Good on Graham Dixon and his band of 30 Northumberland farmers for questioning EBLEX’s demand for an 18% increase in levy fees. A hike like this bears challenge even in boom times, much less when money is tight.
EBLEX which only covers England already has a big budget amounting to £13.5m, of which £12.7m comes from levy fees. This compares with a levy budget of £9.9m for Cereals and Oilseeds, which has a UK remit, and £6.8m for Dairyco which covers Great Britain.
The extra money raised amounts to £2m. £1.2m of this will be spent on promoting exports of beef, lamb, and the fifth quarter, and the rest on increasing domestic demand for beef and lamb. The current budget for export work is £2.4m, and the budget for domestic promotion is £4.5m.
Mounting a challenge is not easy, for it is difficult to pinpoint exactly who makes the decisions at EBLEX. There is a board, upon which sit a number of farmers and processors. The board seems to report to the AHDB board, and somewhere along the line DEFRA has a say. But if the decision makers could be found it would be helpful to get a view on the following issues.
1. Will not export performance be more a function of the strength of the Euro rather than anything EBLEX can do? If so, it seems odd that of the £2m extra raised by the new levy, £1.2m will go on export work.
2. With lamb consumption falling by 7% this year, and beef consumption just about static, what evidence is there that EBLEX marketing activities to date have made any difference at all to domestic consumption? It is not enough to cite awareness of promotional activities as evidence. Just knowing about something is not the same as being motivated to buy.
3. Given the substantial spend by retailers on advertising red meat on TV, in magazines and newspapers, promoting it on their websites with recipe ideas, and featuring it in store, where does EBLEX think it is adding value with its promotional spend?
4. If the increased funding does not come through, does EBLEX believe so firmly in the value of this new work that they are prepared to rejig budgets to carry it out?
The NFU is working to pull together responses from the industry about the proposed levy increase, and is right to request a business plan with clear and measurable targets. It should go further and insist upon a detailed analysis of effectiveness to date, to act as a basis for deciding whether an increase in the levy is justified, and to help judge whether the business plan is rooted in reality.
Monday, 29 November 2010
Thursday, 11 November 2010
Why the consumer is buying less lamb – insight from EBLEX shows it’s not just about price
This year consumers have bought 6% less lamb than last, and the decline seems to be speeding up. In the last 12 weeks consumers bought 11% less lamb than they did in the same period last year.
These are scary numbers and the pessimist might envisage a time not very far away when consumer demand for lamb is about half of its current level, with a similar fall in demand for livestock.
A recent EBLEX report gives clues about why lamb is out of favour, and what can be done to reverse the drop.
The 500 meat eating women interviewed each quarter by EBLEX say that the main reason they don’t buy lamb as much as other proteins like chicken, beef or pork is that lamb is too expensive.
So far so predictable many might think. But price is not the whole story. What makes people buy anything, even the very highest priced products, is their perception of whether the product in question is good value for money, and most cuts of lamb are seen as “not at all good”, or “not very good” value. The exception is lamb mince which is just about neutral – neither good nor bad.
All sorts of factors come into the value equation, and compared with other proteins lamb is rated worse on versatility, on ease of cooking, and especially on fat content. 57% of people say lamb “can be fatty” compared with 46% for pork, 28% for beef, and 5% for poultry.
Lamb falls down on other health aspects. Consumers feel that lamb is not as protein rich as beef, and do not realise it is as good a source of vitamins and minerals as beef.
The one positive point is that consumers view lamb as a tasty food.
So what should be done?
Lamb needs to be given an image makeover. EBLEX suggests that its versatility and health benefits need to be promoted. To this could be added using imagination to present unpopular cuts such as shoulder in a better way. One supermarket for example sells shoulder chops – butchered in a way that ensures they are just as tender as from the leg, but around half the price, and far less time consuming than cooking a roast.
Producers could focus even harder on reducing the number of over fat lambs sent into the food chain, and processors and producers together might find ways of ensuring that the product is consistently of high quality when it reaches the consumer, which is not always the case at the moment.
