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The Squeezed Middle: How Independent Retailers Can Benefit From Changing Shopper Behaviour

simon — Tue, 13 Dec 2011 12:10:45 +0000

I was interested to learn that the three UK supermarkets growing fastest at present are Aldi, Lidl and Waitrose. That is two discounters who major on low prices and a limited product selection plus our most up-market food retailer. What do they have in common?They are all very single-minded in what they do. Unlike Asda, Sainsbury’s and Tesco these shops do not offer basic, medium and top-tier ranges: everything is pretty much the same price-range (Aldo and Lidl cheap, Waitrose reassuringly expensive. And yes I know that the Waitrose Essentials range exists but it is not positioned as a low price option). So being clear with your price positioning seems to work.

Is it all about people with not much money going to Adli and Lidl and people with lots of money going to Waitrose? My own experience is that this is an oversimplification. The Lidl I visited last week had plenty of Mercedes in the car park and customers who were selectively buying high quality, low priced items such as single origin, high cocoa solids 100g chocolate bars. The after effects of the economic recession have made shoppers more promiscuous – they are less likely only to shop in one supermarket. It may be that we are moving towards the German model where you are seen as canny if you get your loo rolls from a discounter and your baguette from the local French deli.

What can the natural food retailer take from this? Low cost is attractive to customers but it is not the only option. Having a clear and well-signposted price position is important, whether you are low cost / no frills or whether you justify higher prices through a higher-quality shopping experience. Perceived value remains the key.

Some Notes from the Soil Association Organic Briefing 26.09.11

simon — Wed, 28 Sep 2011 14:18:54 +0000

Held at the Rudolf Steiner Centre, London

OCADO

Lawrence Hene

Head of Grocery Retail

Ocado (www.ocado.com)

1.1Market Share

Organic is 10% of sales and still in growth (11% year-on-year: however total business grew by 20%)
Ocado has less than 0.5% total retail shares but 5% of organic sales, ie over-trades on organic x10
Believe that future growth will come from brands not own-label
Total range to expand to 40,000 SKUs, 10% to be organic

1.2 Reasons For Outperformance

Wider range – 1391 organic SKUs versus Waitrose (1067), Tesco (634), Sainsbury’s (439)
More organic brands (1100 vs 300 Duchy/Waitrose own-label)
Availability of information and content onsite
Better customer profile

1.3 Customer Profile

Average shop = 50 items
Over 40% of customers are under 40, almost 10% are over 60
60% of customers have household income below £60k
14% have a baby
Under half of customers live within the M25
Coverage of UK is now 72% of consumers
20% of sales now made via mobile phones (early adopters)
Organic sales are 7-11% of total sales across the UK
79% of customers buy at least 1 organic item
27% of customers buy at least 5 organic items
Organic brands outperform organic own-label (Waitrose and Duchy)

1.4 Adding new lines

Possible from Feb 2012
Write to LH as the first step
Sampling a good launch vehicle (highly targetted)
Transactional websites possible from next year
Website to be personalised “soon”

2 Ed Garner, Kantar

Data generated by recording what 25,000 UK households actually buy (do rather than say)

2.1 Current UK retail scene

Growth is coming only from discounters (+12% year-on-year) and Waitrose (+9%)

2.2 UK organic sales

Year-on-year organic performance (%)

Asda –22

Morrisons –25

Sainsbury’s –2

Waitrose –5

Tesco –7

Overall –8

Organic chocolate now worth £31m per year (w/e August 7 2011)

Challenge: niche organic fixture or mass market run of store?

2.3 Organic penetration

85% of households buy organic in a year
63% of buyers account for 13% of sales
8% of buyers account for 54% of sales

Top 4 organic brands have sidelined organic claim to be replaced by:

Sustainable (Duchy)
Sense of place (Yeo Valley)
Health (Rachel’s)
Luxury (Green + Black’s)

3. Helen Browning – new Soil Association strategic plan

“Healthy soil, healthy people, healthy planet.”

