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.

Meat Eating Trends – Beef and Pork Meat Down, Lamb up, Chicken Nearly 50% of All Meat Purchases

From grocery researchers Kantar Worldpanel comes news that after years of plummeting consumption volume sales of lamb grew by 14% in the year ending August 13^th 2013. (Source: BPEX). By contrast pork consumption dropped by 5% and beef by 2%.

The reason is price of course. Over the same period the price of lamb per kilo dropped by 5% to £7.85 per kilo, compared with an increase of 6% for both beef and pork.

Staples like bacon and sausages have suffered from price increases too. The price hikes have led to a  2% drop in bacon sales, and sausage sales are down by 4%. The only other sector to show an increase is sliced cooked meats which grew sales by 1%.

At the same time as these figures were released we heard Andrew Large of the British Poultry Council predicting that by next year chicken will account for over half of all meat eaten, up from just over a third 20years ago.  He attributes the growth in sales to price. In the last two decades he says, chicken prices went up by 31%, whereas beef prices went up by 50% and lamb prices have doubled.

It is easy to over analyse the figures. We can though conclude that price dictates consumers’ buying habits and they readily switch from one type of protein to another. Which means that the price of, say, beef cannot rise in isolation without there being a knock on effect on consumption.

We might also conclude that the image and benefits of red meat, particularly British produced meat, need to be constantly reinforced to consumers. If they felt that red meat was a “must have” then they would bite the bullet and purchase the same quantity regardless of price rises. Yet despite the increase in lamb sales in the last year, the overall volume sold of red meat including bacon and sausages dropped by 2 %. This may seem small, but from a producer perspective a drop in demand is a cause for concern as it all too often leads to oversupply and a consequent fall in farm gate prices. 

ALDI - Delivering Booming Sales and Profits

Companies usually deliver either booming sales or booming profits – it is rare to see both in combination but discount supermarket Aldi managed to do just that in 2012.

Results posted on Monday at Companies House show that revenue grew by 40.9% to £3.9bn, and profit more than doubled, up from £70.5m to £157.9m. And this at a time when the total grocery market was growing by less than 4%. The result is all the more remarkable given that the company went into the red in 2010.

Why the great performance?

Above all Aldi wins customers because it is cheap. Price is key in these straightened times, and according to Aldi the average basket of goods bought from them comes in at 20 – 25% cheaper than the “Big 4” grocers, Tesco, Sainsbury, Asda and Morrisons.

They are adapting their business model to be more like the Big 4, both in the products carried and in the service provided. The range been extended from a basic 800 lines to 1350, and a premium brand “Specially Selected”  introduced to compete with the likes of Tesco’s Finest and Asda’s Extra Special.

More emphasis has been given to fresh food. Sales of fresh meat have grown by 60% in the last year and fresh vegetables by 50%.

More staff have been recruited and more tills opened in stores to cater for the growth in sales.

According to Aldi, “We learnt from customers that we needed to become more British”. This has  meant a greater commitment to buying British meat, milk and eggs, but it also seems to reflect a recognition that to grow, Aldi has to become more like the shopping experience British customers are used to, hence the move to premium, to British sourcing and to wider choice.

As to future growth, Aldi  currently have around 500 shops and plan to increase by 84 before the end of 2014. Running counter to conventional thinking about growth channels, they have stated that they will not expand into convenience stores or sell food on line. Instead they will concentrate on doing exactly what they are doing now.

Their challenge will be to hang on to their price advantage at the same time as absorbing the increased costs which come as they adapt to being more like a standard supermarket. If they lose their price competitiveness then they lose the prime reason why shoppers choose Aldi.

OnlIne Grocery Retailing and the Hunt for Growth

The biggest challenge for grocery retailers today, regardless of size, is how to get volume growth. Since the start of the recession any sales growth has come from inflation, not from volume. The actual amount of food we buy is still shrinking, and retailers are keen to encourage us to buy more.

So it is easy to understand the fascination that online retailing holds for those involved in the grocery industry. IGD (Institute of Grocery Distribution) has just published its forecasts for growth until 2018, and they predict that online will be the fastest growing sales channel, doubling in size over the next 5 years, up from £6.5bn today to £14.6 bn.

As a percentage though, online will still be small – just 7% of a projected £206bn industry. And it has been well recorded that it’s profitability is considerably less than that for selling through a traditional store.

So why the headlong rush?

There may be a human element at play. Not only is online fast growing, it is a glamorous channel – all that new technology, all those apps to play with, all those fancy smart phones to work with. Much more exciting than getting the shirtsleeves rolled up and working out how to inject life into a standard supermarket.

But getting back to the facts, it is perhaps best to view online growth in absolute rather than percentage terms. Projected cash growth by 2018 is £8bn. Assuming that all the major retailers get a share of this growth to match their current market share, then Tesco would benefit from 30% of the incremental cash or £2.4bn, Morrisons would take £.9bn and Sainsbury £1.4bn. These are huge numbers and go some way to explaining the effort (and investment) being put into the channel. To this should be added the certainty that people are increasingly living their lives through smart phones and tablet computers and to ignore this may mean a substantial loss of market share.

The challenge therefore is as much about how to make profit as how to get growth and there are signs that supermarket minds are starting to address the issue.

Walmart puts it succinctly. The conditions which make online work are “market density” (lots of customers in a small area), “basket density” (each order has to be high value), and “route density” (every truck needs to go out fully loaded).

Dutch company Ahold has decided that click and collect is a better way forward than home delivery, and is investing in pick up points and secure lockers.

An IGD survey of UK retailers put developing tools to understand the financial implications of online as number 5 on their “to do” list.

