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Genuinely Premium Products - Organics, Fairtrade…

and the Q Awards

Simon Wright, O&F Consulting

FDIN Product Premiumisation

September 19th 2007

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Today’s Presentation

1. Introduction to O&F Consulting

2. What Does The Success of Organics tell us ?

3. What Does The Success of Fairtrade tell us ?

4. The Organic and Fairtrade Future

5. Case History : Whole Foods London

6. Insight From The Q Awards

7. Q & A

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1. Simon Wright - O&F Consulting

Working with Organic and Fairtrade Food since 1986. Examples of current clients include;

• Sainsbury’s Supermarkets (multiple retailer)• Planet Organic Ltd (independent retailer)• Free Natural (Organic liquorice from Finland)• Lyme Regis Fine Foods (snack bars) • The Organic Spirits Company (gin, vodka, rum)• The Soil Association (UK premier organic body)• Nexus Media (Quality Food Awards)Information / contact www.organicandfair.com

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ADVERTISEMENT !The Handbook of Organic and Fair Trade Marketing

• Published February 19th 2007 by Blackwells• First ever book on this subject• Edited by Simon Wright and Diane McCrea• More information at www.blackwellfood.com• Written by industry experts - covers UK,

Germany, Italy and the USA• Case histories on the success of key brands

such as Green & Black’s, Yeo Valley, Clipper, Duchy Originals, Abel & Cole

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2. What Does The Success of Organics Tell Us ?

Hypothesis One

“ The ongoing success of organic food in the UK suggests that UK consumers are interested in investing in food that is of inherently better quality, rather than in recipe-enhancement or flashy packaging”

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2. What Does The Success of Organics Tell Us ?• Latest official sales figures are approx £1.94

billion (2.87 billion Euros) in the calendar year 2006

• This equals 27% year-on-year growth• Equivalent to only 1.6% of total food sales

(Denmark is 6%)• 34% of primary organic produce sold in the

UK by supermarkets is imported• Global market worth £19.3 billion (28.6 billion

Euros) in 2006 Source: Soil Association Organic Market Report 2007

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2. What Does The Success of Organics Tell Us ?• Supermarkets account for 76% of all

sales of organic food in the UK

• The other 24% includes all other channels - independent retailers, farm shops, box schemes, internet delivery companies and farmers markets

• Last year direct sales of organic food via box schemes, farmers markets and farm shops rose by up to 53%

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2. What Does The Success of Organics Tell Us ?

• The UK organic market is now the third largest in the EU after Germany and Italy

• Mintel’s latest report indicates that more than half of respondents had purchased organic fruit and vegetables in the previous 12 months (1 in 6 had purchased organic packaged goods)

• Households with children under the age of 15 tend to buy a wider variety of organic products

• Organic product growth rates year-on-year include babyfood (+7%), poultry (+39%), milk (+20%)

Source: Soil Association Organic Market Report 2007

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Why do UK Consumers Buy Organics?Reasons have changed with time

Main Reason to Buy Percentage Who CitedTaste 38Health 26No pesticides 22Animal welfare 18No hormones 16Natural and Pure 11

SOURCE: Sainsbury’s Supermarkets 2002

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Why do UK Consumers Buy Organics? Reasons have changed with time

Main Reason to Buy Organic1. Taste2. Health3. Origin • UK (certification - 60% more likely to buy)• Local (regional - 52% more likely to buy)

SOURCE: TNS work for Organic South West / South West RDA / Welsh RDA (2003)

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Why do UK Consumers Buy Organics? Reasons have changed with time

Why choose organic ?

Avoid pesticides and additives 95%

Protect the environment 93%

High standards of animal welfare 91%

Tastier diet 90%(72% say organic fruit & veg taste better,

71% prefer taste of organic meat)

Source: Interviews with 813 organic consumers

conducted by Market Tools for the Soil Association 2005

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2. What Does The Success of Organics Tell Us ?

Market Share1. Tesco (35%) 2. Sainsbury’s (28%)3. Waitrose (18%)4. Asda (8%) 5. Morrisons (5%)

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2. What Does The Success of Organics Tell Us ?

Organic Sales as Percentage of Total Sales

1. Waitrose (3.3%) 2. Sainsbury’s (1.3%)3. Marks & Spencer (1.2%)4. Tesco (0.9%) 5. Asda (0.4%)

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2. What Does The Success of Organics Tell Us ?

Sir Terry Leahy, Tesco Chief Executive"I believe we're seeing a fundamental shift in

the priority that consumers place on food. The link between diet and health, interest in cooking, provenance - including local and fair trade - is also not only about affluent customers. The growth in the proportion of our customers buying organics is fastest among less affluent customers.”

The Observer, 2 September 2007

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3. What Does The Success of Fairtrade Tell Us ?

Hypothesis Two

“ The ongoing success of Fairtrade food in the UK suggests that consumers want a more direct connection with food producers”

(see also Farmers Markets, Farm Shops, Pick Your Own, Local Food sourcing initiatives)

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3. What Does The Success of Fairtrade Tell Us ?

