Rapid Changes in Meat Eating - All Down to Price and Horsegate.

 From BPEX and EBLEX comes interesting data about the nation’s meat eating trends. BPEX’s quarterly category report shows that fresh meat consumption in the year to mid October 2013 is down in tonnage by 2%, although up in value by 5%.

It is the differences in species consumption which are most fascinating, and they show that consumers are quick to change their buying patterns according to price.

For the first time for years the amount of fresh chicken eaten has gone down. The 3.5% drop is significant when considering that in the previous year consumption grew by 7%. The change is driven by prices which on average went up by almost 10%.

On the other side of the coin an average reduction in prices of 4% has seen lamb consumption grow by a whopping 12.5%. Again, this is a huge change in buying habits for the lamb market had been dropping year on year since 2008. BPEX tells us that pork, where volume sales have dropped by 4%, has been the biggest loser with leg and shoulder joint sales falling as consumers switch to lamb for their Sunday roast.

Over the same period beef consumption dropped by 1% as prices rose by an average of 6%.

 Horsegate fits into the picture because, EBLEX tells us, consumer concerns about exactly what it was they were eating drove retailers to buy more British produced meat. As a result supplies of beef, chicken and pork were tight and prices rose.

There are signs though that the pendulum may be swinging again. Stories are appearing about sizeable increases in imports of Polish and Irish beef, which if sold at a low enough price may trump shopper worries about how the meat was produced.

BPEX also publishes details of which supermarkets over or under trade in fresh meat relative to their market share for all groceries.

Tesco, ASDA, and the Coop under trade. Sainsbury, Waitrose, discounters ALDI and LIDL and beleaguered Morrison’s overtrade. Price alone is therefore not a guide to how well a supermarket might do on fresh meat sales. The overtraders are a mixture of the upmarket and pricey (Waitrose and Sainsbury) and the “noted for low prices” discounters and Morrisons. Conversely Asda and Tesco might be said to be operating at the lower end of the price spectrum yet under trade.

Doing well in meat demands a tricky balance of good value, good quality, provenance and trust. Get it wrong and shoppers will vote with their feet and take their meat buying elsewhere. The challenge is made more difficult by shoppers' increasing tendency to change their buying behaviour with lightning speed. 

Spotlight on Morrisons – Why is it Struggling and What Can be Done to Stop the Rot

Supermarkets, apart from ASDA, have now reported their Christmas trading results. “Patchy” might be a good description with Aldi, Lidl and Waitrose booming, Marks and Spencer doing well, but Tesco and Morrisons down on the previous year. Even Sainsbury only managed 0.2% growth.

It was Morrisons who shocked most with a 5.6% drop in sales versus the previous year, and this at a time when the economy is generally agreed to be picking up.

Their performance highlights both long and short term issues. Their long term problems are well documented. Until last week they had no online presence at a time when more consumers are turning to the internet for grocery shopping: and they have few convenience stores which puts them at a disadvantage as people move away from mid week top up shopping in bigger stores, preferring to avoid temptation and buy just the essentials at their local convenience store.

   

Yet, neither Aldi nor Lidl offer online, and have few convenience shops, and Tesco offers both but is struggling.

Morrisons problems must therefore be more deep rooted than lagging behind in two growth areas.

Perhaps their biggest issue is that shoppers cannot see a compelling reason to shop at Morrisons. They are uncompetitive on price versus the discounters, and lack the quality reputation of Waitrose or Sainsbury. This lack of clarity about what the brand stands for is obvious when viewing the Morrisons Christmas advert, where the four points made about Morrison’s offer (service, wide variety, having their own chefs and “putting on a show for little dough”) were eclipsed by the undoubted star quality of Ant and Dec. Four messages were three too many,  and money would have been better spent on articulating one reason to shop at Morrisons rather than waste hundreds of thousands on personalities who drown out the message.

So Morrisons must get back to its roots and the core values that made it into a success. The company will have reams of consumer research to guide them, but price and value for money are likely to figure strongly.

Morrisons are too small to be able to match the discounters on the price of packaged goods. Both Aldi and Lidl are huge internationally and can use their buying clout to keep prices rock bottom. Rather, Morrisons should be focussing on the one thing that all of their competitors will find difficult to match, which is that Morrisons, by owning their own abattoirs, bakeries and fresh fruit and veg packing houses can offer fresh food at unbeatable prices.

They need also to be true to their values. It did not receive much publicity but at the back end of 2012 they started to stock an imported red meat brand called Helmsley. This was followed in November 2013 by imported chicken. Such stepping away from their stated policy of selling only UK produced meat does little to boost consumer confidence, and is the sign of a muddled thinking business.

It is to be hoped that Morrisons swiftly get back on track. The supermarket sector needs competition. The more successful supermarkets there are to choose from

the better for all in the food chain.

Genetically Modified Food Labelling - On It's Way to the UK?

The UK observes American trends but usually queries their relevance. There is one trend though that could have massive implications for food businesses over here and that is the drive to label all foods that contain genetically modified ingredients.

To date, here and in the US, the emphasis has been on claiming that foods do not contain GMO’s.