 A small business which does not have luxury of massive scale and matching mountains of cash to experiment with online should remember that traditional grocery purchase will still account for 93% of sales.Smaller retailers will continue to prosper provided they understand what their shoppers want, and make the instore experience inviting. It would not though be sensible to ignore technology developments, and at the least these businesses should be interacting with their customers via tablets, smart phones and the web. They will also need to keep a watchful eye on developments, and be ready to consider ways of retailing on line that add to sales but minimise hits to profitability. Suitable models will no doubt emerge as more businesses grapple with the online challenge. 

Cooperative Food - Struggling to Regain Lost Ground

It is not just the Coop’s banking arm that faces problems, food is struggling too albeit not on the same disastrous scale.

In the 6 months to July 26^th food sales were down 0.4%, despite food inflation running at well over 3%, and profits declined from £119m to £117m.  Market share is dropping, and Kantar Worldpanel figures for the latest twelve weeks show share at 6.6% compared with 6.8% in the previous year.

The performance is made more depressing by the fact that changing habits mean a boom in shopping in smaller local stores, territory on which the Coop has operated for decades.  Shoppers are weighing up the savings on time and petrol costs that shopping locally offers, and recognising that shopping only to buy what is needed for immediate consumption can help keep costs under control.

The Coop realises that it needs an overhaul.

It has recruited senior staff from Tesco, Asda, and Sainsbury, and drafted in the former  Morrisons finance director. Prices have been sharpened, and it is trying to improve its own brand quality. It is setting up farming groups to get closer to suppliers.

It acknowledges the rise of on line grocery shopping and recently announced that it is trialling four different ways of delivering an online service to its customers. In perhaps the most memorable quote yet made on the issues surrounding a move into online, Steve Murrells CEO said “Evidence shows it replaces bricks and mortar sales and is margin eroding. But if you are not prepared to eat your own children someone else might.”

Intensifying competition means that attention to price and quality alone is unlikely to be enough to generate growth.  All of the major supermarkets are going local. Sainsbury has announced that it plans to open 100 new convenience stores a year. Morrisons has got in on the act, albeit belatedly, and will have 100 M Local stores open by January 2014. Asda is using its Netto acquisition to experiment with different types of smaller store retailing, and Tesco just wants to be the biggest in every sector.

So now the Coop has to work out what it can offer that will persuade customers to walk past a local store from one of the “big four”, past a local operator such as Budgens, and choose to enter a Coop.

The Institute of Grocery Distribution offers helpful advice to smaller store owners. It boils down to having a deep understanding of why shoppers go to a particular local store. There are basic requirements of quality and value, but thereafter shopper needs can differ by customer age, whether or not they have children, age of children, type of locality, and time of day. One size is unlikely to fit all.

The Coop will need to be more analytical, flexible and faster to respond to shopper needs than it has been hitherto.

Building a Strong Brand - Why Sainsbury May Win the Branding War Despite the Advertising Standards Ruling in Tesco's Favour

The recent row between Tesco and Sainsbury has been characterised by many as just another skirmish in an ongoing war between the two companies.

It may turn out to be rather more fundamental than that.

The background is this. Tesco are guaranteeing that their own label prices will never be more expensive than their competitors, but Sainsbury protested to the Advertising Standards Authority saying that price is not everything and in doing comparisons Tesco needs to take into account other issues like animal welfare and responsible sourcing.  Tesco responded that the way food is produced is not a primary reason for purchase, and what matters to their customers is that they are getting the best deal possible.

The Authority found in favour of Tesco, ruling that Tesco had compared prices on the basis of products meeting the same need, and that food such as meat eggs or fish are interchangeable.

Sainsbury are incensed by the ruling, and by Tesco’s attitude. They are convinced that consumers care about where their food comes from, and that being on a budget should not mean sacrificing ethical considerations.

They have retaliated with an advertising campaign pointing out the ethical standards it applies to food sourcing, but which Tesco do not. An advert for bananas has the headline “Same price, different values” and points out that all Sainsbury’s bananas are Fairtrade but Tesco’s are not. A second advert with the same headline pictures two rolls both containing ham from each supermarket’s lowest price range, but pointing out that Sainsbury’s ham comes from British pork, whilst Tesco’s does not. Other advertisements show that the low price “Basics” tea from Sainsbury is Fairtrade, Basic eggs are from cage free hens, and Basics fish fingers come from Pollack a fish which is in plentiful supply.

What lies behind Sainsbury’s strong reaction is a realisation that building a distinctive brand which persuades shoppers to opt for a particular supermarket is more vital than ever in today’s low growth, budget conscious retailing climate.  Price as a differentiator is not the weapon it was, now that all the major supermarkets are committed to selling branded goods at the same price as competitors. And own label goods are increasingly price matched too. So the persuasive brand has to offer “price plus”. Sainsbury have chosen ethical sourcing as their point of difference. Other options could be superior quality or exemplary service.

Tesco by contrast seem not to have identified their point of difference. Worse, they continue to come across as arrogant. Their reaction to the ASA issue is dismissive of what consumers value, seeming to say that when on a budget nothing else matters apart from price. Which is not the case as the horsemeat scandal, in which Tesco was embroiled, amply demonstrates. Tesco have upset farmers too. As the NFU pointed out on behalf of British pig farmers, “comparing EU ham with ham produced in Britain is wrong, and misleading to consumers”.

In this altercation between the two companies, Sainsbury is the one projecting a strong brand image, which will stand them in good stead in the long run.

