Retail Trends - Ireland and the UK 20111
Transcript of Retail Trends - Ireland and the UK 20111
1SCB Partners for Board Bia, In Confidence
Retail Markets Today & TomorrowIn Ireland & the UK
August 2011
Growing the success of Irish food & horticulture
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Background & Research Objectives• ReportObjectives 3• Methodology 4
1. State of the Grocery Retail Industry• SummaryOverview 5• FoodRetailSalesProjections 5• ConvergenceofIrishandUKRetailMarkets 6• Mergers&AcquisitionsintheRetailSector 6• GroceryRetailFormatGrowth 7• ChallengeswithinUKandIrishRetailMarkets 9• HowIrishFoodisPerceivedattheMoment 10
2. Retailer Expansion Plans• SummaryOverview 11• ExpansionPlans 12• MajorConvenienceExpansion 13• InternationalExpansion 14
3. Technologies for Channel Expansion• SummaryOverview 15• DevelopedOnlineShoppingExperience 16• MCommerce 17• MergerofDigital&PhysicalWorld 19• NewTechnology 20
4. Trends in Promotions• SummaryOverview 21• RetailerPromotions 21
5. Private Label vs Branded• SummaryOverview 23• PrivateLabelDevelopments 23
6. Retailer Perspective on Best-In-Class Products•SummaryOverview 26• Best-In-ClassFormulation 27• Best-In-ClassPackaging 29• Best-In-ClassPositioning 31
7. Supply Chain Advancements• SummaryOverview 32• RetailerSupplyChainOverview 33• SustainableDistribution 34• Logistics 35• Rationalisation 36
8. Appendix: Implications for Irish Producers• SummaryOverview 37• FoodforThought 37
CONTENTS
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BACKGROUND&RESEARCHOBJECTIVES
Report ObjectivesRetailersinIrelandandtheUKareessentialtothesuccessofIrishfoodandbeveragesuppliers.InordertohelpdrivefuturecompetitiveadvantagefortheIrishfoodandbeverageindustry,adeepunderstandingofthekeygroceryretailtrendsandchangingretaildynamicsisrequiredtoprepareforthefuture.
Theobjectiveofthisreportistoanswerthequestion“What does the future hold for the Irish and UK Retail Landscape?”
Thisreportprovidesanin-depthforecastofthefoodandbeverageretailenvironmentinIrelandandtheUKinthenext3–5yearsandprovidescriticalinsightsintohowIrishproducerscanachievecompetitiveadvantage.Thereportprovides:
• Avision and understandingofthegroceryretailenvironmentandexpectedchanges
• Expansion,contractionorconsolidationofretailersandtheeffect on Irish suppliers
• Drivers, scenarios and conditionsthatwillimpactontheretailenvironment
• Strategiesthattraditionalretailersanddiscountershaveinplacetodevelopgrowth
• Supplychainimplicationsforretailers
• OpportunitiesforIrishretailerstoexpandtheirshareofshelfinretailers in Ireland and the UK
ReportOverviewRetail Markets Today and Tomorrow in Ireland and UK This report provides a detailed projection of a series of key trends that will materially impact Irish food and drinks suppliers. The report illuminates developments in the following areas over the next 3-5 years and is structured as follows:
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3
State of
the Grocery
Retail
Industry
Retailer
Expansion
Plans
Technologies
for Channel
Expansion
Supply Chain
Advancements
Implications for
Irish Producers
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5CurrencyusedisusingexchangerateatMay2011of1=$1.42,1=£0.87
1
Retailer
Perspective
on Product
Innovation
Trends in
Promotions
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7
8
Private
Label vs.
Branded
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Thereportwasdevelopedusingacombinationofsecondarydeskresearchandprimaryqualitativeresearch.
Secondary Desk Research Duringthedeskresearchphaseavarietyofpublicationsweresourcedandanalysed.Rigorousanalysisofsocio,politicalandeconomicdatafromreportsandwhitepapersfromgovernments,researchinstitutionsandannualreportsfromkeyretailsectororganisationswasconducted.Thesearereferencedbelow:
Selected Bibliography: Desk Research
• BuildingonSuccess,IGD• FullYearResults2010/2011,Marks & Spencer• PathwaysforGrowth,Bord Bia• WhereBritainShops2010,Verdict• UKFood&GroceryRetailers2010,Verdict• FoodRetailing,November2010,Mintel• FoodHarvest2020,Dept.ofAgriculture,Fisheries and Food• EuropeanFoodRetail,Barclays Capital• UKRetailFutures2012:Food&Grocery,Verdict• UKe-RetailGroceryRetailers2010,Verdict• FutureofRetail2010,PSFK• RetailIndustryGlobalReport2010, IMAP Retail• SustainabilityTrendsinEuropeanRetail,2009,Forum for the Future• RetailFutures,Forum for the Future• Food2030,Defra• UKFoodIndustry2010,Keynote
• UKMarketForecasts:FoodCatering&DrinkMarket2010,Keynote• PlanetRetail2010• AnualReport2010Tesco
Selected Qualitative InterviewsAspartofthequalitativeresearch,keyfiguresintheretailandfoodsectorsofIrelandandUKwereinterviewedfortheirinsights.Interviewswereconductedwithhigh-rankingtradebodyrepresentatives,CEOsoffoodretailersanddistributors,foodsectoracademicsandjournalistsaswellasproduct-innovationexperts,FMCGindustryexpertsandpackagingexperts.SCBconductedacombinationoftelephoneandface-to-faceinterviewsfromover30organisations.Eachinterviewlastedbetween15–60minutes.Abreakdownoftheprofileofrespondentsisillustratedinthetablebelow.
