Speciality Farm Produce Available Online - Former Asda CEO's New Venture

One of the more interesting  news items from last weekend is that Andy Bond, former chief executive officer of ASDA is investing in Farmison.com, an online food retailer which aims to provide home cooks with speciality food ingredients produced by small British farmers and normally only found in restaurants.

The move is interesting on a number of counts. Bond clearly believes that online food retailing has a big future and that Farmison can sort out the problems that stop many from buying fresh food online such as variable quality, and irritating substitutions. He must also believe, despite harsh economic times that super premium food, with a provenance that traces back to the individual farmer has a future too.  And he must believe that Farmison has something unique about its offer which will ensure it succeeds in an increasingly crowded market.

Farmison faces competition from other online retailers, and from grocery stores making increasing efforts to go super premium. Marc Bolland wants to take Marks and Spencer in this direction, Waitrose and Ocado makes strenuous efforts to be special, and all three are investing online, along side every other food retailer. There is also competition from the likes of Riverford Organics and Abel and Cole companies who sell local food from small farms.

Will Farmison be a good financial investment not just for Andy Bond, but for the small farmers who are paying for the privilege of being sold through it? Difficult to say at this early stage, but the business will face challenges. Ocado, after 10 years still has not made a profit, its sales are slowing, and investors are so spooked they have written the share price down to about half of its launch price. Although the supermarkets are happy to talk about growth rates in their online business, no one ever mentions profitability which probably means it is low. On the other hand, Andy Bond has a good track record and will have investigated Farmison’s potential in detail before parting with his money.

Shopper Buying Behaviour - Insights from the NFU Conference

Edward Garner of Kantar Worldpanel ( previously called TNS) spoke yesterday about whether recent events like the move away from discounters, a decline in sales of value ranges, the resurgence of Waitrose and a swing to buying premium food over Christmas heralded the end of recessionary food buying behaviour. He did not offer a conclusion but en route to a fence sitting finale he did offer interesting nuggets about shoppers and the way they buy from the major supermarkets.

ASDA
The main message here is that ASDA is all about lowest price. When questioned, the overwhelming reason consumers give for shopping at ASDA is low prices., and it is ASDA who has gained most from the trend away from discounters. ASDA’s most recent price wheeze is to sell at a “round pound” price point, and in the last 12 weeks items priced at £1 have accounted for 14% of all sales. The round pound price point extends to £2, £3, £4 etc, and in total accounted for 22% of sales. Suppliers are being encouraged to tailor their products to sell at these particular prices.

The other side of the coin is that ASDA are not rated highly on quality. They undertrade on fresh and chilled foods, meaning their share of these is less than their total share, sales of their premium range are falling, and their organic sales are down 25% in the last twelve weeks, the worst performance of all supermarkets. (Note that ASDA would argue that they have upgraded quality and won lots of awards, but the Worldpanel figures suggest shoppers are not on the same page.)

Edward Garner did not say, but this obsession with price, coupled with a slight share decline over Christmas, may explain why Andy Bond who runs ASDA took the odd step of doing a public video in which he lambasted suppliers for not reducing prices when costs fell back , preferring instead to offer promotions which he termed “Weapons of Mass Distraction”. Bond declared that ASDA would “return with force” to its “Every day Low Price Strategy”, which he believes is best for customers, suppliers and shareholders. Other supermarkets might disagree.

Morrisons
Morrisons tends to be lumped with ASDA as a low price store, and certainly is seen by customers as offering good value, but it is changing its image and performing well. Morrisons overtrades by 3% in fresh and chilled foods, and by a huge 14% in fresh meat. As Garner says, something for farmers to be aware of. Also Morrisons is growing its number of wealthier customers, classed AB’s, who generally have more spending power.

Tesco
The news here is that their premium range is growing, and their discount range, introduced to fight Aldi and Lidl, only accounts for 1% of sales. Apparently the claim to be Britain’s biggest discounter backfired as we shoppers do not like to be told that we are buying cheap goods.

Waitrose
Waitrose has been doing well as shoppers get over the shock of inflationary price rises. Essentials, which Garner stressed is not a value range, but rather a communication exercise designed to make shoppers re- evaluate the store, has helped.

Marks and Spencer
Still a big problem, due to a lack of regular customers.

Fair Trade, Organics, Local Foods, and High Welfare
Sainsbury remains the biggest seller of Fair Trade products, and Waitrose sells 4.5 times more organic produce than its market share. However organic food has still not regained its position and Garner feels that the term organic will become a statement of production rather than a prime reason to buy.

Local Food sales are booming, and supermarkets are increasing the shelf space devoted to them.