Consumer Opinion and its Influence on Monsanto and Arla Decisions

Last week Monsanto announced that it is stopping efforts to persuade the EU to allow Genetically Modified crops to be grown in Europe. And Arla announced that it is introducing its own farm assurance scheme because, they say, the Red Tractor no longer satisfies the needs of retailers or consumers. Both stories illustrate the importance of understanding consumers, and the impact they have on the business climate in which farming operates.

In the case of GM crops, those who supported their introduction failed to realise that there was no compelling reason for consumers to embrace the technology. GM was not going to make food cheaper, or more nutritious, health giving or delicious. This lack of a clear benefit means that whilst 13% of the population are strongly opposed to GM, and 3% strongly in favour, over 50% do not have a view either way, a figure that has remained the same for the last 10 years. (Source: IGD research). And such is the lack of interest or concern that, according to Food Standards Agency research undertaken last year, 76% of the population have never sought information on the topic, and 63% have never talked about it with anybody.

Add to this inertia the vocal lobbying done by anti GM campaigners, and the lurid stories put out by the tabloid press (example - the Daily Mail’s headline following Monsanto’s announcement was “Frankenstein food firm quits Europe”) then it is unsurprising that Monsanto felt it sensible to put their efforts elsewhere.

In the case of the Red Tractor, those in charge have failed to recognise that a growing number of consumers these days want more than bare minimum standards, particularly when it comes to animal health and welfare.

Whilst just 16% of people put animal welfare as a key driver of their food buying behaviour compared with 74% for price and value and 76% freshness and quality, almost 80% state that animal welfare matters to them. These numbers are sufficiently sizeable for retailers to take note and act. (Source: Labelling Matters Project by RSPCA, Soil Association, WorldSociety for the Protection of Animals, Compassion in World Farming).

The Red Tractor people are now starting to rethink their approach, and now seem prepared to move forward. Commenting on the Arla announcement the Red Tractor response was to say that they would work with Arla to ensure that the scheme meets the needs of buyers, consumers and farmers.

Farming faces a number of major issues as it strives to balance food production and environmental management, whilst remaining competitive in a global fight. Consumers will have a view on all of them, from TB management to large scale pig and dairy farms, crops for biofuels to animal cloning.

Farming leaders need to ensure that consumer opinion forms the backcloth to deciding the issues upon which the industry feels it must stand its ground.

Today's Top Priorities for Retailers and Their Suppliers

The IGD (Institute of Grocery Distribution) does an annual survey which looks at the areas where retailers and their suppliers are placing most of their effort. This year the top priorities are new products, deeper understanding of what goes through shoppers minds as they decide what to buy, and how best to manage the various channels through which they choose to buy whether online, or in convenience stores, discounters or the traditional supermarket.

The emphasis on shopper behaviour is not new. Continued pressure on finances means that consumers now have a very different mindset when it comes to shopping than they did when money was freer. They work to tight budgets, even to the extent of handing a product back to the cashier at the till if the bill goes over the amount they are prepared to pay. They look for money saving offers, meaning that over 40% of grocery items are bought on promotion. They compare prices on line before setting foot in a shop. Yet they are prepared to splash out on special occasions, or on top quality, as shown the 10% growth in sales of their premium “Taste the Difference” brand announced by Sainsbury a couple of weeks ago.

The emphasis on different channels is not new either. The efforts of Morrisons to get into convenience stores and online shopping are well documented, as is the contribution to growth made by these channels as well as discounters Aldi and Lidl.

The most interesting finding from the IGD’s research is resurgence of interest in new product development. The most likely reason for its move up the agenda is that overall the grocery market is showing little sign of growth, margins are under pressure because consumers are so cost conscious and retailers and suppliers are now very keen to find products which are sufficiently different and exciting to persuade shoppers to spend a little more than would otherwise have been the case.

For a new product to receive a favourable response from retailers it will need to be genuinely value adding. Not only will it need to be different from anything else currently available, it will need to chime with what consumers see as important, and will probably need to command a premium price.

New products can take several forms – the product itself could be innovative, the way it is grown or reared or processed could be new, or the format in which it is sold could be new.

New product development can be risky . What must not be underestimated is the time it takes to come up with something new,  the level of investment required in time and money, and the chance that after all that effort it does not work. Careful thought therefore needs to be put in to how to de-risk a venture.

But it is an exciting opportunity for the food industry. 

Retail Sales of Fairtrade Products Now £1.5bn. Is Success Due to Consumer Demand or Manufacturer and Retailer Push?

The issue of whether Fairtrade’s success is due to consumers or to manufacturers and retailers is worth some thought. All products should be traded in a way that provides a fair price for the farmer, whether that farmer resides in Ghana or Gloucestershire, Caracas or Cumbria and any learning that can make farmer returns fairer merits consideration.

A look at Fairtrade figures shows that 90% of the £1.5 billion retail turnover of Fairtrade products is accounted for by sugar, chocolate, coffee, tea and bananas, and by big food manufacturers and major supermarkets.  Every banana sold in Sainsbury's and Waitrose is Fairtrade, as is every bar of Cadbury’s Dairy Milk Chocolate, every bar of Nestle’s Kit Kat, and Mars Maltesers. All of Tate and Lyle’s sugar products are sold under the Fairtrade banner. All the big supermarkets have a range of Fairtrade teas and coffees.

 Indeed it is hard to avoid buying a Fairtrade product at some point in the weekly shop.

Not only have big companies pushed Fairtrade, they have done so in a way that requires little sacrifice on the part of the shopper, for no major player has added a price premium to their Fairtrade products, electing instead to sell at the same price as they did prior to adopting the logo.

There is a lesson here – big companies are prepared to swallow a hit to their margins if they see a benefit, and in Fairtrade they saw a way to polish their ethical credentials at relatively little cost.

