanied by another benefit, which has to be explained and supported. An example might be freshness -"from the cows to your door in less than 24 hours". Or the particular steps a farmer takes to protect the environment, or the history of the farm and the product.

3. If wishing to sell a long way from home, for example to London stores, then locally based, community messages are less relevant. Instead, selling points which address food safety and health concerns can be highlighted, such as total traceability, or pesticide and additive free feeding regimes. Environmental and animal welfare standards can be emphasised. Again, any claims must be explained and supported.

As well as consumers, the researchers spoke to people in the dairy industry and from them identified several new opportunities, which could also be relevant to other products. The three with the most appeal are county specific products, products from named farmers, and a range of pre-prepared meals. Similar products do exist, so thorough market research is needed to check the competitive scene before proceeding.

There we are then. Provenance is of interest to consumers - but best banish the word from use unless talking to a food jargon specialist. These can be found in consultancy, marketing departments in processors and retailers, and government departments. Not the person in the street - who is the one person that matters.

Wednesday, 9 July 2008

Red Meat Grocery Sales - Beef and Pork Holding Up, Lamb Down

The new British Pig Executive (BPEX) website now carries monthly red meat sales through supermarkets. Here's a look at data for the 12 weeks ending 18th May 08 compared with last year.Data is compiled by TNS.

1. Price inflation is not as rampant as government figures make out, probably because the Office of National Statistics (ONS)does not capture promotional offers such as buy one get one free. Of which there have been many. TNS shows beef prices up 5%, lamb up 5%, and pork up 4%.

2. There are signs of a cutback by consumers. Consumers are buying the same amount of red meat as this time last year, but there is a trading down to cheaper meats and cuts. Total beef tonnage sales are the same as last year, pork sales have increased by 2%, but lamb sales are 3% less. Lamb could be suffering because it is more expensive. Lamb sells at £6.12 average price per kilo compared with beef at £5.46 and pork at £4.46. Beef and lamb mince and stewing steak have increased sales, whereas roasting joints of both species are selling less than last year. Frying and grilling beef have also dropped in sales, although lamb chops have held steady.

3. Sales of bacon and sausage are growing. Both have increased by 4% in tonnage, and average prices are up by 2% per kilo. Bacon selling prices average £5.63 per kilo, and sausages £3.08.It is easy to see why sausage sales should have grown, given how comparatively cheap they are. Bacon may be doing well because there is so little waste due to easy portion control, and willingness to eat the fat.

4. Sales of cooked meats are up by 2% despite costing a hefty £7.85 per kilo,which shows that if a product meets a real consumer need, in this case convenience, sales are likely to grow despite a high price.

5. There are differences by country. Scotland has turned away from beef and lamb in a big way, with sales of beef down 3% and lamb down 12%. By contrast Wales remains loyal to lamb, with volumes up 2%, beef is down 5%, and pork sales are static.


The future for lamb sales looks bleak just now. Consumers are buying less from grocery stores, and sales through hotels and restaurants, which feature alot of lamb on their menus, will be struggling as consumers turn away from eating out.

Wednesday, 2 July 2008

Credit Crunch and the Catering Trade

The UK catering market, sometimes called food service, is big but woefully under-reported. Whilst goings on in the grocery trade seem to be analysed almost daily, figures about performance in catering are difficult to find.
Yet,having some understanding of sales may be helpful for producers to gauge whether demand is rising or falling and to take a view on likely future prices. For the many producers selling direct to catering outlets, this understanding becomes vital,not only to assess impact on demand and prices, but to monitor the trading performance of their customers to avoid bad debts.
So here's a go at pulling together available data.
First, not all catering outlets will see a change in demand. Schools, hospitals, prisons, care homes, will still need to feed those they look after. But local authorities work to a strict budget, and may change the type of food they offer and bargain over prices paid to suppliers.
In the profit making sector, there is evidence that the cheaper or budget end of the restaurant market is doing well. McDonalds Europe reported that its sales for May were 9.6% ahead of last year, with the UK believed to have done even better.
At the other end of the spectrum, the Guardian contacted 8 of the smartest restaurants in London and only one had a table for 4 free at 8.00 on a Saturday before the end of July.It is the middle ground, outside of London which seems to be suffering. The Cumberland News reported on 3rd June that Carlisle had seen a slump in diners and that a number of eateries had closed.
Restaurants and eating places located in out of town shopping malls will be struggling. The Financial Times yesterday reported a survey by Experian, the market research company,which found that 5.8% less people visited such malls in June, as consumers, spooked by high petrol prices, decide not to travel. The survey also found that traffic in town centres had fallen by 1.8%. Eateries are bound to be affected.
The picture in pubs is mixed, as are views about whether the smoking ban has been a good or bad thing for food sales.J.D Wetherspoon has reinvented itself as an all day food provider, and recently reported rising food sales, although bar takings were down.Whitbread also seems to be defying the gloom. In the 13 weeks to 29th May their Beefeater and Brewer's Fayre chains grew by 3.6%. Mystifyingly, their Costa Coffee shops, despite purveying extremely high priced coffees, grew by 6%. Other good news from catering operators is thin on the ground though.
An email from a market researcher with the new meat levy board says that in the early1980's recession catering was worse hit than grocery, and that eating at home increased particularly at lunchtime. Some work they have done with consumers recently indicates that they intend to eat out less, and it is likely to be pubs which suffer most.
So catering businesses are facing a difficult time. But as ever, whether premium budget or somewhere in between, those giving great food, great service and value for money (which is not the same thing as cheap), should weather the storm.

