National Trust MyFarm Experiment Falters

MyFarm, the National Trust’s experiment to involve the general public in farming decisions is closing down due to lack of demand.

Launched in May 2011 the idea was that for a joining fee of £30 people could vote on various farming decisions which needed to be made on the Trust’s 1200 acre organic farm in Cambridgeshire, and the farm manager, Richard Norris was obliged to enact whatever plan got the most votes. People voted on issues such as which crops to plant, and what breed of beef cow to rear on farm.

Despite the Trust’s 3.7 million members, and a massive publicity campaign at launch, the numbers signing up fell well short of the 10,000 required.  A reported 29,000 people went on to the internet on the first day to see what the project was all about, but a recent article in the Telegraph says that the number of people enrolling stalled at under 3000, with the Trust refusing to confirm exact figures. And this despite a decision in May 2012 to abolish the joining fee.

So what issues does this raise.

Well, it demonstrates that if the general public think something this a bad idea then no amount of money, publicity or clout will turn it into a good one.

We do not know what turned the public off and it is a puzzle given that most other pieces of information suggest that farming holds a fascination for many.

Could it be that those who went on to the website realised that the premise was unrealistic in that  a financially vital decision was being made by committee in just a few days and on the basis of few facts and less experience. Perhaps the unreality was exacerbated by a feeling that the Trust is wealthy enough for a bad decision not to lead to financial ruin. Perhaps some realised that the results of their decision would not be available for months if not years, which can be unsatisfying in today’s climate of instant gratification.

In truth the MyFarm experiment made farming a game and trivialised its importance. It was interesting that the Telegraph article appeared in the week that Farming Today on radio 4 was covering the issue of why youngsters seem not to understand that farming is a highly skilled and technically demanding career and Farmers Weekly published its survey showing that the average farm manager’s salary is a respectable and competitive £50,000, a number that does not include non cash benefits such as a car or rent and council tax payment. By contrast MyFarm gave the impression that farming could be done with little expertise and a seat of the pants approach.

The NT should be applauded for trying something new, and for its efforts to reconnect the general public to farming.

But this experiment did neither they nor the farming profession any favours.

The Changing Face of Private Label

Ever since the 1980’s when Loblaws Canada introduced a premium private label “Decadent” chocolate chip cookie which tasted miles better than any branded equivalent, private label has ceased to be a poor relation and became a potent weapon in the retailers armoury.

Once an inferior substitute for brands, private label marketing  evolved into the well known tiering strategy of “good, better, best” with most attention paid to “best” because those were days of affluence when consumers shelled out vast sums regardless of whether the quality justified the price, and were happy to pay for the premium label.

Now, in a very different economic  climate retailers are once again rethinking their strategies.

They face multiple challenges to keep customers, and grow sales and profits.

Shopping behaviour is well documented, and few who are interested in the food industry will be unaware of the consumer search for value, and the increasingly creative ways that retailers are responding, like cheaper petrol,  money off in store, bogofs (buy one get one free) or “threefers”, (three for the price of two).

The biggest battle ground has been branded goods. Whether it is Sainsbury’s promise to refund if a branded shop on a given day could be bought cheaper at Tesco or ADSA, ASDA’s promise to be 10% cheaper, Waitrose’s promise to match Tesco on branded goods ( promotional activity excepted), orTesco’s penchant for price promoting, branded goods have become the punchbag of shopping. As a result, depite the pressure put on branded manufactures to fund promotions, retailers are struggling to make profit from branded goods.  

The question facing retailers is how to keep sales and profits rolling, and the answer is through private label.

Private label offers flexibility to address the needs of most shoppers from affluent to cash strapped.  If it gets the quality/price/taste equation right it can be a tremendous tool for generating loyalty. And it does this in an environment where price comparisons between stores are difficult, bordering on  impossible.

So we see £millions being poured into private label development, at the value end of the spectrum where, according to Kantar Worldpanel sales of value lines are rocketing, up 13% in May 2012 compared just 1% last year, and at the premium end which has traditionally been a source of substantial profit but has seen sales performance swing from +10% last year to minus 1% in June of this.

The range of value products is growing as are retailers efforts to explain to customers why they represent a good buy. Tesco say they “are proud to bring you Everyday Value – quality and value for everday eating, cooking and living”. Morrisons M Savers go flat out on communicating price, and visitors to their website are guided by price bands – under 30p, under 50p, and under £1.

At the other end, retailers are busy developing premium ranges that rely on provenance and quality of ingredients, like Sainsbury pasta which comes from a family firm in Puglia, Italy. Morrisons M Kitchen ready meal range has been developed by celebrity chefs.

