Edward Garner of Kantar Worldpanel ( previously called TNS) spoke yesterday about whether recent events like the move away from discounters, a decline in sales of value ranges, the resurgence of Waitrose and a swing to buying premium food over Christmas heralded the end of recessionary food buying behaviour. He did not offer a conclusion but en route to a fence sitting finale he did offer interesting nuggets about shoppers and the way they buy from the major supermarkets.
ASDA
The main message here is that ASDA is all about lowest price. When questioned, the overwhelming reason consumers give for shopping at ASDA is low prices., and it is ASDA who has gained most from the trend away from discounters. ASDA’s most recent price wheeze is to sell at a “round pound” price point, and in the last 12 weeks items priced at £1 have accounted for 14% of all sales. The round pound price point extends to £2, £3, £4 etc, and in total accounted for 22% of sales. Suppliers are being encouraged to tailor their products to sell at these particular prices.
The other side of the coin is that ASDA are not rated highly on quality. They undertrade on fresh and chilled foods, meaning their share of these is less than their total share, sales of their premium range are falling, and their organic sales are down 25% in the last twelve weeks, the worst performance of all supermarkets. (Note that ASDA would argue that they have upgraded quality and won lots of awards, but the Worldpanel figures suggest shoppers are not on the same page.)
Edward Garner did not say, but this obsession with price, coupled with a slight share decline over Christmas, may explain why Andy Bond who runs ASDA took the odd step of doing a public video in which he lambasted suppliers for not reducing prices when costs fell back , preferring instead to offer promotions which he termed “Weapons of Mass Distraction”. Bond declared that ASDA would “return with force” to its “Every day Low Price Strategy”, which he believes is best for customers, suppliers and shareholders. Other supermarkets might disagree.
Morrisons
Morrisons tends to be lumped with ASDA as a low price store, and certainly is seen by customers as offering good value, but it is changing its image and performing well. Morrisons overtrades by 3% in fresh and chilled foods, and by a huge 14% in fresh meat. As Garner says, something for farmers to be aware of. Also Morrisons is growing its number of wealthier customers, classed AB’s, who generally have more spending power.
Tesco
The news here is that their premium range is growing, and their discount range, introduced to fight Aldi and Lidl, only accounts for 1% of sales. Apparently the claim to be Britain’s biggest discounter backfired as we shoppers do not like to be told that we are buying cheap goods.
Waitrose
Waitrose has been doing well as shoppers get over the shock of inflationary price rises. Essentials, which Garner stressed is not a value range, but rather a communication exercise designed to make shoppers re- evaluate the store, has helped.
Marks and Spencer
Still a big problem, due to a lack of regular customers.
Fair Trade, Organics, Local Foods, and High Welfare
Sainsbury remains the biggest seller of Fair Trade products, and Waitrose sells 4.5 times more organic produce than its market share. However organic food has still not regained its position and Garner feels that the term organic will become a statement of production rather than a prime reason to buy.
Local Food sales are booming, and supermarkets are increasing the shelf space devoted to them.
High welfare products also continue to grow. 60% of all eggs sold in retail are now free range, despite costing about 30% more to buy, and free range chicken sales are also growing albeit at a slower rate.
Garner ended by saying that many industry watchers feel recessionary food buying habits may not have gone away because tax rises and spending cuts will breed uncertainty. On the other hand, he said, food only accounts for about 8% of overall consumer spend and so may not be the first port of call for consumer cutbacks.
If asked to come down on one side or the other, I’d say that there will be no return to unthinking spending any time soon, that people will pay for what they value whether it be premium ingredients or ethical beliefs, and not just follow lowest price, and that poor quality will not be tolerated.
Thursday, 25 February 2010
Sunday, 14 February 2010
Consumers and Shoppers – The Importance of Understanding the Difference.
From The Institute of Grocery Distribution comes a timely reminder of the difference between shoppers and consumers, consumers being the person who ultimately eats or uses a product and the shopper being the one who buys the product from the shop. Sometimes they are one and the same person, but not always. An example would be mothers buying food for the family where Mum is the shopper but the family eats what she buys (mostly!). Or in the case of a gift, the shopper buys but the consumer is the recipient. And when in the store, what someone feels as a consumer can be trumped by the immediacy of making a shopping choice.