Tuesday, 24 June 2008

Organic Market Outlook

The media's fascination with the organics market continues but this time with the focus on how it is faring during the credit crunch.
The question of how a sector which is still less than two percent of total food sales can command so many column inches will be tackled another day. The more pressing issue is whether organic farmers will find a ready market for their produce or will it have to be offloaded at conventional prices.
Here's a round up of the latest news on the state of the market.
Sky News commissioned a special piece of research, and found that total sales of organic produce had been growing until April when for the first time sales dropped below the previous year.
The Telegraph reported that sales of fruit and veg box schemes have fallen sharply. One supplier said that 10% of his customers had cancelled their order, and he reckoned that 20% would have cancelled by the year end. One firm has gone into administration.
Up at the Royal Highland Show, Andrew Gibson of Two Sisters Food Group said that sales of organic chicken had virtually disappeared, and that free range was not growing as fast as it had. The British Poultry Council says that sales of organic eggs are showing no growth year on year, although free range sales were still up.
DairyCo's latest data on the milk market shows flat organic milk sales.
No consumer sales figures have been reported for beef or lamb.
The reason for the slowdown/declines in sales seem firmly to do with price. One Abel and Cole box scheme customer, interviewed in the Telegraph said "I'm afraid the organic box is a bit of an unaffordable luxury"; and another said "It was a luxury, but we never used it up each week. I have no regrets at all that we cancelled." A new mother interviewed by Sky also said that it was price which had made her turn away from organics, especially packaged food.
All of which looks a bit gloomy.
By contrast though ASDA reckons that organics are one of their fastest growing areas, and they plan to add new organic lines this year, Tesco reported that the growth rate for total organic sales had slowed to about 10%, which is not bad, even though it compares with about 30% in previous years, and Sainsbury that organic sales were one of their major growth areas. Grampian Country Foods have said they want to increase organic chicken production from 15,000 birds annnually to 20,000 (and double free range production to 90,000 birds). The Soil Association is projecting sales growth of 10% in 2008, and Nic Lampkin, an academic expert on Welsh organics said in the Western Mail that " There is still room for some growth".
It does look as if the rate of sales growth for organic food will slow whilst the current financial climate continues, which is what we predicted at the start of the year.
Could sales actually decline? Lampkin points out that 80% of organic sales are made to just 20% of all those who buy organic, and he thinks those customers will stay loyal because they buy for reasons of principle. However, should there be a wholesale walking away by the other 80% of consumers then clearly sales will fall substantially. Trying to decide if organics are worth the money is made more tricky by groups such as Which saying that their taste tests showed no difference between standard and organic products, strawberries being cited.
The overall conclusion though is that sales growth will continue in the major supermarkets who want to promote higher priced food like organics, but who will work hard to reduce the differential between organic and conventional food to ensure that consumers will trade up and not be put off by an overly big organic premium.
The outlook for those outside of the supermarket food chain looks bleaker unless they too can reduce the difference in price. At the moment some of the price differences are steep to put it mildly. The Telegraph quotes prices from an Abel and Cole box versus the same items bought from Tesco's organic section. Jersey Royal potatoes are £7.00 a kilo from Abel and Cole compared with £1.99 from Tesco, cherry tomatoes £10 a kilo versus £2.46, Little Gem lettuce £2.18 versus 50p, and even the humble onion at £1.66 a kilo compared with 84p. There's got to alot of added value to justify those differences, and for many thay value just is not there.
As far as action is concerned, organic farmers will of course need to watch costs carefully. Those contemplating a move to organic farming should take a very close look indeed at the overall cost of organic production versus conventional, and be absolutely sure that are still better off even if current premiums are reduced. They should also investigate what is happening to the market for their particular product, as not all organic sectors will perform in the same way.

