Does Waitrose Sales Growth and Deal with Duchy Signal Return to Premium Food Buying?

Market research company Taylor Nelson Sofres tells us that in the last three months, Waitrose sales grew by 10.2% versus 5.6% for the whole grocery market.

So what prompted the spurt?

Contrary to popular belief the powerhouse has not been Essential Waitrose. This range was never meant to a budget offer competing with value ranges from other supermarkets. In fact most of the products in the range remained as they always had been, and were sold at the same price as previously. The difference was that the range was pulled together under one distinctive brand name.

Essential Waitrose was a rebranding of mostly existing lines, but the vast publicity surrounding its launch seems to have encouraged shoppers back into the stores to re-evaluate what Waitrose had to offer. Once back inside, and helped many more price promotions than hitherto, shoppers liked what they saw and started buying again across the whole Waitrose range. Indeed, Richard Hodgson Commercial Director told the Grocer “Essential Waitrose has played a role at the bottom end but most of our growth is coming at the top end”.

The other factor behind growth may well have been the froth coming off discount shopping. Many of the shoppers who were lured to Aldi and Lidl tried them once, and never came back. The discounters have not converted triers into regular shoppers and growth has slowed from north of 20% per annum to a still respectable but not earth shattering 8% for Aldi and 6% for Lidl.

So does the growth in Waitrose sales and the bloom coming off the discount rose signal the end of the recession and a return to premium food shopping? Well in truth, premium food shopping never went away provided the product in question justified the price charged. What shoppers were not prepared to do was buy premium merely because the label said premium. This is where many organic foods struggled.


Which leads to the Duchy deal. This does seem to be a good thing for both parties. Duchy Originals is a well known and respected brand which should benefit from Waitrose support, and Waitrose commitment to donate to the Prince of Wales Charities can only be beneficial.

It will be interesting to see what Waitrose does with Duchy. The brand is apparently being positioned as super premium, and Mark Price Waitrose Managing Director reckons that it will grow to about 2.5% of Waitrose sales, equating to a turnover of some £100million. The challenge will be to ensure that shoppers are given a clear justification of the super premium positioning. We know that just saying organic on its own will not be enough. One thing is certain. Unless the quality of Duchy products is absolutely superb, and better than anything else available for a similar price, the brand will not blossom.

Finally, can we say that the growth in Waitrose sales, their optimism about Duchy, and the slow down in growth for discounters means a return to pre credit crunch ways of shopping?

Not completely. Shoppers now have a much better handle on what is and is not worth paying for. They have got the taste for chasing bargains. And lurking at the back of most people’s minds is a worry about what the economic climate will be like over the next few years. They won’t be throwing their money away in a hurry.

UK Lamb Market - Farmgate Prices Strong, Yet Amount Eaten Plummeting. Should We Be Worried?

To the relief of farmers across the land, farmgate prices for lamb remain firm. Eblex (the English Beef and Lamb Executive) attributes this to the strong euro boosting exports, and a reduction in UK sheep numbers. Eblex forecasts that the euro will continue relatively strong, lamb numbers will fall in the UK, Ireland and France, and good prices will probably continue.

The one cloud on this bright horizon is the effect high lamb prices are having on the amount people eat. Farmgate prices for lamb over the twelve weeks to end July rose by around 12% compared with last year, the average price in the shops rose by 17% and the amount that people bought fell by 15%. This compares with a fall of 5% for beef and level sales for pork, both of which have been hit by higher prices and consumer cutbacks because of the recession, although not nearly to the same extent.

The drop in lamb sales is startling, although not surprising. The shopper is now paying an average of £7.15p per kilo for lamb versus £6.22p for beef, £5.10p for pork and £4.02p for chicken. No wonder that fewer people are choosing lamb. All cuts are affected particularly roasting joints.

The question is where it will all end? What happens if the euro falls back, flock numbers increase as farmers, attracted by higher prices dip a toe in the water again, yet consumers lose the lamb buying habit, and there is little demand for lamb either at home or abroad.

The obvious solution is for supermarkets to slash the price when farmgate prices fall, and get people buying again. History would say though, that prices in supermarkets do not come down nearly as quickly as they go up, as we saw during the foot and mouth crisis.

