Wednesday, 23 January 2013

Horseburger Scandal - An Opportunity to Build Trust in British Farming?

Farmers Weekly has a poll this week asking who is to blame for the horseburger scandal. Of the 800 or so who have responded 55% say the processors,34% the retailers and 11% the food standards agencies.

It is difficult to allocate blame conclusively. Certainly processors are culpable because selling horse meat for human consumption is illegal in Britain.

Retailers should also be searching their consciences – is their pressure to get lowest prices leading to suppliers cutting corners so much that processes are by passed and unpleasant or even unsafe things happen. Tesco’s rush to blame their suppliers and adopt a stance of innocent victim was unedifying, and the fact that many of the major supermarkets cleared their shelves of frozen burgers mean that they also were not 100% sure that their meat was unaffected by the issue.

Some blamed consumers asking  –“ what did they think was in an ultra cheap burger?”.

It is the consumer position in the saga that deserves further analysis. What indeed did consumers think they were getting? The answer is that they trusted retailers to provide wholesome food regardless of price. That trust will now be severely shaken.

This is where British farming come into the picture. Who better to be the consumers champion and trusted ally when it comes to food. Who better to put forward a clear and transparent message to the effect that “Buy British and you know what you are eating”.

But we have been doing that for years some will cry. Well, no, we have not. To date the farming industry has only been playing at building Britishness.

Take the Red Tractor logo. It should stand for meat where the animal was born, raised and processed in Britain. It does not. Only the Red Tractor combined with the Union flag means British. The other logos mean that animals could come from anywhere.

Little money has been spent on educating consumers about why they should buy British and what they should look for to ensure that they do. Few have the knowledge to interpret food labels and those that do lack the time to get down to the miniscule print which details where the product was produced. Even the word produced is confusing. How many consumers realise that produced means born raised and slaughtered in the UK rather than raised elsewhere and packed over here?

An unequivocal logo would help as funds could then be put behind a clear, easily understood and instantly recognisable message.

Most of all, if a big push is made to gain consumers’ trust it must be backed by squeaky clean and stringent standards which are rigorously monitored.

Such a radical overhaul will only be achieved through strong, single minded leadership, and this is where the idealism starts to fall apart. There is no leader for British farming, no single voice to whom the public can listen, confident that they will hear truth.

The Red Tractor people seem oblivious to growing criticism about the relevance of the logo in its current form and are therefore unlikely to embrace a radical, standards raising agenda. The NFU is managing an already huge and largely defensive agenda as it aims to protect CAP subsidies, secure support for GM, and push for action to minimise TB in cattle. The levy bodies have funds to drive a consumer push but split interests across national lines (QMS in Scotland, HCC in Wales and EBLEX in England) prevent unity.

This fragmentation is in direct contrast to the retail trade which speaks with one voice through the British Retail Consortium, or, in the case of individual retailers has one figure, usually the Chief Executive who has just one objective, namely to protect his company image.

Transferral of trust to farmers could happen. A paper presented to this year’s Oxford Farming Conference suggests that the public are looking favourably at farmers just now, albeit with some reservations. The opportunity will be lost without focussed leadership.

Friday, 11 January 2013

Should Small Food Retailers Offer Online Shopping?

As the big supermarkets report Christmas sales much press comment has focused on online food shopping and what it has contributed to a successful Christmas performance.

First out of the blocks was Morrisons who have no online presence, saw sales drop by 2.5% over the Xmas period and were slated for not being online where all the growth is coming from.

Sainsbury reported sales up 0.9%, with online up 15%, a recovering Tesco reported sales up 1.8% with online up 18%.

On the other hand, Aldi with no online presence grew sales by 30% in the last twelve weeks and are reported to have had a highly successful Christmas trading due to offering specialist foods like goose.

More thoughtful commentators highlighted the online conundrum which is that it may be growing fast but it remains far less profitable than sales though shops. One estimate widely quoted is that it costs an additional £15 to fulfil an online order of around £70 - £80, yet the average price charged for delivery is around £3.50p.

One thing is clear – offering on line food shopping requires dedicated, sophisticated and therefore pricey technology, and expert staff to run it.

What are the facts?

Consumers are embracing on line grocery shopping. The this way of buying has grown at about 15% per annum and the IGD estimates that it will virtually double in size over the next 5 years. It is still small though. Worth around £5.6 billion today, it remains just 3.6% of total grocery sales.

The IGD could be underestimating the pace of change. Growth rates to date reflect a business in its infancy, which is still struggling to iron out wrinkles such as matching delivery slots to when consumers are at home, and  causing irritation by sending the wrong product, or an unwanted substitute product, or product with overly short shelf life left. Retailers are working very hard to resolve these issues.