Monday, 9 June 2008

Consumers,Clones and Concerns

The Food Standards Agency research findings that consumers do not support animal cloning for food have been widely reported, (apart from in the farming press, bizarrely), and both the findings themselves and consumer reactions to the reports merit pause for thought. The research is thorough, and the reports on it were confined to the facts, with no hysterical headlines. Media commentators reactions were also well balanced, with a couple of commentators coming out in support and one asking for a reasoned debate on the subject. The facts are though that consumers are unlikely to buy food from cloned animals.
In the research itself, people were worried about the animal welfare implications of cloning for both the mother who, because of the high failure rate risked becoming a breeding machine, and for offspring who in most instances are born with disease and deformity. People vividly remember BSE and CJD, and so were concerned about whether the food would be safe to eat; and they doubt whether those involved can be trusted, be they biotech companies, breeders, farmers, or retailers. All the worries were compounded by an inability to see any benefits from cloning apart from more profit to those in the cloning chain.
I don't think that this research can be dismissed as the views of a tiny number of people who may have particularly strong views about animal welfare or food safety or the ethics of cloning.Those taking part were screened to ensure they had no extreme ideas about any aspect of food, and findings are in fact very similar to those from America where they have carried out extensive research on the topic.
Reaction to media commentators columns also showed resistance from the public, but with a sizable minority being open minded. Melanie Reid in the Times came out strongly in favour of cloned food. 29 people were moved to respond to her views, of whom 8 said it sounded ok to them. The rest were strongly against, with some saying her piece was an illogical and factually incorrect piece of journalism. The Observer's Tim Haywood sat on the liberal fence saying that whilst he did not like the idea himself, there should be a reasoned debate about it, a point of view endorsed by 6 out of nine people commenting on his article. Hannah Strange also of the Times concluded that the animal welfare issues associated with cloning would mean that UK consumers would not support it.She drew one response saying that cloning needed the same animal welfare safeguards as ant other animal related activity, and one feeling that there was no cause for concern.Many of those reponding to articles, whether for or against,called for clear labelling so that consumers knew what they were buying and could avoid if they wished. The Mail, mouthpiece of middle England, reported the research and of the people who commented half were open minded, particularly if cloning would help feed the world.
At first sight therefore, public response seems more favourable than the FSA research might indicate. However there are two major findings which lead to the conclusion that UK consumers just will not buy cloned food.First, the research shows clearly that the more consumers know about cloning the more alarmed they get. As yet the cloning debate is still in its infancy in the UK, but anxiety will grow with more publicity. Second, there is a striking attitude difference between men and women. 60% of women reject outright the idea of buying cloned food, compared with one third of men. Conversely, about a third of men are prepared to buy cloned food, but only 14% of women.The key point here is that its still women who do most of the food shopping.
So, there are major drawbacks in consumers minds already about cloned meat, and as the debate unfolds there will be alot who will not accept it.
But this consumer unease won't come as a surprise to farmers, many of whom instinctively understand the public's feelings.

Tuesday, 3 June 2008

From the Farmer's Mouth - More Farmer Views on Diversification

DEFRA's startling statistic that 19% of farm profits come from diversification compared with 5% from core farming has prompted a regular look at what farmers who have taken the diversification plunge are saying about the good, bad, and ugly of stepping along this path. Information is collected from farmers featured in the farming press.

Over the last twelve weeks there have been 16 diversification stories, covering adding value to beef, lamb, pigs, poultry, dairy, and vegetables, plus a milk round, 2 farm shops, marquee hire, property development, and, in a sign of the times, eco farm holidays, and an eco friendly visitor centre and restaurant.

Once again there is a high level of agreement about what makes a diversification successful. Most speak about the need for a top quality, great tasting product. Peter Willes, producing cheeses from Higher Alminster Farm near Bideford in Devon, says " Milk must be a particular quality, 4% butterfat and 3.5% protein", adding that he favours cow condition and a moderate yield over pushing too hard, so that quality is maintained. Ian Burdess, who farms with his wife Zoe at Dottril Farm in the Yorkshire Wolds, says " I think its very important for flavour that lamb has been on grass. Our customers tell us that it is superior to lamb that has never been outside." Peter and Henrietta Grieg of Piper's Farm in Devon say that their aim is to sell " pre packed meat of high quality, meat that is wonderful to eat". James Hague of Lyde Green Farm Rotterwick in Hampshire who has a milk round says " The key is providing good service, and above all good quality milk". Malcolm Sutton and his wife Kate of Postern Lodge Farm Belper sell ice cream, and Malcolm talks about the need for a top quality product, "no additives, just milk, cream, eggs and sugar, with natural flavours."

Product consistency is important too. Zoe Burdess sells to restaurants, and says "Chefs want consistency both in terms of quality and weight". Peter Grieg says " What drives this business is absolute consistency so that the customer always gets the same food to the same high standard."

Another common theme is to understand what customers want not just at the start of a project but regularly, by doing market research. Peter Grieg spent hours in Marks and Spencer watching how people shopped and what they bought. Rod Smith of Beal Farm near Lindisfarne, who has opened the eco friendly visitor centre, spotted the eco trend, and noted that 500,000 people pass by the front door annually. He is now "Inviting constructive criticism and suggestions about our menus and facilities in order to improve them". Richard Scoles who farms with sister Rachel on Railton Farm near Driffield Yorkshire has started growing speciality vegetables like chicory, squash, pumkins, flageolet beans and kohlrabi, and their sales manager Mark Southwell says " We have a strong emphasis on attention to detail, listening to our customers requirements, and making sure we supply what they want and deliver when they want it." Hugh and Sascha Grierson from Newmiln near Methven Perthshire started by selling organic meat but were constantly asked by customers for organic chicken.