If supermarkets don’t support the market who might? This could be an opportunity for butchers to become very price competitive, and attract customers with a banner comparing their prices to the local supermarket. It’s also an opportunity for the catering trade who sell disproportionately more lamb than supermarkets, and for direct sellers. The trouble as always is that supermarkets are so big they do dictate market trends.

The easy conclusion is that we should be worried about people eating much less lamb, as it is bound to have an effect on prices, perhaps not next year but soon enough. The harder bit will be working out how to reignite the lamb buying habit.

Note: Farm gate prices based on Farmers Weekly data, and consumption on Taylor Nelson Sofres data, published by BPEX.

Assessing Hilary Benn's Call for UK Farming to Produce Alot More

Excited by Hilary Benn’s call last week for farmers to safeguard food security by “producing a lot more”, and keen to understand what we are all supposed to do, I read the back up papers issued by Defra.

Nothing in those papers looks radical enough to provide a step change in output. And its clear that Defra, whether consciously or unconsciously, is prioritising the environment over productivity.

For the first time Government has produced a set of performance related indicators, or in plain English, a list of things they want to measure. This is important as what gets measured tends to get done. The Sustainable Food and Farming performance indicators show that Government wants to measure 9 areas.

Of the 9, just one, Market Focused Farming, measures farming productivity. The target is for UK farmers to deliver 50% more Gross Value Added than the EU average of 14 pre enlargement countries. Currently the figure is 32%.

The things that Government feels will help achieve the target include more diversification, more collaboration, more membership of farm assurance schemes, more benchmarking, higher levels of training, more organic farming, and more use of risk management tools, particularly in the arable area. Government is working on how to measure farming’s response to climate change, and the cost to farming of regulation.

Whilst all of those indicators are useful, none will deliver big increases in output.

Also specifically farming related is an indicator called The Burden on the Taxpayer, where two sets of figures will be produced, the value of direct CAP payments, and the cost of animal disease and the level of cost sharing. As yet no target has been set for the cost to the taxpayer, either up or down, but it can probably be assumed that the aim is to reduce it.

Of the other 7 performance indicators, three are directly environment related. The Environmental Cost of the Food Chain indicator will measure river water quality, pesticide and fertiliser use,good agricultural and environment condition,pollution incidents, and membership of the Entry level Stewardship Scheme.

Better Use of Natural Resources has a target of halting the decline in soil organic matter. Landscape and Biodiversity has a target of halting the decline in farmland birds by 2014, and then seeing an increase, and also improving the condition of Sites of Special Scientific Interest. It specifically mentions farmer entry to the Higher Level Stewardship Scheme as a way of achieving the objectives.

Animal Health and Welfare targets have yet to be developed.

The final two areas are Public Health, which targets more fruit and veg consumption, and there will be a target for Rural Productivity.

Overall, the indicators are heavily environment related, and suggest that Government actions prioritise environment over productivity.

No one is denying that in the words of Peter Kendall, farmers “must produce more and at the same time impact on the environment less”. And certainly there should be no return to production linked subsidies as this leads to poor quality products, and a complete disconnection from what the market wants.

But there are actions which can make a radical difference to productivity levels, yet contribute to a better environment.

The number one priority has to Research and Development. As yet there is no target for the amount of money to be devoted to agriculture, and current R&D expenditure stands at just £164m. The obvious area for focus is developing disease resistant fruit, veg, cereal and grass species which require minimal water and fertilisers to grow. More has to be done to understand and eradicate animal disease, including animal husbandry and stock management techniques which concentrate on disease prevention and avoid the need for routine treatment.

There are other areas to target. There must be a measure for bovine TB levels. There should be a target for public procurement of British produce. There should be a time frame for sorting out labelling to make clear what is and is not British. And the Rural Development agencies should have a target for direct farm initiatives.

But enough of the whingeing. What can be done? Well, there is a consultation going on, and it is an opportunity for every farmer in the land to make their views known.

All in all, the talk from Benn is disconnected from the walk. Hopefully though, it will be just a short time before his call is turned into practical, prioritised, and funded government action plans.

