Canny Consumers - Cutting Food Costs Without Cutting Quality or Amount Consumed

Peter Marks of the Coop, trying to explain a 4.6% reduction his first half year food sales, said that “People are spending less on food – that’s a first.”  Kantar Worldpanel confirms the cutback, explaining that in the last three months grocery sales were up 3.8% in value, compared with inflation up 5.2%.

But behind the scary sound bites lies a story of canny consumers shopping and cooking more wisely, cutting expenditure but not sacrificing standards.

Take waste. Consumers recognise that waste is a big issue. In a recent Institute of Grocery Distribution survey, waste was cited by consumers as their major environmental concern. Whilst they raged against food companies for not selling smaller packs, and using cut price promotions to encourage buying too much, consumers acknowledged that they themselves cause much waste through lack of planning, and not paying enough attention to using leftovers.

And there is considerable scope to reduce waste. According to WRAP, in 2009 UK households generated £12 billion of avoidable food and drink waste, or about £480 per year for the average household. To put into context, DEFRA estimates that households spend around £125 billion each year on food and drink, so if WRAP figures are anything like accurate we waste about 10% of what we buy.

As to what is being wasted, WRAP estimates that £6.7bn goes on food and drink thrown away untouched or started but not finished. Examples are fresh fruit and vegetables (£1.4bn), bread and bakery products (£1.1bn), milk (£280m), yoghurts past their sell by date, and unused slices of bacon. A further £4.8bn is wasted on food and drink where too much has been prepared, cooked or served.

Still on the waste theme, there is evidence of shoppers spending less merely by refusing to shop impulsively and throw something into the trolley just because they like the idea.

Shopping at discounters is seen another way of spending less, and according to Kantar sales of ALDI and LIDL continue to grow at a clip, the former recording a growth of 24% in the last three months compared with the previous year. And sensible use of promotional offers is another well tried method of reducing spend.

Interestingly though, as Kantar points out, consumers’ food choices are not only about price. In the last 3 months sales of budget own label lines grew by just 2%, compared with an 8% growth in sales of premium own label products. So premium foods are by no means dead, but they do have to offer that elusive combination of quality and value to justify their price.

Shoppers have the scope to reduce spend and in the current economic climate will continue to do so. We can expect more years of cutbacks, especially on what could be described as poor value, over processed or not strictly necessary.

By contrast, spend on staples should continue to hold up. Despite the pressures, sales of beef, pork, bacon, sausages, milk and cheese have all shown volume growth in the last year. Consumers clearly see them as necessary, and, critically, fairly priced.

Red Meat Consumption Update - Beef and Pork Steady, Lamb Plummets

Shoppers bought 19% less lamb in the 12 months to mid July 2011 than they did in the previous year. (Source: Kantar Worldpanel)

By contrast, volume sales of beef are up 1%, pork and sausages up 2%, sliced cooked meats up 3%, and bacon up 5%. Overall, purchases of red meat have remained level with last year, indicating perhaps that lamb buyers have migrated to alternative red meat options.

This is perhaps not surprising given that the average price of a kilo of pork is £4.71p, and beef £6.12p, both around what they were last year. The price of a kilo of lamb though has increased by 14%, and now stands at £7.94p, the knock on effect of higher prices being paid to farmers for their live lambs.

Consumers are walking away, put off by having to pay around £5 for a couple of chops, or £13 for a small leg of lamb. Only 22% of people buy lamb every 4 weeks compared with 37% buying pork and 55% buying beef, and when they do buy they buy less – 1kg of lamb compared with 1.5kg for pork, and 1.4kg for beef.

The figures should make those advocating higher retail prices for beef and pork pause for thought. So far, despite the difficult economic climate, sales of these meats have held up well. The question is whether they are sufficiently special to persuade people to buy despite price hikes. Or would demand just fall as it has with lamb? And will a fall in demand lead to oversupply of pigs and cattle, and reduce the price paid to farmers anyway?

Many factors influence prices paid to farmers, and it is difficult to find a clear link between retail prices and those paid at the farm gate. The lamb experience shows that domestic eating of lamb can fall dramatically yet prices paid for live lambs stay buoyant due to external factors like a strong euro, less imports and shrinking breeding flocks. By contrast, when farm gate prices for beef fell sharply last year due mostly to high quantities of dairy beef cattle, retail prices hardly moved at all, and consumption stayed about the same.

What is clear though is that a push too far on price will probably result in big falls in the amount of meat eaten, and  that the fundamentals of supply and demand tend to hold true in the long term. So, if farmgate prices are to remain higher following an increase in retail price in the home market, additional outlets for British cattle and pigs need to be found urgently. Not an easy task.

Buying British - Catering Companies Letting the Side Down Badly

Unlike supermarkets, catering companies are not obliged to tell the public where the food they sell every year actually comes from. So you and your family could be eating anything from anywhere, and produced to heaven knows what standards.

Quite apart from the standards question, it is depressing to see that so many catering companies, even the big ones, do not wholeheartedly support British farmers and growers.

Trawling through profiles of some of the larger businesses we find that:

Compass Group, the biggest catering suppliers in the world, use 100% British for their fresh beef, milk, and eggs. All their root veg comes from Britain “where seasonality and quality allow”. They do not claim that their chicken is British, but use the words “British Farm Assured”, which may mean it is produced in Britain. We do not know where they get their pork, bacon and ham from, or their dairy products apart from milk, or their lamb.

McDonalds’ goes for dual sourcing, buying milk (all organic), eggs, (all free range), beef, pork and oats from both Ireland and Britain, probably to benefit from the effects of currency exchange.  100 tonnes of the 440 tonnes of apples they use in their fruit bags are British. We do not know where their chicken comes from.

Wetherspoons the pub chain have 100% British beef in their burgers. All the pork in their sausages is British, as are their potatoes. Their eggs (all free range) “carry the British Lion quality mark”. Again, it is not clear whether the eggs are produced in Britain.

 About 40% of KFC’s chicken is imported, with the rest coming from Britain. They have just put the Red Tractor logo on their on the bone chicken.

Gregg’s, noted for their pies and sausage rolls, provide no details of where their food is produced but have committed to issuing an ethical sourcing policy this year.

Subway, now said to be the biggest fast food chain in the world, also has nothing about sourcing in its literature, but is reported to get their turkey from Brazil, and their chicken from 5 different countries – Thailand, plus 4 in South America.

The most transparent company found is Pret a Manger, the £350million turnover purveyor of extremely high class sandwiches. On their website you can find details of where every ingredient they source comes from.

Their chicken is UK sourced, to higher welfare standards, as is their ham, bacon, organic milk, and free range eggs “if we can get them”. Their beef though comes from southern Ireland, as does their cheddar, and their butter from France!! But though it is possible to cavil at a company which for some reason won’t buy British beef, cheese or butter, at least we know a fair bit about what we are eating.

So some caterers make more of an effort than others, but clearly there is a lack of commitment by catering companies to buy British, and it is disappointing. The market for food and soft drinks eaten out is worth £43 billion. Supply to catering companies would be a welcome boost to demand at a time when consumers are cutting back on the amount of food they buy from the shops.