A Shopping Trip to ALDI

To ALDI, and a look at what all the excitement is about. Latest figures from research company Taylor Nelson Sofres say that discount stores in general and ALDI in particular are growing sales at a great rate as cash strapped shoppers flock to take advantage of their low prices.

German owned ALDI is the biggest of the discounters with a market share of 2.9%, which compares with 31% for Tesco, 17% for ASDA, 16% for Sainsbury, and 11% for Morrisons. Whilst relatively small their sales have grown by 19.5% in the 12 weeks to July 13th, compared with a total grocery market growth of 7.3%. ALDI says its success is due to always selling at very low prices, something they are able to do, according to their UK head of buying Tony Baines, because "we have a low cost base, and take lower profit margins" (than the major multiples).

So what is it like shopping there?

Immediately you can see why their cost base is low. Trolleys are chained, and have to be purchased, with money refunded when they are returned. So no extra staff are required to collect them up. The aisles are narrow, all the better to pack more in to a limited space, saving on building and maintainance costs Products are left in their outer boxes on shelves, not taken out of the box and displayed individually, so again fewer staff are needed. There are far fewer checkouts, so far fewer staff are required to man them. Yet you don't queue for long. They whip you through very fast. First, because you are not allowed to hold things up by packing at the checkout, instead, you unload your products on to the belt, they are scanned, and you put them straight back into the trolley. Second because the belts are about twice as long as conventional belts, so there's no waiting to unload the trolley. And finally, although I have no evidence for this, the staff could be paid on the speed of scanning the goods, which went through the checkout like lightening.

What about the products?

ALDI stocks just 11 well known brands. The rest of their goods have got brand names, but ones few will have heard of. So ALDI is not paying typical national brand prices for their packaged products. Most of the fresh produce is sold under a little known name, the meat and chicken for example is called "Ashfield" . In just a few instances, ALDI puts its own name on fresh produce, something they want to do more of apparently to create a better quality image.

The range of goods on offer is very limited, which means less cash tied up in stock. But the basics are there.

What about price and quality?

Prices varied. 500kg of British beef mince was £2.29p compared with £2.25p at Tesco and £2.20p at ASDA. But sirloin steak, also British, was £14.68p per kilo compared with £15.47p at the big chains, strawberries were £1.69p compared with £1.99p, and new potatoes, on special offer, were 69p per kilo compared with £1.38p.

Taste wise, the strawberries, mince, steak, and tomatoes were as good as any other supermarket's, the potatoes better than a recent Sainsbury purchase.

Will ALDI become the new face of grocery shopping? It certainly offers good value on some products, which, for those on a very strict budget, could be most welcome. However, the limited range, lack of brands to which many are very loyal, and the feeling that, whether grappling with the chained trolleys to being hustled through the checkout, it is an even bleaker shopping experience than at other supermarkets, makes me think that many will shop there once but not go back. Added to this the big supermarkets have started major price wars which will make them more competitive with ALDI and its fellow discounters, at least some of the time. Discount shopping won't go away, but its probably not going to dramatically change the UK shopping world.

Jargon Busting - What is "Provenance"?

Its amazing how jargon creeps into business language. "Provenance" is a classic example. No food discussion passes without reference to provenance. Farmers are regularly told that having provenance is big market opportunity, and that people are more interested in provenance than ever before. And yet, according to a piece of research on the topic published by DairyCo(www.dairyco.co.uk) 63% 0f consumers questioned in a survey replied "don't know" which asked what the term provenance meant to them.Indeed an informal poll in my local pub showed 90% not knowing what the word meant. So an easy lesson is never to use it when selling to the general public.

Which is not to rubbish the idea of provenance, defined by the Oxford English Dictionary as "The source and origin of a product, it's history and pedigree". Many consumers do care about where their food comes from.

The DairyCo research offers a good guide to the type of consumers most interested in the origins of their food, and what particular aspects of food production concern them most, or appeal to them most. Whilst it is mostly about dairy products, the findings apply just as much to meat, eggs, fruit and vegetables as cheese or milk.

Much of the research builds on what is already known. It tells us that the consumers most likely to be worried about where their food comes from are older, richer, and well informed about food matters. The positive things they value are freshness, high quality, excellent taste, naturalness, tradition. In rural areas, supporting local farmers, local businesses, and the community are of great interest, and organic seems to be most valued in towns and cities. The issues that most worry consumers are connected with health and food safety, as well as ethical issues. So traceability,transparency, additives, pesticides, animal welfare, food production methods and food miles are all relevant. The research also confirms the increase in sales of local foods.