The notion of differentiating the two has been around for years, but the point the IGD makes is that shopper understanding has become a multi million pound science. Retailers, engaged in a ferocious war for market share, are spending vast sums on understanding their shoppers in a climate where people are very picky about how they spend their money, and low inflation makes it doubly hard to get sales growth.
So, in this shopper is king (as IGD calls it) environment, suppliers approaching a retailer stands a better chance of getting heard if they bring deep knowledge about the way people shop for their particular product. Finding fresh insight is not easy given the enormous amount of data possessed by the retailers themselves. Tesco for example via their 83% owned subsidiary Dunnhumby reads the data of 22 million Clubcard holders every year.
Having said that, increasing sales is not just a matter of numbers, its also about psychology. IGD tells us that 70% of brand choices are made in store, and that 68% of product purchases are made on impulse. This seems a high number but it is not difficult to imagine products suddenly finding themselves in the shopping basket as a result of a stunning display, a slot alongside an obvious partner, or simply because it solves a shopper’s problem like what to dish up for dinner.
The snag with all this of course is that it stretches suppliers’ profits even more thinly. Not only do they have to be able to give retailers the margins they want, and cough up increasing sums for value based promotions, they now have to match retailers in shopper understanding, as well as spend money on marketing to build their brands with consumers.
This may give a clue as to why the big branded manufacturers want to get bigger. Size gives them the economies of scale they need to handle retailer demands both in the UK and globally, for the same retailer game is being played world wide. Such pressures may help explain moves like the Kraft bid for Cadbury.
It is clear though that anyone who supplies products under a retailers own brand name must be very conversant with shopper behaviour.
Which leads to an interesting dilemma for the levy boards - DairyCo, EBLEX, BPEX et al. Are they better spending money on broad messages to the consumer, as EBLEX have just started to do again, or would it be more productive to carry out forensic, in depth research on shoppers.
The notion of differentiating the two has been around for years, but the point the IGD makes is that shopper understanding has become a multi million pound science. Retailers, engaged in a ferocious war for market share, are spending vast sums on understanding their shoppers in a climate where people are very picky about how they spend their money, and low inflation makes it doubly hard to get sales growth.
So, in this shopper is king (as IGD calls it) environment, suppliers approaching a retailer stands a better chance of getting heard if they bring deep knowledge about the way people shop for their particular product. Finding fresh insight is not easy given the enormous amount of data possessed by the retailers themselves. Tesco for example via their 83% owned subsidiary Dunnhumby reads the data of 22 million Clubcard holders every year.
Having said that, increasing sales is not just a matter of numbers, its also about psychology. IGD tells us that 70% of brand choices are made in store, and that 68% of product purchases are made on impulse. This seems a high number but it is not difficult to imagine products suddenly finding themselves in the shopping basket as a result of a stunning display, a slot alongside an obvious partner, or simply because it solves a shopper’s problem like what to dish up for dinner.
The snag with all this of course is that it stretches suppliers’ profits even more thinly. Not only do they have to be able to give retailers the margins they want, and cough up increasing sums for value based promotions, they now have to match retailers in shopper understanding, as well as spend money on marketing to build their brands with consumers.
This may give a clue as to why the big branded manufacturers want to get bigger. Size gives them the economies of scale they need to handle retailer demands both in the UK and globally, for the same retailer game is being played world wide. Such pressures may help explain moves like the Kraft bid for Cadbury.
It is clear though that anyone who supplies products under a retailers own brand name must be very conversant with shopper behaviour.
Which leads to an interesting dilemma for the levy boards - DairyCo, EBLEX, BPEX et al. Are they better spending money on broad messages to the consumer, as EBLEX have just started to do again, or would it be more productive to carry out forensic, in depth research on shoppers.
I'd vote for shopper research on the grounds that the findings would be valuable to all producers, large or small. No concrete case has been made about whether generic advertising works, yet a thorough understanding of how people shop a category could lead to fresh ideas and a much needed rise in sales.
Thursday, 28 January 2010
Hard Cheese – The Baffling Behaviour of Branded Cheddar Sellers
Dairyco have just published figures for cheese sales in the 52 weeks to end December 2009. The top line picture is that total cheese sales are up, by 4.2% in tonnage, helped, as Dairyco points out, by a very modest price rise of just 1p per kilo.