Themes

Facing The Future
Good Food For All
Enabling Change

“Celebrate the complexity of organics”

SW 27.09.11

Confessions of an organic vegetarian

simon — Fri, 20 May 2011 07:45:27 +0000

Meat Free Monday (and Tuesday and Wednesday and Thursday and Friday and…)

There is nothing more illogical than an organic vegetarian, but that is what I am. Organic farming relies upon animals to add fertility to the land during the rotation of fields. It is technically possible to farm organically without animals (so-called stockless systems) but it is more difficult. And if farmers rear organic animals then it is logical that organic consumers need to eat the resultant organic meat.

I opted out of meat-eating during my student days around 30 years ago. My main motive was poverty – my student grant (in the days when it was possible to have one) could buy me nasty cheap meat or OK fruit and veg. Subsequently I discovered that I didn’t really like the taste or texture of meat. Much later I started reading about the cruelty involved in intensive animal production. At no point did I consider the environmental impact of meat eating, but this is something that we now all must do.

It has been estimated that to produce 1kg of animal protein it takes 10 times more land than it takes to produce 1kg of vegetable protein. So it will take ten times more land to feed a carnivore than a vegetarian.

And that’s why we are all going to have to do a lot more than give up meat one day a week (aka Meat Free Mondays, www.meatfreemondays.com ). Include the fact that ruminants such as cows emit greenhouse gases from their many stomachs and a vegetarian diet looks like the only way forward for the planet. In fact a vegan diet would be optimal, as dairy production carries the same sort of environmental baggage as meat production.

So maybe it will be meat or dairy once a week as a special treat. Which would be the way that most people in this country used to eat. Back to the future!

Rise of organic food stalled by recession

simon — Tue, 05 Apr 2011 14:33:49 +0000

Martin Hickman www.independent.co.uk

Monday, 4 April 2011

A £100m hole was knocked in sales of organic food last year as shoppers opted for cheaper produce in the economic downturn.

Overall, sales fell by 5.9 per cent from £1.84bn to £1.73bn, according to research by the Soil Association, the country’s biggest certifier of organic products.

The fall – outlined in the organisation’s 2011 Organic Market Report, to be published today, dashed the Soil Association’s prediction made last year of a 2 to 5 per cent recovery in 2010. However, it was half the 12 per cent slump in 2009, which ended 16 years of uninterrupted growth.

The fall also slowed in the second half of the year to around 2 per cent and continued to bottom out this year, according to the Organic Trade Board, which is running a £2m advertising campaign to promote organic food as tastier and kinder to animals and the environment.

Organic rules ban artificial fertilisers and pesticides and lay down higher standards for the keeping of pigs and poultry.

Amid concerns about the environment and food quality, the organic movement experienced a boom in the mid-noughties, with sales rising by up to 30 per cent a year.

However, as shoppers adjusted to a harsher economic climate last year, sales of organic fresh fruit and vegetables and dairy – which account for more than half of all organic sales – fell by 6.3 per cent and 2.7 per cent respectively. Fresh meat was down by 5.8 per cent.

Organic ready meals crashed 36 per cent, which the Soil Association put down to people cooking more cheaply from scratch.

By contrast, organic baby food continued its strong growth, jumping 10.3 per cent, and organic textiles – made fashionable by H&M and Zara – increased by 7.8 per cent.

The amount of land in organic production fell by more than 10 per cent, from 4.8 per cent to 4.2 per cent of all farmland, and the number of producers slipped from a record high of 7,896 to 7,567.

Production of organic vegetables and organic milk fell but cereal production increased, buoyed by high grain prices and strong demand for milling wheat.

The big supermarkets still clocked up £1.25bn in sales, 72 per cent of the total, but that was down by an above average 7.7 per cent on the previous year. Box scheme and mail-order deliveries grew by 1 per cent to £156m, probably because those customers have a stronger commitment to the movement.

The Soil Association pointed out that 86 per cent of households now bought organic products.

Despite the overall drop, the Soil Association was quietly confident about the future, saying that Tesco, Sainsbury’s, Morrisons and the Co-op expected sales to level off this year while Waitrose and Marks & Spencer predicted a small rise.

“The outlook for 2011 is cautiously optimistic,” it said. “Despite fragile consumer confidence in the wider economy, the report shows positive signs of resilience and recovery for the organic sector overall.”