Where the research does shed more light is in the following areas:

1. Selling on a local foods message is not the only way to benefit from consumers' interest in how and where their food is produced.Concern about food is more to do with a consumer way of thinking than location. Indeed the research warns that a local message can be confusing because some consumers see local as within a 10 mile or so radius whereas others, particularly Scots and the Welsh, see local as from their country.

2. If deciding to sell in a small radius of the farm, it is not enough just to say you are local, the product must be accompanied by another benefit, which has to be explained and supported. An example might be freshness -"from the cows to your door in less than 24 hours". Or the particular steps a farmer takes to protect the environment, or the history of the farm and the product.

3. If wishing to sell a long way from home, for example to London stores, then locally based, community messages are less relevant. Instead, selling points which address food safety and health concerns can be highlighted, such as total traceability, or pesticide and additive free feeding regimes. Environmental and animal welfare standards can be emphasised. Again, any claims must be explained and supported.

As well as consumers, the researchers spoke to people in the dairy industry and from them identified several new opportunities, which could also be relevant to other products. The three with the most appeal are county specific products, products from named farmers, and a range of pre-prepared meals. Similar products do exist, so thorough market research is needed to check the competitive scene before proceeding.

There we are then. Provenance is of interest to consumers - but best banish the word from use unless talking to a food jargon specialist. These can be found in consultancy, marketing departments in processors and retailers, and government departments. Not the person in the street - who is the one person that matters.

Red Meat Grocery Sales - Beef and Pork Holding Up, Lamb Down

The new British Pig Executive (BPEX) website now carries monthly red meat sales through supermarkets. Here's a look at data for the 12 weeks ending 18th May 08 compared with last year.Data is compiled by TNS.

1. Price inflation is not as rampant as government figures make out, probably because the Office of National Statistics (ONS)does not capture promotional offers such as buy one get one free. Of which there have been many. TNS shows beef prices up 5%, lamb up 5%, and pork up 4%.

2. There are signs of a cutback by consumers. Consumers are buying the same amount of red meat as this time last year, but there is a trading down to cheaper meats and cuts. Total beef tonnage sales are the same as last year, pork sales have increased by 2%, but lamb sales are 3% less. Lamb could be suffering because it is more expensive. Lamb sells at £6.12 average price per kilo compared with beef at £5.46 and pork at £4.46. Beef and lamb mince and stewing steak have increased sales, whereas roasting joints of both species are selling less than last year. Frying and grilling beef have also dropped in sales, although lamb chops have held steady.

3. Sales of bacon and sausage are growing. Both have increased by 4% in tonnage, and average prices are up by 2% per kilo. Bacon selling prices average £5.63 per kilo, and sausages £3.08.It is easy to see why sausage sales should have grown, given how comparatively cheap they are. Bacon may be doing well because there is so little waste due to easy portion control, and willingness to eat the fat.

4. Sales of cooked meats are up by 2% despite costing a hefty £7.85 per kilo,which shows that if a product meets a real consumer need, in this case convenience, sales are likely to grow despite a high price.

5. There are differences by country. Scotland has turned away from beef and lamb in a big way, with sales of beef down 3% and lamb down 12%. By contrast Wales remains loyal to lamb, with volumes up 2%, beef is down 5%, and pork sales are static.

Note

The future for lamb sales looks bleak just now. Consumers are buying less from grocery stores, and sales through hotels and restaurants, which feature alot of lamb on their menus, will be struggling as consumers turn away from eating out.