The detailed figures reveal one startling change, namely that the price of branded cheddar dropped by 29p per kilo or 5% whereas that of supermarkets’ own label increased by 1p. This means that branded cheddar is 7% cheaper than the supermarket equivalent, whereas all received wisdom would say that it ought to be at least 10% dearer to pay for the advertising and promotional costs that accompany a branded product. At the end of 2007, branded cheddar cheese sold at £5.63p a kilo versus own label at £5.21p, a premium of 8%. At the end of 2009, branded cheddar sold at £5.99p versus supermarket own label at £6.42p.
The branded guys will no doubt be celebrating spectacular sales. The price cut meant that their volumes grew by 21% in 2009 and their sales value by 16%. The own label people acted very differently. On their standard cheddar they took a modest price rise and achieved increases of just under 1% in volume and value.
So what might be the right strategy - to maintain price, volume and profit margin, as retailers did with their own brands, or to cut prices, get higher volume, but sacrifice margin.
We will never know exactly what the financial outcome of these heavy promotions is. All we will hear during investor presentations is that brands saw terrific growth. However, the chances are that the branded sellers made much less money than own label.
Here’s why. At a price of £5.99p per kilo, a 30% margin to retailers and a 50% cost of goods the volume increases achieved would deliver the same profit as holding the price at 2008 levels. If either the cost of goods or retailer margin is higher then the promotions lose money. Add to this a likely payment to the retailer to run the promotion, a possible demand for cash margins to be maintained even though prices are reduced, and overtime running at factories to produce the incremental volume then losses increase.
The supermarkets will be laughing their socks off. Their total cheese sales are up, and their profits will be too as all the expensive price cutting promotion costs will have been borne by the brands.
The branded processors behaviour is baffling. Deep price cuts are a zero sum game, for as soon as one company breaks ranks the others follow to avoid losing market share, and they are generally ruinous to profits.
We can speculate as to how any shortfall in profit might be made up. The reasons for declines in farmgate milk prices get lost in a terrific snow job from processors who blanket us with tales of unfavourable exchange rates and world commodity prices. But one is left wondering whether the drop in liquid milk prices went some way to funding all these cheese promotions.
The detailed figures reveal one startling change, namely that the price of branded cheddar dropped by 29p per kilo or 5% whereas that of supermarkets’ own label increased by 1p. This means that branded cheddar is 7% cheaper than the supermarket equivalent, whereas all received wisdom would say that it ought to be at least 10% dearer to pay for the advertising and promotional costs that accompany a branded product. At the end of 2007, branded cheddar cheese sold at £5.63p a kilo versus own label at £5.21p, a premium of 8%. At the end of 2009, branded cheddar sold at £5.99p versus supermarket own label at £6.42p.
The branded guys will no doubt be celebrating spectacular sales. The price cut meant that their volumes grew by 21% in 2009 and their sales value by 16%. The own label people acted very differently. On their standard cheddar they took a modest price rise and achieved increases of just under 1% in volume and value.
So what might be the right strategy - to maintain price, volume and profit margin, as retailers did with their own brands, or to cut prices, get higher volume, but sacrifice margin.
We will never know exactly what the financial outcome of these heavy promotions is. All we will hear during investor presentations is that brands saw terrific growth. However, the chances are that the branded sellers made much less money than own label.
Here’s why. At a price of £5.99p per kilo, a 30% margin to retailers and a 50% cost of goods the volume increases achieved would deliver the same profit as holding the price at 2008 levels. If either the cost of goods or retailer margin is higher then the promotions lose money. Add to this a likely payment to the retailer to run the promotion, a possible demand for cash margins to be maintained even though prices are reduced, and overtime running at factories to produce the incremental volume then losses increase.
The supermarkets will be laughing their socks off. Their total cheese sales are up, and their profits will be too as all the expensive price cutting promotion costs will have been borne by the brands.
The branded processors behaviour is baffling. Deep price cuts are a zero sum game, for as soon as one company breaks ranks the others follow to avoid losing market share, and they are generally ruinous to profits.
We can speculate as to how any shortfall in profit might be made up. The reasons for declines in farmgate milk prices get lost in a terrific snow job from processors who blanket us with tales of unfavourable exchange rates and world commodity prices. But one is left wondering whether the drop in liquid milk prices went some way to funding all these cheese promotions.