Theinterviewswereconductedwithexecutivesfromadiverserangeoforganisationsincluding:
• AlliedIrishBank• AngloBeefProcessors• AssociationofConvenienceStores• Barclays• CheckOutMagazine• DawnsMeats• Flahavans• IrishDairyBoard• Jeraboams• KepakFoods• Marks&Spencer
Profile Breakdown of Respondent
Type of RespondenT no. of InTeRvIews
FoodRetailers 15
Media 2
Producers 7
Financial 3
Other 7
About SCB PartnersThisreporthasbeenproducedbySCBPartners;aninternationaltrend-basedmarketinginsightsconsultancyspecialisinginprovidingcriticalbusinesslearningsforsomeoftheworld’smajorbluechipcompanies.SCBspecialisesinconsumerinsights,researchanalysis,innovations,marketingandbrandstrategies.
• Musgrave• OneStopConvenienceStores• Partridges• PlanetOrganic• RetailExcellenceIreland• RGDataIreland• TennantandRuttle• Tesco• TrinityCollege• Utilyx• Waitrose
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Background&ResearchObjectives
Methodology
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STATEOFTHEGROCERYRETAILINDUSTRY
Summary OverviewBoththeIrishandtheUKretailmarketsarebothsettoexpandin3-5yearstime,withIrishfoodretailgrowingatanaverageof1%ayearandUKfoodretailgrowingatanaverage2.8%peryearthrough2014.ThegroceryretailindustryinIrelandisexpectedtoreturntopreviousgrowthlevelsastheIrisheconomyrecovers,whiletheUKwillexpandatasteadyrate.
AdegreeofconvergenceoftheIrishandtheUKretailmarketsisexpected,asretailerslooktostreamlinecostsandcreateareasofmutualbenefit.
InIreland,theenvironmenthasbeendifficultfordomesticproducers.Suchconvergence,asUKretailerssuchasTescomovetowardsitsUKsupplynetworkwillcompoundthisunlesstheproducersareactiveintheirbusinesstothebrandagainstUKsuppliers.
AsintheUK,mergeractivityismorelikelytobeintheareaofacquisitiontoexpandintotheconveniencesector.
FoodRetailSalesProjectionsTotalIrishfoodretailsalesinIrelandhaverecentlybeenindecline,fromahighof11,398millionin2007decliningto10,370millionin2010.However,sales’projectionsto2014lookpositive,withgrowthof3.91%projectedtobeachievedby2014-creatingnewopportunitiesforIrishproducers.
FoodretailsalesintheUKareexpectedtoachieveCAGRof2.8%overthenext4years.FoodretailsalesintheUKfor2010wereestimatedat129,260million,andarepredictedtoreach144,511millionby2014.
Republic of Ireland United Kingdom
value Index % Annual Change value Index % Annual
Change2007 11,398m 116 9.4% 112,229m 87 4.3%
2008 11,204m 114 -1.7% 118,877m 92 5.9%
2009 10,602m 108 -5.37% 128,107m 99 7.8%
2010 (est) 10,370m 106 -2.18% 129,260m 100 0.9%
2011 (fore) 10,392m 106 .2% 131,392m 102 1.6%
2012 (proj) 10,492m 107 .96% 134,668m 104 2.5%
2013 (proj) 10,728m 110 2.25% 137,807m 107 2.3%
2014 (proj) 10,776m 110 .44% 141,183m 109 2.5%
2015 (proj) 10,823m 111 .44% 144,511m 112 2.4%
All Food Retail Sales 2007 - 2015
“As today, retailers will need to provideextraordinary good value. Whatever
happens to the economy, people are still going be in the market for a treat,
but only at the right price.” Head of food – Major Multiple
“The concept of the weekly grocery shop is ‘past its sell by date. The
younger generation are performing the shopping equivalent of grazing and want more ready-made or easier to eat
food than ever before.”Academic, Trinity College
Source: Mintel 2010
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StateofTheGroceryRetailIndustry
ConvergenceofIrishandUK Retail MarketsTheculturalandcommercialtiesbetweenIrelandandtheUKstretchbackcenturies,andthenextfiveyearswillsee increasing convergence of the two marketsfromtheperspectiveofmajorplayerswithinthegrocerysector,withagrowingnumberusingasingular UK and Irish strategy.
Today,theUKisIreland’slargestsingletradingpartner,accountingfor13.4bnofIrishexports(16%oftotal)and13.7bnofIreland’simports(30%oftotal).UKtradewithIrelandexceedsthetotalUKtradewithBrazil,Russia,IndiaandChinaandat£2.4bn;the Irish market consumes more UK produced food and drink than any other country.Theeconomicfiguresthenpointtothelogicofgreaterconvergence.