Private label is also good for retailers in that, with the exception of Morrisons they own few production assets relying instead on suppliers to make the products. So if an idea does not work they do not bear the burden of factories lying idle, or workers laid off because demand was less than hoped.

Expect to see the private label battle intensify over the coming months, and branded suppliers to do much head scratching about how to fund both advertising to keep their brands front of mind with consumers, and cut price promotions demanded by retailers.

Multi Channel Retailing - Is It a "Must" For Success?

Multi channel retailing is business speak for offering customers more than one way to buy something be it a shop, mail order, online, or through a mobile phone. The concept is further confused by defining different types of shops as channels, so we have the convenience channel, the discount channel, and the standard mainstream grocery shop.

The words multi channel strategy appear in most major company reports and those not seen to be participating get criticised.

Morrisons supermarket has been lambasted because it is not represented in the fast growing channels of on line retailing and convenience stores, and this has led to a drop in sales and market share. On the other hand, Ocado which is solely available on line has been criticised for missing out on sales at peak periods because there are not enough hours in the day or vans available to deliver the increased amounts people have ordered.

Large retailers are investing £millions into multi channel development.  Although trialling food sale on line, and offering customers the opportunity to order online and collect in store, Walmart is putting most of its emphasis on opening stores – small ones in urban areas, medium sized stores for towns and more of the huge supercentres for which they are famous. Marks and Spencer has said that whilst web based channels are important they feel that stores will remain the core of their business.

New and eye catching digital developments are announced daily.  At Gatwick airport Tesco has built huge screens that look like a fridge and the idea is that holidaymakers waiting for their flight can scan products from the screens on to their phone, ping to Tesco, and have their groceries delivered immediately they arrive home again, cutting out the need to make a stop at the shops after a long tiring journey.

Certainly in today’s fast paced society there is something compelling about the notion that consumers must have a quick and easy way to purchase whatever time of day or night the urge strikes. The rapid growth of food shopping online, said by the Office of National Statistics to be 14-15% per annum compared with 3% for the market as a whole, and the explosion in ways to access the net whether through smart phones or tablets or the standard computer, seem to suggest that food retailers large and small should be seriously examining online retailing, or risk getting left behind.

Nevertheless, there are question marks over all this multi channel effort.  It is noticeable that whilst all retailers are keen to talk about sales growth, few mention profits, and indeed there is recognition among most retailers that online will never be as profitable as shops. There is little discussion of the different skills required to run different channels. And despite all the effort, the proportion of food retailing done through the internet remains small – around 2 or 3% according to Mark Price of Waitrose. Even mighty Tesco is estimated to have just 6% of sales made on line, and Sainsbury 4%. The fastest growing retailer of them all, Aldi, avoids online shopping possibly because the costs involved might mean they cannot continue offering the very low prices which makes them the success they are.

Anyone deciding to experiment with a new channel may first want to ensure that they are operating a secure, cash generative core business. It will be important to have the requisite skills in place, to capture all the costs associated with the new venture, to ring fence the investment and returns, and to accept that it will take time to achieve success.

The Co-op - Not Good With Food

If ever there was a company which should be flourishing in today’s economic climate it is the Co-op, yet last week it posted a 16% drop in its food business profits for the last 6 months. Like for like sales are down 1.2%, and market share is sliding.

The Coop should have much going for it. It operates in the convenience sector which is growing fast and is now worth nearly £34 billion or 21% of the UK food and grocery market, driven by factors such as consumers shopping locally to save on petrol costs, and the benefit of longer opening hours. With nearly three thousand stores it has a scale advantage that smaller shops envy, and it is Britain’s biggest farmer which should give it access to high quality food at reasonable prices. It also claims to be ethical in its sourcing policy.

Peter Marks, the Co-op’s chief executive, attributed the drop in profits to budget conscious consumers and a particularly competitive grocery trade, where over 40% of goods are sold on promotion. Well yes, but none of this is new news, and the Co-op has failed to deal with market place reality.

Price is not everything. If the Co-op offered something different and special then the fact that it is a bit more expensive would not be a stumbling block. A trip to several Co-op stores seems to indicate that what can be bought is anything but special. Despite the claim to be “Good with food”, there is a minimal amount of space dedicated to food, and what is available often looked tired and unappetising.

   

Add to this a sense that nothing new or exciting has happened to the Co-op food offering in years, and it is possible to see why shoppers might be tempted to pop down the road to a Tesco or Sainsbury or even Marks and Spencer and Waitrose who are all now operating in the convenience sector, and upping their game with a focus on value, innovation and good if not superb quality.

