In the words of Justin King of Sainsbury, speaking during a business performance update last week - “the consumer is in a bad place just now”. Which is not really surprising, given the amount of depressing economic news.
Nevertheless, both Sainsbury and Morrisons, who also gave a business update last week, feel that food is one of the last things where consumers are prepared to trade down. A view echoed by the IGD (Institute of Grocery Distribution) who say their research indicates that “Economising is not the same as down trading”. Sainsbury’s “Basics” range is indeed up 60% year on year, but it still accounts for only 3% of total sales. Sales of their premium “Taste the Difference” range are “off the pace”, which is corporate speak for falling, but the range is still 2.5x as big as Basics, and the sales decline is attributed to a drop in the market for ready meals, rather than a flight from quality. Morrisons “The Best” premium range is up by 5.3%
So there is still a search for good food, and a Times Populus survey (26th March) put quality as equal to value for money when it comes to choosing a store. But its not quality at any price. Instead, people are far pickier about what they buy and energetic about finding the best deals.
The search for good deals is leading to much shopping around. The days of convenient one stop shopping have given way to two and even three stop shopping and both Morrisons and Sainsbury claim an increase in numbers of shoppers in their stores. What this suggests is that the traditional way of categorising stores is dead. No longer can we say Sainsbury and Waitrose upmarket, ASDA and Morrisons downmarket, and Tesco in the middle. Its much more individual than that now with each shopper asking whether the quality /value equation at a particular store at a particular time is right for them. Looking at the crystal ball I’d say that the next big strategic challenge from supermarkets will be how to build loyalty. Meanwhile value offers will become increasingly innovative.
Once in the store, what the shopper buys is changing. The aforementioned ready meals market is plummeting, and TNS (Taylor Nelson Sofres) the market research company tells us that frozen foods are growing by over 9% year on year, enjoying a change in status from poor relation to a wise choice due to cheaper prices and far less waste.
The IGD as well as the supermarkets tell us that there’s a lot more cooking from scratch going on, apparently herbs and fresh pasta are flying off the shelves in Morrisons. And there is a return to families eating together.
There are mixed views about whether ethical purchasing is taking a back seat. The decline in the organic market has been reported to death (sales down 15% in the last three months, bread down 31%, vegetables down 10% according to TNS), but as is being acknowledged even by the Soil Association, the issue here is that consumers can’t get their heads around why organics in general are worth a premium. Animal welfare issues though remain important to consumers. Sainsbury stressed again last week that this is something shoppers search for, and IGD research confirms it. The question of course is where this welcome concern about animal welfare will go next and there are reports that Hugh Fearnley Whittingstall is turning his attention to dairy cattle.
So in summary, the recession is leading to changes in what and how shoppers buy. They are not prepared though to sacrifice quality, and will shop around to get it at the right price. Equally they are prepared to support ethical products where they clearly understand what it is that they are paying for.
Nevertheless, both Sainsbury and Morrisons, who also gave a business update last week, feel that food is one of the last things where consumers are prepared to trade down. A view echoed by the IGD (Institute of Grocery Distribution) who say their research indicates that “Economising is not the same as down trading”. Sainsbury’s “Basics” range is indeed up 60% year on year, but it still accounts for only 3% of total sales. Sales of their premium “Taste the Difference” range are “off the pace”, which is corporate speak for falling, but the range is still 2.5x as big as Basics, and the sales decline is attributed to a drop in the market for ready meals, rather than a flight from quality. Morrisons “The Best” premium range is up by 5.3%
So there is still a search for good food, and a Times Populus survey (26th March) put quality as equal to value for money when it comes to choosing a store. But its not quality at any price. Instead, people are far pickier about what they buy and energetic about finding the best deals.
The search for good deals is leading to much shopping around. The days of convenient one stop shopping have given way to two and even three stop shopping and both Morrisons and Sainsbury claim an increase in numbers of shoppers in their stores. What this suggests is that the traditional way of categorising stores is dead. No longer can we say Sainsbury and Waitrose upmarket, ASDA and Morrisons downmarket, and Tesco in the middle. Its much more individual than that now with each shopper asking whether the quality /value equation at a particular store at a particular time is right for them. Looking at the crystal ball I’d say that the next big strategic challenge from supermarkets will be how to build loyalty. Meanwhile value offers will become increasingly innovative.
Once in the store, what the shopper buys is changing. The aforementioned ready meals market is plummeting, and TNS (Taylor Nelson Sofres) the market research company tells us that frozen foods are growing by over 9% year on year, enjoying a change in status from poor relation to a wise choice due to cheaper prices and far less waste.
The IGD as well as the supermarkets tell us that there’s a lot more cooking from scratch going on, apparently herbs and fresh pasta are flying off the shelves in Morrisons. And there is a return to families eating together.
There are mixed views about whether ethical purchasing is taking a back seat. The decline in the organic market has been reported to death (sales down 15% in the last three months, bread down 31%, vegetables down 10% according to TNS), but as is being acknowledged even by the Soil Association, the issue here is that consumers can’t get their heads around why organics in general are worth a premium. Animal welfare issues though remain important to consumers. Sainsbury stressed again last week that this is something shoppers search for, and IGD research confirms it. The question of course is where this welcome concern about animal welfare will go next and there are reports that Hugh Fearnley Whittingstall is turning his attention to dairy cattle.
So in summary, the recession is leading to changes in what and how shoppers buy. They are not prepared though to sacrifice quality, and will shop around to get it at the right price. Equally they are prepared to support ethical products where they clearly understand what it is that they are paying for.
2 comments:
Hi,
do you have a link to the TNS publication in which they discuss the decline in the organic market? I'd be very interested to read it, and I can't find anything about it on their website. Thanks in advance!
Tony
Hi Tony,
I picked up the organic data from a TNS person interviewed on Farming Today, plus alot of press coverage at the same time. Unfortunately there is no report on their site. However, the Soil Association has just published their annual survey, which whilst not bang up to date does give a fair amount of info which may be useful.
Colette
Post a Comment