Wednesday, 24 July 2013

Consumer Opinion and its Influence on Monsanto and Arla Decisions

Last week Monsanto announced that it is stopping efforts to persuade the EU to allow Genetically Modified crops to be grown in Europe. And Arla announced that it is introducing its own farm assurance scheme because, they say, the Red Tractor no longer satisfies the needs of retailers or consumers. Both stories illustrate the importance of understanding consumers, and the impact they have on the business climate in which farming operates.

In the case of GM crops, those who supported their introduction failed to realise that there was no compelling reason for consumers to embrace the technology. GM was not going to make food cheaper, or more nutritious, health giving or delicious. This lack of a clear benefit means that whilst 13% of the population are strongly opposed to GM, and 3% strongly in favour, over 50% do not have a view either way, a figure that has remained the same for the last 10 years. (Source: IGD research). And such is the lack of interest or concern that, according to Food Standards Agency research undertaken last year, 76% of the population have never sought information on the topic, and 63% have never talked about it with anybody.

Add to this inertia the vocal lobbying done by anti GM campaigners, and the lurid stories put out by the tabloid press (example - the Daily Mail’s headline following Monsanto’s announcement was “Frankenstein food firm quits Europe”) then it is unsurprising that Monsanto felt it sensible to put their efforts elsewhere.

In the case of the Red Tractor, those in charge have failed to recognise that a growing number of consumers these days want more than bare minimum standards, particularly when it comes to animal health and welfare.

Whilst just 16% of people put animal welfare as a key driver of their food buying behaviour compared with 74% for price and value and 76% freshness and quality, almost 80% state that animal welfare matters to them. These numbers are sufficiently sizeable for retailers to take note and act. (Source: Labelling Matters Project by RSPCA, Soil Association, WorldSociety for the Protection of Animals, Compassion in World Farming).

The Red Tractor people are now starting to rethink their approach, and now seem prepared to move forward. Commenting on the Arla announcement the Red Tractor response was to say that they would work with Arla to ensure that the scheme meets the needs of buyers, consumers and farmers.

Farming faces a number of major issues as it strives to balance food production and environmental management, whilst remaining competitive in a global fight. Consumers will have a view on all of them, from TB management to large scale pig and dairy farms, crops for biofuels to animal cloning.

Farming leaders need to ensure that consumer opinion forms the backcloth to deciding the issues upon which the industry feels it must stand its ground.

Monday, 15 July 2013

Today's Top Priorities for Retailers and Their Suppliers

The IGD (Institute of Grocery Distribution) does an annual survey which looks at the areas where retailers and their suppliers are placing most of their effort. This year the top priorities are new products, deeper understanding of what goes through shoppers minds as they decide what to buy, and how best to manage the various channels through which they choose to buy whether online, or in convenience stores, discounters or the traditional supermarket.

The emphasis on shopper behaviour is not new. Continued pressure on finances means that consumers now have a very different mindset when it comes to shopping than they did when money was freer. They work to tight budgets, even to the extent of handing a product back to the cashier at the till if the bill goes over the amount they are prepared to pay. They look for money saving offers, meaning that over 40% of grocery items are bought on promotion. They compare prices on line before setting foot in a shop. Yet they are prepared to splash out on special occasions, or on top quality, as shown the 10% growth in sales of their premium “Taste the Difference” brand announced by Sainsbury a couple of weeks ago.

The emphasis on different channels is not new either. The efforts of Morrisons to get into convenience stores and online shopping are well documented, as is the contribution to growth made by these channels as well as discounters Aldi and Lidl.

The most interesting finding from the IGD’s research is resurgence of interest in new product development. The most likely reason for its move up the agenda is that overall the grocery market is showing little sign of growth, margins are under pressure because consumers are so cost conscious and retailers and suppliers are now very keen to find products which are sufficiently different and exciting to persuade shoppers to spend a little more than would otherwise have been the case.

For a new product to receive a favourable response from retailers it will need to be genuinely value adding. Not only will it need to be different from anything else currently available, it will need to chime with what consumers see as important, and will probably need to command a premium price.

New products can take several forms – the product itself could be innovative, the way it is grown or reared or processed could be new, or the format in which it is sold could be new.

New product development can be risky . What must not be underestimated is the time it takes to come up with something new,  the level of investment required in time and money, and the chance that after all that effort it does not work. Careful thought therefore needs to be put in to how to de-risk a venture.

But it is an exciting opportunity for the food industry. 

Wednesday, 10 July 2013

Retail Sales of Fairtrade Products Now £1.5bn. Is Success Due to Consumer Demand or Manufacturer and Retailer Push?

The issue of whether Fairtrade’s success is due to consumers or to manufacturers and retailers is worth some thought. All products should be traded in a way that provides a fair price for the farmer, whether that farmer resides in Ghana or Gloucestershire, Caracas or Cumbria and any learning that can make farmer returns fairer merits consideration.

A look at Fairtrade figures shows that 90% of the £1.5 billion retail turnover of Fairtrade products is accounted for by sugar, chocolate, coffee, tea and bananas, and by big food manufacturers and major supermarkets.  Every banana sold in Sainsbury's and Waitrose is Fairtrade, as is every bar of Cadbury’s Dairy Milk Chocolate, every bar of Nestle’s Kit Kat, and Mars Maltesers. All of Tate and Lyle’s sugar products are sold under the Fairtrade banner. All the big supermarkets have a range of Fairtrade teas and coffees.
 Indeed it is hard to avoid buying a Fairtrade product at some point in the weekly shop.

Not only have big companies pushed Fairtrade, they have done so in a way that requires little sacrifice on the part of the shopper, for no major player has added a price premium to their Fairtrade products, electing instead to sell at the same price as they did prior to adopting the logo.

There is a lesson here – big companies are prepared to swallow a hit to their margins if they see a benefit, and in Fairtrade they saw a way to polish their ethical credentials at relatively little cost.

Mostly therefore the success of Fairtrade has little to do with consumers demanding fairness for third world farmers. What the Fairtrade people have done well though is to build a recognisable brand with a simple message that appeals to consumers and allows them to feel good when they purchase a Fairtrade product. Ten years ago few had heard of Fairtrade, but now, according to the IGD, four out of five shoppers recognise the logo, and just over a third say they have specifically chosen to purchase a Fair Trade product
 And it is this undoubted consumer appeal that companies are harnessing when they adopt Fairtrade accreditation.

So what about fair trading for British farmers? The tide does seem to be turning. Scarred by the horsemeat scandal, and conscious that the British public views farmers and home produced food in an increasingly favourable light, manufacturers and retailers are slowly embracing closer, more transparent relationships with producers. This is vital for as the Fairtrade story shows, the lead has to come from players with clout and the ability to make big, transformational decisions.

The Fairtrade story also illustrates the value of strong branding, and here is where British farming could help itself and make a real difference to the way in which the industry is perceived by consumers and retailers alike. Replacing the Red Tractor with a recognised logo and brand which stood for exceptional production standards, not just the bare legal minimum would be a good start, as would tough policing of the standards.

The twin aims should be to move consumers from a vague feeling that they should be buying British into state of mind where they understand exactly why they should support British farming; and to build a system that retailers feel they must be part of to be credible with their customers.