Thursday, 24 February 2011

Food Inflation + Recession Worries = Less Food Bought

DEFRA’s recently published Family Food Survey compares 2009 with 2006 and shows that people coped with rising prices and recession pessimism by buying less food. They did not, as might have been thought, buy the same quantities as before but pay less by searching out good deals, moving to value ranges, switching to own label products, or flocking to discount supermarkets.

So, in volume terms, 2009 saw grocery shoppers buying 11% less red meat than in 2006, 7% less fish, and even 4% less poultry which is usually the fall back protein when prices rise. Sales of vegetables have fallen by 3%, potatoes by 6%, fresh fruit by 11%, fresh milk by 3%, and butter and spreads by 2%. Even bread sales have fallen by 5%.

The only fresh foods bucking the downward trend are eggs, up 6%, cheese and yogurts which are level with 2006, and, bizarrely, cream where sales are up by 5%.

By contrast, flour sales are up 8% which could mean that people are baking more. Confectionery, which usually holds up when times are tough has seen purchase grow by 9%, and cereals are up 3%.

Overall, when food inflation soars shoppers seem to work to a budget, and accept that they will get less for their money.

The cutback does not mean that people are necessarily eating less. They could be reducing the amount of food they throw away. A DEFRA study published in July 2010 estimated that 15% of food is wasted, with bread waste reaching a shocking 40%.

As far as the catering sector is concerned, the DEFRA figures show that the amount of food eaten outside of the home in 2009 was 9% less than 2006, although expenditure, excluding alcoholic drinks was up by 3%.

Short term, the DEFRA figures show signs of growth in grocery food buying 2009 compared with 2008, and, given anecdotal evidence about a return to premium food purchasing and the excellent performance of more up market retailers, it would seem that 2010 saw a further increase. What consumers will do in 2011 though, is difficult to project. Food inflation is ramping up again, and signs of depressed consumer confidence are re-emerging.

So, how can profits grow if volumes are shrinking?

Food inflation can help when prices rise ahead of costs. Currently food inflation is running at about 4.6%, compared with wages at about 2%. Those businesses with clout will negotiate lower costs from suppliers.

Another strategy is to develop premium products so that maximum revenue is extracted from a smaller volume.

The third, albeit often costly avenue is to grow market share, stealing volume from competitors.

Examples of all three will no doubt be seen this year.

Friday, 18 February 2011

Appy Talk – Will Apps Change how Consumers Look at Food and Farming?

Apps, (defined as computer programmes for a mobile phone, customised for the phone user) get acres of media coverage, and there are hundreds of thousands available to download. Are they another technology gimmick falling into the category of interesting but ultimately useless, or could they have a lasting impact on the way consumers buy food and on the way that food is produced?

To make real changes apps have to be widely available, which is not the case now. The vast majority of apps can only be accessed by users of Apple products such as the Iphone or Ipad, of whom there are not many. Other smartphone manufacturers will catch up but it will take time.

Let’s assume though that apps are available to every mobile phone owning consumer. Which in the UK means nearly 60million people. Are there any apps around which might change food buying habits?

Like any other product, an app will only succeed if it fulfils a consumer need. An app which makes food related life more convenient, or offers information quickly and clearly could well be taken up and used regularly. And here the potential for apps becomes quite exciting.

Supermarkets are well away on developing apps to make shopping more convenient. Tesco recently launched an app which allows shoppers to scan a product wherever they are and add it to their online shopping list. All by pressing a few buttons on a phone.

The apps with most power to change consumer food buying behaviour are those providing instant information.

Here are examples already up and running in America.

Seafood Watch allows shoppers to see at a glance which fish to buy if they want to support sustainability. The app provides three options – best choice, good alternatives, or avoid.

The Center for Food Safety, an organisation that supports organic farming has an app to help shoppers avoid GM containing foods. “Safe” foods are highlighted in green, and GM containing foods in red. The information is based on what manufacturers say, and also on general advice such as avoiding American corn and soy on the grounds, they claim, that most is genetically modified.

The Environmental Working Group has a guide to fruit and vegetables with the least and most pesticide residue, based on data collected by American regulatory bodies.

There is an app in development designed to support local sourcing. AUG/Living Goods allows shoppers to scan a barcode and get details of how far the product has travelled to reach the shop, the identity of the primary producer, and whether the ingredients are in season.

Several apps allow users to input the type of foods they want to eat or avoid, including allergens, and be warned if a product does not meet these requirements.

As the IGD points out there are obstacles to successful app take up. How for example to ensure accurate timely data. Who has the legal responsibility for inaccurate data? How do manufacturers complain if the data misrepresents them.

However the IGD concludes that the day of app impact is coming. And they are right.

Consumers are demanding ever more knowledge about what is in their food and how it was produced, all the way from farm to shop. As talk of gmo's and cloned animals gets louder in Europe, as more publicity surrrounds "mega farms", and more horror stories emerge about hunger or extreme weather, so increasing numbers of people will seek information about exactly what they are putting into their mouths. And the app developers will make it easy for them to get hold of the information.