The EBLEX findings are important to all in the lamb supply chain. A strong home market forms the backbone of the sector, cushioning participants from the ups and downs of exports, and from the ebb and flow of lamb supply.It is critical to ensuring a consistently profitable future.
These are scary numbers and the pessimist might envisage a time not very far away when consumer demand for lamb is about half of its current level, with a similar fall in demand for livestock.
A recent EBLEX report gives clues about why lamb is out of favour, and what can be done to reverse the drop.
The 500 meat eating women interviewed each quarter by EBLEX say that the main reason they don’t buy lamb as much as other proteins like chicken, beef or pork is that lamb is too expensive.
So far so predictable many might think. But price is not the whole story. What makes people buy anything, even the very highest priced products, is their perception of whether the product in question is good value for money, and most cuts of lamb are seen as “not at all good”, or “not very good” value. The exception is lamb mince which is just about neutral – neither good nor bad.
All sorts of factors come into the value equation, and compared with other proteins lamb is rated worse on versatility, on ease of cooking, and especially on fat content. 57% of people say lamb “can be fatty” compared with 46% for pork, 28% for beef, and 5% for poultry.
Lamb falls down on other health aspects. Consumers feel that lamb is not as protein rich as beef, and do not realise it is as good a source of vitamins and minerals as beef.
The one positive point is that consumers view lamb as a tasty food.
So what should be done?
Lamb needs to be given an image makeover. EBLEX suggests that its versatility and health benefits need to be promoted. To this could be added using imagination to present unpopular cuts such as shoulder in a better way. One supermarket for example sells shoulder chops – butchered in a way that ensures they are just as tender as from the leg, but around half the price, and far less time consuming than cooking a roast.
Producers could focus even harder on reducing the number of over fat lambs sent into the food chain, and processors and producers together might find ways of ensuring that the product is consistently of high quality when it reaches the consumer, which is not always the case at the moment.
The EBLEX findings are important to all in the lamb supply chain. A strong home market forms the backbone of the sector, cushioning participants from the ups and downs of exports, and from the ebb and flow of lamb supply.It is critical to ensuring a consistently profitable future.
Wednesday, 27 October 2010
Addressing the Beef Pricing Problem
The short answer to the problem of low farm gate prices is to get demand to outstrip supply.
The balance this year is particularly out of whack. Between April, when prices started to plummet, and August (latest published data), around 9% more cattle were slaughtered in Great Britain compared with the same time last year. Demand in the grocery trade over the same time grew by just 1%. So we cannot be surprised that prices have dropped.
The issue of oversupply might ease. According to the National Beef Association, dairy beef finishers will drop out of the market next year as profits suffer through low prices and high feed costs. Longer term, industry experts forecast that global demand for beef will outstrip supply.
Meanwhile, what can be done about demand.
There is no shortage of advice. We have heard the NBA call for supermarkets to follow America’s lead and be creative about developing high value cuts from the forequarter, and to stop selling mince at cheap prices because they cannot be bothered to think up other ways of selling meat from the front end.
Peter Allen, respected head of Midlands based catering butchers Aubrey Allen says the answer is to create a beef brand that will deliver guaranteed quality, and so command a higher price which can then be passed back along the chain.
John Cross, EBLEX chairman, reckons the answer is to export more, and that EBLEX is ideally placed to lead the charge across the channel and beyond. It’s true that exports are growing fast, up 20% this year, but at 56,000 tonnes compared with over 300,000 tonnes sold through supermarkets it will not solve the problem.
One thing is clear – raising the price of beef to consumers in the hope that some of the increase will be passed back to producers will merely dampen already fragile demand. We should be pleased that people are buying mince because at least that keeps them in the beef market rather than turn to cheaper pork or chicken.
What also needs to be recognised is that vague calls for “the industry” to grow demand will not work. Stimulating demand requires focus, funding, and clear accountability for performance.
Producers do not have this type of clout. Neither do industry bodies who can influence and campaign, but do not have the sales and profit responsibility that brings with it a hunger for results.