Now the debate has moved on and a head of steam is building up to say that consumers need to know exactly what is in their food, not just what might not be in it, and that means declaring if food has a GM content.

The implications are huge. USDA, (the American DEFRA) estimates that in 2013 some 90% of the corn crop and 93% of the soybean crop were planted with genetically modified seed. 90% of rapeseed is genetically modified. Corn based products go into a wide array of foods, including soft drinks, cereals, and  breads. Rapeseed oil is widely used as are soy bean based products, most notably in animal feed. Consumers doing their grocery shop will find it difficult to avoid buying GM containing food. They may not like this and start demanding non GM versions. 

The implications are huge. 

Should this happen then every player in the food chain will be affected. As Karen Batra of the Biotechnology Industry Organization says “Farmers, food producers, grocers and retailers would have to implement separate and distinct systems to grow, handle, record, process, transport and sell products”. There will be many players in the food chain who simply cannot make a change to non-GMO products for cost reasons.

Many will say that it won’t happen here.

 There is though an interesting straw in the wind. Wholefoods Market, an American premium food retailer with 9 stores in the UK, has committed to labelling all its GM containing foods by 2018, with many labelled before then. Currently the move is confined to the US and Canada, but if it proves a business builder then they may decide to adopt a similar stance in the UK. From there it is but a short hop to the big retailers here implementing a similar policy.

The debate about whether GM products should be allowed in the UK ebbs and flows. It may become obsolete if consumers are forced, through labelling, to confront the issue and decide that GM foods are something they are not prepared to buy.

Fever-Tree Mixers - A Masterclass in How to Add Value

Fever Tree mixers are basically a combination of water sugar and flavourings – just like Schweppes or any mixer sold under a retailer’s own brand.
Yet newcomer Fever - Tree retails at over three times the price of old established Schweppes, and as much as seven  times the price of retailer brands.

“Hmm, must be a tiny brand” will be most peoples’ reaction. Not true. Whilst Fever Tree is undoubtedly a niche product , it is a sizeable niche . Turnover in 2012 was £16.4 million, up from £12 million the year before, and this year turnover is predicted to top £25 million.

It is a profitable niche, reporting underlying earnings in 2012 of £5 million before tax, depreciation and amortisation. And it has international appeal with 70% of its sales coming from abroad, mainly Spain and the US.

Charles Rolls and Tim Warrillow who founded the brand attribute its success to outstanding product quality. Fever Tree products contain only fresh ingredients and natural flavourings which are claimed to be unique. Its products are made from cane sugar, and none contain artificial sweeteners like aspartame or saccharin.

The mixers do indeed taste good. But I would suggest that the packaging plays a big part in the brand’s appeal. The bottles are glass, not plastic. The simply designed, shiny labels look classy, as does the outer sleeve. Displayed on supermarket shelves they make everything else look cheap.

And then there is the story behind the brand. It seems that the co founders travelled to the four corners of the earth to source their ingredients. So the quinine comes from a plantation in the Congo that produces the purest form of quinine in the world. Lemon and thyme for the tonic come from Provence, and the three gingers used come from Ivory Coast, Nigeria, and Cochin in India.

There may be psychology at play. After all, if you have shelled out over £26 for a bottle of fancy gin or £36 for vodka (the going rate for Tanqueray and Grey Goose) then you probably want to buy what you believe to be the best mixer available. As the Fever-Tree website says “If ¾ of your gin and tonic is tonic, make sure you use the best”.

It is difficult to break down what adds value. Usually it is a combination of factors, both rational, like product taste and ingredients, and emotional, like how much the story behind the brand appeals, and how buying the brand makes you feel about yourself.

Fever - Tree manages to combine a myriad of factors and turn them into a considerable success.

Small Stores Rise Again

What goes around comes around.

How true that is for small stores. Having reached endangered species status the wheels have turned and now buying food in small local stores, usually styled “convenience” or C-store shopping, is forecast to be one of the fastest growing sectors of the market. IGD (Institute of Grocery Distribution) says that the convenience sector will grow by over £10bn to reach £46.2bn by 2018.

Consumers are buying more food locally to cut down on fuel costs, to help budgeting because they are less tempted to spend on stuff they either don’t need or which is likely to have passed its sell by date before they get round to eating the product, and to save time. According to IGD 85% of consumers visited a convenience store in the last month, and in August 2013, 9% of people did their main shop at a convenience store.

All the big retailers have jumped on the bandwagon. Even Aldi who have hitherto resolutely stated that they will focus only on on their traditional supermarkets, are trialling a convenience store in West London.

It is not just the big supermarkets who are developing strategies for convenience stores. Costcutter offers 3 different models of small store shopping – good, better and best – and shop owners can choose the model which best suits their local customers.

The keys to successful convenience store management start as ever with the needs of the shopper. In the past these needs may have been limited to topping up on staples like bread, milk and eggs, and buying a daily paper, bar of chocolate or cigarettes. The game is changing now, and whilst many will still visit the store for these items, shoppers say that they would like more fresh food counters, fresh food available at the front of the store, and fresh food grouped together.