FSA Research Furore Shows Organic Movement Must Get Back to its Roots

The FSA’s pronouncement that organic food is no healthier than that farmed conventionally has generated acres of headlines, hundreds of comments, and thrown the organic world into disarray.

It’s interesting to reflect on why the reaction has been so vocal. After all, the FSA was very specific in its research. It stated that its remit was only to look at nutrient content of organic versus conventionally produced products, and it also stated that conclusions were drawn from 55 fully defensible, peer reviewed scientific studies. Its findings echo those of the pro-organic, scientifically based EU project QualityLowInputFood who at the conclusion of 5 years of research said - “Health claims for organic foods are not yet substantiated.”

So why the furore?

One of the problems with the rise and rise of the organic market is that its recent explosion has been due more to hype than substance, fuelled by uncritical affluence.

Any publication over the last few years about organic food implies that it is better for you. Celebrity chefs, food writers in the broadsheets, and bodies such as the Soil Association have all insisted that organic food is the only sensible thing to eat, but they have rarely backed this up with scientific facts. Indeed even after the FSA report was published, a writer in a middle class paper was saying that there are certain food purchases that should always be organic, but yet again gave no reason why, and a Sunday paper had a full page article headlined “We dig out the facts from the manure”, but still filled the page with opinionated claim and counterclaim rather than facts. So one reason for the uproar could be that food writers and chefs may well be feeling very silly about supporting something unfounded, and possibly worried about their credibility.

The Soil Association and other organic supporters will understandably be concerned that their carefully built market will collapse down round their ears, especially in the current difficult economic climate.

So how should the organic world respond?

Instead of rushing to damn the FSA’s findings, organic practitioners should be re-evaluating in a calm, fact based and non spun way, the reasons why people might consider buying organic food.

They are fortunate in that already there is a highly committed core of organic devotees. A look at the reams of comments which newspaper articles generated from the general public gives a good steer on what they value. These people suggest that the main reason for purchase is not what is in organic food but what isn’t. The vast majority say that the reason they buy organic is to avoid pesticides. A few said they just have a belief that the whole system with its focus on the soil onwards is the right way to farm, some feel it is better for the environment, and some feel it promotes higher standards of animal welfare. (Few mentioned taste, although in a health story this is perhaps not surprising).

The organic movement needs to slow down, concentrate on what is true and factually supported about this approach to farming, tell the public and allow them to make an educated choice. Any supporting facts need to be backed by rigorous and defensible research.

This is not a strategy which will support fast growth. Recent IGD research shows that the number of people actively interested in avoiding pesticides for health reasons is relatively small . Far higher is the number seeking to promote good animal welfare, but many issues have been addressed by conventional farming such as free range eggs, and higher welfare pork and chicken. Those interested in animal welfare can choose to buy locally produced meat, and see for themselves whether the animal welfare standards behind their meat is what they want.

So whilst massive market growth will not come from a slower approach, and there may even be a sales decline in the short term, the movement can be sure that their integrity will be protected, the public will be reassured, and longer term, the organic movement will achieve the sustainability and public confidence that it seeks.

What is striking about the organic movement is that its current high powered, fast talking, heavy spinning marketing focus, with its frequent denigration of conventional agriculture, is the complete antithesis of what organic farming is all about. Organic agriculture is a slow maturing way of farming which aims to work in harmony with the natural world to ensure long term sustainability. There is little about it which is unnatural or false. It would be good if organic marketing and organic production were more closely aligned.

How Market Research Can be Misleading – New Report on the Lamb Sector Overstates Sales Growth, and Opposed Views about Ethical and Premium Products

We are continually advised to do research to connect with the market place, improve performance, or check out whether an idea has a good chance of working.

Market research is indeed critical, but the information gathered needs to be interpreted with care.

Two examples of how market research can be misleading appeared in the last few days.