All the farmers sell their produce under a brand name, sometimes the name of the farm, sometimes something completely different, but all with the objective of setting themselves apart from competition. Scott Milligan from the Ballathie estate near Stanley Perthshire sells beef direct and says " We see branding as very important so that Ballathie is associated with high quality". Malcolm and Kate Sutton have two brand names for their ice cream, the upmarket Cowhouse Dairy brand, and Udder Stuff for younger consumers. George and Pat Booth who farm near Ellon in Aberdeenshire developed "The Store" as the name for their farm shop, but it now goes onto a range of products. Ian and Zoe Burdess registered the name LUST (Lamb U Can taste) so that no one else could steal it.

There is much similarity in where farmers sell their produce.Farmers Markets are usually the start point, followed by local shops, delicatessens, catering outlets, and even cinemas and garden centres. Some sell to supermarkets.

Most regularly publicise their products. Free samples to taste are popular, as is attendance at food fairs and local events, often offering cooked food, getting stories published in local newspapers, compiling a list of customers and sending them newsy updates. Two farmers had entered local food competitions with James Hague the milkman really landing on his feet when Antony Worrall Thompson, one of the judges decided to use the milk in his restaurant.

The farmers also give good advice about the downsides of diversification. Four of the meat sellers warn that selling the whole carcass is vital to making a profit. Some dealt with the forequarter by making beefburgers, some sausages, and one did ready meals. Two warned about the time it takes to become profitable with one being honest enough to say that the first year was bad and the second worse, and then it turned around. As Malcolm Sutton said "Diversification is easy to say, but it is not a cheap or easy option. You have to be interested and live the dream."
Overall though diversification does seem to work. DEFRA's analysis says that only 1.5% of diversification projects fail to make a profit, meaning that 98.5% contribute positively to farm earnings.
(See blogpost of 12/2/08 for further analysis of DEFRA's diversification report, and blogpost of 28/2/08 for the first in this series of reviews about farmers' thoughts on diversification).

Friday, 30 May 2008

Supermarket Sales Show Strong Growth, No Sign of Consumer Cutbacks

Taylor Nelson Sofres (TNS) has published grocery sales growth and market share figures for the 12 weeks to May 16th. They show no signs of a consumer cutback. Total sales are up 6.6%, with big share gains for Morrisons (sales up 8.7%) and ASDA (up 7.6%) at the expense of Sainsbury (up 4.6%) and Tesco (up 6%). Somerfield and the Coop continue to lose share, and independent stores are holding up well.

The much talked about growth in sales through cheaper priced discount stores seems to be more about shoppers at the now defunct Kwiksave seeking a similar type of store rather than a consumer flight to cheaper shopping. The total market share held by discounters last year was 5.7% and it is still 5.7% . At the other end of the scale, up market Waitrose held a 3.9% share both last year and this, indicating that consumers are still buying premium food. Overall, the only hint of a change is a small share growth for Iceland which sells lower priced frozen food.
The actual share numbers for 2008, with 2007 in brackets, are as follows:
Tesco 31.1 (31.3)

Asda 16.9 (16.7)

Sainsbury 16.0 (16.3)

Morrisons 11.4 (11.2)

Somerfield 3.7 (3.8)

Kwiksave 0.0 (0.2)

Waitrose 3.9 (3.9)

Iceland 1.7 (1.6)

Netto 0.6 (0.7)

Lidl 2.3 (2.3)

Aldi 2.8 (2.3)

Co-ops 4.5 4.3

Other Multiples 1.6 1.7

Independents 2.8 2.8

Wednesday, 28 May 2008

Grass Fed Cows - A Market Opportunity?

Today's headlines announce that a recent study has found organic milk to be healthier than conventionally produced. Dig a bit deeper and we find that's not what the study found at all.
The study was carried out by Newcastle University, and published yesterday in the Journal of the Science of Food and Agriculture. It compared nutritional content of milk from three production systems - low input organic, low input non organic, and high input conventional.
And here's the interesting bit. During the outdoor grazing period milk from low input non organic systems were just as rich in good essential fats and antioxidants as organic. Both were much richer than conventional high input milk. When the cows were housed, there was little difference in nutritional composition between high input and organic.
The increased fats and antioxidants cited in the study include Omega 3, Vitamins A and E, and conjugated linoleic acid which has been found to shrink cancerous tumours. Consumers are likely to feel that milk which contains more of them is a better buy.
The study shows that the difference between the two low input systems and the high input is the amount of fresh grass grazed, with an average high input cow having just 37% of her food from fresh grass compared with around 80% for the low input animal.
Of course in our sound bite society few journalists are going to delve into the detail of a heavyweight journal article, and uncover the facts that low input non organic is just as good as organic, and that the extra richness disappears from organic during the winter period. Hence the easy headlines that organic is better.
Nevertheless, the findings are significant for the dairy industry. At last there seems to be an opportunity to divide liquid milk into another market sector rather than just talk about organic and conventional. It is not too difficult to see an added value milk on shop shelves with a selling point about being from grass fed cows and therefore naturally higher in health benefits.

Wednesday, 21 May 2008

Pricing Power - A Tale of Two Companies With Lessons for UK Milk Coops.