Credit Crunch and the Catering Trade

The UK catering market, sometimes called food service, is big but woefully under-reported. Whilst goings on in the grocery trade seem to be analysed almost daily, figures about performance in catering are difficult to find.
Yet,having some understanding of sales may be helpful for producers to gauge whether demand is rising or falling and to take a view on likely future prices. For the many producers selling direct to catering outlets, this understanding becomes vital,not only to assess impact on demand and prices, but to monitor the trading performance of their customers to avoid bad debts.
So here's a go at pulling together available data.
First, not all catering outlets will see a change in demand. Schools, hospitals, prisons, care homes, will still need to feed those they look after. But local authorities work to a strict budget, and may change the type of food they offer and bargain over prices paid to suppliers.
In the profit making sector, there is evidence that the cheaper or budget end of the restaurant market is doing well. McDonalds Europe reported that its sales for May were 9.6% ahead of last year, with the UK believed to have done even better.
At the other end of the spectrum, the Guardian contacted 8 of the smartest restaurants in London and only one had a table for 4 free at 8.00 on a Saturday before the end of July.It is the middle ground, outside of London which seems to be suffering. The Cumberland News reported on 3rd June that Carlisle had seen a slump in diners and that a number of eateries had closed.
Restaurants and eating places located in out of town shopping malls will be struggling. The Financial Times yesterday reported a survey by Experian, the market research company,which found that 5.8% less people visited such malls in June, as consumers, spooked by high petrol prices, decide not to travel. The survey also found that traffic in town centres had fallen by 1.8%. Eateries are bound to be affected.
The picture in pubs is mixed, as are views about whether the smoking ban has been a good or bad thing for food sales.J.D Wetherspoon has reinvented itself as an all day food provider, and recently reported rising food sales, although bar takings were down.Whitbread also seems to be defying the gloom. In the 13 weeks to 29th May their Beefeater and Brewer's Fayre chains grew by 3.6%. Mystifyingly, their Costa Coffee shops, despite purveying extremely high priced coffees, grew by 6%. Other good news from catering operators is thin on the ground though.
An email from a market researcher with the new meat levy board says that in the early1980's recession catering was worse hit than grocery, and that eating at home increased particularly at lunchtime. Some work they have done with consumers recently indicates that they intend to eat out less, and it is likely to be pubs which suffer most.
So catering businesses are facing a difficult time. But as ever, whether premium budget or somewhere in between, those giving great food, great service and value for money (which is not the same thing as cheap), should weather the storm.

Organic Market Outlook

The media's fascination with the organics market continues but this time with the focus on how it is faring during the credit crunch.
The question of how a sector which is still less than two percent of total food sales can command so many column inches will be tackled another day. The more pressing issue is whether organic farmers will find a ready market for their produce or will it have to be offloaded at conventional prices.
Here's a round up of the latest news on the state of the market.
Sky News commissioned a special piece of research, and found that total sales of organic produce had been growing until April when for the first time sales dropped below the previous year.
The Telegraph reported that sales of fruit and veg box schemes have fallen sharply. One supplier said that 10% of his customers had cancelled their order, and he reckoned that 20% would have cancelled by the year end. One firm has gone into administration.
Up at the Royal Highland Show, Andrew Gibson of Two Sisters Food Group said that sales of organic chicken had virtually disappeared, and that free range was not growing as fast as it had. The British Poultry Council says that sales of organic eggs are showing no growth year on year, although free range sales were still up.
DairyCo's latest data on the milk market shows flat organic milk sales.
No consumer sales figures have been reported for beef or lamb.
The reason for the slowdown/declines in sales seem firmly to do with price. One Abel and Cole box scheme customer, interviewed in the Telegraph said "I'm afraid the organic box is a bit of an unaffordable luxury"; and another said "It was a luxury, but we never used it up each week. I have no regrets at all that we cancelled." A new mother interviewed by Sky also said that it was price which had made her turn away from organics, especially packaged food.
All of which looks a bit gloomy.
By contrast though ASDA reckons that organics are one of their fastest growing areas, and they plan to add new organic lines this year, Tesco reported that the growth rate for total organic sales had slowed to about 10%, which is not bad, even though it compares with about 30% in previous years, and Sainsbury that organic sales were one of their major growth areas. Grampian Country Foods have said they want to increase organic chicken production from 15,000 birds annnually to 20,000 (and double free range production to 90,000 birds). The Soil Association is projecting sales growth of 10% in 2008, and Nic Lampkin, an academic expert on Welsh organics said in the Western Mail that " There is still room for some growth".
It does look as if the rate of sales growth for organic food will slow whilst the current financial climate continues, which is what we predicted at the start of the year.
Could sales actually decline? Lampkin points out that 80% of organic sales are made to just 20% of all those who buy organic, and he thinks those customers will stay loyal because they buy for reasons of principle. However, should there be a wholesale walking away by the other 80% of consumers then clearly sales will fall substantially. Trying to decide if organics are worth the money is made more tricky by groups such as Which saying that their taste tests showed no difference between standard and organic products, strawberries being cited.
The overall conclusion though is that sales growth will continue in the major supermarkets who want to promote higher priced food like organics, but who will work hard to reduce the differential between organic and conventional food to ensure that consumers will trade up and not be put off by an overly big organic premium.
The outlook for those outside of the supermarket food chain looks bleaker unless they too can reduce the difference in price. At the moment some of the price differences are steep to put it mildly. The Telegraph quotes prices from an Abel and Cole box versus the same items bought from Tesco's organic section. Jersey Royal potatoes are £7.00 a kilo from Abel and Cole compared with £1.99 from Tesco, cherry tomatoes £10 a kilo versus £2.46, Little Gem lettuce £2.18 versus 50p, and even the humble onion at £1.66 a kilo compared with 84p. There's got to alot of added value to justify those differences, and for many thay value just is not there.
As far as action is concerned, organic farmers will of course need to watch costs carefully. Those contemplating a move to organic farming should take a very close look indeed at the overall cost of organic production versus conventional, and be absolutely sure that are still better off even if current premiums are reduced. They should also investigate what is happening to the market for their particular product, as not all organic sectors will perform in the same way.