Huw Bowles, the chairman of the Organic Trade Board – funded by producers such as Yeo Valley and Organix – said the economy had been the main reason people had reduced their spending. “A couple of years ago, people thought it was the end of the world and nobody would be able to afford organic, but as time has gone on, people have realised that organic is still here and that the reasons to buy organic are still still valid,” he said. “People are probably not buying as frequently and as much as they were two years ago.”

Roger Mortlock, the deputy director of the Soil Association, said it would be “rash” to make predictions for the future. “The instability caused by climate change, population growth and resource depletion mean that business as usual in food and farming is not an option.”

Local Is The New Organic…Not

simon — Wed, 09 Mar 2011 13:38:12 +0000

“Local Is The New Organic” is a headline from a recent edition of The Grocer. And there is no doubt that many people would like it to be so, especially supermarkets. It is much easier and cheaper to source potatoes ‘locally’ than organically. It also helps that there is no legal definition of the word local so, to paraphrase Alice in Wonderland, it means what you want it to mean. The honourable exception here is Waitrose who define local food as that sourced no more than 30 miles from the store. Local can refer to a village, town, county, region or even country, and I have seen all these descriptions used to justify the use of the word local on UK food and drink.
I don’t want to see South African apples on sale in my local greengrocers when UK apples are freely available. I am delighted at the renaissance in beer, bread and cheese that has resulted in the revival of artisan UK brewers, bakers and cheesemakers. I chair the judging at the Quality Food Awards ( www.qualityfoodawards.com ) and our Local category goes from strength to strength – every year it highlights the terrific food and drink available from small UK producers.

But what is inherently sustainable about local? Nothing. The 3,770 cow mega-dairy that was planned for Nocton could have been described as local if you were unfortunate enough to live in the vicinity. Locally sourced products are good for keeping food miles down, but this is just one facet of the sustainability challenge. And I want the whole thing – low input (preferably organic), Fairtrade, cruelty-free, sustainably packaged and from a company of whose ethics I approve. Where does local fit in? As one aspect of a much larger picture

Preparing for Change In the Ethical Landscape

simon — Tue, 08 Mar 2011 12:35:28 +0000

Footprint Forum, London, March 7^th 2011

Footprint Forum is organised by Foodservice Footprint whose remit is to address the environmental aspects of the foodservice process (more at www.foodservicefootprint.com ). Yesterday they organised an event at the NFT to consider how ethical marks and accreditation are having an impact on foodservice. Here are the some of the more interesting things I heard said

Wolfgang Weinmann, Cafedirect

Ethical onpack labels have proliferated in recent years – there are now over 90 in common use
This has lead to great confusion within industry and with consumers
Labels are NOT the answer to everything because they only deal with products and sourcing – what is needed is to look at the full sustainability impact of an entire organisation which must encompass sourcing, processing and how the organisation interfaces with other stakeholders (employees, investors, suppliers, consumers)
Sourcing should include a direct investment in helping producers achieve higher quality of crops and long term supply relationships (“sustainable supply”)
Processing is nor currently covered by labels – we need a “cradle to grave” approach where the inside of the product is consistent with the outside
There has been much progress made by ethical labelling over the last 20 years – now we need to move on from being product-led to whole company evaluation

Shefalee Loth, Which? Magazine

Recently carried out some research with consumers and ethical labels (survey plus focus groups)
Surprised by low level of understanding re the various onpack logos
Fairtrade logo known and understood by about 80% of consumers but the others much less so
Consumers feel there are too many schemes, streamlining number of accreditors would be good
Popular were schemes that encompass more than one aspect of a product eg Red Tractor
Consumers want logos that are independent, verifiable and underpinned by scientific evidence (supermarkets own schemes not popular)
40% of consumers want an ‘omni-label’ that covers everything

Bill Vorley, International Institute for Environment and Development

Local is currently a very strong driver, this leading to conflicts between supporting small farmers in the South vs supporting local farmers in the North (however there is nothing inherently sustainable about local food, however it is defined)
Despite this big companies making strong commitment eg Unilever 100% sustainable procurement by 2020, Walmart to triple sales from emerging economies, Co-op to source everything that can be Fairtrade by 2013
Four possible options for companies going forward: adopt labels and standards, set targets, initiate informed debate with stakeholders as to what they want, adjust fundamental business model to ensure sustainability

