Thursday, 29 July 2010

Keeping the Farming Flag Flying

Matthew Naylor in his Farmers Weekly Mouth of the Wash blog, is urging peace between environmental enthusiasts both in and out with farming, and it inspired me to tackle the British Trust for Ornithology who were quoted in an article in this week's Sunday Times which accused farmers of getting paid to allow bird numbers to decline. Usually I'd have dismissed such a report with a tut and a " typical" and turned the page.

But not this time. It was on to the BTO to request the survey information to which the article alluded, and to make the point that it would be far more productive if we all worked together to preserve the environment and avoid scoring cheap points in the press.

The BTO's response in the shape of Dr. Gavin Siriwardena could not have been more different from that of the RSPB in the previous week. Commenting on one part of the same survey which showed reductions in the number of kestrels, the RSPB engaged mouth before brain, blamed intensive farming practices, and overall could not have been much more hostile.

Dr. Siriwardena by contrast went to great lengths to explain the BTO's research, and forwarded the newsletter which had been produced, which to be fair was far more balanced than the Sunday Times' heavily spun take. Importantly he recognised that too often there is a "them and us" feeling between farming and non farming environmentalists, and stressed the BTO's committment to working in unity.

Things have moved on, and today DEFRA released the BTO's survey results. I see that the RSPB is taking a much more even handed tone, possibly reacting to a barrage of outrage from their previous comments.

And the moral of the story?

What cannot be denied is that the decline in farmland bird populations is worrying to put it mildly. It needs a concerted and unified approach to sorting out the problems, with energy put into solutions rather than sniping. Some, like the BTO, have recognised this.

There are many farmers working diligently to improve the environment. It is time consuming, often financially draining, and usually happens without acknowledgement. Their efforts need to be communicated, but the only people who can spread the farming message are farmers themselves. No one else is going to do it.

Matthew quotes Heather and Phil Gorringe who upon hearing of the RSPB's comments about kestrels orchestrated a Twitter campaign to show what farmers are doing for the environment. Twittering may not be every farmers cup of tea, but the idea of making an effort to communicate the good things being done, and to challenge unfair attacks, looks like a pretty sound one.

Friday, 23 July 2010

Ocado Looks Like NOcado, at Least for Now

As of 3.00pm Friday 23rd July shares in Ocado, the online grocery delivery company, were trading at £1.55p. Well down on Wednesday's opening price of £1.80p and a country mile from the £2.72 - £2.00p that its ex Goldman Sachs owners touted as the company's value on Tuesday evening.

£1.55p still values Ocado at around £500 million, and the mystery is why anyone should think that a business which has never made a profit in its 8 years of trading, has an unproven business model, is competing with grocery giants like Tesco, and is fighting head to head with Waitrose who supply Ocado's products but who are also seeking to build an online offering, can be worth even that.

The optimists would point to Ocado's massive top line growth. They would cite projections that online grocery shopping will double in size to £7.2bn or about 5% of total grocery sales by 2014 (IGD research). And they would say that online retailers such as Amazon struggled to make a profit when they started out.

The Goldman Sachs founders would also add that they own world beating sophisticated technology, and that American investors who account for nearly 60% of shareholdings "get" this, whereas the Brits do not.

It should also be noted that, despite adverse comments in the press, Ocado's own customers were confident enough to invest between £5 and £10m of their own money in the company, and whilst customer investment was expected to be much higher (up to about £60million), this could say something about the quality of the Ocado offer versus competition. These customers have the chance to offload their shares at the original price of £1.80p and it will be interesting to see how many do so.

This blog was very sceptical about Ocado way back in March, and remains sceptical. It would be great to be proved wrong and find that a British business could succeed due to a genuinely different consumer offer backed by technological innovation.

We shall watch with interest.

Thursday, 15 July 2010

A change in ethical food buying - consumers now "want value for their values"

Joanne Denney Finch of the Institute of Grocery Distribution in her keynote speech to the Consumer Goods Forum stated that consumers now "want value for their values". The conclusion is based on research they carried out in Britain, France ,Spain and Germany, and its interesting because it indicates that consumers are once again raising the bar on what they expect when they buy food.