Buy British, Buy Local“BuyBritish”campaignshavebenefitedIrelandoverothercountriesintheEuropeanContinent.Whilethe“BuyBritish”campaignsintheUKhavehadconsiderablesuccessinsteeringconsumerspendingtowardshome-producedfoods,many UK consumers view Irish food to be practically local,allowingIrishproducersasizable advantage over importsfromContinentalcompetitors.
Thereisapotentialparadoxforsuppliersprovidingproducewithprovenanceandquality.ThisusuallyhasapricepointattachedtoitwhichcouldmakesuchproducehardtocompetewithotherUKproducedfoodsbeingsoldunder“BuyBritish”banners.CombinethiswithdownwardpricepressurefromthemajorUKretailers,andIrishproducerswillneedtoplancarefullytheirstrategyandpricing.Irishsupplierswillneedamethodtoovercomethepowerofthemultiples.Suppliers should play a very powerful role in the future of Irish exports-focusingonvalueandnotjustpricewillbepre-requisile.
Impact of TescoTheimpactofTesco(whichcurrentlycommands35%ortheIrishretailmarket)cannotbeunderestimated.TescoislookingtosynergiseproductofferingsbetweentheUKandIreland;supplierswillbeforcedtofollowsuit.
Advancementsinlogisticsandsupplychaintechnologywillallowcompaniestohaveonemainoffice,onesupplychainandoneproductstreamwhichservicebothcountries.
Thisstreamliningposesbothopportunitiesandchallengesforfoodproducers.ViewingtheUKaspartoftheIrishmarketmeansIrishproducerswillhavea65-millionstrongmarketofconsumerstosellto.However,thedominationoftheUKretailsectorbytheBigFoursupermarketsandtheirpropensitytostockfewerproductsacrossalloftheirstoresmeansthattogainafootholdintheenlargedmarket,thescale of Irish food production not only needs to be expanded but also differentiated.Beingregardedaslocalin“BuyBritish”campaignsinUKstoresmaynotbeenoughtocompensateforUKretailerssellingmoreUKproduceinIrishstores.Atpresent,theriskofnotgainingafootholdintheUKmarketisthatTesco’sproductsynergieswillcutIrishproducersoutofTesco’sshareofthedomesticmarket.IfWalmartweretoentertheIrishmarket,theycouldbeexpectedtobeatleastasaggressiveasTescointermsofrangesynergiesbetweenthetwocountries.
Mergers&AcquisitionsinRetailThedegreeofconsolidationintheIrishandUKretailsectors,aswellascompetitionlaw,indicatethattherewillbelimited merger and acquisition activity in either Irish or the UK markets in the next 3-5 years.Weakerindependentretailers,forexample,arethemostlikelytakeovercandidates.
Mature MarketsBoththeIrishandUKretailmarketsareconsideredverymature,andthus,growthintheretailsectorsisunlikelytooutstripthatofthewidereconomy.Moreover,bothmarketsaredominatedbyalimitednumberofhighlyentrenchedplayers.Takentogether,thesefactorsmeananyM&Awouldbeveryexpensive,followedbyslowgrowth.Combiningthisfactwiththeuncertaineconomicoutlookmakesitclearthatneither the Irish nor UK markets represent obviously good investment opportunities in the short to medium term.
Competition LawIt is unlikely thatcompetitionregulatorswouldgivethego-ahead for further consolidation in the retail sector given that 80% of the Irish and UK markets are already controlled by each country’s respective Big Four.
Theonlyscenariolikelytoaltertheabovedynamicisifaretailerwerestrugglingfinancially.Insuchasituation,thereducedcostofatakeovermightrenderthefirmanattractiveproposition,whilecompetitionauthoritieswouldlikelywaivethemergerthroughinordertoprotectjobs.ThemodelhereistheLloydsTSB/HBOSbankingmergerof2008which,undernormalcircumstanceswouldnothavebeenclearedbyauthoritiesbutinordertoprotectjobswasallowedtoproceed.
M&A RumoursDuetomaturemarketsandcompetitionlawM&Aactivityislimited.In both UK and Ireland, the key reason for acquisition would be for larger retailers to expand into the convenience sector.
Iceland: Icelandistheonlysupermarketchainwithanimmediatelyuncertainfuture.Thischilledfoodschainis67%ownedbythetroubledIcelandicbankLandsbanki,whichinturnisownedbytheIcelandicgovernment.AsofFebruary2011,Landsbankihassignalleditsintentiontosellitsstakeinthefrozenfoodsretailer.AsofMay2011,Momsanshadshowninterestinacquiringthestakeasawayofacquiringpropertytoenterintotheconveniencesector.Icelandhas682outlets,makingitasmallplayerrelativetothecompetition.Largerrivalsmightspypotentialefficiencysavingsthroughintegrationintoalargersupplyanddistributionchain,butitismorelikelytoremainanindependentchain.
Nisa: ThefutureofsymbolgroupNisaisalsouncertain.AnalystsareparticularlyinterestedtoseewhetherCostcutter’snewownerBibbyLinerenewsitsordercontractwithNisain2014,whenthepresentarrangementends.WereBibbyLinetotakeitsbusinesselsewhere,Nisawouldlose40%ofitsturnoveratstroke.ItisbelievedthereisagoodchanceofthishappeningafterNisaawardedDHLaseven-yeardistributioncontractinsteadofBibbyLine.
