Dragons Den’s Evan Davis on the Secrets of Successful Entrepreneurship

After 4 years hosting Dragons Den Evan Davis probably knows more than most about entrepreneurs. At a conference in December held at the Royal Agricultural College on the topic of "Inspiring Entrepreneurship" in agribusiness, he described the 5 characteristics he feels all successful entrepreneurs possess.

1. Optimism
This is the key requirement. Successful entrepreneurs possess an optimism “bordering on the delusional”. Those who make it see the glass half full all the time, they are never put off by obstacles thrown in their way, and bounce back after the hardest of knocks.

2. The ability to spot how things could be done better
The good entrepreneur has the knack of spotting the irritations in life’s everyday activities, and working out how they could be removed or reduced. Evan advised would-be entrepreneurs to make a point every day of finding two products or services which could be improved.

Equally entrepreneurs can see ways to create opportunities. He gave as an example the couple who developed cardboard beach furniture, but decided that the most lucrative route was to sell the opportunity to brand the furniture, rather than sell the furniture itself. Their product ended up on Henman Hill at Wimbledon, carrying the logo of a well known company.

3. The energy to make things happen
Being highly creative is on its own not enough, great entrepreneurs come out of the clouds, get their shirt sleeves rolled up, and work out the nuts and bolts of putting their ideas into practice.

4. Basic business knowledge
And, in the same vein, they have basic business skills. They can write a business plan, and understand costs and cash flows. This skill often clashes with their optimism resulting in wildly overblown projections, but the successful entrepreneur can temper the optimism with reality.

5. Willingness to adapt and change
The best entrepreneurs have tested their ideas thoroughly on potential customers, not just mum and dad, or sympathetic friends. They have listened to feedback, and adjusted their idea accordingly.

Despite all those skills an entrepreneur’s idea may not get off the ground, and even if it does, may not fly for long for all sorts of reasons. The most successful business people can catch a cold as the recent failure of green haulier JPM Eco Logistics which received investment from Dragons Deborah Meaden and Theo Paphitis showed.

But that’s presumably where the optimism comes back in. The best entrepreneurs just dust themselves down and get going again, regardless.

Dairy Products Market 2008

Here’s a look at the Dairy Products market in 2008, courtesy of the Grocer. All data is for the 12 months to end October, and supplied by Nielsen market research.

It was a year when huge jumps in food prices collided with credit-crunched consumers reining in spending. Unsurprisingly there were changes in how people shopped for dairy products, but not perhaps as many as might be imagined.

Consumers bought roughly the same volume of products, despite dairy price inflation of 13.4%. There was some trading down to own label, notably in the butters and spreads sector, but by and large the big well advertised and promoted brands held on to their positions with the weaker ones struggling. There was a turning away from products sold as functional or fortified, with the exception of Danone Activia with its promise of a revved up digestive system. And Organic slipped back but is not yet in freefall.

Butters and Spreads
Total value sales were up by 17% to £1.1bn, with own label growing almost twice as fast, up 31%
Total volume sales were down by 1.1%, but own label grew by 4.3%.
A couple of grocery trade spokespeople commented that spreadable butters are growing fast because they combine convenience with a natural and healthy product. By contrast fortified spreads are losing sales because consumers are confused about why they should buy them, and they are more expensive.
Perhaps echoing the natural message, Lurpak butter is the number one brand for the second year running, beating Flora.
This is a sector where organic is struggling with Yeo Valley’s value sales up by only 6% in a market where inflation was 13%, meaning that volume sales must have been well down.

Cheese
Total value sales grew by 11.5% to £2.2bn. Own label grew slightly faster, up 11.8%
Its good to see that Cathedral City, is still the biggest brand in the market, owned by Dairy Crest, and British of course.

And a cheer for Wyke Farms which grew by 30% and is now the eighth biggest cheese brand. Here’s hoping that it is making money, and continues to show that it is possible to compete with multinational companies.

Yogurts
Total value sales were up by 7.7% to £1.9bn, and volumes grew by 1%. This is one category where own label is not growing as fast as branded products.
According to the Waitrose buyer consumers are flocking to Natural and Greek yogurts because they are seen as healthier.
Organic yogurt Rachel’s Dairy bucked the organic downturn and grew by 14%, but Yeo Valley clocked up a 1% growth.

Yogurt Drinks
This market is struggling. Value sales despite inflation were down 2.6%, and volume sales down by 8.3%.
The buyer for Booth’s supermarkets reckons that this is a market where consumers are cutting back because of price.