Mostly therefore the success of Fairtrade has little to do with consumers demanding fairness for third world farmers. What the Fairtrade people have done well though is to build a recognisable brand with a simple message that appeals to consumers and allows them to feel good when they purchase a Fairtrade product. Ten years ago few had heard of Fairtrade, but now, according to the IGD, four out of five shoppers recognise the logo, and just over a third say they have specifically chosen to purchase a Fair Trade product

 And it is this undoubted consumer appeal that companies are harnessing when they adopt Fairtrade accreditation.

So what about fair trading for British farmers? The tide does seem to be turning. Scarred by the horsemeat scandal, and conscious that the British public views farmers and home produced food in an increasingly favourable light, manufacturers and retailers are slowly embracing closer, more transparent relationships with producers. This is vital for as the Fairtrade story shows, the lead has to come from players with clout and the ability to make big, transformational decisions.

The Fairtrade story also illustrates the value of strong branding, and here is where British farming could help itself and make a real difference to the way in which the industry is perceived by consumers and retailers alike. Replacing the Red Tractor with a recognised logo and brand which stood for exceptional production standards, not just the bare legal minimum would be a good start, as would tough policing of the standards.

The twin aims should be to move consumers from a vague feeling that they should be buying British into state of mind where they understand exactly why they should support British farming; and to build a system that retailers feel they must be part of to be credible with their customers.

A Look at Lidl - The "Other" Discount Store

Despite running more stores than fellow discounter Aldi, (nearly 600 versus Aldi’s 400)  Lidl remain smaller in market share, and have not managed to achieve Aldi rates of growth. In the last quarter Aldi’s market share was 3.6% and its sales grew 30% year on year. Lidl’s share was 3%, and it grew by 9%.

Why might there be this disparity in performance? I visited the Lidl store in Penicuik in the Scottish borders to find clues.

Both Aldi and Lidl sell products at prices far lower than available in mainstream supermarkets.( The dark chocolate pictured sells at 79p versus the branded equvalent at £1.85p).   Lidl follows many of the practices embraced by Aldi, designed to make the cost of operating the stores very low, and passing the benefits of the low cost base on to shoppers. Both sell a small range of products under brand names that few have heard of, many of which are imported. The small range means smaller stores which are cheaper to run. Products are displayed in their outer cases as opposed to being unpacked and placed on the shelf, saving staff costs. Costs are also saved by having fewer checkouts, and employing super fast till checkout operators. Both stores encourage those with alot of shopping to pack away from the till, again speeding up the process.

Lidl differs from Aldi in that it offers more big name brands and it is difficult to judge whether this deviation from the standard discount model results in increased sales by attracting shoppers who like to buy known brands or whether the added cost means that prices are possibly not quite as low as Aldi.

Lidl’s fresh food offer seems more attractive than Aldi’s. Many breads are baked on the premises, and attractively displayed in wicker baskets. Most of the meat on offer was produced in Scotland, well displayed in stand alone  chiller cabinets, and accompanied by an explanation of Lidl’s animal welfare standards. Some ham was imported but British product was available. Certainly the Scottish produced pork chops purchased at the Penicuik store were excellent.

The fruit and vegetables looked fresh enough, but do not display a sell by date (another cost saving action employed by both discounters as once a sell by date is reached product has to be sold at a heavy discount.) It was therefore disappointing that my Jersey Royal potatoes, albeit  costing 18p per kilo less that Sainsburys, had turned green by the day after purchase.

Overall though, the combination of availability of major brands and generally good quality fresh food made the  shopping experience in Lidl Penicuik  more like that in a major supermarket than does Aldi  and the company embraces more consumer trends like attention to animal welfare and supporting local produce.

So why would Lidl be growing more slowly than Aldi?

One answer could be that Aldi are opening more stores than Lidl.

It could be that prices are not as sharp, or product quality in general not as good. Aldi seems to do particularly well when it comes to food awards.

My guess is that Lidl’s marketing is not as good as Aldi’s.  Aldi generates more publicity in the papers than Lidl - it is always Aldi that journalists write about when doing a feature on discount stores.  And Aldi has promoted and advertised its products more heavily.

This could be why Lidl have embarked on two advertising campaigns, one talking about the quality of its fresh food, the other highlighting packaged products that consumers rate as highly as major brands, but which cost considerably less.

If Lidl wants to grow faster it needs to make sure its activities are squeaky clean.

Lidl, like Aldi, was caught up in the horsemeat scandal. There has been a recent allegation that Lidl only pays UK tax of around £12,000 on a business with a £3 billion turnover. Lidl of course claims that it complies completely with UK tax laws. Whilst unlikely to have impacted on sales growth to date, such an allegation will do little to enhance the company’s reputation. 

Which is unfortunate as it seems to have much to offer its customers, particularly in difficult economic times.

ALDI - Winning Awards but Misleading Consumers

Discount supermarket Aldi is in the news again. It scooped 16 gold awards at the supermarket industry magazine “The Grocer” s taste tests of various own label brands. And it has been criticised for misleading consumers by putting a Scottish flag on packs of beef and turkey from South America and the EU.

The awards story is impressive. Aldi came first, Tesco came in second with 12 golds, Asda scored 11, Marks and Spencer 8, Waitrose 3, and fellow discount supermarket Lidl achieved 4 golds. The awards come on top of Aldi’s Oliver Cromwell  gin winning silver in the International Spirits Challenge, beating  Bombay Sapphire which sells at twice the price, and collecting a silver award for champagne.