Panel Discusion

“Ethical certification started off in retail. Food service needs it’s own certification schemes with lower costs per unit and more appropriate documentation requirements.” (Anil Alim, BaxterStorey)
“Some companies like Cadbury’s see working more closely with farmers as a way of securing a long-term ingredient supply in times of shortage – the Fairtrade status is almost a bonus. Interesting development is Albert Heijn’s ‘Pure and Honest’ which represents a bundle of sustainable standards – expect more of this. Ethical schemes need to show impact on the ground. We expect more collaboration between schemes being developed in new industries.” (Karin Kreider, ISEAL)
“We will have to strip cost out of the certification and label initiatives and develop a low-cost alternative to certification.” (Bill Vorley, IIED)

SW 08.03.11

Organic Monitor predicts more investment in European organic sector

simon — Tue, 01 Mar 2011 21:17:30 +0000

Claire Videau , 24th February 2011 (from FoodNavigator.com)

Organic Monitor predicts an eight per cent rise of European organic food and drink sales in 2011, as the global economy is coming out of recession more capital is now available for companies to invest.

“We saw sluggish growth in 2009, but growth rates started to pick up in the second part of 2010. There was not much capital available to finance deals from September 2008 to January 2010,” said Amarjit Sahota, director of Organic Monitor.

Europe accounts for almost half of the global revenue from organic food and drink products in 2010, USD$59bn in total.

Although the American market became the world’s largest organic industry in 2010 overtaking Europe, Europe is bouncing back and as result, companies have started to make cross- borders acquisitions and to invest more into the market.

For instance, the US natural and organic food company Hain Celestial strengthened its position in Europe when it acquired Danival, a French producer of organic foods and GG Unique Fiber, a Norwegian natural foods company earlier this month (terms of acquisition were not disclosed).

Another example of the manufacturers putting back their confidence in Europe is the Dutch company Royal Wessanen, which is repositioning on the market. It divested two of its US companies last year – Tree of Life in January for USD$190m and Panos Brands in December for USD$22m – in order to focus mainly on the organic industry in Europe.

Small and medium size companies

However Organic Monitor reckons that unlike North America, where generally big organic companies are growing in size, the small and medium size companies remain significant in Europe.

“Small and medium size companies can compete in the European market by focusing on specific product categories or channels. Indeed, many companies are re-focusing on health food shops / organic food retailers, rather than the supermarkets and mass market retailers,” said Sahota.

Despite the downturn, in Europe these small and medium companies are expanding whereas the big players continue to invest and make acquisitions. Such spike in activity can only consolidate the organic food and drink industry.

Food price inflation?

With commodity prices increasing, what could be the impact of speculation on the organic industry?

“We do not see food inflation- or rising prices of organic products to affect the investment climate in Europe. If anything, it could spur more deals as companies try to secure supply by acquiring companies,” said Sahota.

With more capital available, the future of the organic food and drink industry will see a healthy growth rates and even more deals, mergers and investments.

‘Local’ food labelling misleads consumers, regulator reveals

simon — Tue, 01 Mar 2011 21:10:09 +0000

Amy Fallon, The Guardian, February 26^th 2011

Consumers are being misled by “local” foods, with almost a fifth of products bearing the label making the claim falsely, a study has revealed.

Items that were found to be misleading include “Welsh lamb” from New Zealand, “Somerset butter” from Scotland, “Devon ham” from Denmark and “West Country fish fillets”, where the fish had been caught in the West Country but filleted in China.

Consumers are also being tricked by “local” ice-cream, while “fresh local cream” was actually a cream substitute with vegetable fat and “Yorkshire chillies” in chilli sausage were really supermarket-purchased, the local government regulation (LGR) research found.

The LGR, which oversees council regulation, tested 558 “local” products on sale in 300 shops, restaurants, markets and production centres in England and Wales. It found 18% of local claims were “undoubtedly false”, with a further 14% unverifiable and therefore assumed to be false. Restaurants had the highest rate of false claims (19%), while manufacturers were found to have the lowest (11%).

The results were “extremely worrying”, said the LGR’s chairman Cllr Paul Bettison. “Councils are working with businesses to make sure consumers have the information they need and that they are not being ripped off.