Wednesday, 20 January 2010
Food Buying Behaviour – Distinguishing Between a Fad and a Trend
There is a lot of change just now in consumer food buying behaviour, and being able to distinguish between which of these changes are fads and which are trends saves time, money and heartache.
Well documented changes include more buying of local and British, a drop in organic sales, more interest in welfare friendly products and Fair Trade, a shift back to upmarket Waitrose and away from discounters, a boom in buying premium foods over Xmas but increased amounts of products sold on promotion, a massive rise over Xmas in online food buying, and frantic attempts by retailers to stop what Laurie McIlwee of Tesco called “promiscuous” customers shopping around for the best deals. Other reported changes are more people growing their own vegetables, more scratch cooking and less ready meal purchase, and an upsurge in sales of unfashionable cuts such as pigs trotters and skirt of beef.
What in all that might be a fad to be avoided or a trend to be embraced?
The text books tell us that a trend is something that reflects broader society and what it values. Often a trend will cut across various industries, usually emerges slowly and builds over time, and is a development of an already existing trend . A fad appears from nowhere, is taken up with exaggerated enthusiasm for a short time, and is often fed by media hype. It is not fuelled by consumers needs.
So, which are fads and which trends in all the changes mentioned earlier?
Predictable fads are oddballs like pigs trotters. The rush to grow your own is also likely to be a fad, dying down as all but the most dedicated realise how backbreaking and expensive home vegetable growing can be.
More controversially I’d say that the big rise in organic sales between 2005 and 2007 was a fad, as was the flocking in 2008 to discount supermarkets. Purchasing organic for a short while became the fashionable thing to do, fuelled by the media who liberally advised organic purchase without saying why. Equally, the discount rush quickly subsided as many who felt they had to go and see what all the fuss was about decided that they could get more choice at the value they wanted in conventional supermarkets. This is not to dismiss the loyal core of consumers who won’t buy anything but organic, or who find exactly what they need at Aldi or Lidl. Rather it is to stress that explosive growth is rarely sustainable,unless it results from a solid reason to buy.
The jury is out on whether Fair Trade is a trend. On the one hand the British support fair play, but on the other I’m not sure whether there would be a huge outcry of protest if it disappeared from the shelves.
On line food shopping is definitely a trend. It started in other industries and fulfils a consumer need for convenience. Buying British and local are trends as is the increased interest in welfare friendly products. Both tap into a deep rooted albeit often latent- until- prodded British wish to fly the flag, support community, and care about animal welfare. The move towards premium food is also a trend. People are interested in high quality ingredients and good tasting food. The only reason for a hiccup in premium buying was that a lot of products labelled premium did not justify the price asked.
One definite trend is the cutthroat competition among supermarkets. This will only accelerate as they try to lap what have been high growth years. Despite all having good sales over Christmas the price cutting promotions have already begun with Tesco and ASDA leading the way. Where they go, others will follow.
Well documented changes include more buying of local and British, a drop in organic sales, more interest in welfare friendly products and Fair Trade, a shift back to upmarket Waitrose and away from discounters, a boom in buying premium foods over Xmas but increased amounts of products sold on promotion, a massive rise over Xmas in online food buying, and frantic attempts by retailers to stop what Laurie McIlwee of Tesco called “promiscuous” customers shopping around for the best deals. Other reported changes are more people growing their own vegetables, more scratch cooking and less ready meal purchase, and an upsurge in sales of unfashionable cuts such as pigs trotters and skirt of beef.
What in all that might be a fad to be avoided or a trend to be embraced?
The text books tell us that a trend is something that reflects broader society and what it values. Often a trend will cut across various industries, usually emerges slowly and builds over time, and is a development of an already existing trend . A fad appears from nowhere, is taken up with exaggerated enthusiasm for a short time, and is often fed by media hype. It is not fuelled by consumers needs.
So, which are fads and which trends in all the changes mentioned earlier?
Predictable fads are oddballs like pigs trotters. The rush to grow your own is also likely to be a fad, dying down as all but the most dedicated realise how backbreaking and expensive home vegetable growing can be.