The Scottish flag story is shameful, and only came to light through the vigilance of NFU Scotland.  Aldi’s limp response was to say that no laws were broken but they recognised that featuring a Scottish flag could make shoppers think the products were wholly Scottish, and they have promised to re-label. At best their action was naive, at worst deliberately misleading.

Low prices combined with a growing reputation for quality mean that Aldi is showing the fastest growth of all supermarkets in the UK, up by 31% in the last twelve weeks according to Kantar Worldpanel, the company which monitors grocery sales. Fellow discounter Lidl grew by 9%. The only other grocer showing significant growth is Waitrose, which operates at the premium end of food shopping. The big four are stumbling along with growth in the low single digits.

The combined share of Aldi and Lidl now stands at a record 7.9%, and industry watchers are asking how far it can go. Conventional wisdom says that the strength of UK competition means that discounters will never touch the heady heights achieved in home country Germany where they enjoy a combined share of just under 30%.

But both Aldi and Lidl are raising their game. Aldi had just launched a trial convenience store in Kilburn, tapping int0 the growing tendency of shoppers to visit local stores to save petrol costs and  ensure they buy only what they need and not be tempted by the plethora of stuff available at bigger shops.

Lidl has just announced that it is increasing the shelf space it devotes to fresh meat and poultry by 50%.

Across the water in Ireland Aldi and Lidl together command a share of 13.6% of the grocery market, up from 11.6% last year. Their growth is coming from new customers as well as regular shoppers, which has not to date been the case in the UK.

There seems to be room for further discounter growth, but to achieve it requires continued rock bottom prices, whilst improving quality.

It also requires consumer trust, especially when it comes to buying fresh food. And here is where the discounters have stumbled. The Scottish flag issue reflects badly on Aldi, and both Aldi and Lidl were caught up in the horse meat scandal. Aldi and Lidl will be painfully aware of the need to take a firm grip on supply chain issues, and stop any erosion of consumer trust in its tracks.

More Evidence That Food Retailers Need an Online Operation

Hardly a day passes without reference to the rise of on line shopping and how it will affect the retail landscape.

Last week we heard that Morrisons supermarket are paying £170m to Ocado for their depot in Warwickshire, a further £30m to license their technology, plus 1% of any Morrisons online sales and 25% of any cash profits. They also threw in £46m to expand the Warwick depot, and a contribution to Research and Development costs.

Whether one thinks that Morrisons are out of their minds to get involved with Ocado, whose business model is far from a successful example of how to compete in online grocery retailing, or whether your view might be that this is an excellent  move for all concerned, what is unarguable is that Morrisons felt so pressurised about the adverse impact of not being on line that they were prepared to pay handsomely for a way in.

Today the Centre for Retailing Research heaped on the pressure by publishing a report claiming that the percentage of sales made on line will rise from 12.7% in 2012 to 21.5% sometime between 2018 and the end of the decade.

They make the chilling prediction that the rise will result in a loss of some 316,000 jobs,  that total store numbers will fall by 22% from 281,930 today to 220,000, and that a further 164 major or medium sized companies will go into administration.

As ever it is the consumer who is driving the change.  Shoppers’ way of buying has changed out of all recognition in just a few years. Nowadays, having read up all the reviews about a potential product on line, they can choose to visit a store and buy then and there, (having just checked on their smartphone that the prices on offer cannot be beaten by a competing store).Or they can use the store to see what a product looks and feels like and then go home and buy online. Even then they have a choice – to have the product delivered to their home or, rather than wait in, to collect at a convenient specified outlet.

As to food, the Centre concedes that purchasing food online has not exploded on the same way as other sectors, but predicts that online food sales will rise from 3.7% today to 9.5% by 2018, largely driven by the supermarkets investing heavily in this way of shopping.

There are substantial obstacles to overcome. There are reasons why shoppers have not enthusiastically embraced the internet to buy food.

The IGD tells us that consumers are still worried about the quality of fresh food bought on line, and that this remains one of the biggest barriers. 2 in 5 shoppers want longer shelf lives on products but this alone will not solve it. The taste and look of fresh products bought online continues to be highly variable.

Reliable delivery times are also critical, as is confidence that what is ordered will be what arrives on the doorstep. 90% of online shoppers report that a reliable delivery service is a major factor in deciding which supermarket to buy from.

And of course, prices and promotions must at least match what is happening in the store itself.

Buying groceries on line is not yet the ingrained behaviour that is evident in other categories. Most people shop online every now and then. Others have a more regular approach. But very few buy weekly, and the number doing so is dropping.

There are many problems to solve, not least that online as a way of retailing groceries is much less profitable than via the store.

It would seem though that all involved in selling food need to factor in the online issues when they review their business strategies.

Understanding the Consumer - How Pork Producer Cranswick is Responding to Food Trends

Cranswick, mostly known for its pork products, was once a farmer owned cooperative and is now a public limited company with a turnover of £875m. It has just announced full year pre tax profits up 8%, and sales up 5% (on a like for like basis).

Any company which operates with a heavy dependence on commodities is liable to have a roller coaster ride, and none more so than in the pig sector where prices fluctuate wildly and cheaper imports from countries like Denmark pose a constant threat. Indeed at least 65% of pork products eaten in the UK come from imported pig meat compared with around 36% for lamb and 33% for beef. (Source: EBLEX, BPEX)

Additional risk for a company like Cranswick comes from the structure of the UK grocery trade. Like many food suppliers it is reliant on a few major customers, and a change in trading relationships can mean a significant drop in sales and profits.