“Many people want to support local businesses or choose food that has not travelled from the other side of the world, so it is vital that they have accurate information to help them make their choices.”

There is no legal definition of “local” in food labelling. But the food law code of practice states that it should mean “sales within the supplying establishment’s own county plus the greater of either the neighbouring county or counties or 30 miles/50 kilometres from the boundary of the supplying establishment’s county”.

Consumers spend just five seconds reading each product label in the supermarket, it has been claimed.

In December 2009, Marks & Spencer announced that its meat, fish and dairy items would all be clearly labelled with their country of origin.

Why I Love Organic

simon — Fri, 18 Feb 2011 14:49:57 +0000

Have you seen the Yeo Valley TV ad yet ? (that should probably read Yo! Valley). The rapping farmers have become the toast of YouTube and added £10million to Yeo Valley’s sales.

And hot on their heels comes another campaign to promote organic food, Why I Love Organic. Go to the website www.whyiloveorganic.co.uk and you will find lots of reasons to love organic such as great tasting food, better for nature, better for animal welfare and more natural. Plus you can share your own reasons for loving organic and there are lots of recipes, news and a competition . The campaign is jointly funded by the UK organic sector and the EU (the UK government declined to get involved – no surprise there) and there are full page advertisements going into a wide range of magazines, all to promote the O word. The campaign runs for 3 years so watch out for it.

New Soil Association Director Helen Browning was certainly upbeat when she addressed the Soil Association Manchester organic conference in February when she referred to organic sales as being stable after a recession-driven fall. “The sense for the future is much more positive than the last year or two” Browning added. “People’s values haven’t gone away. They just had other priorities over the last year or two.”A delegate at the Manchester conference called for a campaign for Plain Food to promote food that was not mucked around with, in much the way that the Campaign for Plain English called for language that is not mucked-around with. Plain Food sounds a bit dull so…let’s call it organic! By staying true to our organic values whilst making the organic message easier to understand we can we can rebuild the UK market for organic food. The UK is the only market in the world where organic sales have dipped so let’s consign that blip to history and get back into growth!

Where next for the Soil Association?

simon — Fri, 29 Oct 2010 16:09:03 +0000

So farewell then Patrick Holden. After 15 years as Director of the Soil Association Patrick is off to pastures new, specifically spending a month in the USA in order to set up a Sustainable Food Trust. In the New Year Helen Browning will replace him as Director of the Soil Association. Helen “has previous” with the Soil Association, as they used to say on The Bill. She has been a licensee, Chair of Council and Food and Farming Director. So she is well known and respected within the Soil Association. Crucially she is also well known and respected outside the Organic sector, not least for the work she has done with the Curry Commission, the Food Ethics Council and the Meat and Livestock Commission. The short-list for the Director’s job was long with some very strong candidates. Patrick’s vision, determination and drive will make him a hard act to follow, but the faith that the Council of the Soil Association have placed in Helen suggests that she is the person to do just that.

The Soil Association under Helen’s leadership will have to take some very crunchy decisions. Income is down, both because of a pause in the growth of the organic sector and because NGOs are generally struggling to maintain their funding in these straightened times. Since only 8% of consumers buy 55% of organic food one possibility would be for the Soil Association to hunker down and concentrate on servicing the needs of this group. This would essentially mean preaching to the converted rather than trying to bring new consumers into the fold. It would then make sense to hold the high ground on organic standards and focus on satisfying existing licensees.

I believe that, though tempting, this would be the wrong approach. The 92% of the population who are not heavy organic purchasers should not be ignored. Maybe the Soil Association will never be a membership-driven organisation like the RSPB or the National Trust. However it can play a key part in driving the UK sustainability agenda, helping to fill the vacuum left by the demise of the Sustainable Development Commission. Which is not the same thing as saying that the Soil Association should re-position itself as an environmental NGO. Patrick wanted the Soil Association to be seen as operating in the same area as Greenpeace or Friends of The Earth through it’s championing of the peak-oil and Transition Town movements. I disagreed with him then and I disagree with him now. The Soil Association’s strength lies in its expertise with sustainable food and farming. The success of the Food4Life campaign suggests that the Soil Association can most successfully achieve its aims by collaborating with other like-minded organisations. I wish Helen and her team good luck with the mission.