More controversially I’d say that the big rise in organic sales between 2005 and 2007 was a fad, as was the flocking in 2008 to discount supermarkets. Purchasing organic for a short while became the fashionable thing to do, fuelled by the media who liberally advised organic purchase without saying why. Equally, the discount rush quickly subsided as many who felt they had to go and see what all the fuss was about decided that they could get more choice at the value they wanted in conventional supermarkets. This is not to dismiss the loyal core of consumers who won’t buy anything but organic, or who find exactly what they need at Aldi or Lidl. Rather it is to stress that explosive growth is rarely sustainable,unless it results from a solid reason to buy.
The jury is out on whether Fair Trade is a trend. On the one hand the British support fair play, but on the other I’m not sure whether there would be a huge outcry of protest if it disappeared from the shelves.
On line food shopping is definitely a trend. It started in other industries and fulfils a consumer need for convenience. Buying British and local are trends as is the increased interest in welfare friendly products. Both tap into a deep rooted albeit often latent- until- prodded British wish to fly the flag, support community, and care about animal welfare. The move towards premium food is also a trend. People are interested in high quality ingredients and good tasting food. The only reason for a hiccup in premium buying was that a lot of products labelled premium did not justify the price asked.
One definite trend is the cutthroat competition among supermarkets. This will only accelerate as they try to lap what have been high growth years. Despite all having good sales over Christmas the price cutting promotions have already begun with Tesco and ASDA leading the way. Where they go, others will follow.
Tuesday, 12 January 2010
Food 2030 – Can We Rely on the Consumer to Make Everything OK?
One new thread in a document generally viewed as big on aspiration but light on action is the role of the consumer in driving change.
By 2030, according to the document, consumers will be “aware of the origins of their food and understand the environmental and social impact of their choices.” They will “choose and afford healthy and sustainable food”. They will play a major part in achieving a low carbon food system. They will “express environmental concerns in the market place” and by demanding environmentally friendly products they will prod producers and processors into climate friendly innovation and invention.
They will be sufficiently educated to stop their current practice of wasting a third of the food they buy.
Net net, consumers will use their influence and spending power to support those who produce environmentally sound, sustainable, animal welfare friendly, healthy food.
It’s a lovely idea. How super to think that in just 20 years time Britain will be a nation of slim, fit, concerned individuals dedicated to spending their money only on the right type of food, bought in the right quantities, produced in the right way, and with a fair reward for those who produce it.
This is a massive attitude change, and raises the question of just how do you change consumer behaviour so radically.
It helps to have a following wind, and it is true to say that consumers are becoming more interested in eating healthily, want to know where their food comes from and how it is produced, and like to buy local foods. But it’s still a minority, and its an even smaller minority who are interested in things like the carbon footprint of their food. The document acknowledges that the topic of a sustainable diet is a “niche interest”.
The strategy document talks about encouraging change by putting information on the “eat well” website and make labelling more explicit. This is nowhere near enough. Getting the wholesale change described will require enormous advertising and promotional budgets, commitment from major retailers to disproportionately stock and display so called healthy and sustainable foods, and a situation where the price of the “right” food” is the same as, or only a few pence more than the “wrong” equivalent.
How big might the marketing and advertising budget need to be? In the year to March 2009, the government spent £540 million pounds on communicating anti smoking, climate change, anti obesity and road safety messages. This is a 59% increase since 2005, yet 25% of the population still smoke, and obesity levels do not seem to be falling. Big budgets do not guarantee success, particularly when it is government talking, and its interesting to note that one of the major shifts in consumer buying, the shift to higher welfare chicken, came about not through government action but through the efforts of celebrity chefs Oliver and Fearnley-Whittingstall.
Major retailers with their 80%+ share of grocery shopping will be crucial to consumer change. They are past masters at running with even a hint of consumer demand, but they are unlikely to support anything they see as overpriced or giving them a lower margin.
And on the subject of price, the search for the "right" food is unlikely to be accompanied by a major loosening of consumer purse strings. We know that consumers will pay a bit extra for something they value, but baulk at overpaying, as the recent collapse in organic sales has shown. One of the reasons Fair Trade has been so successful is that many of its products are sold at the same price as equivalents, such as bananas, Cadbury’s Fair Trade Dairy Milk chocolate, and Tate and Lyle’s Fair Trade sugar.
It will take alot to reach the Nirvana described in Food 2030, and at the end of the day one is left wondering what difference the attitude change, were it achieved, would make to producers. It would probably impact the actual foods that were produced, and how they were produced. It would not help the issue of how to produce more, and it would not address the issue of profitability. Which leads us back to the failure of the strategy document in that it is a social and environmental treatise, not a production plan.
