Speciality Farm Produce Available Online - Former Asda CEO's New Venture

One of the more interesting  news items from last weekend is that Andy Bond, former chief executive officer of ASDA is investing in Farmison.com, an online food retailer which aims to provide home cooks with speciality food ingredients produced by small British farmers and normally only found in restaurants.

The move is interesting on a number of counts. Bond clearly believes that online food retailing has a big future and that Farmison can sort out the problems that stop many from buying fresh food online such as variable quality, and irritating substitutions. He must also believe, despite harsh economic times that super premium food, with a provenance that traces back to the individual farmer has a future too.  And he must believe that Farmison has something unique about its offer which will ensure it succeeds in an increasingly crowded market.

Farmison faces competition from other online retailers, and from grocery stores making increasing efforts to go super premium. Marc Bolland wants to take Marks and Spencer in this direction, Waitrose and Ocado makes strenuous efforts to be special, and all three are investing online, along side every other food retailer. There is also competition from the likes of Riverford Organics and Abel and Cole companies who sell local food from small farms.

Will Farmison be a good financial investment not just for Andy Bond, but for the small farmers who are paying for the privilege of being sold through it? Difficult to say at this early stage, but the business will face challenges. Ocado, after 10 years still has not made a profit, its sales are slowing, and investors are so spooked they have written the share price down to about half of its launch price. Although the supermarkets are happy to talk about growth rates in their online business, no one ever mentions profitability which probably means it is low. On the other hand, Andy Bond has a good track record and will have investigated Farmison’s potential in detail before parting with his money.

Going for Growth - How Marks and Spencer, Waitrose, Morrisons and Aldi are Tackling the Challenge

Growth remains the holy grail for all supermarkets. Here we look at four different approaches -   M&S and Waitrose at the premium end of the market, Morrisons in the mainstream, and Aldi the discount chain.

The discount sector remains an endless source of fascination for supermarket watchers because the business models are so different from the mainstream, but their growth rates are tremendous. In the 12 weeks to September 4^th, Aldi has grown by 26% and LIDL by 13%. This run of growth has been going on for months. Part of it is down to the demise of Netto, meaning that discount fans have had to transfer their allegiance, part of it is a response to rising food prices and shrinking disposable income. Interestingly though, the growth has come for the most part from loyal discount shoppers who previously would divide spend between discounters and say Tesco, but who now choose to spend an increasing proportion in the discount shop. The actual number of new discount shoppers is small.

So the Aldi challenge is to persuade those shoppers who already like much of what they see in Aldi to spend an increasing amount of their grocery budget there. And the key to achieving the objective is to bring the quality of its fresh food up to that of its packaged goods, but maintaining value. Already work is underway and Aldi stand a very good chance of continuing the growth levels already experienced.

Morrisons is one of the “big four” supermarkets, and the only one growing faster than the market average. It is managing to combine growth with increased profits.

Their success so far is down to the quality and value of their fresh food, and they now want to extend this expertise to online shopping. To this end they purchased a stake in FreshDirect,  the New York based company heralded as a leader in online. If Morrisons get this right they could be on to a winner as one of the main gripes about buying food on line is that fresh food is of variable quality, too near its sell by date and often the first choice is substituted for something less acceptable.

Waitrose today published its half year results, and whilst it is achieving sales growth of 9%, profits are down by 14%. Waitrose is chasing growth in a big way, by opening more stores, improving its online business, and promoting more heavily. Its challenge is to expand from its niche without losing the emphasis on quality and service that has made it successful, and the strategy is not without risk. As a privately owned company it has more time than most to get the model right, but at some stage it will need to restore profitability.

The M&S challenge is different. You cannot do your weekly shop there, so what CEO Marc Bolland and the team have to do is develop a food offer that cannot be bought in supermarkets. The answer according to Bolland is to make M&S even more special, putting delicatessens into bigger shops, upping the specialness of the bakery section, and featuring products little known in the UK but acknowledged as outstanding in other countries like Iberico ham and fresh burrata cheese (a mixture of mozzarella and cream apparently!).

These  moves are unlikely to transform performance. Introducing such products is merely a difference of degree – another step along the rarity spectrum. It is not the radical, totally new meeting of a consumer need that has characterised M&S success in food in the past. In bygone days M&S was noted for pioneering, whether it was exotic sandwiches where previously only cheese and pickle was available, or ready meals which allowed a harassed meal provider to put something on the table which not only tasted great but was whipped up in half an hour, or previously unheard of  fruit and veg.

Here we have four different companies all with different growth strategies. All will be convinced that their strategies will be successful. Time will tell who has got it right.