We heard from Cohn and Wolfe, a subsidiary of WPP the biggest advertising company in the world. Headlined “Recession spells the end of ethical shopping”, their most recent research says that UK shoppers are turning away from organic, Fairtrade and eco friendly products in favour of cheaper versions. More importantly, they also found that in future, recession or not, 73% of shoppers will try and pay less for premium lines such as Tesco’s Finest and Sainsbury’s Taste the Difference, 69% will buy less organic food, and 61% will pay less for Fairtrade. At which point anyone either in, or thinking about going in to premium or ethical foods might give up.

But the Cohn and Wolfe survey was followed about a week later by a press release from Tesco headlined “More confident consumers boost sales of premium and ethical foods”. They report that Finest, organics and Fairtrade products are all returning to growth. In the last 8 weeks their sales of organic mince are up 60%, organic cheddar up 70% and organic blueberries up 79%. In the upmarket Finest range, Cumberland Sausage has grown sales by 159%, and Wiltshire Cured Ham by 51%. Tesco specifically says that the news flies in the face of the Cohn and Wolfe survey, and attributes the growth to their policy of “offering customers great value for money”.

To be fair to Cohn and Wolfe they do say that the challenge for higher priced food producers and retailers is to make their products more affordable, but you have to get into the fine print of their release to catch this.

The other recent example of misleading market research comes in the shape of a new report called “Fresh Lamb - A Local Opportunity”, prepared specifically for sheep farmers by Kent University. The report is sponsored by the NFU, and the Institute of Grocery Distribution.

The report says that lamb sales have been steadily increasing, and that last year they grew by 15%. This rosy picture is in direct contrast to figures from Taylor Nelson Sofres, the market research firm, published every couple of months on the BPEX/EBLEX websites. These figures show that in the year to April, lamb sales have in fact dropped by 5% year on year, and have been dropping for nearly two years as retail prices have increased.

So what’s going on?

It turns out that the Kent University report is based on sales of lamb through Tesco, not sales in the total market which is what the levy board numbers are based on. The levy board numbers are of course more representative of what is really happening to lamb sales. It would have been helpful if the Kent report mentioned that its numbers are based on Tesco shoppers.

Accurate interpretation of market research matters. Just glancing at the Kent University report might lead sheep farmers to conclude that demand is rising and so prices for their stock might well rise too. They might even think that the recent buoyancy in stock prices is all due to British consumers wanting lots of lamb when in fact they are due mostly to the strength of the Euro, and may well fall back sharply if the Euro declines, and there is no home demand to offset exports.

Threading a true path through all the information available can be difficult, but there are a few actions which can help avoid wrong conclusions.

First, examine the fine print of any research report, and don’t rely on headlines. Second, try and collate information from various sources to check for consistency, and investigate anything that does not make sense. Third, gather data over time rather than rely on a snapshot. And fourth, don’t rely entirely on what the public say they will do, but check out what they actually do when faced with a buying decision in the shop.

Ps. Farmers Weekly and the IGD have both been alerted to the lamb figures issue, although no response has yet been received.

Milk Drinking on the Up Despite Price Hikes

DairyCo has just published liquid milk consumption figures for the 12 months to 14th June 2009, and they show some striking trends.

All those concerned about the effect of price rises on consumers’ fresh milk buying habits need not have worried. Despite an average 11% increase in prices in the last twelve months, from 62p to 69p, the total market has kept on growing and has now reached just over 5 billion litres. Which says something about the importance of milk to the British diet, much about a complete lack of awareness by the average consumer of how much they are paying for their daily pinta, and is a tribute to some of the innovative products launched into the market. It also illustrates how nonsensical it is for major retailers to slash milk prices - this is a product which does not need price promoting.

On the innovation point, the figures show that milk is not just a big undifferentiated commodity market. A careful look at what’s important to consumers results in successful new products. Filtered milk is a good example. Pioneered by Cravendale, premium priced, and sold with the consumer benefit of staying fresh for longer, filtered milk continues to grow its volume and now accounts for about 6% of all milk sales. Another innovation is milk with 1% fat which has found a niche between skimmed with no fat at all, and semi skimmed with 2% fat.

Equally, not listening to consumers results in problems. A case in point is modified milk which lost half its sales in the last 12 months and is about to expire completely. Consumers just don’t want a fresh and natural product like milk interfered with.