Consumers,Clones and Concerns

The Food Standards Agency research findings that consumers do not support animal cloning for food have been widely reported, (apart from in the farming press, bizarrely), and both the findings themselves and consumer reactions to the reports merit pause for thought. The research is thorough, and the reports on it were confined to the facts, with no hysterical headlines. Media commentators reactions were also well balanced, with a couple of commentators coming out in support and one asking for a reasoned debate on the subject. The facts are though that consumers are unlikely to buy food from cloned animals.
In the research itself, people were worried about the animal welfare implications of cloning for both the mother who, because of the high failure rate risked becoming a breeding machine, and for offspring who in most instances are born with disease and deformity. People vividly remember BSE and CJD, and so were concerned about whether the food would be safe to eat; and they doubt whether those involved can be trusted, be they biotech companies, breeders, farmers, or retailers. All the worries were compounded by an inability to see any benefits from cloning apart from more profit to those in the cloning chain.
I don't think that this research can be dismissed as the views of a tiny number of people who may have particularly strong views about animal welfare or food safety or the ethics of cloning.Those taking part were screened to ensure they had no extreme ideas about any aspect of food, and findings are in fact very similar to those from America where they have carried out extensive research on the topic.
Reaction to media commentators columns also showed resistance from the public, but with a sizable minority being open minded. Melanie Reid in the Times came out strongly in favour of cloned food. 29 people were moved to respond to her views, of whom 8 said it sounded ok to them. The rest were strongly against, with some saying her piece was an illogical and factually incorrect piece of journalism. The Observer's Tim Haywood sat on the liberal fence saying that whilst he did not like the idea himself, there should be a reasoned debate about it, a point of view endorsed by 6 out of nine people commenting on his article. Hannah Strange also of the Times concluded that the animal welfare issues associated with cloning would mean that UK consumers would not support it.She drew one response saying that cloning needed the same animal welfare safeguards as ant other animal related activity, and one feeling that there was no cause for concern.Many of those reponding to articles, whether for or against,called for clear labelling so that consumers knew what they were buying and could avoid if they wished. The Mail, mouthpiece of middle England, reported the research and of the people who commented half were open minded, particularly if cloning would help feed the world.
At first sight therefore, public response seems more favourable than the FSA research might indicate. However there are two major findings which lead to the conclusion that UK consumers just will not buy cloned food.First, the research shows clearly that the more consumers know about cloning the more alarmed they get. As yet the cloning debate is still in its infancy in the UK, but anxiety will grow with more publicity. Second, there is a striking attitude difference between men and women. 60% of women reject outright the idea of buying cloned food, compared with one third of men. Conversely, about a third of men are prepared to buy cloned food, but only 14% of women.The key point here is that its still women who do most of the food shopping.
So, there are major drawbacks in consumers minds already about cloned meat, and as the debate unfolds there will be alot who will not accept it.
But this consumer unease won't come as a surprise to farmers, many of whom instinctively understand the public's feelings.

From the Farmer's Mouth - More Farmer Views on Diversification

DEFRA's startling statistic that 19% of farm profits come from diversification compared with 5% from core farming has prompted a regular look at what farmers who have taken the diversification plunge are saying about the good, bad, and ugly of stepping along this path. Information is collected from farmers featured in the farming press.