By 2030, according to the document, consumers will be “aware of the origins of their food and understand the environmental and social impact of their choices.” They will “choose and afford healthy and sustainable food”. They will play a major part in achieving a low carbon food system. They will “express environmental concerns in the market place” and by demanding environmentally friendly products they will prod producers and processors into climate friendly innovation and invention.
They will be sufficiently educated to stop their current practice of wasting a third of the food they buy.
Net net, consumers will use their influence and spending power to support those who produce environmentally sound, sustainable, animal welfare friendly, healthy food.
It’s a lovely idea. How super to think that in just 20 years time Britain will be a nation of slim, fit, concerned individuals dedicated to spending their money only on the right type of food, bought in the right quantities, produced in the right way, and with a fair reward for those who produce it.
This is a massive attitude change, and raises the question of just how do you change consumer behaviour so radically.
It helps to have a following wind, and it is true to say that consumers are becoming more interested in eating healthily, want to know where their food comes from and how it is produced, and like to buy local foods. But it’s still a minority, and its an even smaller minority who are interested in things like the carbon footprint of their food. The document acknowledges that the topic of a sustainable diet is a “niche interest”.
The strategy document talks about encouraging change by putting information on the “eat well” website and make labelling more explicit. This is nowhere near enough. Getting the wholesale change described will require enormous advertising and promotional budgets, commitment from major retailers to disproportionately stock and display so called healthy and sustainable foods, and a situation where the price of the “right” food” is the same as, or only a few pence more than the “wrong” equivalent.
How big might the marketing and advertising budget need to be? In the year to March 2009, the government spent £540 million pounds on communicating anti smoking, climate change, anti obesity and road safety messages. This is a 59% increase since 2005, yet 25% of the population still smoke, and obesity levels do not seem to be falling. Big budgets do not guarantee success, particularly when it is government talking, and its interesting to note that one of the major shifts in consumer buying, the shift to higher welfare chicken, came about not through government action but through the efforts of celebrity chefs Oliver and Fearnley-Whittingstall.
Major retailers with their 80%+ share of grocery shopping will be crucial to consumer change. They are past masters at running with even a hint of consumer demand, but they are unlikely to support anything they see as overpriced or giving them a lower margin.
And on the subject of price, the search for the "right" food is unlikely to be accompanied by a major loosening of consumer purse strings. We know that consumers will pay a bit extra for something they value, but baulk at overpaying, as the recent collapse in organic sales has shown. One of the reasons Fair Trade has been so successful is that many of its products are sold at the same price as equivalents, such as bananas, Cadbury’s Fair Trade Dairy Milk chocolate, and Tate and Lyle’s Fair Trade sugar.
It will take alot to reach the Nirvana described in Food 2030, and at the end of the day one is left wondering what difference the attitude change, were it achieved, would make to producers. It would probably impact the actual foods that were produced, and how they were produced. It would not help the issue of how to produce more, and it would not address the issue of profitability. Which leads us back to the failure of the strategy document in that it is a social and environmental treatise, not a production plan.
Tuesday, 5 January 2010
Ways to Grow the Beef Mince Market - A Report for Beef Producers
Mince accounts for 52% of all beef sold, and it has come under the spotlight in a new report written by the Institute of Grocery Distribution with contributions from Dunhumby, who analyse Tesco data, and Taylor Nelson Sofres who monitor the total market. The report’s aim is to “help beef producers understand the challenges that the wider beef supply chain faces in maintaining and growing one of the most important and versatile meat products”. The report is endorsed by the NFU, EBLEX and the AHDB.
Some of the data in the report could be guessed, but some is really quite startling. Fairly predictable is the fact that mince beef sales, although down 1% in volume over the past year, have held up better than any other cut. Total beef sales are down around 3%. It’s also unsurprising that premium mince, sold under supermarkets expensive labels such as Tesco’s Finest and Sainsbury’s Taste the Difference, tends to be bought by the more affluent, whilst value mince is bought by the less well off. Smaller 250g packs are bought by pensioners and older families, and bigger packs by bigger families.