It is processors, who are best placed to drive demand and it is they who should shoulder the main responsibility for growing beef sales. A creative processor, who understands what consumers want, and has close relationships with the outlets they supply, should be able to develop products which build sales and profits for all in the supply chain.
Flashes of inspiration do exist, but mostly supermarket shelves and food service menus are filled with the same cuts that were available decades ago.
The role of the processor is rarely mentioned in the beef pricing debate. Processors need to come forward, raise their game and add some dynamism to a sluggish market.
Monday, 11 October 2010
Food for Thought from Marks and Spencer
Last week, after years of lacklustre performance, Marks and Spencer announced that in the last 16 weeks food sales have grown by 5.2% on a like for like basis. This is a better result than Sainsbury, or Tesco, or Asda. With a 3.7% market share Marks is still tiny, but what makes them worth watching is that historically they have set the pace in food innovation. What Marks started others followed, and food buying has been transformed as a result. They were, for example, pioneers in ready meals, leaders in getting exotic fruits and vegetables in the shopping bag, and the company that made a sandwich lunch something special.
They then lost their creative edge, and competitors not just copied but improved on what they had done.
Does the recent food performance mean they have got their edge back?
Marc Bolland their new chief executive said that growth was down to a combination of aggressive price cutting offers and innovation, with 370 new lines being launched in the last three months.
Certainly they are promoting heavily. A wall of special offers greets the shopper. In the meat area, there were bacon, chicken, sausages, small beef joints, and the ever present mince all priced at 3 for £10. There were offers in fruit and veg, fish, ready meals, desserts and wine. In this they are no different from any other supermarket.
What about the innovation? The offer is certainly more exciting than it was, with ever more exotic combinations of flavours in a ready meal, and even more indulgent biscuits and cakes. There were also some new ideas such as “One Pot Casserole” where diced beef, ready peeled and chopped vegetables, and a cook in sauce could all be purchased for a fiver, thus encouraging shoppers to try something other than mince, with minimum hassle.
Importantly, the merchandising was good, with green coloured “new” stickers highlighting every new product.
The question is whether enough has been done for Marks to regain its position as leader in food, and the answer just now, is probably not. What is on offer is a variation on a theme rather than a genuine breakthrough. There is a limit to the amount of exotic and indulgent food that people will buy, either through monetary constraints or the inability to stomach yet another fancy meal.
It will be interesting to hear in November how Mr. Bolland intends to take the business forward. Premium indulgence leavened with price cuts is fine, but more will be needed to keep M&S food sales moving ahead.
Wednesday, 29 September 2010
Supermarket Watch - How Sainsbury and Waitrose Got it Right but ASDA Didn't
Americans call it “The Big Mo” and it means that happy state when a business has momentum - the team is winning, confidence is brimming over, and whatever is being done is a huge success. Sainsbury, with 19 consecutive quarters of growth under their belts have it, Waitrose, currently the fastest growing supermarket have it, but ASDA whose sales have dropped month after month for nearly a year, most certainly do not have it.
Confidence about doing the right thing and doing it well is illustrated by the way these three supermarkets have executed their recent new initiatives. Sainsbury have revamped their premium “Taste the Difference” range with trading director Mike Coupe claiming that “this is the best range of premium food available in any supermarket”. At the other end of the scale Waitrose is trumpeting value credentials by saying they will match the Tesco’s price on 1000 major brands. In the middle, ASDA have announced the launch of “Chosen by You” which is a quality upgrade of their standard range, with products selected after talking to 40,000 people across the UK.
So here are three major activities, but it’s the way they have been executed which marks out Sainsbury and Waitrose as confident winners, and ASDA as an outfit that, temporarily at least, has lost its way.
Sainsbury’s have made sure that food shoppers across Britain know about the new range. They took out three and sometimes four page advertisements in the papers, are running a TV ad with Jamie Oliver, and are giving away glossy leaflets in store. Customers who shop on line get a message about the new range as soon as they click on to the website. Waitrose also took out three page advertisements, are advertising on TV, and have the price cut message when shoppers click on the website. They have put up big displays of the newly priced products in their shops, pinned up labels on the shelves, and just in case the message has still been missed, the dividers shoppers put on the checkout belt to signify the start of their shopping also mention the price cuts.
