Sunday, 20 June 2010

Then Along Came the GM Salmon

It started as a week of positive news for food, food labelling, and British farming. The MEP's in Brussels voted for clear country of origin labelling, sweeping aside the ambiguity which meant that food can be labelled British even though it was only packed in this country rather than actually born or grown here. Then the Red Tractor celebrated 10 years of existence and here too clarity is emerging with the symbol accompanied by the Union flag meaning that the product really did start life here. Yes there are still niggles and wooliness. The Tractor without the Union flag can be used on foods which come from abroad but adhere to British standards, and on foods where the main ingredient is only 65% of the finished product. Both could mislead, but progress has been made towards the transparency that today's consumers demand.

Then along comes the GM salmon, coinciding with the GM potato trials just starting, and the ruckus at the Food Standards Agency which stands accused of being less neutral than it should be. The salmon, which grows 2 to 3 times faster than normal, was pictured dwarfing its tiny, conventionally farmed sister, and at a stroke reinforced perceptions of Frankenstein foods.

The last piece of research on GM was done by the Institute of Grocery Distribution in September 2008. It showed that 15% of those questioned strongly opposed GM, and 20% tended to oppose. Just 3% strongly supported the technology and 10% tended to support it. The IGD points out that, despite much publicity, the picture had hardly changed since it's 2003 research where 17% were strongly opposed and 3% strongly supportive.

The issue of course is that consumers do not know what to think, as vested interests rush to defend their corner, and no one has come up with a compelling reason why GM is a good thing. The FSA is reportedly about to spend £500,000 of scarce taxpayers money on more research which will probably show yet again that British consumers don't like the idea of GM.

Indeed, however rational you are, and however much you support science, that salmon is just plain creepy, and will do nothing to further a very controversial cause.

At the very least, should by some combination of genuine benefits from GM and overwhelming pressure from lobbyists GM products appear on our supermarket shelves, the products need to be clearly and unambiguously labelled. No weasel words, no vague statements, and no arguments about the need to mention if the amount of GM falls below a certain percentage. As much effort needs to go into this as on pro farming initiatives like the Red Tractor or country of origin labels.

Like growing numbers of the British public, I want to know exactly what I'm eating.

Wednesday, 2 June 2010

Seeking White Knight to Rescue Rachel's Organic

Actually, it's just “Rachel’s” now, the company having dropped the organic word from its brand name in April 2009, apparently because of the difficulties faced by the organic sector.

The company has been put up for sale by American giant Dean Foods with a price tag said to be around £20million. Whatever the reasons, this is sad news, putting a respected brand into play, with all the uncertainty and worry this brings to the 125 strong workforce.

Rachel’s is a small company with a turnover of £20million and a profit before tax of £2.3million according to accounts for the year to December 2008. For comparison, nearest rival in the organic dairy sector, Yeo Valley, has a turnover of around £175million of which 40% is organic.

So who might buy Rachel's? And what might they do with it?

At the brutal end of the spectrum, any of the existing dairy companies could buy, paying back the acquisition price by taking a hatchet to costs. They could close the Aberystwyth plant and either make themselves or contract manufacture, and fold all the administrative functions into their existing structure. The current sales and marketing strategies would continue,with Rachel’s sold alongside all the other brands in the acquirer’s portfolio.

There is an alternative and much more attractive strategy, one which would carve out a highly distinctive position in the market. Keep the plant open, continue to buy milk from the dairy farmers who currently supply, and market the brand as 100% Welsh, drawing heavily on Rachel’s Welsh heritage and history. Keep it organic, for this is what the brand is known for, and there is a market there, albeit small and going through a rocky patch, but make the brand the focus, not the organic tag. Instead of getting the product stocked sporadically nationwide, make sure that it is in every food store the length and breadth of Wales. And cut the price. Currently it sells at too high a premium over Yeo Valley, much less supermarket’s own brands

Is this a good enough strategy to pay back the acquisition cost?

It is not without risk. A pessimist would look at Rachel's declining sales,and its number two position in the wobbly organic dairy market and walk away.

The optimist might say here is a brand with potential,and it could be a strong number one in its homeland.

They would think through how to manage the business. Possibly the marketing budget could offer savings and be more effective if put in the hands of a Welsh company who understands marketing on a shoestring, and how to promote through the internet and social media.

They would accept that costs will have to be looked at, but pruned rather than axed.

They would take a forensic look at where the cash in the business is going. Is there for example too much tied up in stock and would a reduction in number of different lines release money. Are haulage costs overly high because of shipping products nationwide.

They would take a cautious but sensible look at increasing sales.

And then they would negotiate an appropriate price for the business.

Any of the dairy companies could follow this strategy, but consumers might feel warmer towards Rachel's if it went back to its privately run roots, rather than be yet another small company involved in a huge conglomerate.

Is there an entrepreneurial Welsh wizard out there who could really make something of this rather special brand?