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
Friday, 30 May 2008
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.
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?
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."
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.
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.
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.
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