And what about ASDA? The range was launched on September 21st, but on a trip to the Leamington store today I saw only a couple of overhead posters talking about the range - easy to miss as few shoppers were walking around staring at the ceiling. There were no displays, no markers at the shelves, and no in store tasting sessions. There have been no advertisements, and when clicking on to the website the first message is that prices are low, the second that there is 15% off furniture, and only the third talks about “Chosen by You”.
Possibly ASDA don’t feel that the new launch is that big a deal, but this seems unlikely as their recently promoted MD has made a point of criticising the quality of its food, and in the press release that accompanied the launch he talks about ASDA now driving as hard on quality as it does on price. More probably, the launch smacks of a company that has lost its edge, cannot decide what its main message is, and forgotten the attention to detail that is vital. Retail is detail as someone once said. The ASDA approach It is a big contrast to the super- confident actions of Sainsbury and Waitrose.
Confidence about doing the right thing and doing it well is illustrated by the way these three supermarkets have executed their recent new initiatives. Sainsbury have revamped their premium “Taste the Difference” range with trading director Mike Coupe claiming that “this is the best range of premium food available in any supermarket”. At the other end of the scale Waitrose is trumpeting value credentials by saying they will match the Tesco’s price on 1000 major brands. In the middle, ASDA have announced the launch of “Chosen by You” which is a quality upgrade of their standard range, with products selected after talking to 40,000 people across the UK.
So here are three major activities, but it’s the way they have been executed which marks out Sainsbury and Waitrose as confident winners, and ASDA as an outfit that, temporarily at least, has lost its way.
Sainsbury’s have made sure that food shoppers across Britain know about the new range. They took out three and sometimes four page advertisements in the papers, are running a TV ad with Jamie Oliver, and are giving away glossy leaflets in store. Customers who shop on line get a message about the new range as soon as they click on to the website. Waitrose also took out three page advertisements, are advertising on TV, and have the price cut message when shoppers click on the website. They have put up big displays of the newly priced products in their shops, pinned up labels on the shelves, and just in case the message has still been missed, the dividers shoppers put on the checkout belt to signify the start of their shopping also mention the price cuts.
And what about ASDA? The range was launched on September 21st, but on a trip to the Leamington store today I saw only a couple of overhead posters talking about the range - easy to miss as few shoppers were walking around staring at the ceiling. There were no displays, no markers at the shelves, and no in store tasting sessions. There have been no advertisements, and when clicking on to the website the first message is that prices are low, the second that there is 15% off furniture, and only the third talks about “Chosen by You”.
Possibly ASDA don’t feel that the new launch is that big a deal, but this seems unlikely as their recently promoted MD has made a point of criticising the quality of its food, and in the press release that accompanied the launch he talks about ASDA now driving as hard on quality as it does on price. More probably, the launch smacks of a company that has lost its edge, cannot decide what its main message is, and forgotten the attention to detail that is vital. Retail is detail as someone once said. The ASDA approach It is a big contrast to the super- confident actions of Sainsbury and Waitrose.
Sunday, 19 September 2010
Wiseman's Profits Warning - Deja Vu All Over Again
Robert Wiseman’s profits warning shocked investors who promptly knocked 30% off the share price. The problem, says the company, is “intense competitive pressures across all sectors of the market”, and so they are reducing second half profit expectations by £7m, and 2011 by £16m.
The background has been well documented. Basically a price war has broken out on milk, with ASDA starting the fight, and Tesco promptly retaliating. The cost is being borne by processors, and the situation is seemingly exacerbated by smaller dairies being prepared to cut prices to gain more volume.