Two dairy companies reported profit results in the last few days and the difference between the two is stark. Robert Wiseman gave a profits warning for 2008. Dairy Crest oozed confidence and said it will have another good year.

The make or break factor is the ability of each company to implement price increases sufficient to cover the huge rises in costs they both face. Basically, Dairy Crest has managed to get price increases through to the customers it supplies, but Wiseman has not. A Wiseman spokesperson said "We are operating in a very tough market at the moment, and in a tough market it takes a while to negotiate a settlement from your customer base." They declined to say exactly how much of their rising costs they had passed on so far. Dairy Crest said "To date we have been successful in implementing price increases to our customers", and Mark Allen their Chief Executive added that he was confident the company would be able to pass inflation costs on to retailers "as and when" it became necessary.

Whilst Dairy Crest is bigger than Wiseman, and operates in spreads, yoghurts and cheeses as well as liquid milk, the difference in pricing power between the two companies boils down to brands and spread of customers.

Dairy Crest has built big brands which consumers want to buy like Cathedral City Cheese, Utterly Butterly and Country Life. Brands like these can go up in price without much impact on sales, but if prices did go up too far and consumers buy less, Dairy Crest has the option of reducing them through promotions. They are in control. Contrast this with Wiseman who sell almost all their products under supermarkets' own brand names, and face the problem of supermarkets being reluctant to put prices up in case they lose their reputation of offering their customers good value for money. Wiseman has no control over what the supermarkets do.

Yes, Dairy Crest supplies milk under supermarket brands too, but I'd bet that when it came to price negotiations, Dairy Crest got alot less of an increase, if any, on liquid milk than they did on their brands. What they will have done is hike up the price of their own brands much higher than on supermarket ones, and ensure on average that costs were recovered. Wiseman does not have this flexibility and has suffered.

Dairy Crest is further helped by selling not just to big supermarkets but to smaller stores and door step delivery where it is easier to pass on increases. Wiseman has 70% of it volume going through the big supermarkets, and has less than 1% of its business through doorstep. Again it lacks flexibility.

And the lessons for Milk Coops? They need strong brands and a spread of customers. At present they are individually too small to afford to build brands and a broad customer base. They need to merge, and use the cost savings to invest in the market place. Just like Friesland and Campino with 5 times the farmers operating across three countries have managed to merge.

What is it with our Coops that they find this so difficult?

Wednesday, 14 May 2008

Food Inflation - Consumer Behaviour, Supermarket Reaction, Farm Gate Price Fights Ahead

There's been a raft of data published in the last few days covering April's inflation numbers, consumer research from the levy boards, and supermarket performance in the first quarter of the year. Four messages come singing out and these are:

1. Annual food inflation at 6.6% (Retail Price Index) is indeed higher than consumers have been used to recently, but despite the increases food remains a small proportion of household spend.
2. There is little sign of consumers spending less, or of any flight from premium quality food.
3. Supermarkets are keeping price inflation well below published figures because of heavy price promotions.
4. There's an almighty battle ahead on farmgate prices as supermarkets fight ferociously to keep prices low and stop consumer defections to a rival store.

Food Inflation
The rate of inflation varies by sector. Bread and cereal suppliers continue to rack up prices, as do egg producers. By contrast, after a run of monthly increases dairy prices are now dropping compared with March. The biggest change is red meat pricing which has shown price rises in April of 7.2% for pork, 4.2% for beef, and 5% for home produced lamb. All connected to the industry need to remember that until the last couple of months beef and lamb prices were dropping, and that these rises are a much needed correction to help farmers recover their input costs.

Consumer purchases
There is no evidence of a downturn in consumer purchasing of basic products. As reported in May 5th's blog, liquid milk sales have dropped very slightly, but Taylor Nelson Sofres data, published by the British Pig Executive (BPEX), shows volume sales of beef for January to March up 3%, lamb up 4%, and pork up 10%. Neither are consumers trading down to cheaper cuts of meat.
Indeed, the trend to buying top quality food is not just continuing but actually accelerating. Morrisons have said that sales of their value range are up 13%, but it's premium ranges have grown by 22%. ASDA have said their total food range grew by 6.4% in the first three months of 2008, but their premium lines are up 30%. Sainsbury's have said they reckon that quality food is resilient in when the economy is sluggish, in their view because people eat out of home less often. Latest figures show that Waitrose, purveyor of top quality and fairly expensive food is holding market share. The only sign of slowing down is organics, according to the Guardian, where growth is 10% year on year compared with about 30% recently. But 10% is still healthy.
The only sign of consumers being price conscious is that discount stores who sell at rock bottom prices, such as Netto, Lidl, and Aldi are gaining market share, which could signal more willingness on consumers part to seek the best price for basics, but on the other hand, the share gain could be due to consumers who used to shop in the now defunct Kwiksave turning to a similar type of shopping outlet.