Dunnes:InIreland,therehasbeenmuchspeculationaboutthefutureofDunnes.Atthetimeofwritingdespiteongoingconcernsaboutthefutureofthisretailer,therearenospecificandcredibletakeoverrumours.
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GroceryRetailFormatGrowth
TheUKfoodandgroceryspendwasvaluedat173.42bnin2010,representing52.7%oftotalretailsales.By2015,the total UK food and grocery spendisestimatedtoreach210.11bn,withaverageannualgrowth projected to be 3.9%, offering large growth potential for Irish producersexportingintotheUK.
Nearly 50% of this growthwillcomefromtheconvenience and online channels alone,withconvenienceinparticularbeingthebattlegroundbetweenthemajorretailersoverthenextfiveyears.Asthemajorretailerspursueexpansionswithstoreenlargementsandnewopeningstheywillcontinuetogainmarketsharefromindependentandspecialityretailers.Furthermore,onlineretailisexpectedtodoubleinvaluefrom5.52bnin2010to10.93bnby2015.
In Ireland, the retail format breakdown is similar to the UK by category, with the exception of hypermarkets.AsplanningpermissionismuchstricterinIrelandthanintheUK,thehypermarketformatislessprevalent.TheothermajordifferencebetweentheUKandIrelandistheproportionofindependentstoresthatdominateIreland’sconveniencesector.Whileconveniencewillgrow,theshareheldbyindependentsisdeclining.
Irish and UK producers will be expected to create products and packing sizes designedforchannel-specificneedsandthedifferentstore formats.
Source: IGD Research, 2010
UK Grocery Retail91,509 Stores191.3m sq ft
£150.8bn
Convenience Retailing48,289 Stores
53.5m sq ft • £32.1bn
Co-ops2,448 Stores •4.8m sq ft • £3.8bn
Co-ops1,402 Stores • 11.9m sq ft • £6.3bn
Symbol Groups16,072 Stores • 19.2m sq ft • £12.1bn
Discounters1,240 Stores • 11.2m sq ft • £6.4bn
Non Affiliated20,351 Stores • 18.1m sq ft • £6.9bn
Co-ops104 Stores • 0.9m sq ft • £0.6bn
Forecourts6,506 Stores • 5.5m sq ft • £4.3bn
Hypermarkets, Supermarkets & Superstores
7,970 Stores109.1m sq ft • £107.8bn
Traditional Retail35,250 Stores
28.7m sq ft • £6.1bn
Online£4.8bn
Multiples2,912 Stores • 5.9m sq ft • £5.0bn
Multiples5,224 Stores • 85.1m sq ft • £94.5bn
Breakdown of Grocery Retail Formats in the UK
SupermarketsOfatotal91,509foodretailstoresintheUK,7,970oftheseareclassifiedassupermarkets,hypermarketsorsuperstores.Rangingbetween3,000and60,000sqft,theselargeformatstoresrepresentapproximately2/3oftotalfoodretailsales(amountingto124billionin2010)andthusdecreasingthenumberofviableretailpartnersforIrishexporters.
Despiterepresentingthegreatestportionofsales,theavailablespacerequiredtoopenstoresofsuchsizeisfiniteandthereforesuchlargestoreformatswillnotbetheprimaryavenueforexpansioninthefuture.Majorretailerswillcompeteforplanningcommissionrightstobuildinthelimitednumberofspaceswheresuchlargestoresarepossible,andfocusonenlargingtheirexistingsupermarkets.
AtthemomentdiscountersAldiandLidlareexpandingtheirpresenceintheIrishmarketandgrowing.
Irishdatanotavailable
StateofTheGroceryRetailIndustry
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ConvenienceGenerating35.5bninsalesinthe12monthstoApril2010,theconveniencechannelnowrepresents20.5%ofthetotal UKfoodandgrocerymarket.With predicted growth rate of 5.8% over the next five years, convenience is growing considerably faster than the retail market as a whole,andwillrepresent25%oftheUKgroceryandfoodmarketby2016.Irish exporters that tailor their products to the needs of convenience retail (via NPD, packaging and logistics) will benefit. In3-5yearsconvenienceformatswillgrowtakingsharefromsupermarketsforthefollowingreasons:
• Growingconsumerneedforquick,easy-accessshops• Retailerfocusonconveniencesites,duetoplanningpermission
restrictionsandfinitesuperstorespaces• Consumersincreasinglyshiftingthe‘weeklyshop’online
As major retailers focus on smaller formats, the big four will continue to take sales from independents, forcing these smaller retailers out of the market.Notably,growthinconvenienceisoccurringinthefaceofstoreclosures:asofApril2010therewere48,410conveniencestoresintheUK,representingadecreaseof0.5%overtheprevious12months.Asthemultiplescontinuetoexpandaggressivelyintothechannelwithsophisticatedlarger-sizedconveniencestores,itispredictedthattheabsolutenumberofoverallstoreswillcontinuetodecrease.