Cranswick has coped with this volatility through investment to help keep costs down, but also through innovation.  The company is committed to operating in the quality end of the market, and has been able to develop premium foods which command premium prices. It was one of the pioneers of the gourmet sausages sector and it claims to be the first company to sell air dried hams from UK bred pigs.

The acquisition in April of East Anglian Pigs illustrates the company’s consumer awareness. Cranswick now has end to end control of it’s supply chain – a move that is becoming more relevant to consumers who are seeking British produce in the wake of the horsemeat scandal, and to retailers who are quick to respond to consumer demands. East Anglian Pigs operates to RSPCA higher welfare standards, and has a major outdoor reared pork enterprise – both fast growing sectors in tune with consumer trends.

The drive to be consumer focussed is admirable, but as the business expands into areas outside of traditional expertise, and particularly in light of the EAP acquisition, Cranswick will need to be vigilant in ensuring that it does indeed have full control of all that goes on in its supply chain, whether this be product safety, quality of taste and ingredients, and animal welfare standards.

Advertising Provides Clues to Consumer Trends

What companies say in their advertisements can be a good guide to what matters to consumers.

The holy grail of a good advert is to be eye-catching, relevant, and persuasive. It has to stand out amidst the hundreds of advertising messages with which we are bombarded every day, it needs to address an issue that matters to consumers, and it has to affect behaviour, either by reinforcing the rightness of a decision made,  or encouraging a change in what or where a product is bought.

It is therefore interesting and instructive to see what the big advertisers are saying. That is not to suggest that they always get it right – frequently they do not, but, most advertisements are the result of thousands of hours spent listening to consumers and crafting messages which will appeal.

Many supermarkets have jumped on the British bandwagon in the wake of the horsemeat scandal. The IGD (Institute of Grocery Distribution)  tells us that trust in food manufacturers and retailers was dented by the issue, and their most recent research shows increased consumer interest in buying British with the proportion of people saying that “it is not important to me to buy British” dropping from 45% in 2007 to 22% in 2013.

Morrisons, as indicated by the advert above, have clearly decided, in the wake of the scandal that their unique position of buying direct from the farm and owning their meat processors, and their commitment to buying British beef, lamb and pork gives them a one up on competitors. They are undoubtedly right. So their message is relevant. Where it starts to fall down is that the way they say it is complicated. Consumers might ask themselves what exactly is meant by. Morrisons headline is “All the fresh meat we prepare in store is 100% British, 100% of the time”, but consumers might ask themselves questions like how much and what meat exactly  is not prepared in store, and they will be none the wiser if they take the time to read all of the words in the advert.

Morrisons also advertise the quality of their fresh food, as indeed they have done for some years.

The Coop takes a simpler approach to buying British with the headline – “All of our fresh beef is reared on British farms”.

And the Coop combines buying British with animal welfare in an advert saying that “All our fresh chicken is reared by British farmers to higher welfare standards”. Again, though, consumers might ask themselves what exactly is meant by higher welfare.

Which is not to say that price is unimportant. ASDA take the no holds barred approach – “We are 10% cheaper or your money back.”

Sainsbury by contrast go for the softer sell. Their message combines quality with a price, hence the beautifully photographed pictures with a teeny tiny reference to the price, so small it could easily be missed. It is difficult to criticise Sainsbury, their track record of growing sales and profits is sound. But perhaps here they are overly subtle.

What can we conclude?

Price will remain important to consumers but so, increasingly, will quality and provenance.

McDonalds Move to Freedom Food Pork - Understanding What matters to Consumers

A look at food sourcing policies of major companies provides useful clues about what matters to consumers.

Such companies spend tens if not hundreds of thousands of pounds tracking consumer trends and are keen to adopt those which they think will make a difference to the way they are supported by the public. It is therefore interesting to see that McDonalds have committed to serving only RSPCA Freedom Food pork. A call to the McDonalds helpline confirmed that by pork they mean their bacon and sausages.

Whether or not you happen to be a supporter of the RSPCA, particularly their recent overtly political moves on hunting prosecutions and stance on badger culling, there is no doubt that the Freedom Foods logo and standards appeal to the public, and are becoming more widely used. Sainsbury for example is a huge supporter of Freedom Foods chicken and pork based products, and charges a premium for them.

Sainsbury though is positioned as one of the more upscale supermarkets, selling pricey food. McDonalds aims at the value end of the market, yet they have sufficient belief in the appeal of higher welfare to incorporate such foods on their menu, despite the added cost this presents along the chain.

We do not know who bears the cost, and whether consumer prices have nudged up, or McDonalds take a hit on margin, or indeed the producers and processors are squeezed.

What we do know is that this commitment to providing more than basically produced food is a thread that has been running through McDonalds for some time. They still use only organic milk and eggs. They came out very well in the recent horsemeat scandal because they only use beef from UK or Irish farms. 

Their move to Freedom Food pork will mean that they see animal welfare as of sufficient interest to their customer base to make the change worthwhile in business terms.

The McDonalds move does not necessarily signal that consumer demand will lead to an upgrade of pig welfare standards across the whole food industry. But it does suggest that concern for animal welfare is no longer a niche issue.

Note to McDonalds's marketing department - the advert would have been much stronger if it referred to bacon and sausages, not pork which tends to mean chops or a roast.

Organic Sales Still Dropping - What Will Restore Growth?

The Soil Association’s recently published Organic Market Report shows that sales of organic products fell by 1.5% in 2012.

There are pockets of strength, particularly where brands are well known and promoted. Combined sales of specialist retailers Ocado, Abel and Cole and Riverford Organics grew their sales by 10%.  Rachel’s Dairy, noted for its yoghurts, grew by 15% and Yeo Valley who sell a range of dairy products grew by 6.6%.