It is difficult to avoid the conclusion that the Co-op has been badly managed, and it is perhaps here that we see the downsides of the cooperative model where operators are insulated from shareholder pressure to improve performance. Indeed if the Coop were publicly quoted it would have faced demands for management changes and a strategy rethink. Instead, the chief executive has decided to retire at a time of his own choosing leaving a mess at the food business as well as a huge challenge on the banking side which also saw a big drop in profits and must now set about the huge task of integrating the Lloyds TSB branches it recently acquired.

Shopping at ALDI Again

Spurred on by reports of a return to booming sales through discount grocers and news that ALDI is so confident about its growth prospects that it intends to employ an additional 3000 people in the next year, I visited a brand new ALDI in leafy Stratford on Avon to work out why discounters are proving more popular than ever.

Discounters first came to national consciousness in 2008 as a way to save on groceries at a time of economic pressure.  When things got a bit better economically speaking in 2009/2010, discount supermarket sales levelled off. But now in the face of further economic challenges discount supermarkets ALDI and Lidl have come into their own again, and in the last 12 weeks according to Kantar Worldpanel, ALDI grew by 26% and Lidl by 11% when the total market was down by 2%. Now ALDI and Lidl have record brand shares of 2.9% each.

The IGD (Institute of Grocery Distribution) tells us that the number of people visiting a discounter in the last month grew from 35% in May 2011 to 42% in May 2012, and that 31% say they will shop again in the next month, up from 24% last year. Thus discounters are benefitting from more people through their doors as well as regular customers choosing to spend a bigger slice of their food budget in a discount shop.

Indeed according to IGD it is better off families with children who are frequenting discounters more often, with 39% of ABC1’s with children saying they will return to shop compared with 30% of CDE’s with children.

It is clear from the trip to Stratford that ALDI is moving away from its traditional business model.  It continues to sell most of its packaged  goods under brand names only available at ALDI , in pack designs remarkably close to the national brand equivalent but at prices significantly below that of the national brand or a supermarket own label offering. The ALDI ginger nuts pictured cost 29p, versus McVities at over a £1. The company has also started to bolster its price credentials through witty advertising.

However, it now stocks many more national brands than previously, including Tetley, Nescafe, Mars, and Cadbury.

In the fresh arena it has started to offer premium lines, mimicking the “good, better, best “ approach taken by bigger supermarkets. Thus we find a “Specially Selected” range featuring lines like West Country butter with sea salt crystals.

The store acknowledges trends such as free range eggs and chicken, and seems to be a supporter of British produce. The chicken was British as was beef and some cuts of pork, although not bacon or sausages. Packs featured the Union flag and Red Tractor logo.

Despite the move upmarket,  fresh food prices in most cases remain remarkably low. However, there are signs of an upward drift. Beef mince claiming less than 28% fat was £3.11p per kilo, compared with Tesco less than 25% fat at £3.00.

The products Aldi sells are changing, and there are signs that the way in which they sell them is changing too. Of those extra 3000 staff, many will be employed in existing stores which will mean an  increased cost. I noticed too that the old speedy and cost efficient way of checkout whereby customers cannot pack at the till but have to throw goods back in the trolley and pack on one side is changing too. In Stratford, customers were packing at the till, leading to long queues. Another change is the availability of baskets which again are more time consuming to checkout as well as taking up valuable selling space.

 Some things have not changed. Trolleys still cost £1, redeemable on return, which means no staff are needed to collect them from the car park. Product is still displayed in boxes to reduce staff time involved in stacking shelves.

 There is no doubt that ALDI is evolving to offer more of what customers seem to want. However the big thing which makes ALDI successful is the low prices they offer – if all the new ideas interfere with that they will lose not only those seeking bargains at a time of austerity, but their core budget conscious customers too. And that way lies disaster.

Spectacular Increase in Lamb Eating as Supermarkets Cut Prices - But Still a Premium Meat Needing Premium Marketing

Lamb eating in the UK has grown for the first time in over three years. 

According to KantarWorldPanel data for the 12 weeks ending 10^th June volume sales of lamb grew by 16%. This reverses a severe downward trend, with sales at one time looking as if they were in free fall. Indeed, annual sales of fresh and frozen lamb through supermarkets have dropped from around 101,000 tonnes in 2008 to 70,000 tonnes today. (Source: World panel/EBLEX).

Renewed growth is welcome news to sheep farmers for the halcyon days of high lamb prices caused by the weakness of the £ versus the euro are behind us at least for the foreseeable future, and a strong domestic demand is needed to ensure that prices do not fall to unsustainable levels.

