Horsemeat Scandal - Catering Trade Getting Off Too Lightly

It is the major retailers who have had the most opprobrium heaped on them in the horsemeat scandal. And this is fair enough given that most food bought comes from supermarkets. The adverse publicity has had an effect. The furore has led to a shift in sourcing policy from Tesco who have committed to closer working relationships with farmers. If Tesco delivers on their promises this can only be good for all in the food chain from farmer to consumers, and where they lead others will follow.

By contrast catering suppliers, those hundreds of thousands of premises who feed us outside of the home, have got off lightly . Even news of local authorities withdrawing meat fed to children has caused barely a ripple, yet up and down the country from fast food outlets like Burger King, through up market caterers like Sodexho who ironically supply Royal Ascot, Compass, one of the biggest catering companies in the world, IKEA with their restaurants claiming to provide family friendly meals, multi- national giant Whitbread who owns Brewer’s Fayre, Beefeater and Premier Inns,  and local authorities from Scotland to South west England, and across Wales have all had to change what they provide to customers because they were failing in their duty of care to those they are feeding

.

Every one of these companies and the local authorities has blamed their suppliers. No one has searched their consciences to see whether demands to save money or increase profits might have been a factor in things going so wrong.

Few will be punished. Assiduous followers of the scandal might defect from Burger King to McDonalds, who despite providing food at the lower price end of the spectrum seem to have emerged with their sourcing integrity intact. Families might avoid the meat balls in IKEA restaurants, for a day or two.

The rest of the catering trade will experience no adverse comeback because, with over 420,000 outlets, it is highly fragmented  and  largely uncontrolled. It is also has few recognised consumer brands so there is little for the media to get its teeth into and inflict reputational damage, as in the case of supermarkets.

So what can be done to ensure that caterers are serving what they purport to serve?

They could for starters be obliged to tell consumers at point of eating where the food comes from. People might think twice if the beef, bacon, or ham comes from anywhere but Britain.

The Food Standards Agency could focus their analyses on the catering trade, on the grounds that in the short term at least supermarkets will be bending over backwards to ensure that their supply chain is scandal free.

Local authorities could actually be local when it comes to sourcing the food they supply, much of which goes to the vulnerable – the very young or the old and sick.

Crusading foodie types could focus attention on the catering trade with as much vigour as they do the supermarkets.

And as for us , the general populace, we too could play a part as opposed to leaving it up to everyone else – and actually ask those supplying food when we eat out to give a full account of what they are serving to us.

What is served up in catering establishments does matter. We spend £48 billion on food and non alcoholic drinks consumed outside the home. £2.5bn is spent on food procurement by the public sector, most going to those who have little choice of eating establishment. The number of times we eat out is growing despite the recession.

Yet we have little reassurance if any as to the quality and provenance of the vast majority of the food we eat when away from home.

Horsemeat Scandal – Consumers Won’t pay More to Avoid Horse, Are Unlikely to Change Buying or Eating Habits

In the most illuminating piece of research yet done on the horsemeat scandal, a survey carried out between 11^th and 13^th February for respected industry journal The Grocer found that half of the consumers questioned are not prepared to pay any more for their meat to ensure it does not contain horse. Of the other half of the population, 35% were prepared to pay a bit more (around 10%) and 15% answered “don’t know”.

And while the specific question about who is to blame for the mess was not asked, we can probably conclude that the average person feels that it is retailers and their suppliers who caused the problem, and they should not expect the general public to pay to help them sort it out.

Further, the survey will disappoint those expecting a sudden big change in meat buying as a result of the scandal. Yes, 29% agreed they would buy more British meat, and 30% agreed they would shop more at the local butcher. But 41% said that the episode would not change their shopping or buying habits at all, and only 4 % thought they would change supermarkets as a result.

Despite screaming headlines and blanket media coverage, just 31% professed to be shocked by the horsemeat scandal, and 33% are “quite worried”. On the other hand 42% said they were not surprised by the news and only 18% felt that the food industry would get on top of the situation.

It takes alot to alarm British consumers and horsemeat being passed off as beef seems not to be causing much of a stir among the general public. It may have been different if horsemeat caused a health problem, but even at the height of the BSE scare where health was at risk, 30% of people made no change to their eating habits, according to Tim Lang, professor of food policy at City University.

How Consumers Decide What Meat to Buy

According to a recent piece of market research by EBLEX 23% of people are cutting back on the amount of meat they buy. This is not good news as a drop in demand tends to mean over supply and falling farmgate prices.

Conscious of the need to stimulate demand the EBLEX research goes on to analyse how people make their meat buying decisions and what levers can be pulled to encourage them to buy more. They interviewed 1200 shoppers in stores owned by the 4 main supermarkets.