The most surprising thing about this announcement is that everyone is so surprised. Wiseman has a history of profit problems due to negotiations with the big supermarkets. In May 2005 the Group warned that profits had fallen by 15% versus the prior year due to losing a contract with ASDA. In May 2008, the company warned that profits would take a hit of £8.5m because it was taking longer than anticipated to get retailers to agree to price rises which were needed to cover escalating costs.
Here it all goes again, and with the firm’s current business model, profit performance will continue to be volatile.
The big issue with Wiseman is that it sells one product, fresh milk, and is reliant on one distribution channel, the major supermarkets. It has nowhere to go if things get difficult – no other product sectors, no major brands, and few other sales outlets. Unlike its competitors Arla, and Dairy Crest, the latter rushing out an announcement of their own saying that they expected full year profits to come in as forecast. They did admit though that the fresh milk market was proving challenging.
The optimist would point to Wiseman’s cash generating ability, and a good record on cost reduction. Unfortunately neither seems to be enough to protect against supermarket whims and power.
The background has been well documented. Basically a price war has broken out on milk, with ASDA starting the fight, and Tesco promptly retaliating. The cost is being borne by processors, and the situation is seemingly exacerbated by smaller dairies being prepared to cut prices to gain more volume.
The most surprising thing about this announcement is that everyone is so surprised. Wiseman has a history of profit problems due to negotiations with the big supermarkets. In May 2005 the Group warned that profits had fallen by 15% versus the prior year due to losing a contract with ASDA. In May 2008, the company warned that profits would take a hit of £8.5m because it was taking longer than anticipated to get retailers to agree to price rises which were needed to cover escalating costs.
Here it all goes again, and with the firm’s current business model, profit performance will continue to be volatile.
The big issue with Wiseman is that it sells one product, fresh milk, and is reliant on one distribution channel, the major supermarkets. It has nowhere to go if things get difficult – no other product sectors, no major brands, and few other sales outlets. Unlike its competitors Arla, and Dairy Crest, the latter rushing out an announcement of their own saying that they expected full year profits to come in as forecast. They did admit though that the fresh milk market was proving challenging.
The optimist would point to Wiseman’s cash generating ability, and a good record on cost reduction. Unfortunately neither seems to be enough to protect against supermarket whims and power.
Wednesday, 8 September 2010
Reviving Organic Food - The Waitrose Way
We can now see how Waitrose will handle Duchy Originals, the brand pioneered by the Prince of Wales, and moved into partnership with Waitrose 12 months ago. And the plans show impressive commitment to the organic market and the ideal of supporting sustainable food from small family farms which motivated the Prince when he started the company 20 years ago.
Basically, Waitrose is using Duchy as their organic brand, featured on a raft of products, from staples such as milk, eggs and frozen foods, to fancier products like Handmade Organic Hafod Welsh Cheddar. According to Waitrose there are plans to increase the range to 400 products.
The launch of “Duchy Originals by Waitrose” has been heralded by advertisements in the papers, a TV spot featuring Heston Blumenthal, and a 25% introductory price cut to tempt shoppers to buy. None of this comes cheap and it shows that Waitrose are deadly serious about the potential of organic food.
It’s not just the commitment to organics which is interesting (and should give producers soldiering on with the sector despite a big drop in consumer demand some cause for optimism). It’s the way that Waitrose have approached the market. Clearly the company has decided that calling a product organic is not in itself a sufficient reason for consumers to pay the organic premium. Consumers want something more, and Waitrose feel that by adding the prestigious Duchy name, and explaining the values which lie behind it, they are giving people that extra bit of reassurance and motivation to choose the more expensive option.
There may be another reason for Waitrose’s organic commitment. In a previous blog I suggested that supermarkets might be turning their attention to super- premium foods again to offset the costs of heavy price cutting on everyday items, a problem which is only going to get worse as food inflation strikes once more. Organic food is an obvious premium market for Waitrose to develop as they already hold a 21% share of the sector, but only a 4% share of the total grocery market.
Whatever the reasons, it would be great if the Waitrose move works. Many Duchy suppliers are small, and a foothold in the company will help grow sales. With the Prince keeping a close eye on things, they should get a fair return too.
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