Other facts are less obvious. For example, nearly half of all mince is sold on some sort of price promotion, the most popular just now being “buy 2 packs for (say) £4”. This compares with about a third of sales on promotion a year ago. And mince is not just mince. In fact the market is divided up into 4 segments – premium, standard, value and healthy. These are categories defined by supermarkets themselves, and are designed to appeal to different types of consumers. Region wise, the Scots eat most premium mince, value sells best in the North East, and healthy mince appeals most in the south and east.
Most startlingly of all, value mince has grown very fast with sales doubling in the last year, but it still only accounts for a small proportion of mince sold. IGD shows that in Tesco, value mince in the biggest selling 500g pack size, is just 3.4% of sales of all its mince in the 250g to 500g sizes, compared with 4.5% for premium and 11% for healthy. So, contrary to most people’s expectations, consumer choices are not all about lowest possible price.
Looking forward, the report suggests that anyone seeking to grow the beef mince market should bear consumer trends in mind. Chief of these is health, with 57% of people thinking that they can make a difference to their health through the foods they eat. Interest in local foods continues, as does commitment to buying products with high animal welfare standards. And most encouraging of all, 89% of consumers feel that British farmers should be supported.
The last point made by the report is the need for carcase balance. And they are right to point this out. Clearly it makes little financial sense to grow the mince market yet in the process use up cuts which can be sold at a higher price. Although easier said than done, a marketing strategy is needed for the whole animal.
Monday, 14 December 2009
UK Milk Market – Examining Opportunities for Growth
Tetra Pak, multi billion pound maker of drinks cartons, has just published a review of the UK liquid milk market, setting out where growth opportunities might lie.
The company estimates the total market, retail and catering together, to be around 6 billion litres, with sales down 1% year on year. Growth in retail sales is partly offsetting a decline in catering. (For comparison, DairyCo’s latest numbers for retail show the market to total 5 billion litres, up 0.4%).
According to Tetra Pak, functional products with added health benefits are the biggest growth opportunity. They point out that products like Unilever’s Flora Pro Activ which promises lower cholesterol, and Lactofree from Arla are growing strongly, and increasing health consciousness will drive growth still further. This has apparently happened in America where products with added health benefits are booming.
Whilst Tetra Pak are correct to say that keeping healthy is a worry in the UK, launching successful products will not be easy. Health benefits do not trump a poor tasting product, so much research and development will be needed to ensure that the products not only deliver their claims but also taste great, and vast marketing budgets are needed to explain a benefit to a public generally mistrustful of anything which smacks of being modified.
A more straight-forward opportunity identified by Tetra Pak lies in the flavoured milks market, where, helped by the launch of exotic varieties, the market has grown to 200 million litres in 2009. An EU ruling that subsidies for milk now apply to secondary as well as primary schools may encourage teenage consumption. And at the youngest end of the age scale, Tetra Pak has noted a rise in sales of baby and toddler milks.
One of the quirkier facts in the review is that goat’s milk is the fastest growing sector of all.
And so to brands and innovation. The Tetra Pak review shows that the share of branded milks has grown to over 20%. EU regulations whereby milks of varying fat levels can be labelled as milk, rather than milk drink, allowed a new sector to emerge, led by Wiseman’s “The One %". Cravendale filtered milk from Arla with its longer shelf life has been a shining example of innovation. The product is sold at a premium and the sector has come from nowhere to be now worth £229million. Lactofree is another branded success. All demonstrate that premiums and innovation are possible even in a so called commodity market.
Anders Olsson of Tetra Pak reckons that more creative thinking and better consumer understanding would lead to a more dynamic milk market. He says that “The current state of mind is auto-pilot”. It may sound harsh but he has a point. Liquid milk is a huge but static market, and there is a crying need for innovation to reduce dependence on sales of low margin standard milk to major retailers, to get the value of milk sales up, and to return some of the higher value margin to milk producers.
Notes from DairyCo’s consumer sales audit for the 12 months to 1st November 2009
- the liquid milk market is up 0.4% in volume and 6.7% in value
- filtered milks grew by 10%
- organic milk sales are down 2%
- Jersey and Guernsey are doing well off a small base, up 13%
- UHT milk is down 2%, but a new sector, sterilised milk, is growing rapidly albeit is still very small. DairyCo thinks this is because it offers a longer shelf life.
- soya milk sales are down 5%
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