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.