Getting the meat purchase right is important to shoppers. They spend an average of 74 seconds at the meat fixture, considerably more than they did 10 years ago in a similar piece of research, and more than anywhere else in store apart from the veg counter.

EBLEX highlights the importance of appearance in the buying decision, and it is certainly true that appearance trumps price in most instances. If a piece of meat does not look right it will not be bought. Whilst the research does not go on to tell us what it is about appearance that matters we can guess that too much fat, an over watery look, flabby appearance, and too light or too dark are all flaws which are just not tolerated.

However we cannot dismiss the importance of price.

People are very price conscious. They buy on the price of the pack, not pence per kilo and of those questioned in the research 80% knew what they had paid for the product just bought. 35% of those questioned had bought products on promotion.

Some meat is more price sensitive than others. Pork is price sensitive, as is beef mince. Chicken legs and thighs are particularly price sensitive, and at the other end of the scale steak is too. There is clearly a price point over which people will not go however good looking the product.

The research confirms that meat purchase is not species specific. It indicates that 35% of people will change to an alternative if the species they first thought of is not available in the way they want it, compared with 30% who will change to another cut within a species. Decisions about roasting joints are especially fluid with 48% being prepared to change to another species.  17% will leave without buying anything if they cannot find exactly what they want.

This piece of work from EBLEX demonstrates that the meat buying decision is complex. Unsurprisingly in a category now so expensive that packs are security tagged people take their time over purchase. If something does not look right it will be rejected. If it is not priced right it will be rejected. If one species does not provide what is wanted then shoppers will in many cases move to an alternative. This is an important finding as it suggests that merely putting the price up in store and funneling the incremental back to the farm gate will not work, unless all species go up in price together, which is an unlikely event.

.

What is clear is that all parts of the food chain need to work closely together to deliver what the shopper wants. This represents a colossal communication challenge when according to DEFRA there are 86,000 beef farms, 73,000 sheep farms and 9,000 pig farms in the UK.

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.

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.

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.

Over Obsessing About GM Ignores Other Ways to Solve the 9 Billion People Food Challenge

GM foods are once again in the headlines this time raised by new minister Owen Paterson who says that he cannot understand the fuss about authorising GM production in the UK as the horse has already bolted.

According to Paterson, most of the beef we eat contains GM ingredients because the concentrates fed to cattle comes from GM modified crops. Which may well be true as according to Monsanto’s website 95% of soy beans grown in the US are GM, as are 95% in Argentina and 50% in Brazil.

It is extraordinarily difficult to get to the bottom of the real facts about GM – is it a way to save the world or a pernicious threat to health and the environment?

What is becoming increasingly clear is that GM crops as a tool to feed the developed world are just one part of the solution. There are less contentious and arguably more fruitful ways to meet the challenge.

A look at where the major agribusiness investment companies are placing their bets helps put GM into context.

Sustainable Asset Management, a division of Rabobank sees the solution to satisfying the growing demand for food as one of identifying bottlenecks right across the food chain, and supporting innovative companies who can find profitable ways to ease the pressure points. Examples of food chain wide bottlenecks are waste, transport, and storage.

Focusing on farming,  SAM says that producer profitability primarily depends on factors such as soil quality, rainfall and water management, and distance to markets. But secondary factors like agricultural expertise, management capabilities and wise use of fixed assets and working capital are critical, and can either enhance or limit growth potential. Successful businesses, according to SAM are distinguished primarily by their level of agricultural expertise. Note that GM as a driver of profitability does not feature in this analysis.

Agribusiness investment house, Paine and Partners discussed investment opportunities in a recent EFFP conference, touching on many of the same themes as SAM. They have identified 25 investment hotspots of which GM seeds is just one - and a moderate growth and somewhat risky one at that, the risk being strict regulatory frameworks for development. 

They illustrate the impact of GM through a wheat example where they say that 2010 production of 2.4 billion mt could rise to 7.9 billion mt by 2030 but only 0.6 of this is accounted for by yield, which in turn includes more effective fertilisers and better irrigation techniques as well as increased use of high yield seeds. Waste reduction by contrast accounted for an additional 1.1 billion mt.

GM could play a part in solving the challenge of feeding 9 billion people. It may not be as large a part as some think. In the developed world consumers will have a say – even if it is only to avoid GM containing foods. As for the impact on the developing world, this too is not clear cut. Just last week The Times of India reported on a campaign targeted at stopping Monsanto setting up a research and development unit in the Punjab.

All concerned with increasing food production in the UK might want to consider whether spending so much of their time and energy fighting for GM could be better spent on other ways of improving productivity.