Over1,000newconveniencemultiplesareforecasttohaveopenedbyApril2015anditispredictedthatthenon-affiliatedindependentswillsuffermost,withtheirstorenumbersalreadydeclining5%yearonyeartoApril2010.Amongstaffiliatedindependents,thebuyingpoweroftheirsymbolgroupsoffersreasonableinsulationagainstcompetitionfromthemultiples,whiledespitetheUSPofindependentforecourtstheirstorenumberscontinuetodeclineduetocompetitionfrombothsupermarketsandsymbolgroups.
It is worth noting, however, that even as their store numbers continue to fall, non-affiliated independents still account for 41.3% of all UK convenience stores in 2011,andwithsalesof7.8bntheywillremainanimportantpartoftheretailmix.These retailers offer small and new Irish producers further opportunities,astheytrytokeeptherangeandqualityoftheirstockcompetitivewiththelikesofTescoExpressandSainsbury’sLocal.
OnlineOnline grocery retailing in the UK is projected to double in valuefrom5.5bnto10.9bnin2015fuelledbytechnologicaldevelopments,greaterconsumerconfidenceinonlineretailgenerallyandsignificantimprovementsindelivery/collectionmethodsandaccuracy.
Althoughonlinesalesrepresentedonly 2% of total grocery sales in the UK in 2008, it is predicted that by 2015 this will increase to 5.4%.Currentlymostpopularamongstyoungerconsumers,familiesandmoreaffluentconsumers,onlineshoppingwillbecomeincreasinglywidespreadamongthemainstreampopulation.
In Ireland, online grocery retail is currently held back by a relatively low broadband penetration and logistic issues.HoweverkeymarketplayerssuchasTescoarekeentoexpandtheironlineoperationsinIrelandoverthenext5years.
Big 4 Planning Applications 2010
Glasgow:64(+36)
Cleveland:59(+52)
Sheffield:74(+58)Nottingham:82(+70)
Birmingham:104(+85)Cardiff:
64(+44)Bristol:
76(+57)
2010
0-10
11-20
21-30
31-40
41-50
50+
Expansionofthebigfoursupermarketscontinueswith577planningapplicationsapprovedamongstthembetween2008and2010.Tescoistheleaderinnewstoreopeningswith392approvals,whileLondonistheleadingdestinationwith110newopeningsplanned.
Specialty 1
SpecialtyretailersintheUKrepresented8.0%ofthemarketshareinfoodretailin2009,includinggreengrocers,butchers,fishmongers,farmshops,gourmetshopsanddepartmentstorefoodhalls.1
However,asmajorretailersfocusonexpandingtheirpremiumown-brandofferingsaswellasstockingluxuryitemstoencouragecustomerup-sell,theyareexpectedtofurtherconsolidatethemarketandgainfurthersharepercentage.
One area of growth for specialty retailers is an increased consumer interestinlocalsuppliersasaconsequenceofthetrend for localisation.
1BasedonDatamonitorwhichusesadifferentclassificationsystemtoIGD
StateofTheGroceryRetailIndustry
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ChallengeswithintheUK and Irish Retail MarketsConsumer SpendingThe ongoing recession both in Europe and internationally continues to impact consumer spending levels in relation to food and has been particularly evident in the ongoing shift to value offerings.
Whileanyturnaroundinconsumerfoodpricesiswelcome,theongoingpromotionalpressuresonmanufacturersasretailersseektomaintainmarketsharecontinuedtoimpactonaveragereturnsacrossmostcategoriesduring2010.Withglobalfoodcommoditypricesincreasingstronglyoverrecentmonths,it is expected that consumer prices are likely to come under renewed pressure to increase in 2011.
Changing Consumer Trends The perception of ‘value’ has changed amongst UK and Irish consumers,largelyduetotherecentrecessionandincreasingstrengthofprivatelabelbrands.Consumers have been content to down trade to lower-priced brands,oftenstoreeconomyranges,safeintheknowledgethattheycanfindhigh-qualityproduceinthevalueendofthemarket.
Brand loyalty has diminished somewhat, as consumers sought more for their money,althoughnotsimplythecheapestoption.Irish producers can reposition their product portfolios where necessary to address this issue and exploit areas for growth.
• Someconsumershaveneededtodrasticallyreducetheirgroceryspend,andhavelookedforthelowestpossiblepricesforfoodanddrink.
• Forothers,thepriorityhasbeenmoreaboutcontrollingspendthroughmakingtrade-offs;foregoingindulgentspendonfoodanddrink.
• Consumershavenowcometoexpectdeals.Theyaremuchmoresavvyandawareandlookfor(andexpect)value,eveninpremiumproductsandranges.
UK Retail Demand FoodsectorsalesfortheUKretailmarketsareexpectedtobeconsiderablymorestablethaninIrelandandfollowalinearpathuntil2015.
However,therearestillconcernsaboutthestateoftheconsumerpositionintheUK.WhiletheUKmarketisgrowing,severalfactorsarehamperinggrowthrate:
• Wagesgrowthisaveragingunder2%,whileinflation(theRPI)isapproaching5%.Thismeansincomesarebeingsqueezedalready.Consumershavefinancedgrowthinspendingbysavingless.