Fresh Milk (Additional data from DairyCo)
The total fresh milk market grew by 14.1% in value to £3.2bn, and 0.6% in volume. People are still purchasing as much fresh milk as they ever did.
Filtered milk, led by Cravendale continued to grow, up by 29%, but the modified milk market is fast disappearing, down by 35%, and is another example of consumers resisting a natural product which has been tampered with.
The Organic milk market was stable and Yeo Valley grew by 46%. There is anecdotal evidence that mothers like to buy organic milk for young children, even though it costs more than standard.
Wiseman’s “The One” milk did well growing by 48%.

NB

The one thing to bear in mind when looking at these numbers is that they are for the 12 months ending October 2008, about when recession truly started to bite. A look at data for the last quarter of 2008 may show some differences.

The Food Consumer 2009

Tis the season for predictions, and whilst the cynical might feel that forecasting in today's volatile climate has as much chance of accuracy as Mystic Meg, a trawl of what the pundits are saying is showing alot of concensus about where consumers are headed.


Here are the key themes.

1. Paying down debt.

Spurred on by fears of losing their job, and the dawning realisation that even if employed they are living well beyond their means, consumers are determined to reduce their debt, by spending the minimum possible. They are thinking hard about what they really need, and what product benefits they think are worth paying for.

As strategy consultants Marakon put it, this means a big gap between the features of many products and what consumers truly value. In other words, anything over priced for what it is, or where a perfectly good cheaper alternative exists, will see plummeting sales. Organic products, many premium foods and drinks, and pretentious restaurants selling substandard food at inflated prices will come under an increasingly harsh spotlight.



2. Searching for security and emotional comfort

The gloom and doom is bringing with it a yearning for security, comfort and simplicity. Future predictor Richard Watson reckons that this trend will result in more commitment to buying British and local as opposed to foreign and global. Jasper Gerard the Times restaurant critic, and Mintel the research company along with many others feel that consumers will seek even more reassurance about where their food has come from, how it has been produced and what is in it, hence another reason for buying local. Animal health and welfare will also be prominent, especially pig welfare following the Jamie Oliver programme about pig production, scheduled for end January.

Linked to this trend come predictions from many, including innovation business the food people, of a return to home cooked simple food such as as stews casseroles and roly poly pudding, home baking, an increase in foraging, (the National Trust is running foraging weekends!), and an increase in gardening especially vegetable growing.

3. Worrying about the here and now as opposed to what happens down the road.

Some forecasters are predicting a turning away from environmental issues and products, unless they don't involve effort or extra cost, and are not a marketing ploy.

4. Trading down but some trading up too

These are Mintel's words and capture the urge consumers have, even in the most austere times, to break out and treat themselves. Certainly the continued growth in champagne and smoked salmon sales, and the news that Waitrose had a recovery in sales just before Christmas says that consumers will splurge occasionally.


5. Trend summary


Going Up:

Prudence

Staying in

Comfort food

Home cooking from scratch

Home baking

"Find your own food" from foraging to vegetable growing

Local, particularly if close in price to the alternative

Buying British

Cheaper cuts of meat, including a return to offal

Own label

Higher welfare options

Old fashioned, trusted brands



Going Down

Conspicuous consumption

Anything overpriced

Premium food unless very special, including organics

Eating out, except fast food

Bad service

Going to the pub


In truth, most of these trends have been emerging over the last few months, with the continuing flow of bad news merely accelerating them, and confirming that the choosy consumer is here to stay for a good while.

Pros and Cons of a Locally Sourced Xmas Dinner

According to a recent report from Farmers Weekly Farmer of the Year John Geldard and Henry Brown of Westley Consulting the local foods market could grow from its current £2.34bn to over £15bn in 10 years.

A growing number of consumers believe that local food is fresher, of better quality, and a good thing because it supports local business. Many, though, think that local food is expensive and difficult to find.

To test the pros and cons of local food shopping we set about making a Christmas Dinner entirely from produce grown and reared within 10 miles of home in mid Warwickshire. Here's what we found.
Sourcing meat was no problem at all. Free range turkey, goose, and duck could be easily purchased direct from the producer's farm. There was a choice of both Limousin and Aberdeen Angus beef, outdoor reared pork, bacon and sausages, and home bred lamb. More intensively reared produce was also available for those choosing that option.
A nearby bakery made their own mince pies and Pudding as well as bread, we bought local Berkswell Cheese, and local free range eggs.
Getting good locally grown vegetables was another story. The local farmer's market was held too early for the veg to still be fresh on Xmas Day, and none of the farm shops sourced from close by. So it was off to the supermarket where nothing was local, but at least the sprouts came from Lincolnshire, the carrots from Notts, and the potatoes from Norfolk. Sadly the mushrooms were Irish, so they had to stay on the shelf.
But what about taste and price? There's no getting away from the fact that these locally sourced products cost more, sometimes alot more, than the supermarket equivalent, and there is a time and hassle factor involved in visiting various different shops. But the quality and taste was far superior. The Kelly Bronze turkey was outstanding as were the bacon and sausages, lamb and Aberdeen Angus beef. The Limousin beef was good too, and certainly better than supermarket beef, even from a premium range. The bakery items and cheese were excellent.