 Under 35’s spent more on organic products than ever before. Sales to catering outlets are up.

But some core markets still struggle. Supermarket sales of pork, eggs, and poultry dropped by 30%, horticulture products (fruit and veg) dropped by 8%, milk sales are down 4%, lamb down 2%, and beef down 1%.

So what of the future. The Soil Association admits that difficult economic circumstances have hindered organic sales and we know that money will be short for a few years yet.  And herein lies the problem. Whilst many consumers like the idea of buying organic, they struggle to convince themselves that the organic premium is worth paying on a regular basis.

This nettle has to be grasped if supporters of organic produce want to see sustained growth.

It is not enough for the Soil Association to chastise government for not doing enough and lambast the big multiple retailers for turning their back on organics.

The government cannot address the fundamental issue of consumer demand. Scotland’s Organic Action Plan, cited by the Soil Association as a template that the English government should follow, is helpful in that it provides support for farmers to convert to organic and makes funds available for businesses to promote their products. But the Scottish plan acknowledges that at the end of the day it is consumers who are key to success.

Multiple retailers are close to consumers but in a low growth, highly competitive environment they will not offer up precious shelf space to products whose sales don’t justify it.

There are just two ways to overcome the consumer issue. Either, communicate a compelling reason to justify the organic premium –or - reduce the premium.

The first route is difficult. The organic story is a complicated one to tell, and getting across the idea that organic is an integrated way of producing food is difficult when funds are limited and consumers are used to picking up messages in sound bites or in 140 characters on Twitter.

So is there any mileage in the second route, namely reduce the price premium. This would be ideal because many consumers like the idea of buying organic. Indeed some 80% do so, but too infrequently to affect growth.

Reducing the price premium requires increasing yields.  And to increase yields requires solid science, and science needs funding. At the moment there appears to be just one project tackling production issues – a Duchy Originals sponsored initiative led by the Soil Association with the help of the Organic Research Centre at Elm Farm. Whilst welcome, its progress will be slow. Starting May 2012, it is not due to complete its initial findings until May 2015. Only at this point will it decide on research priorities.

Here is the question. Would the considerable funds currently available across British governments, the EU, the Soil Association itself, the industry groups Organic UK and the Organic trade Board be better spent on broadening and speeding up scientific work.

This is not to overlook the task of communicating with consumers.This is probably most effective when done by strong, trusted brands. The success of Rachel's, Yeo Valley, and Riverford shows that when done well the organic story translates into solid sales growth.

Online Grocery Shopping - Supermarket Giant Morrisons View on the Challenges

Dalton Phillips, CEO of Morrisons, speaking on Radio 4 about his company’s future prospects, has given a clear analysis of the challenges food retailers face when considering going into online grocery shopping.

The basic problem, he says, is that when it comes to online, the mechanics involved in the cost of shopping transfer from the shopper to the supermarket.

The shopper going to a supermarket pays the time cost of going round the aisles loading products into the trolley, the time cost of wheeling the goods out to out to the car and loading up, and  the time and transport costs of getting the product home. Should the shopper arrive home with the wrong products they have to lump it – no getting on the phone or computer to complain that what they wanted has not arrived, no “goodwill” compensatory money changes hands to soothe disgruntlement.

Once the shopper orders on line all of those costs pass to the supermarket. The supermarket has to have the staff to process the order, pick the goods, load them onto the van, deliver to the customer’s house, deal with complaints. They have to buy or lease the vans, and bear the petrol and insurance costs of going around the country to deliver. We know from various industry studies that the cost of processing an on line order is about £15. Yet the shopper pays about £5, less if placing a big order.

Dalton Phillips point is that someone has to pick up the tab for all this additional cost, and none of the options is palatable. The competitive jungle that is the grocery sector means that costs cannot be passed back to shoppers in the form of higher prices. Equally, a hit to profit margins is unlikely to please investors.

What Dalton Phillips perhaps has not accepted is that embracing online grocery shopping means a structural and permanent change to the way profits are made by the grocery trade. At the moment online is a small part of supermarket sales, and so the profit drain is largely disguised, but this will change if the sector grows as predicted.

 Morrisons may not have much choice in whether or not they offer an online service. On line is something that today’s food shoppers want and to ignore the trend is to risk being sidelined, perhaps not today or tomorrow but certainly in the longer term. British retailing history is littered with examples of big businesses which ignored trends, got stuck in the past and collapsed. Comet, Jessops and Blockbuster spring to mind.

The challenge for Morrisons and any other business developing an online facility is to work out how to adjust business performance to take account of the reduced profit margin which comes from an online presence.

Horsemeat Scandal - Catering Trade Getting Off Too Lightly

It is the major retailers who have had the most opprobrium heaped on them in the horsemeat scandal. And this is fair enough given that most food bought comes from supermarkets. The adverse publicity has had an effect. The furore has led to a shift in sourcing policy from Tesco who have committed to closer working relationships with farmers. If Tesco delivers on their promises this can only be good for all in the food chain from farmer to consumers, and where they lead others will follow.

By contrast catering suppliers, those hundreds of thousands of premises who feed us outside of the home, have got off lightly . Even news of local authorities withdrawing meat fed to children has caused barely a ripple, yet up and down the country from fast food outlets like Burger King, through up market caterers like Sodexho who ironically supply Royal Ascot, Compass, one of the biggest catering companies in the world, IKEA with their restaurants claiming to provide family friendly meals, multi- national giant Whitbread who owns Brewer’s Fayre, Beefeater and Premier Inns,  and local authorities from Scotland to South west England, and across Wales have all had to change what they provide to customers because they were failing in their duty of care to those they are feeding

.