Over the last twelve weeks there have been 16 diversification stories, covering adding value to beef, lamb, pigs, poultry, dairy, and vegetables, plus a milk round, 2 farm shops, marquee hire, property development, and, in a sign of the times, eco farm holidays, and an eco friendly visitor centre and restaurant.

Once again there is a high level of agreement about what makes a diversification successful. Most speak about the need for a top quality, great tasting product. Peter Willes, producing cheeses from Higher Alminster Farm near Bideford in Devon, says " Milk must be a particular quality, 4% butterfat and 3.5% protein", adding that he favours cow condition and a moderate yield over pushing too hard, so that quality is maintained. Ian Burdess, who farms with his wife Zoe at Dottril Farm in the Yorkshire Wolds, says " I think its very important for flavour that lamb has been on grass. Our customers tell us that it is superior to lamb that has never been outside." Peter and Henrietta Grieg of Piper's Farm in Devon say that their aim is to sell " pre packed meat of high quality, meat that is wonderful to eat". James Hague of Lyde Green Farm Rotterwick in Hampshire who has a milk round says " The key is providing good service, and above all good quality milk". Malcolm Sutton and his wife Kate of Postern Lodge Farm Belper sell ice cream, and Malcolm talks about the need for a top quality product, "no additives, just milk, cream, eggs and sugar, with natural flavours."

Product consistency is important too. Zoe Burdess sells to restaurants, and says "Chefs want consistency both in terms of quality and weight". Peter Grieg says " What drives this business is absolute consistency so that the customer always gets the same food to the same high standard."

Another common theme is to understand what customers want not just at the start of a project but regularly, by doing market research. Peter Grieg spent hours in Marks and Spencer watching how people shopped and what they bought. Rod Smith of Beal Farm near Lindisfarne, who has opened the eco friendly visitor centre, spotted the eco trend, and noted that 500,000 people pass by the front door annually. He is now "Inviting constructive criticism and suggestions about our menus and facilities in order to improve them". Richard Scoles who farms with sister Rachel on Railton Farm near Driffield Yorkshire has started growing speciality vegetables like chicory, squash, pumkins, flageolet beans and kohlrabi, and their sales manager Mark Southwell says " We have a strong emphasis on attention to detail, listening to our customers requirements, and making sure we supply what they want and deliver when they want it." Hugh and Sascha Grierson from Newmiln near Methven Perthshire started by selling organic meat but were constantly asked by customers for organic chicken.

All the farmers sell their produce under a brand name, sometimes the name of the farm, sometimes something completely different, but all with the objective of setting themselves apart from competition. Scott Milligan from the Ballathie estate near Stanley Perthshire sells beef direct and says " We see branding as very important so that Ballathie is associated with high quality". Malcolm and Kate Sutton have two brand names for their ice cream, the upmarket Cowhouse Dairy brand, and Udder Stuff for younger consumers. George and Pat Booth who farm near Ellon in Aberdeenshire developed "The Store" as the name for their farm shop, but it now goes onto a range of products. Ian and Zoe Burdess registered the name LUST (Lamb U Can taste) so that no one else could steal it.

There is much similarity in where farmers sell their produce.Farmers Markets are usually the start point, followed by local shops, delicatessens, catering outlets, and even cinemas and garden centres. Some sell to supermarkets.

Most regularly publicise their products. Free samples to taste are popular, as is attendance at food fairs and local events, often offering cooked food, getting stories published in local newspapers, compiling a list of customers and sending them newsy updates. Two farmers had entered local food competitions with James Hague the milkman really landing on his feet when Antony Worrall Thompson, one of the judges decided to use the milk in his restaurant.

The farmers also give good advice about the downsides of diversification. Four of the meat sellers warn that selling the whole carcass is vital to making a profit. Some dealt with the forequarter by making beefburgers, some sausages, and one did ready meals. Two warned about the time it takes to become profitable with one being honest enough to say that the first year was bad and the second worse, and then it turned around. As Malcolm Sutton said "Diversification is easy to say, but it is not a cheap or easy option. You have to be interested and live the dream."
Overall though diversification does seem to work. DEFRA's analysis says that only 1.5% of diversification projects fail to make a profit, meaning that 98.5% contribute positively to farm earnings.
(See blogpost of 12/2/08 for further analysis of DEFRA's diversification report, and blogpost of 28/2/08 for the first in this series of reviews about farmers' thoughts on diversification).