Cynics would say that consumers have always wanted more than they are prepared to pay for, but I think there is a subtle shift of emphasis here. Yes, in the past a sizeable minority have been prepared to pay for what they believe in, but what seems to be happening now is that people expect higher standards but don't expect to have to pay for them. As Mary Vizosa of Waitrose said in the Times, consumers expect their retailers and suppliers to act ethically and sustainably, and not present ethics as an extra which commands a premium.

We can therefore expect a change in consumer behaviour, as they shop around to find the outlets that offer both value and values for a given product. Those who fail to deliver will lose custom.

This could be why Sainsbury took full page advertisements in today's papers to say that they have been named as "Best large supermarket 2010" by Compassion in World Farming, and put a value offer in the advert too ( 2 packs of sausages for £4, and 20% off Freedom Food chicken). Waitrose stopped short of adding a value twist to their communications but the front page of this weekend's newsletter features a very handsome beast with the caption "Farming with Compassion - Waitrose wins award for putting animal welfare first".

It would seem that ethical foods are just another example of what was niche gradually becoming the norm.
With the move to mainstream comes the loss of any price premium. The best example is Fair Trade, where volumes have rocketed but price stayed the same as the standard version, witness Sainsbury's Fair Trade bananas, and Cadbury's Dairy Milk.

Ms. Denney Finch argued that ethical products now offer competitive advantage, and that British business, which generally has a good ethical reputation, can use them as a springboard for growth internationally.

The notion that British business should raise the ethical bar is very welcome. The challenge of course to raise the bar without raising the price, and ensure in the process that all players in the food chain are treated ethically and sustainably.

Monday, 5 July 2010

Protected Food Names - Useful Marketing Tool?

References to protected food names are popping up all over the place, most recently last night on Countryfile where Julia Bradbury was reporting on West Country Farmhouse Cheddar, explaining that it can only be labelled "West Country" if the cheddar is made in Dorset, Somerset, Devon or Cornwall using the traditional mixing by hand or "cheddaring" process. A couple of weeks earlier the Gloucestershire Old Spot Breed achieved protected name status, becoming the first pigs in the world to be recognised for their distinctive taste. And there are another 40 British foods or beverages protected in one way or another.

The Protected Food Name scheme is an EU initiative which awards a quality stamp to authentic regional and traditional foods. There are three grades of stamp. The strongest is Protected Designation of Origin where the product must produced and processed and prepared in a geographical area, and have characteristics due to something special about the area. A red and yellow logo is available to reinforce the message. As well as the cheddar, Jersey Royal Potatoes, Yorkshire Forced Rhubarb, Orkney beef and lamb, Cornish Clotted Cream and Sardines, and Manx Loaghtan lamb are among the products falling into this category.

Protected Geographical Indication means the product has either been produced or processed or prepared in an area. Welsh beef and lamb, and Scotch beef and lamb are examples. Traditional Speciality Guaranteed means that the name must express the character of the food, like the Gloucester Old Spot. Both categories have a blue and yellow logo.

The process of authentication is a long haul, taking up to 21 months, and involving masses of paperwork.

So is the scheme a useful marketing tool? Well, a quality stamp is not a bad thing to have on a pack. Achievement of the stamp is usually reported by the press so the product gets publicity which in turn should help sales, and there is no doubt that people are increasingly interested in where their food comes from and keen to support local produce.

It also means that a manufacturer or retailer cannot say a product comes from an area if it does not, and this is important if years have been spent building up the quality and reputation of a product. To take extreme examples, Jersey Royals can't come from Spain, or Scotch beef from Argentina, which does offer some protection for farmers and growers.

In a world of many logos ( Red Tractor, EBLEX mark, LEAF mark, the new green organic leaf logo from the EU to name but a few), the usefulness of protected status as a marketing tool depends on the ability to communicate what it means, and also on the strength of the message behind the product. Having a protected food name is especially useful if the product in question has either a good reputation already or has a real, fact based point of difference that can be publicised, like the Gloucester Old Spot.
Given the importance of communication, it was disappointing not to find examples of products with protected name staus giving the award some prominence. The one exception is Manx Loaghtan lamb where the website makes much of the achievement. Hopefully it has helped contribute to better sales of their product.