Predictably, the main reason for higher consumption is a drop in retail price. In the 12 weeks under review the average price of a kilo of lamb reduced from £8.22p to £8.08p as supermarkets promoted the product over Easter and in the run up to the Jubilee. Sales were also helped by the rocketing price of beef in the shops. The gap between the average price of a kilo of beef versus lamb has narrowed to around £1 a kilo versus £1.92 a year ago.

£8 a kilo is not cheap. Lamb remains a premium priced product out of the reach of many. And there has been sobering news on the premium food front. According to Kantar World panel, sales of supermarket own brand premium ranges, like Sainsbury’s Taste the Difference or Tesco’s Finest, have declined for the first time since 2008. It had seemed that consumers were willing, despite the general price of food rising, to keep buying premium food as long as they felt the quality justified the price. Now they are thinking twice, and in the last 12 weeks sales of premium own brand ranges have dropped by 6%. By contrast, sales of value ranges have soared, up 13%.

Further signs of belt tightening come in the form of below inflation sales through supermarkets – down 0.7% in June 2012 compared with June 2011, and the well documented performance of discounters Aldi and Lidl who continue to grow, up 26% and 11% respectively.

The increase in lamb eating is good news, and it is hoped but not expected that supermarkets will keep the price of lamb at these lower levels to encourage consumption.

What is urgently needed is a total rethink about the way lamb is marketed so that product quality is consistently superb, the type of cuts offered and advice about how to cook them are imaginative and relevant, and lamb becomes a worthwhile buy in the eyes of more consumers.

From Farm to Fork -Ireland's Plan to Brand its Food and Drink Exports

Ireland’s food and drink exports are worth 8.9 billion euros, around 9% of all exported merchandise, and grew 25% in 2011. In an effort to ensure that they remain competitive the country is embarking on a project to sell Ireland’s produce as a premium brand with sustainability as its key selling point, and hard evidence to back up the claim.

“Origin Green” is a voluntary scheme  embracing farmers, processors and food and drink manufacturers, run by Bord Bia the government body set up to promote growth in Irish food production. On signing up, participants commit to environmentally friendly actions like using less energy inputs, encouraging more biodiversity and minimising water use.

The idea of branding a country’s food output in order to achieve a premium price is original, ambitious and rather exciting. But will it work? 

Sceptics may say that the project is doomed to failure: that special interests will get in the way of uniting such a disparate band of players, and that it will be a hard sell to the independent minded farming community who must be engaged if the effort is to succeed given that sustainability starts on the farm.

These naysayers are probably adding that the sustainability bandwagon has rolled on and that in the current economic climate few consumers, the ultimate definers of what is worth a premium, are not prepared to shell out for such a nebulous benefit.

They could well be right of course, but here are a few reasons why the Irish approach might fly.

First, the impetus for the strategy comes from the top. The Irish Minister for Agriculture, Simon Coveney wants Ireland’s exports to grow and sees the way to do this as making Irish produce “Recognised globally as a trusted source of high quality, high value foods.”

Second, across the globe greenness and Ireland go hand in hand in the public’s mind. The Emerald Isle has a bigger opportunity than most to claim “greenness” as a point of difference and turn it into a strong reason for people to buy.

Third, the food and drink industry seems enthusiastic about the idea. Several heavy hitters have signed up to pilot the programme including ABP, Dawn Farm Foods, Kerry Group, Marine Harvest and Irish Distillers, and  Irish farmers are already engaged in projects designed to improve their environmental credentials. Since May 2011 Bord Bia has been monitoring the carbon footprint of all its quality mark beef farmers, checking around 500 farms per week. The dairy industry is next in line to take part in a similar programme.

Which leaves sustainability and whether it is a strong branding message. There is no doubt that consumers expect the companies they buy from to act with integrity, and this includes doing the right thing for the environment. Social media means that those who do not are quickly named and shamed. Thus major retailers, restaurant chains and manufacturers are driving the sustainability agenda, because they feel that this is what their customers expect of them. Bord Bia spoke to Marks and Spencer, McDonalds, Sainsbury and Unilever prior to finalising the Origin Green programme, and all confirmed that their suppliers are increasingly being required to adhere to sustainability criteria.

Whether sustainability can command a premium is difficult to say. But where the advantage might show itself is when a buyer looks at two products he is considering stocking, one Irish and one from elsewhere. All other things being equal he might well opt for the Irish version because of its sustainability credentials.

One wonders if countries on the British mainland would be able to develop and implement such a united, focussed approach to developing food and drink exports.