Fresh and local is a powerful selling message. Smaller stores whose customers like the idea of supporting their local farmer or grower can grasp an edge over the bigger players by stocking local goods and displaying them with a strong message about the individuals who produce the food.

The knowledge that small store operators can develop about their customers, many of whom are regulars, means that they can tailor their offer specifically for them. An example quoted by IGD is that a store sited near to a railway station could offer food for commuters to eat on their journey to work, and ensure that they have ingredients available so that those same travellers on the way home can buy all that is necessary to prepare an evening meal.

There will be many other entrepreneurial ideas that smaller retailers can embrace and profit from. The very good news is that shoppers are looking for first class convenience stores and will support those who cater for what they want.

The Sainsbury Take on What makes Consumers Tick

Sainsbury’s half year results were announced this week and showed good growth in sales and profits. The company has now increased its sales for 35 quarters in a row, something that none of the other “big four” players have done and so when CEO Justin King speaks about what consumers want it is worth a listen.

 When presenting the results King said that the better economic mood in the country has yet to be felt by consumers in their pockets and so Sainsbury’s business plan assumes that household incomes will remain flat to declining over the next two to three years.

Equally striking is his overwhelming belief that, despite the economic pressure, British consumers are driven as much by ethical values as by price. He sincerely believes that Sainsbury’s success can be put down to fairness in dealing with suppliers, high standards of food quality and traceability, (interestingly Sainsbury was not tainted by the horsemeat scandal), and attention to animal welfare, (where they have for years supported RSPCA Freedom Foods, Fair Trade bananas, free range eggs, and Marine stewardship Council fish).

King is convinced that British consumers stand right behind him on this. Which explains why, despite being knocked back twice in the challenge on Tesco’s price promise, Sainsbury are again going to the courts to claim that when comparing prices, issues such as animal welfare and Fair Trade have to be taken into the equation. 84% of consumers apparently agree with him.

According to King this commitment to values applies to supplier relationships. Speaking on the day when Prince Charles took a swipe at rapacious retailers who deal unfairly with farmers, King stated categorically that Sainsbury’s supplier relationships are totally fair.

The commitment to ethical values is an overarching strategy, and it is accompanied by a commitment to financial value in the shape of Brand Match, the scheme whereby consumers get a coupon if their branded purchase would have cost less in one of the other big four retailers. Beyond this, the Sainsbury route to winning consumer spend lies in investment in convenience stores, online shopping, and Sainsbury’s own brand where of course they can display their values credentials to best effect. In the last 6 months sales through convenience stores have grown by 20%, online by 15% and sales of mid range By Sainsbury and Taste the Difference food brands are growing at twice the rate of national brands. They will continue to invest in their Nectar card which they believe allows tailor made promotional activity directed at individual shoppers and is thus more relevant than competitors who use loyalty cards to promote to groups of people.

Cynics might say that there is no such thing as a major retailer who is fair to suppliers. Cynics might also say that it is price alone that matters to consumers and Sainsbury just happen to be on a winning streak because Tesco, Morrisons and ASDA are going through a difficult time.

But, 34 consecutive quarters of growth mean that Sainsbury must be doing something right – something that resonates with consumers sufficiently strongly to make them shop there on as regular basis.

Click and Collect – A Way of Online Shopping that Works for Customers and Retailers

Click and Collect , the system whereby  the customer orders on line but collects from the store, seems to be gaining popularity with shoppers and retailers alike.

It is attractive to retailers because it avoids what is probably the most costly part of online grocery selling - no spending is needed on maintaining a fleet of vans, recruiting  staff to fill and drive the vans, tax, insurance, and ever escalating fuel costs.

 

Customers like click and collect because it is convenient - no waiting indoors for the shopping to arrive. Instead they can swing by the chosen pick up point at a time to suit them.

And so we see ASDA setting up Click and Collect in 300 of its stores, and Tesco trialling pickup points in car parks and schools.

There are though a few facts worth bearing in mind before rushing to invest in click and collect.

First, it is still a tiny fraction of the total grocery market. Online in total as a way of buying groceries is only projected to be around 7% of the market by 2018. Within that, 18% of shoppers claimed to have used click and collect in the last month, but, just 4% of online shoppers claimed to use only click and collect. (Institute of Grocery Distribution)

Secondly, having a click and collect facility does not guarantee loyalty. Click and collect shoppers have used at least three different retailers to shop with online in the last month, compared with two for the average online shopper. They are not wedded to click and collect, or even online, and regularly shop across different channels meaning that they are prepared to  buy from discounters like Aldi, or convenience shops, or conventional supermarkets.

On the other hand, Click and Collectors are attractive customers for retailers to win. They tend to be affluent, and be working parents with children still at home, so they are relatively heavy spenders. They are technologically inclined. 61% have a tablet computer versus 41% for online shoppers using home delivery, and 90% have a smartphone versus 74% for home delivery. This means that it is easy to contact them and send relevant promotional messages.

It is this high spending potential that retailers are chasing, and they are mindful that if captured it is likely to be a more profitable business model than standard home delivery.

According to IGD, click and collect as a way of shopping is showing “unprecedented growth”, and they are increasing their forecasts of how big it could end up being.