On the shopper front, the pace of change could accelerate dramatically with the increased use of smartphones and tablets, and supply of easy to use apps which make the online shopping experience very simple and ultra convenient as it can be done anytime, anywhere. In the UK today 2 in 5 people own a smartphone and this goes up to 66% in the 16-24 age group and 60% for 25- 34 year olds. 46% of ABC1’s own a smartphone.

So, if one believes that online shopping will not go away, is an on line facility crucial? Without it will small retailers face a slow decline to oblivion? Is it better to retain customers rather than lose them, albeit at a lower margin than if they shop conventionally? Or,  is it better to invest the considerable sums of money required to set up and manage an online facility into another way of retaining customers.

Assuming that the basics of quality and value for money are in place, a good place to start might be to understand who your customers are, why they visit you, and critically, who is your competition. If your closest competitor is offering an online service then it would help to be clear about whether this is drawing customers away from you, and what your shop could offer that would trump this.

A customer profile which skews towards young families may mean an online facility will be welcomed, as IGD research published in June 2012 tells us that of the 24% who bought groceries on line in nearly half had children under 5. Conversely, just 13% of all those who purchased on line were over 65.

It is difficult to get away from the fact that developing an online offer will be expensive. There is no easy way to test whether it might be a successful venture without technological investment. Those retailers wrestling with costs might want to consider “click and collect” rather than home delivery. Whilst this is still a small part of online grocery shopping (Tesco said that 5% of their online business was done this way before Christmas) it is exploding in other sectors, offering as it does a saving in time for the shopper, and helps avoid having to wait in for delivery.

Finally, are there any examples of retail businesses who are making money from selling food online? The sceptics might quote Ocado, which sells only online and has not made any money in the 10+ years it has been going.

Optimists might point to  Riverford Organics the online veg box delivery service which grew profits to £1.36m in the year to end April 2012 on a turnover of £41.8m. Guy Watson, Riverford’s founder is clear that its success is not due to being organic, rather it is a combination of being local, working closely with farmer suppliers, some of whom have 7 year contracts, and above all being of the highest quality, something he and his team make sure of by regular taste tests versus competitive products.

Nevertheless, even Riverford with its 40,000 customers has suffered ups and downs in profit fortunes, although has not made losses. It does though show that retailing online can earn profit.

To conclude. Online shopping is here to stay. It probably does need to be seriously considered and costed, particularly for specialist outlets.

Friday, 4 January 2013

UK Food Trends - Coping With Food Inflation by Changing What We Eat

DEFRA’s Family Food Survey annually examines the food intake of 6000 households, and its findings for 2011 show a marked difference in what people are buying since recession struck and food inflation soared.

According to DEFRA people in 2011 bought 4% less food than in 2007, whilst spending 12% more. They saved 7% by trading down to cheaper products within a given food type.

People are buying less milk, lamb, fish, margarine and low fat spreads, fruit, bread, cakes and buns, potatoes, vegetables, biscuits, and soft drinks.

They are buying more cheese, pork, bacon, meat based ready meals, eggs and cereals, and bizarrely, cream.

Beef and butter purchases are holding up.

DEFRA’s statisticians tell us that the most statistically significant downward trends (meaning that the trends are long term) are in milk, fish, margarines and spreads, potatoes, fruit, vegetables, bread, biscuits and lamb purchases. Cheese, ready meals, eggs and cream are the only significant upward trends.

A key question is whether people are buying less because they have got a grip on waste, or they are actually eating less. The changes in short shelf life products like milk and bread suggest a clamp down on waste, and the drop in purchase of soft drinks, biscuits, and cakes indicates that less treats are coming into the home.

What does seem to be true is that although a different mix of foods are being bought, on average the calories that this translates to remain relatively stable, down just 2.1% in 2011 compared with 2007, which is in line with trends in boom years. The one oddity is the second lowest income group whose food purchases when translated into energy levels have historically been above the national average, but dropped markedly in 2011 and are now on par with intake in the lowest income group.
Much has been made in the press about a rush to the “Good Life”, citing the increase in fruit and veg eaten from gardens and allotments, up from 2.9 % in 2008 to 5.0 % in 2011, and the proportion of eggs from home reared chickens increasing to 5.7% of eggs consumed. However, before getting carried away by a vision of Britain returning to the soil it should be noted that the fruit and veg increase comes from potatoes and apples, which together account for 50% of home grown produce.

Some things do not change and one is the British love of takeaway food. Budgetary constraints not withstanding consumption of takeaway food has remained constant both in weight and expenditure.
The DEFRA research is useful in that it quantifies and confirms much talked about food buying trends. It shows that consumers have reacted to food inflation in different ways, be it managing their own inflation by trading down to cheaper options within a given type of food, avoiding products that they consider to be too expensive, or merely buying fewer treats. The research points to marked changes in a relatively short time frame.