The big issue
The big issue is not whether food inflation will stop consumers buying. Rather, its the declared intent of the major supermarkets to keep prices low. Tesco last week announced 1000 price related promotions. Justin King of Sainsbury yesterday said he reckoned inflation was nearer 2% because of the steps big grocers have taken to keep prices down. King saw this fight for low prices continuing because of the competition between them. Andy Bond of ASDA is at this square also. His results statement yesterday ended with the words "We have a duty to lock down inflation by working with our suppliers to cut costs to ensure that our customers are always getting the best possible deal on their weekly shopping."

A pricing battle seems inevitable, and its difficult to see how farmer producers can remain unaffected. Three things need to be regularly and widely communicated, particularly as prices to livestock and dairy farmers are on the rise. The first point is that prices might be rising now but they have been unprecedentedly low for years. Secondly, input prices are rocketing and must be recovered, and thirdly, farm incomes still remain too low to be viable at a time when the country should be producing more to ensure food security.

Wednesday, 7 May 2008

Milk Market Data Quarter 1 08

DairyCo, the new name for the MDC, has just published liquid milk market data for the 12 months to April 2008. The analysts there tend to concentrate on annual figures but a better feel for trends can be got by looking at shorter term numbers, so here's an update on what has been happening over the last 3 months.

Sales of standard Pasteurised milk have dropped very slightly as retail prices have tipped over the 60p mark to average 61p per litre. This is the first hint that consumers might be buying a bit less in the face of continued price rises.

Organic sales have grown by a small amount with average prices being stable at around 76p per litre. This gives additional support to the theory that there won't be much change in organic sales until prices go over the 80p level, at which point the gap between standard and organic will be two price points (70p and 80p), and organic sales will drop again.

Filtered milk, with its selling benefit of staying fresher for longer, grew by 6%. This is still a growth rate that would please most people, but it is a substantial slowdown on previous trends which saw growth at over 20%. Filtered still sells at a 2p premium to standard.

Modified milk sales dropped by 9%, and although this decline is alot less than the 35% drop seen previously it does further indicate that consumers just don't want a natural food like milk to be tampered with.

And finally, Channel Islands milk sales and prices have not changed at all in the short term, and neither have Soya sales and prices.

Sunday, 4 May 2008

What Credit Crunch?

Now here's a thing. On the one hand we have screaming headlines about the rising cost of living. On the other, we see the UK launch last week of Wii Fit, a combined computer and fitness game costing £69.99p, and Grand Theft Auto, another computer game costing around £39.99p. At those prices, in the current climate you'd think both launches would have been a terrible flop.

Not a bit of it. According to a piece tucked away in the business section of Thursday's Times, Wii Fit sold 200,000 copies in its first three days of sale. It might have sold more but stocks ran out. The Times online today tells us that Grand Theft Auto sold 609,000 copies on its first day. Consumers have shelled out a cool £40m on the two games in less than a week.

What's the relevance of all this to a blog which is supposed to be about consumer trends and their impact on agriculture? Well, number one, farmers should not feel remotely defensive about their quest for a fair return for their efforts, even though it may mean a rise in food prices. I'd guess that not many hill farmers have bought Grand Theft Auto. Second, those griping about the price of food might want to reassess priorities, and remember that the price of food has declined by about 17% since 1989. And, nothing to do with food, but is it not a bit disturbing that so much money should have been spent on a Grand Theft given its violent content, which has led to withdrawal of advertising on public transport systems in America.

Monday, 28 April 2008

Food Inflation - Little Link Between Retail Prices and Input Costs, Livestock Farmers Disadvantaged

The hoo-ha about food price inflation which swept the media last week prompted an attempt to disentangle sensationalist headlines from fact. I turned to the independent and usually reliable Office of National Statistics to check their Retail Price Index figures, and what started out as a fact finding mission uncovered some worrying numbers. In a nutshell, there are massive differences in retail inflation between agricultural sectors, and in most cases they bear little relation to input costs, upon which retail price changes are usually based.

Here are the ONS numbers for the 12 months to March 2008 compared with the previous year:
Total Food +6%
Butter +35%
Eggs +32%
Cheese +16%
Milk + 14%
Bread +12%
Poultry +9%
Fresh Veg +5%
Fresh Fruit +4%
Beef +4%
Pork +3%
Lamb -1%*
Fresh Fish -2%
*Home produced lamb inflation +2%, imported minus 3%.

According to a survey by buying group Anglia Farmers, input cost rises across the sectors for the 6 months to April are follows, with the cost increases for the previous 12 months to September 2007 in brackets:

Total Agri Inflation +17% (+7)
Dairy +22% (+9)
Beef and Lamb +19% (+7)
Cereals and OSR + 16% (+6)
Potatoes +12% (+9)

The differences in timing between the surveys mean detailed comparisons are not possible, but what is clear is that huge cost pressures being faced by beef and sheep farmers are not reflected in retail prices.

Many will argue that inflation is complex, that costs are not just about the raw material, which is affected by supply and demand, and accounts for just a part of overall prices, and that in some cases retailers will absorb cost increases but not put retail prices up. All of which is true of course. Nevertheless, one is left with a feeling that achieving appropriate price increases is connected to the ability of different sectors to put their case. The dairy sector was undoubtedly helped by publicity about the plight of the dairy farmer, and cereals by widely reported world price issues.