It was a reassuring purchasing experience too, with the ability to talk to the farmers themselves about their rearing methods, and see relaxed stock ambling about in fields or roomy sheds. In a couple of farm shops there was even someone on hand to advise on cuts to choose and how to cook the meat.
To this Christmas cook knowing exactly where the food had come from, and the quality, justified the extra cost and the time involved in sourcing locally.

But this way of shopping is not for everybody. Getting back to the Geldard/Brown report, they reckon that the growth they predict will only happen if local foods are pushed by supermarkets, the mass market catering trade, and the public sector. They are probably right. It would be possible to move local foods from niche to mainstream, and chasing mainstream volumes will suit some producers and growers. The trade off for the farmer is lower margins, and risk of losing control and independence. There would inevitably be a hit to sales in small local stores. And from the consumer's perspective, a very personal and rewarding way of shopping would be lost.
PS
On my shopping travels I asked each producer whether the difficult economy had led to a downturn in business. Most said that sales were holding up fairly well, although there were some signs of consumers trading down, for example from a Kelly Bronze turkey to standard free range,and from steaks and roasts to casseroles and mince. There was also a trend to buying meat to a price rather than a weight.

Tesco Outgunned by the Competition - Some Reasons Why

So Tesco is getting outgunned by the competition. Third quarter results show their sales up by a miserable 2% compared with Sainsbury up 4.3%, ASDA up 6.9% and Morrisons up 8.1%.

The root cause is customer defection. An analysis by TNS the market research company, shows that in the 12 weeks to November, Tesco lost about £22 million of business to ASDA, a further £10million ALDI and just under £10million to Morrisons . Clearly "every little helps" is not helping enough. Why might this be?

There seem to be three reasons.

First, Tesco has a muddled consumer message compared with competitors. ASDA and Morrisons are known as value supermarkets. ALDI screams rock bottom prices. Sainsbury have stuck with a quality message. Tesco by contrast have responded to the economic downturn by adding a number of discount type products similar to those sold by ALDI and the like, but done little with their main ranges. So in the shopper's mind they are offering neither the cheap prices of an ALDI, or consistent value across everything in store like ASDA and Morrisons. And a slogan like "every little helps" means little to cash strapped consumers keen to hit a budget but reluctant to buy rubbish.

Tesco's prices are too high, and their quality too low. How do we know this? Just read the comments left by shoppers on newspaper articles about Tesco's performance. They tell of huge price hikes, inconsistent prices from week to week, promotions advertised but no product available in store to buy, and inferior fresh products such as bakery and fruit and veg.

And most telling of all, Tesco seems to have forgotten about putting customers first. Customers are outraged at Tesco's arrogant attitude and lack of service.

I'd also add that resentment about the way they treat suppliers is reaching boiling point. At the moment lack of facts means their alleged practices tend not to hit the headlines. This will change if Tesco is demonstrated to cross the line between tough negotiation and outright intimidation, and the publicity will do them little good.

There are lessons for all businesses from the Tesco story.

Successful businesses have a very clear marketing message, and they stick with it. Their actual product offer is often fine tuned, but they do not stray from their basic core principles. And they never, ever, take their customers for granted.

No one would bet against Tesco which is one of the most succesful businesses in Britain. Despite a slowdown in sales they remain almost twice as big as their nearest competitor, and their discount range is turning over about £1billion, which is nearly the same as ALDI's total sales. But they are not invincible, and if they don't learn the lessons then their performance will struggle.

What Tesco Think About Local Foods

Boy, do Tesco tell it like it is.

Alistair Robinson,Senior Buying Manager buyer for the North of England, addressed the Institute of Agricultural Managers conference last week. His topic was "Local Foods Opportunities with Supermarkets".

Here's what Alistair said.

First up, consumers are still hugely enthusiastic about buying local foods, seeing them as fresher, of better quality, and helping to support local businesses and farmers. Tesco's customers want to buy local foods so Tesco is providing them.

Alistair explained what local means to the public. Although more consumers like to buy British, a British label on its own does not mean local. In Scotland and Wales, local means "from my country". In England, local means "from my county". It seems that the more specific a product is about its origin, the more the consumer feels that it will be top quality.