• TheVATincreaseto20%fromJanuary2011
• Thefrontloadingofspendingcutstothefirsttwoyearsofthecurrentparliament
• Theinevitableriseininterestratesandhowthiswillimpacthouseownersalreadysqueezedduetotheabovereasons.
StateofTheGroceryRetailIndustry
FindingsfromBordBia’s‘FeelingthePinch’reportsummarisesprevailingconsumerbehaviourintimesofeconomicuncertainty.
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Building on the Power of Irish ProvenanceIntheIrishandUKmarkets,thereputationofIrishproduceandbrandsremainsstrongandisassociatedwithtrustedqualityandhighstandardsincategories.‘BuyIrish’positioninghasprovenextremelypopularintheIrishmarket,buttheopportunityremainstodifferentiatetheprovenanceofIrishdairy,meatandfreshproduceintheUKfurther.
IrishproducershavetheopportunitytoraisetheidentityofIrishproductsintheUKandbeyond,throughemphasising the traditional production techniquesassociatedwiththecountry.
Irish personality Building
TheperceptionofIrishfood,especiallydairy,meatandfreshproduce,intheUKisofsafe,high-qualityfood.Irishbrandscouldfurtherbuildonthisbyadding a clear personality and narrativetocomplementtheseattributes.Mediapersonalities,suchascelebritychefsorrespectedfoodcritics,andchampionsofIrishproducewouldhelpIrishfoodformastrongeridentity.SuchpersonalitybuildingwillleadtoproducebecomingaspirationalforsomeUKconsumers.
Regional provenance
Whilemanyproducersdotalkaboutprovenancetoadegree,thereisroomforthemtobemorespecificandbeevenmoreconfidentaboutthe‘personality’ofthemeat,dairyorfreshproducetheyareselling.Forexample,inFrance,SpainandItalyitiscommontoreferencetheregionatleastasprominentlyasthecountryandthishelpstounderpinthesemarketsasdiverseculinarynations.Ultimately,consumersfinditeasiertoassociatelambwiththehillyfieldsofConnaughtthansimplywith‘Ireland’.AlreadyIrish beef is, in some instances, being referred to as Irish Angus or Irish Hereford and this does give the meat increased identity. Added personality would come, for example, by giving information about the producers themselves; the farm, the family, history of the herd or breed, or variety and benefits of fruit and vegetables being sold.
StateofTheGroceryRetailIndustry
HowIrishFoodisPerceivedAttheMomentInbothIrelandandtheUK, the reputation of Irish produce is a strong one synonymous with high standards, good quality and trustworthiness.Usingthispositionasafoundation,thereissignificantpotentialforIrishproducerstobuildanevenstronger brand around Irish food and drink by adding a more distinctive Identity beyond being Irish.
Insights from Ireland InIrelanditself,notsurprisingly,domesticretailersareinvariablypositiveaboutIrishproducebutthereisabeliefthatsupplierscandomoretobuild their brand around the provenance of their produce. Simply stating that the produce is either local or Irish will not always be sufficient.Moreinformationaboutthelocalityofwherethefoodisproducedandpackagedcanonlystrengthenbrands.FromtheIrishconsumerstandpoint,clarity around the definition of what local means will be important.Aslargernon-domesticretailersstartsellingproducelabelled‘locallymade‘thispotentiallycouldmeanit’sproducedintheUK.So a very clear labelling of regional provenance will be vital
HavingsuchanapproachtobrandingandlabellingwillalsohelpIrishproducerswithretailersandconsumersintheUK.UKretailersnowregularlyemphasisetheregionalprovenanceofproductsduetothesaturationofthe‘BuyBritish’banner,andtheincreasingknowledgeshownbycustomers.By adopting a branding approach that taps into regional aspects, Irish produce will become more aspirational amongst UK consumers and will also differentiate it from other ‘local’ produce.Differentiationofproduce,toallowitstandoutfromthecompetitionwillbeessential.
Insights from the UKThe national Irish brand does have considerable advantage over other non-UK produced food owing to the natural affinity UK consumers have with Irish culture.SuppliersneedtocontinuetobuildonthesepositiveassociationsandassetsthroughinnovationandNPD,whilecontinuingtoemphasisetheIrishbrandpersonality.
UKretailersperceiveIrishproducetobequasi-local,respectable,safeandofhighquality,butwithouttherobust‘personality’asgarneredbythelikesofFrenchorItalianfoodanddrink.This puts Irish suppliers in a strong position to be able to build upon the ‘face’ of Irish produce–againemphasisingthekeymarketcharacteristicsandregionalassetswhenpitchingforexportopportunities.A strong PR campaign and media seeding of Irish produce would without doubt help this process.
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RetailerExpansionPlans“The multiples are encouraging people
to switch to private label and consumers are far more receptive to
this given the economic backdrop. The pressure on branded manufacturers
will only continue.”Md – Major producer
“Supermarkets based outside of the city provide ‘destination’ shopping
for the average consumer – a once a week trip. Convenience stores have the appeal of being local however
tend to be expensive so a combination of convenience and a reputation for
value will create a new dominant force in the retail market in Ireland.”