A couple of other interesting trends emerge. The organic milk market has dropped by just 2 million litres to 167m, but is holding up reasonably well compared with other organic products. Part of this is due to less aggressive price increases. Whereas regular milk increased average price by 7p per litre, organic increased by 4p. Jersey and Guernsey which hardly increased price at all have held volume, albeit this is still a tiny sector.

Doorstep delivery sales continue to fall, down 11% year on year. With an average price of 98p per litre, this is perhaps not too surprising. But, it still accounts for 6% of all milk volume sold, and the independent milk producer might well be able to build a good business if they could bring the price nearer that of the supermarkets.

For some reason sales of soya milk have dropped by 8%, despite an average price reduction. Possibly at 90p a litre it is just too expensive when budgets are tight.

All in all though, liquid milk looks like a healthy market in all senses.

Discount Supermarket Growth Slows - Is It All Over for ALDI et al?

Discount supermarkets like Aldi and Lidl are making headlines again, but this time for sales slowing rather than growing.

Editor of The Grocer, Adam Neyland wrote a piece a couple of weeks ago entitled “Is the discount boom over?” This was followed a few days later by figures from market research company TNS Worldpanel, which showed that in the 12 weeks to June 14th Sainsbury and Morrison grew faster than Aldi and Lidl, with Asda growing at about the same rate. Actual figures were +6.5% for the total grocery market, Morrisons +9.3%, Sainsbury +8.9%, Aldi +8.7%, Lidl +7.5%, and Asda 8.2%. It’s a marked change. In the previous months the discounters were growing at anything up to 3 times the rate of their main stream competitors.

Why the change?

As Neyland points out some slowdown in growth was inevitable as competitors fought back with price promotions, million £ advertising budgets, and a focus on the quality and value of their fresh food. Which is a lesson to all of us to never underestimate the competition, particularly in UK grocery.

I think there is more to it.

It is interesting to reflect on what caused the discounter boom in the first place. Of course some of it was due to consumers on a strict budget searching for value as food prices rocketed. Much responsibility though must be laid at the door of the media. Not a day went by without headlines about the middle classes turning to Aldi, that it was now more chic to be seen with an Aldi bag than a Waitrose one, and that discount car parks were full of Range Rovers and Mercedes. No wonder many read the hype, worried about missing out, and nipped along to see what all the fuss was about. The monetary value of all that media coverage must have run into millions.

The big question is, of those who made the visit, how many tried, were disappointed and never came back versus how many changed their shopping habits and returned every week. Market research company Him! (yes, new to me too, but they are a genuine outfit despite the odd name), does regular research with discount shoppers. They say that shoppers are less satisfied with discounters this year than they were in 2008. Also that recent shoppers, and more upmarket shoppers expected more from the stores and were disappointed by what they found when they got there.

There is a lesson here too, which is that a business cannot be built on people buying just the once, rather, long term growth will come from having a solid base of loyal fans who buy again and again.

So what of the future?

Discounters have many devoted customers, but it is not a way of shopping that appeals to all. If it were, the market share for all three discounters would be far higher than its current 5.9%, which compares with a share of 11.6% for Morrisons, 16.1% for Sainsbury, 16.8% for Asda, and 30.8% for Tesco.

Adam Neyland rightly concluded that discounters will not go away. Largely privately owned so without shareholder pressure for fast returns, they have cash and big ambitions. Aldi is committed to opening a store a week until they have 1500 in total. It also recently won best supermarket award from Which?, the consumer organisation. Lidl is supporting consumer trends with the addition of Fairtrade products, and a commitment to sourcing British beef, chicken and pork.

Whether they will make a major breakthrough is questionable. Already some research by Him! shows the numbers shopping at discounters dropping from 15% to 13% of the population, which compares with 79% visiting a mainstream supermarket. And if you look at shares held by all discounters, it has not moved much from the days when Kwiksave was operating. Indeed Edward Garner of TNS has consistently argued that the growth seen in discounters is merely a mopping up of market share held by the now defunct Kwiksave.

The future for discounters is likely to be one where the total sector will hold its market share, and within that there will be winners and losers with Aldi consolidating its position as the main player.