High welfare products also continue to grow. 60% of all eggs sold in retail are now free range, despite costing about 30% more to buy, and free range chicken sales are also growing albeit at a slower rate.

Garner ended by saying that many industry watchers feel recessionary food buying habits may not have gone away because tax rises and spending cuts will breed uncertainty. On the other hand, he said, food only accounts for about 8% of overall consumer spend and so may not be the first port of call for consumer cutbacks.

If asked to come down on one side or the other, I’d say that there will be no return to unthinking spending any time soon, that people will pay for what they value whether it be premium ingredients or ethical beliefs, and not just follow lowest price, and that poor quality will not be tolerated.

Why is ASDA Putting Webcams into Food Factories?

Andy Bond of ASDA was in the media yesterday talking about his new strategy, which he calls “Democratic consumerism”. The idea is to let consumers see for themselves via webcams where ASDA’s food comes from. Already there is a camera in a carrot factory, and in a milking parlour somewhere in Scotland.

According to Bond, the move taps into a growing trend. More and more consumers want to be reassured about the practices behind the food they eat, and Bond is saying that cows and carrots are just the start - “The ambition is to reach a point where customers can trace the journey of each ASDA product, from farm to fork or warehouse to wardrobe”.

It is true that consumers want to know more about the products they buy, but there is more to the move than that. It signals a recognition that price promotions and a value message alone are not enough to keep customers loyal to a store. After all anybody can cut prices – and they all do. TNS (Taylor Nelson Sofres the research company) has found that the amount of store turnover from promotions has gone up from 28% in 2007 to 32% in 2009. More worryingly for retailers, the economic squeeze has meant consumers doing much more shopping around to get the best deals, and it seems that this is not so much a chore as a rewarding adventure. As one shopper in a piece of IGD (Institute of Grocery Distribution) research put it “I quite like shopping for less using promotions. It’s a challenge, and I feel quite chuffed having saved some money.”

Which leaves each retailer searching for reasons over and above price based offers to secure loyal customers. Tesco offers extra points on their Clubcard. Sainsbury combines value and quality by advertising their own label products – apparently just as good as the branded equivalent but at least 20% cheaper. Morrisons talks about fresh food available from their “Market Street”. And now ASDA is being reassuring on where their food comes from.

The general feeling among those who study the grocery industry is that ASDA’s initiative will give them an edge over competition. But they and their suppliers have some thinking to do. In this search to understand the origins of their food, will consumers expect webcams in abattoirs, and on farms which rear animals intensively. How will ASDA deal with difficult issues such as lameness in dairy cows? Or will they be selective in what they show, and expose a worthy idea as mere PR fluff.

Animal Welfare - What Does the Public Really Think?

Animal welfare issues are again in the news.

Last week alone saw Hugh Fearnley Whittingstall take on Tesco in the cause of truthful labelling on chicken, Jamie Oliver supporting British pigs, a concerted advertising campaign by Sainsbury promoting their Freedom Foods pork, chicken, and salmon, and news of their ban on caged eggs. We also heard that Tracy, marchioness of Worcester has done a programme advocating better pig welfare, to be screened tonight.

On the other hand, last week also saw a piece by Andy Bond of ASDA in The Grocer claiming that worrying about animal welfare is yesterday’s agenda, and that celebrity chefs are patronising cash strapped consumers. Waitrose who have for years promoted high animal welfare standards seem to be losing sales, and organic meat products, which support high welfare, have apparently seen a big sales drop in the last three months.

So do consumers care?

The facts suggest that many already care enough to have changed how they shop, and that the more information they are given about the issue, the more prepared they are to change. It’s by no means everybody, and even the worried have limits on how much they are prepared to pay, but there is a growing movement to higher welfare products.

IGD research continues to find this. They say that whilst price has increased in importance as a factor influencing shopping habits, the number of consumers who have specifically bought foods with high animal welfare standards has increased from 11% in 2007 to 18% in 2009. They also point out that use of free range eggs has now moved to processed foods such as mayonnaise and pasta.

TNS the market research group in a survey commissioned by Compassion in World Farming have reported that free range chicken sales grew by 35%, and higher welfare sales by 42%, between December 2007 and December 2008. They also say that in December alone, standard chicken sales dropped by 11% in total and by 55% in Tesco. Free range, higher welfare and organic chickens now account for about 15% of sales, still small, but growing fast.

On to pigs. Jamie’s programme attracted 1.9 million viewers, less than the 3 million for his chicken programme, but nevertheless a sizable audience. It is early to judge whether it has made a difference although Waitrose have reported that their sales of pork (all British of course) rose by 20% following the programme.

It looks as if Andy Bond’s sweeping statement that consumers are not prepared to pay for higher welfare products is just not true, and if we are talking patronising, then for Bond to lump all his customers into one box and not recognise that people have different priorities, pressures and values, seems patronising in the extreme.