Brand Manager – Major producer
“Tesco or Sainsbury convenience stores stock half as many lines as
independent convenience, so there will have to be significant
rationalisation amongst the independents.”
Ceo – Trade Body
Summary OverviewRetailersareprojectingconsiderablegrowthoverthenextfiveyearsheavilydrivenbythemultiples,withtheirparticularfocusonconvenienceandonlinechannels.Inaddition,themajorityofmajorretailersarelookingoverseas,eithertocapturegrowthinemergingmarkets,ortoevaluatere-enteringContinentalEuropeanmarkets.
Changingconsumerlifestyleswillrequiremoreconvenienceoptions,soretailerswillreacttothistrendbyopeningmoresmallerandaccessiblebranches.Irishsuppliersandproducerswillneedtoprioritisethesetrendsinrelationtotheirproductandpackagingstrategies.Althoughinternationalmarketsarealreadyastrongsourceofrevenueforsomemajorfoodretailers,thistrendslookssettocontinue.KeyUKplayerswillcontinueaggressiveexpansionabroad(especiallyinemergingeconomiessuchasChinaandIndia),andothermorecautiousretailerswillconsiderre-enteringforeignmarkets.
IrishproducersmustlooktoexploiteverypotentialexportopportunityofferedbyUKretailers,suchastailoringproductstonewmarketsorinvestinginlogisticsthataccommodatethelongdistanceexportofgoodstothelikesofChinaandIndia.Thoseproducerswithstrongrelationshipsarelikelytobenefit,growingwiththeretailers.
AugmentedReality
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ExpansionPlansWithfoodretailers’salesexpectedtoreach166.2billionby2015in the UK alone, competition for market share amongst the key players is intense.Majorretailerswillcontinuetomakegainsfromsmallerchainsandindependentsthroughstoreenlargementsandopeningsinnewareas.In the UK the key battle for space will be played out in the convenience format market, with Irish producers able to tailor their NPD to the specific needs of the convenience sector.Consumerspendinginthissectorwillincreaseat5.8%peryearcomparedto3.9%ingroceryretailgenerally.Internationally,emergingmarketssuchasIndiaandChinawillbecomekeytargetsforexpansionasretailersseektodiversifytheirportfolioandincreasegrowthrates.
Major Multiples Domestic ExpansionFoodretailspendingintheUKisexpectedtogrowatanaverageannualrateof3.9%overthenextfiveyears,reachingatotalof210billionby2015.The major retailers are meeting this demand through store enlargements and new branches,withthebigfourtargetingacombined5millionsquarefeetofnewspaceperyear,equallingonestoreperworkingday.Althoughhypermarkets,supermarketsandsuperstoresaccountfor2/3ofgroceryretailprofit,finitegeographicspace,planningpermissionrestrictionsandcommunitybacklasharemakingsuchlargerformatsdifficulttopursue.With intensifying competition for space in an increasingly saturated market, retailers are being forced to look for new solutions.
Inadditiontotheconveniencesector, the lunchtime sandwich market is also poised to become a new battle ground for the major supermarkets withMorrisonsandAsdaalsoconsideringsmallerformatstorestofollowtheSainsbury’sFreshKitchenroll-out.openits4thlargestbranchinNewtonMearnsthisyear.
Tesco
Sainsbury’s
Asda
Morrisons
Somerfield
Waitrose
Where the Big Retailers Dominate
source: CACI Market Report
• Tesco: Withamajorinternationalpushexpectedinthenextfewyears,Tesco’snationalsalesareexpectedtoaccountforasmallerpercentageofprofits.Butwithplanstoopen2.4millionsqftin2011,amountingto292newstores,theretailerismaintainingasteadypaceofgrowthinIrelandandtheUKnonetheless.InIreland,Tescohasfacedatoughcoupleofyearsbolsteringits“Irish”salesthroughitspresenceinNorthernIreland,closetotheborder.
• Waitrose: Asurgeof250newbranchopeningsisplannedfor2011,followedbyanadditional40peryearupto2015.Scotlandrepresentsasignificantfocusfortheretailer,whichwillopenits4thlargestbranchinNewtonMearnsthisyear.
• Asda: Asda’srecentacquisitionofNettorepresentsamajornewfocusforthecompanyonsmallerstoreformats,andmuchofitsexpansioninthenearfuturewillfocusonthedevelopmentoftheseoutlets.Nevertheless,planstobuildeighty20,000squarefootsupermarketsby2015indicatethatAsdawillcontinuetodevelopthelargerformatstoresforwhichitisbestknown.ThoughmuchdiscussionhasbeenmadeinrecentyearsaboutexpansionintotheIrishmarket,noofficialplansarecurrentlyacknowledgedbyAsda.
• Iceland: AfterclosingallofitsIrishbranchesin2005,Icelandisplanningtore-establishitselfwithamarketpresenceinIrelandwith40newstoresby2014.
• Sainsbury’s: Bylate2011Sainsbury’shopestoincreaseitsgrossspaceby15%,withaparticularfocusoncarbonneutralexpansionsandgreenerstoreformatsthatreduceenergyconsumption.TheretailerisalsotestingasandwichshopformatnamedFreshKitchen,forpotentialroll-outacross200UKsites.