Fairtrade Key Facts

Number of Fairtrade products onsale in the UK 2,500

Current UK Market Size £400million per annum

Global Fairtrade sales £1.1 billion per annum

Rate of UK market growth (year-on-year) 42%

Awareness of symbol 53% of UK adults

SOURCE Fairtrade Foundation, September 2007

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0%

10%

20%

30%

40%

50%

60%

1 2 3 4 5 6 7

Recognition & Understanding of the FAIRTRADE Mark 1999 - 2005

Source: MORI poll March 2005

Recognition

Understanding

= % of people who recognize the Fairtrade symbol

= % of people who correctly associate the Fairtrade symbol with the phrase "Guarantees a better deal for Third World farmers".

1999

11% 12%

2004

39% 42%

2003

25% 33%

2002

20% 24%

2001

20% 19%

2000

12% 16%

2005

50% 51%

Recognition and Understanding of the FAIRTRADE Mark 1999-2005

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0

50

100

150

200

250

1 2 3 4 5 6 7

Flowers & Sports balls

Other Food incl. wine

Fruits & Juices

Confectionery & Snacks

Hot Beverages

Sa

les

in

£ m

illi

on

s

1999 20012000 2005200420032002

UK Sales of Fairtrade Products 1999-2005

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Producer Organisations supplying the UK market

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3. What Does The Success of Fairtrade Tell Us ?

Justin King, Sainsbury’s Chief Executive

“Never before have customers been so engaged on issues of poverty alleviation and never before have so many realised how much difference fair trade makes.”

Foreword to ‘The Handbook of Organic and Fair Trade Food Marketing’

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STRENGTHS•Consumer demand•Environmental concerns (organics)•Improving Quality of Offer•Increased Awareness re Diet & Food Quality

WEAKNESSES•Organic and Fairtrade production imperfect•Environmental concerns (Fairtrade)•Price premium•Media no longer 100% supportive•Newer trends eg, Slow, Local

OPPORTUNITIES•Bigger basket spend•Better education•New areas (beauty, household)•One Planet Agriculture

THREATS•Product recall•Hostile media•GM

•EU legislation (organics)

4. The Organic and Fairtrade Future

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5. Case History: Whole Foods, Kensington High Street, London

Opened June 6th 2007Floor space 80,000 square feet over 3 floorsNumber of Grocery SKUs Around 10,000

Mission Statement“We sell the highest quality, natural and organic

foods - all free from artificial flavors, sweeteners, colors, preservatives and hydrogenated fats.”

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5. Case History: Whole Foods, Kensington High Street, London

Strengths• Scale• Size• Vision• Merchandising & Presentation• Instore Bakery and Cheeses

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5. Case History: Whole Foods, Kensington High Street, London

Challenges• Size of site• Basket size• Absence of local parking• Retail prices• Local competition (Waitrose, M&S)• Lack of adaptation to local trading

conditions (portion sizes, food to go)

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6. Insight From The Q AwardsWhat Are the Q Awards ?• Full name is ‘Quality Food Awards’• Running for last 28 years• This year there were 26 product

categories • Open to brands and own-label, big

companies and little companies• Judged over two weeks by 30+

independent judges (chefs, home economists, nutritionists,consultants)

• I chair judging

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6. Insight From The Q Awards

What Are Judges Looking For ?• The Best, Not The Newest• Genuine and Honest Quality Foods• Outstanding Product Quality• Value For Money (not cheap)• Attractive Packaging• Products that do what they set out

to do - often ‘simple things done well’

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6. Insight From The Q Awards

New Categories This Year• Local (supported by Tesco)• Free From• Fairtrade NB Organic and Healthier Categories

discontinued as there were so many entries it is better to have then throughout the competition

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6. Insight From The Q Awards

Previous Winners - Gold Q2003 Sainsbury’s Organic Somerset Brie2004 Sainsbury’s Taste The Difference Lemon

Butter Thins2005 Sainsbury’s Living Salad2006 Tesco Finest To Cook Thai Green Tiger

Prawns2007 ????????????????????????????????? (To Be Announced at the Awards Dinner in

London on November 28th)

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6. Insight From The Q AwardsTrends observed over the last 8 years of

judging• Established often better than New• Increased Complexity is not the same as

Better(sandwiches, pizzas, ready meals)

• Fashionable Ingredients(cranberries, pomegranates and this year…Watchstrap Carrots!)

• Clear WinnersUsually 3 products per category stand out

• Brands Doing Better (including small ones)• The rise of Discount Quality (especially Aldi)

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6. Insight From The Q AwardsWhy enter ?• If you win, it is an independently verified

badge of quality • Supermarket buyers take note of winning

products• Opportunities for using Q mark on-pack

and in advertising to talk to consumers• The Awards dinner is highly entertaining• For 2008 awards email

nancy.mok@nexusmedia.com

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Today’s Presentation

1. Introduction to O&F Consulting

2. What Does The Success of Organics tell us ?

3. What Does The Success of Fairtrade tell us ?

4. The Organic and Fairtrade Future

5. Case History : Whole Foods London

6. Insight From The Q Awards

7. Q & A

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Genuinely Premium Products - Organics, Fairtrade…

and the Q Awards

Simon Wright, O&F Consulting

Thank You!