And people want a local option in most of the products they buy. Locally sourced fresh meat and veg, milk and cheeses, cakes and bread, and even ales and beers are all welcomed.

Tesco has seen some stunning local success stories."Black Country Pork Scratchings" from the Midlands outsells the national equivalent by 2 to 1. Yorkshire carrots sell 30% more than standard carrots, Cornish potatoes 12% more, and Warwickshire Spring Onions 5% more than an ordinary spring onion.

But here's the rub.

There's no premium in local foods, according to Tesco. Those great sales figures have been achieved by selling local food at a similar price to the standard variant. Basically, Tesco are looking to make the best use of every inch of shelf space, so all products have to sell at the highest possible volume,so this means in Tesco that they have to be on shelf at a competitive price, AND they have to deliver the same profit margin to Tesco as a standard version.

A brave soul at the conference asked whether, if consumers were so keen to buy local, Tesco should consider taking a lower margin, particularly as the whole point of local is that producers are small and so without economies of scale. Absolutely not said Alistair, for to sell something at a lower margin was a flawed business model, was totally unsustainable, and would only result in lost profit to Tesco, which is just not acceptable.

So there you have it. Tesco are very happy to support local foods as long as their customers want them, and as long as they make as much money for Tesco as anything else. At the first hint that consumers might be less enthusiastic about local foods, Tesco will walk away from them.

All this raises the question of whether its just Tesco local foods that cannot command a premium or the local foods sector in general.

According to a recent note from the IGD, consumers do see local foods as high priced. 61% say that price is a barrier to buying local and 43% think local food is too expensive. The IGD's advice is that local food producers and suppliers should review their promotional strategies, and offer competitively priced products in sectors that offer potential for growth.

If the objective is big volumes, then it seems Tesco have got their local food pricing policy right. The alternative strategy for producers is to stay away from the supermarkets, and target a smaller, niche market, possibly with a "local plus" message, in other words local with an extra consumer benefit.

As for the margin issue, Tesco will squeeze hard, and possibly harder than others. The key is for producers to walk into any deal with their eyes wide open.

Trends at Sainsbury - Justin King Speaks of Consumers, Farmers and Buying British

The conference and lecture season is in full swing and a few days ago Justin King, Chief Executive of Sainsbury spoke at the Royal Agriculture College's annual Bledisloe lecture. Smooth shaven, hair slicked back, immaculately suited and lightly tanned even in November, King could not have presented a greater contrast to last week's profiled speaker, John Torode. But in common with John he delivered an excellent session.

Justin King's main messages were these:

Value is increasingly important to Sainsbury shoppers. Own brand sales are booming due, he feels, to offering outstanding quality at a price well below the branded equivalent. Own brand now account for 51% of all the products they sell. The Basics range is also growing fast. People are cooking more from scratch. In an interesting twinning of the two, he said that free recipe cards, which have been around for three years, had really taken off when they had a value message like "Feed your family for a fiver" and "Love your leftovers".

Despite tough times though, consumers are not prepared to go back on their principles, rather they want "value, but not at the expense of values". King cited Sainsbury sales of higher welfare chicken, which now account for 33% of all chicken sold compared with 14% in 2006. And sales have accelerated, even as the credit crunch bites harder. Free range egg sales also continue to grow. Apparently animal welfare issues are the second highest in his postbag, the top issue being palm oil and concerns about destruction of the rain forests and the creatures who dwell there.

The premium market continues to grow, but not all bits of it. Fair Trade still sells well, as does food with higher quality ingredients, and higher welfare products. But organic is struggling, in King's view because consumers are increasingly questioning whether the premium charged is justified, and because the sector has "lost sight of its roots", straying away from core basic foods into fringe activities.

Mindful of his audience and its farming connections, Justin King devoted a section of his speech to British farming.

Justin King had a blunt message to farmers. Basically, there are still too many substandard operators who drag the returns down for everyone else. On the plus side, Sainsbury are prepared to pay a premium to farmers who deliver certain standards, this is the case on milk now, and they are working on a similar scheme for beef and sheep.

He feels British farmers are still too production focussed, and not concerned enough about consumers and what they want. Whilst consumers do like to buy British when it represents the best in quality and freshness, they are very happy to buy from abroad, especially from the developing world. In a nutshell, Sainsbury has no intention of confining itself to purchasing only British food.

A few days after the lecture, Sainsbury posted a good set of financial results for the first half of 2008. Recent TNS market research data showed their market share to be holding up pretty well against the onslaught from the cheaper end of the grocery trade, and doing better than Tesco. Sainsbury seems to be steering a sound course through difficult times.