So, who is speaking up for beef, sheep and pig farmers? The pig industry is making some headway with presenting their case. There's very little about beef and sheep though. Yes, livestock prices to farmers are increasing just now due to external factors such as rising lamb exports and falling beef imports, but they are not increasing enough. Farmers must continue piling the pressure on to industry groups to publicise the huge issues livestock farmers face trying to make a living.

Monday, 21 April 2008

Climate Change and the Farming Industry - At Least They're Saying Something

At last! A glimmer of response from the farming industry to accusations that livestock farming is destroying the environment and the glib message that the answer is to eat less meat and dairy products. Following an article by George Monbiot in the Guardian, both the Soil Association and the NFU got their pens out, and started putting some balance into the debate. (Guardian 17th April)

The Soil Association made the point that grass fed livestock are a good thing because grass traps carbon, so if you plough up grass to plant crops of whatever kind then that benefit is lost. Unfortunately their argument then got a bit complicated when they said that bacteria in the soil of unfertilised grassland breaks down methane without explaining in easy words how, and why this is good.

The NFU wrote that if less meat and dairy is eaten then farmers will turn the land to crops, or just let it go wild with bad environmental effects. Unfortunately they did not explain what these bad effects would be. They also spoiled the clarity, and possibly challenged consumer sympathy, by saying that the problem has arisen in the first place because agriculture has been underfunded for 30 years.

A couple of independent contributors, one in the Telegraph from an organic farmer, have made additional points, namely that most UK beef, and all UK lamb, is grass fed; and that the manure produced by livestock is a natural fertiliser so there is no need to buy in processed product.

The messages from the farming industry are still far too numerous and complicated to influence consumers compared with the crystal simplicity of "livestock bad, so eat less". We know from the free range chicken experience (see blog of April 15th) that to alter opinion the message has to be clear, simple and delivered from a trustworthy source. Nevertheless, within the tentative responses so far lie the beginnings of a sensible debate. The points about grass feeding, and the detrimental impact on our landscape should there be no livestock are powerful, but they need to be honed and simplified. If, as the NFU suggests, investment is an answer then details of investment in what, and why will it work ethically and environmentally must be communicated.

The need for a considered and united agri view is urgent. All sorts of figures and claims are being bandied about, witness the debate on Jeremy Vine's Radio 2 show today following Sir Paul McCartney's interview with PETA (People for the Ethical treatment of Animals) where he advocated vegetarianism as the answer to climate change.

And once farming leaders know what they want to say about climate change, could they please tell the rest of us, so that we who care deeply about a healthy, environmentally friendly and ethical farming industry can respond well when challenged.

Tuesday, 15 April 2008

Free Range Chicken Sales Still Flying

The boom in free range chicken sales continues.

The Sunday Telegraph interviewed chicken buyers from ASDA, Tesco and Sainsbury, and they all report the same thing - rocketing demand following the Fearnley Whittingstall/ Jamie Oliver programmes which highlighted the conditions in which intensively reared chickens are raised. Sales increases in free range and higher welfare chickens have soared by between 50% and 70%, and this might be an underestimate as shelves are often empty because supermarkets can't keep up with consumer demand.

ASDA has seen free range sales increase by 50%, and reckons that it will be August before they are able to keep up with demand from their shoppers. Sainsbury has seen sales of free range and higher welfare chicken grow by 53% in January to March this year, and think it might be close to the end of the year before they are able to keep up with demand. Tesco has seen sales of free range and higher welfare chickens grow by 70%, and these ranges now account for 30% of their total chicken sales.

Eggs are affected too. Executives from the UK's biggest egg packer are reportedly touring the country trying to persuade farmers to convert to free range.

What does this tell us about consumers? Clearly animal welfare is important to them, and they are prepared to pay for it. But the chicken welfare issue has been around for decades, so what has suddenly happened to achieve this transformation in shopping habits? Perhaps the answer lies along these lines....
Animal welfare is something consumers care about but don't want to consider too closely. But all of a sudden the issue is in their living rooms, and so hard to ignore. Further, the issue is clear and simple (are these farming conditions acceptable?). And the solution equally clear and simple (buy free range/ better welfare chicken). Finally, the message is conveyed by trusted people.

Rebels with a cause, seeking change, might learn from the chicken experience.

Wednesday, 9 April 2008

What Do Supermarkets Want from Suppliers?

Well, the cynical might say silly question, its all about lowest price. And indeed there's no getting away from the fact that supermarkets negotiate very hard - to put it mildly. But there are other factors which supermarkets take into account when deciding whether or not to work with a supplier.

According to the Institute of Grocery Distribution (and apologies for mentioning them again, but they do publish some helpful data), retailers' top requirements from their suppliers are as follows:
New product development and innovation, and consistently high service levels, mentioned by 72% of retailers questioned
Understanding the retailers strategic direction, mentioned by 67%
In depth understanding of the category and its future trends, mentioned by 61%.
These four requirements were rated well ahead of any others, with the next highest ranking, mentioned by 47%, being a need for suppliers to have dedicated teams managing the relationship.