Most supermarkets, even Tesco and ASDA have acknowledged the trend and sell a higher welfare chicken to help the conscience stricken but cash strapped consumer.

Sainsbury have introduced a Freedom Food endorsed option costing about £1.50 more for the average bird, but with a clear explanation of the better rearing conditions. Sainsbury have also kept their range of basics, free range and organic for those who want alternatives.

They are adopting the same approach on pork. Again, it’s Freedom Food endorsed, again there is an explanation of why it is better for the pigs, and the extra price is small at about 50p per kilo more than standard.

Where will the animal welfare issue go from here? I feel that as awareness of how farmed animals are raised grows, consumers will increasingly look for higher welfare options. It may take years, and it will require commitment from well known respected champions like Hugh and Jamie who will not be put off by vested interests coming down on them like the proverbial ton of bricks, and equally will seek out the full facts before acting. It was a bit depressing for example that Jamie in his admirable support for British pigs did not mention that there are still some unsavoury yet legal pig raising conditions here such as housing the animals on slats. But you have to start somewhere.

There is evidence too that animal welfare concerns could extend to other species. The long running Anchor advertisements for butter from “free range cows”, with the implication that not all cows run freely in the sunshine as consumers would like to believe, would be an example of a company, foreign at that, spotting both the trend towards higher welfare.

Finally, it is not too difficult to imagine that better welfare conditions become such an issue that supermarkets decide to raise the bar for producers yet refuse to pay more.



























claiming that worrying about animal welfare is yesterday’s agenda, and that celebrity chefs are patronising cash strapped consumers, and a concerted advertising campaign by Sainsbury promoting their Freedom Foods pork and chicken, and their ban on caged eggs. This week Tracy, Marchioness of Worcester, will be seen on More 4 TV in the cause of pigs. Meanwhile Waitrose who have for years promoted high animal welfare standards seem to be losing sales, and organic products, which also promote high welfare, have seen a big sales drop in the last three months.

So do consumers care? The facts suggest that many already care enough to have changed how they shop, and that the more information they are given about the issue, the more prepared they are to change. It’s by no means everybody, and even the worried have limits on how much they are prepared to pay, but there is a growing movement to higher welfare products.

The IGD continues to find this. They say that whilst price has increased in importance as a factor influencing shopping habits, the number of consumers who have specifically bought foods with high animal welfare standards has increased from 11% in 2007 to 18% in 2009. They also point out that use of free range eggs has now moved to processed foods such as mayonnaise and pasta.

TNS the market research group in a survey commissioned by Compassion in World Farming have reported that free range chicken sales grew by 35%, and higher welfare sales by 42%, between December 2007 and December 2008. They also indicated that in December alone, standard sales dropped by 11% in total and by 55% in Tesco. It should be said though that the percentage of sales in free range, higher welfare and organic remains small.

On to pigs. Jamie’s programme attracted 1.9 million viewers, less than the xx for his chicken programme, but nevertheless respectable. It is early to see whether it has made a difference although Waitrose have reported that their sales of pork (all British of course) rose by 20% following the programme.

It looks as if Andy Bond’s sweeping statement that “xxxxx” is just not true, and if we are talking patronising, then for Bond to lump all his customers into one box and not recognise that people have different priorities, pressures and values, seems patronising in the extreme.

Sainsbury have spotted the trend, and have been very shrewd in the way that they have tackled the issue. In an effort to help the conscience stricken but cash strapped shopper, they have introduced Freedom Food endorsed, higher welfare chicken with a clear explanation of why it is better for the birds. It does cost more but only about xxxx a kilo, or £ for an average bird. They have also kept their range of basics, free range and organic for those who want an alternative.

They are adopting the same approach on pork. Again, it’s Freedom Food endorsed, again there is an explanation of why it is better for the pigs, and again, the extra price is small.

Where will the animal welfare issue go from here? I feel that as awareness of how farmed animals are raised grows, consumers will increasingly look for higher welfare options. It may take years, and it will require commitment from well known respected champions like Hugh and Jamie who will not be put off by vested interests coming down on them like the proverbial ton of bricks, and equally will seek out the full facts before acting. It was a bit depressing for example that Jamie in his admirable support for British pigs did not mention that there are still some unsavoury yet legal pig raising conditions here such as housing the animals on slats. But you have to start somewhere.

There is evidence too that others are looking at animal welfare conditions from a different angle. The long running Anchor advertisements for butter from “free range cows” would be an example.

Finally, it is not too difficult to imagine that better welfare conditions become such an issue that supermarkets decide to raise the bar for producers yet refuse to pay more.