Every one of these companies and the local authorities has blamed their suppliers. No one has searched their consciences to see whether demands to save money or increase profits might have been a factor in things going so wrong.

Few will be punished. Assiduous followers of the scandal might defect from Burger King to McDonalds, who despite providing food at the lower price end of the spectrum seem to have emerged with their sourcing integrity intact. Families might avoid the meat balls in IKEA restaurants, for a day or two.

The rest of the catering trade will experience no adverse comeback because, with over 420,000 outlets, it is highly fragmented  and  largely uncontrolled. It is also has few recognised consumer brands so there is little for the media to get its teeth into and inflict reputational damage, as in the case of supermarkets.

So what can be done to ensure that caterers are serving what they purport to serve?

They could for starters be obliged to tell consumers at point of eating where the food comes from. People might think twice if the beef, bacon, or ham comes from anywhere but Britain.

The Food Standards Agency could focus their analyses on the catering trade, on the grounds that in the short term at least supermarkets will be bending over backwards to ensure that their supply chain is scandal free.

Local authorities could actually be local when it comes to sourcing the food they supply, much of which goes to the vulnerable – the very young or the old and sick.

Crusading foodie types could focus attention on the catering trade with as much vigour as they do the supermarkets.

And as for us , the general populace, we too could play a part as opposed to leaving it up to everyone else – and actually ask those supplying food when we eat out to give a full account of what they are serving to us.

What is served up in catering establishments does matter. We spend £48 billion on food and non alcoholic drinks consumed outside the home. £2.5bn is spent on food procurement by the public sector, most going to those who have little choice of eating establishment. The number of times we eat out is growing despite the recession.

Yet we have little reassurance if any as to the quality and provenance of the vast majority of the food we eat when away from home.

Horsemeat Scandal – Consumers Won’t pay More to Avoid Horse, Are Unlikely to Change Buying or Eating Habits

In the most illuminating piece of research yet done on the horsemeat scandal, a survey carried out between 11^th and 13^th February for respected industry journal The Grocer found that half of the consumers questioned are not prepared to pay any more for their meat to ensure it does not contain horse. Of the other half of the population, 35% were prepared to pay a bit more (around 10%) and 15% answered “don’t know”.

And while the specific question about who is to blame for the mess was not asked, we can probably conclude that the average person feels that it is retailers and their suppliers who caused the problem, and they should not expect the general public to pay to help them sort it out.

Further, the survey will disappoint those expecting a sudden big change in meat buying as a result of the scandal. Yes, 29% agreed they would buy more British meat, and 30% agreed they would shop more at the local butcher. But 41% said that the episode would not change their shopping or buying habits at all, and only 4 % thought they would change supermarkets as a result.

Despite screaming headlines and blanket media coverage, just 31% professed to be shocked by the horsemeat scandal, and 33% are “quite worried”. On the other hand 42% said they were not surprised by the news and only 18% felt that the food industry would get on top of the situation.

It takes alot to alarm British consumers and horsemeat being passed off as beef seems not to be causing much of a stir among the general public. It may have been different if horsemeat caused a health problem, but even at the height of the BSE scare where health was at risk, 30% of people made no change to their eating habits, according to Tim Lang, professor of food policy at City University.

How Consumers Decide What Meat to Buy

According to a recent piece of market research by EBLEX 23% of people are cutting back on the amount of meat they buy. This is not good news as a drop in demand tends to mean over supply and falling farmgate prices.

Conscious of the need to stimulate demand the EBLEX research goes on to analyse how people make their meat buying decisions and what levers can be pulled to encourage them to buy more. They interviewed 1200 shoppers in stores owned by the 4 main supermarkets.

Getting the meat purchase right is important to shoppers. They spend an average of 74 seconds at the meat fixture, considerably more than they did 10 years ago in a similar piece of research, and more than anywhere else in store apart from the veg counter.

EBLEX highlights the importance of appearance in the buying decision, and it is certainly true that appearance trumps price in most instances. If a piece of meat does not look right it will not be bought. Whilst the research does not go on to tell us what it is about appearance that matters we can guess that too much fat, an over watery look, flabby appearance, and too light or too dark are all flaws which are just not tolerated.

However we cannot dismiss the importance of price.

People are very price conscious. They buy on the price of the pack, not pence per kilo and of those questioned in the research 80% knew what they had paid for the product just bought. 35% of those questioned had bought products on promotion.

Some meat is more price sensitive than others. Pork is price sensitive, as is beef mince. Chicken legs and thighs are particularly price sensitive, and at the other end of the scale steak is too. There is clearly a price point over which people will not go however good looking the product.

The research confirms that meat purchase is not species specific. It indicates that 35% of people will change to an alternative if the species they first thought of is not available in the way they want it, compared with 30% who will change to another cut within a species. Decisions about roasting joints are especially fluid with 48% being prepared to change to another species.  17% will leave without buying anything if they cannot find exactly what they want.

This piece of work from EBLEX demonstrates that the meat buying decision is complex. Unsurprisingly in a category now so expensive that packs are security tagged people take their time over purchase. If something does not look right it will be rejected. If it is not priced right it will be rejected. If one species does not provide what is wanted then shoppers will in many cases move to an alternative. This is an important finding as it suggests that merely putting the price up in store and funneling the incremental back to the farm gate will not work, unless all species go up in price together, which is an unlikely event.

.

What is clear is that all parts of the food chain need to work closely together to deliver what the shopper wants. This represents a colossal communication challenge when according to DEFRA there are 86,000 beef farms, 73,000 sheep farms and 9,000 pig farms in the UK.