It's interesting to see the emphasis put on innovation and understanding future trends. These skills are vital to retailers who are extremely competitive with each other, and all hell bent on attracting more shoppers and growing their business. Retailers recognise that price alone is not enough to do this.

The high priority given to service, ie having the right product on the shelf all of the time, is also key as nothing frustrates a shopper more than finding that the product they want is out of stock. Often they will either not purchase at all, so business is lost, or worse still go to another store.

The IGD also draws attention to the importance of an efficient supply chain, as this is a way for retailers to get costs down. However they can't do this on their own, and are more likely to support suppliers with whom they can partner in an effort to reduce supply chain costs.

So, for those thinking about dipping a toe in the supermarket supply water, its all about new ideas and the ability to implement them effectively with top class service. For those who do not deal directly with supermarkets, but supply processors or packers who do, its worth remembering that they are judged by their ability to innovate and supply efficiently. The producers who help their processor/packer customers either innovate or become more efficient may find extra profit in their pockets.

Monday, 7 April 2008

Ethical Purchasing and the Credit Crunch... Continued

Concern about whether the credit crunch will bring ethical purchasing to a halt seems to be exercising many minds. The latest to publish a survey is The Times newspaper.

In answer to the question "In the next year are you likely to .....", the 1000 people surveyed replied as follows:
Buy more organic food - 34%
Buy more Fair Trade products - 59%
Buy healthier food - 64%
Buy food that can guarantee a better deal for farmers - 66%
Buy more locally produced goods - 71%
Buy food with less packaging - 80%

The same survey also asked the question "Given the growing economic uncertainty, which of the following best describes how you would be likely to respond if you had to cut back on your consumer spending?" Answers to this question have been tracked over time, and are as follows:

Still try to buy the most ethical and environmentally friendly products I could
Nov o7 - 65%
Dec 07 - 69%
Jan 08 - 63%
Feb 08 - 69%
Be more likely to buy products and services that represented the best value for money regardless
Nov 07 - 35%
Dec 07 - 31%
Jan 08 - 37%
Feb 08 - 31%
Mar 08 - 35%
Mar 08 - 35%

The way consumers anwer questions about their intentions should always be treated with a high level of scepticism. What consumers say they will do and what they actually do are two very different things. This is particularly true when it comes to questioning consumers about their ethics. The best way of interpreting the data is probably like this. In the first table, the answers show what issues are highest on consumers minds, and what messages are getting through to them. So, they are irritated about excess packaging, which we know from many other surveys, and they are thinking favourably about locally produced foods, and fairness to farmers at home and abroad. They are less sure about organic foods though. I'd say the second table has little value given that many consumers won't want an interviewer to think badly of them, and so are unlikely to agree that ethics will go out of the window in favour of a better price.

Friday, 4 April 2008

Ethical Purchasing - Inside the Consumer's Head

The Institute of Grocery Distribution has previously provided data about the 5 ethical issues that most concern people, these being Animal Welfare, Local/British, Environmentally Friendly, Fair Trade, and Organics. See blog of 7/3/08 "Whither Ethical Purchasing" for detailed data.

Now, for anyone interested in what goes on inside consumers minds as they make an ethical purchase, IGD has published findings on how and why consumers decide what to buy.

According to IGD, consumers work to 7 guiding principles:

1. Personal beliefs about what food is right and what isn't.

2. Whether food has been produced in a way that is fair to all involved, be it people or animals, both at home and abroad.

3. Worries about sustainability and whether due thought has been given to the environmental impact of food production.

4. A desire to leave the world in a fit state for future generations.

5. Concern about health and well being, particularly if young children are involved.

6. Food safety as it relates to where the food has come from and how it was produced.

7. What makes the consumer feel good at the time of purchase.

It has to be said that some of these findings look a bit vague, and although the IGD doesn't mention this, not all consumers will act on all these principles all of the time. However, they do support the general view that consumers are becoming more aware of ethical issues. They also give clues about why consumers make a particular decision, whether it's to support the environment, or to be sure that no person or animal was badly treated, or whether more selfish motives such as health or feeling good come into play. The findings can also help those thinking about how to advertise their produce develop an appealing message for their customers.

Monday, 31 March 2008

Premium Food - Sainsbury Says Still Growing

One of the trends we're tracking is whether current financial gloom is affecting sales of premium food. No, says Sainsbury who have just announced 12 week sales to March 22nd. Asked specifically about this, Justin King their CEO said that there is no evidence that consumers are trading down to save money, and that their research says consumers will continue to spend more in areas where quality is important to them. According to King, the biggest sales growth was in their premium "Taste the Difference" range, and at the other end of the scale in their basics range.
The other interesting trend he highlighted was that ready meals sales have stopped growing, but what is booming are foods where one stage of preparation has been done, like meat with a sauce on the side, or veg which has been peeled and diced. King put this down to a wish to eat more naturally and healthily, but save a bit of time where possible.