• Morrison’s: Expansionplansfocusonthesmallconveniencestoreformatoflessthan3,000ft,withatotaltargetof1.5millionsquarefeetofnewspaceby2013.IthasalsoexpressedinterestinacquiringastakeinIceland.
RetailerExpansionPlans
42%
6%2%
Extra
Superstore
Express
Metro
Homeplus
Sainsbury’sNewFreshKitchenFormat
13SCB Partners for Board Bia, In Confidence
Major Convenience ExpansionTheUK’sconveniencesectorwill grow faster than grocery retail in general,andwilltotal36.9billioninfiveyearsaccordingtorecentindustrystudies.Changingconsumerlifestylesaredriving retailers to increase their number of smaller, accessible branches. Irish producers will need to prioritise these trends in relation to NPD and packaging strategies.
However,asthenumberofsmallerindependentchainsfallsduetoacquisitionsbymultiples,buy-outopportunitiesforthemultipleswilldiminish.Overthenextfiveyearsmultiplestoopennewstoresonsitesnotalreadyhousingconveniencestores.
Contributing Factors To Growth of Convenience In Next 5 Years
Contractioninthenumberofindependentconveniencestoresinoperation
Increasingpresenceof‘Big4’retailersandotherbrandsinthesector
Growingfuelpriceswillencourageshopperstowalkratherthandrivetostores
Rapidexpansionofnewentrants(largelymaingroceryretailplayers)helpingtoreduceoveralldecline
Workingmothers’needforconvenienceoptionstobalanceworkcommitmentswithfamilyneeds
On-the-gobreakfast,atdesklunch,andsnackstoreplacemissed home meals
Increaseof‘top-up’shoppingtripstosupplementprimary(oftenweekly)groceryvisitoronlineshop
Operatorsfromoutsidethesectordevelopingbroaderconveniencebasedformats/offerings
Urbanisation,populationdensityincitiesandincreaseduseofpublictransportation
Improvementoftheconvenienceoffering,presentingconsumerswithviableconveniencealternativestosuperstores
Centra: IrishconvenienceretailchainCentraplanstoadd17newstoresandover500newjobstoitsnetworkin2011,inaninvestmentworth23m.
SPAR Ireland: SparIreland’sgrowthisexpectedtocontinueto500storesbytheendof2011.In2010therewerebothstoreclosuresand22newopeningsthatamountedtoatotalof460stores.ThereisoptimismthattheSparchainwillsoonreachthe500markshouldtheIrisheconomystabilise.
Waitrose:PremiumgrocerWaitrose’sgentleexpansionintotheconveniencesectorhasseentheopeningofahandfulof
LittleWaitrosestoresacrosstheUK,inLondon,ManchesterandCambridge.Another37
locationsareexpectedtoopenoverthenextyear.
Sainsbury’s:TheUK’sthirdgroceryretailerisuppingitsconvenienceportfoliobyaddinga
further75storesbytheendofthe2010/11financialyear,withanother100+plannedfortherestoftheyear.Thisexpansionwillfocusparticularlyinthe
northandwestwhereSainsbury’sisunder-represented.ItsFreshKitchensandwichformatwill
alsoenticefurtherconvenienceshoppers.
Asda:TherecentacquisitionofNettowillresultinanewstoreformatakintoaTesco
MetroorSainsbury’sCentral,whichwillallowAsdatomoveintosmallermarkettowns.
RetailerExpansionPlans
14SCB Partners for Board Bia, In Confidence
International ExpansionInternationalmarketsarealreadyastrongsourceofrevenueforsomemajorfoodretailers,andthefutureislikelytoseecontinuationofthistrend.Irish producers must look to exploit every potential export opportunity offered by UK retailers, such as tailoring products to new markets or investing in logistics that accommodate the long distance export of goods to the likes of China and India.
• Tesco:Withastrongpresenceonthreecontinents,Tescoleadsthewayinglobalexpansion.Internationalsalesaccountfor22%ofthegroup’sprofit,withexpectationsthatthiswillreach43%by2015.WithitshighestrevenuecomingfromSouthKorea,ThailandandIreland,TescoseesAsiaasalong-terminvestmentandwillcontinuetoexpanditsnumberofstoresthere.InChinaspecifically,Tesco’sapproachinvolvesbuildingbespokeshoppingmallsoutsidethemaincitiesandfittingthemwithhypermarkets.PlansforthefutureincludeexpansionintoIndia,withitsfirstcashandcarrystoreopeningin2011.TescoholdspositionsinseveralprofitablemarketsinEasternEuropefromwhichitislikelytoexpandintoneighbouringcountries,includingHungary,Slovakia,PolandandtheCzechRepublic.
*RevenuesaresalesexcludingVAT
Us
£349m*
UK
38,558m*
Asia
£8,432m*
europe
£8,695m*
*RevenuesaresalesexcludingVATsource: TescoAnnualReport2010
• Sainsbury’s: RecentmarketvisitstoShanghaiandpublicstatementsofinterestregardingIndiaindicatethatSainsbury’swillalsobejoiningthebattleforAsia.PastfailuresinforeignmarketssuchastheU.S.havedeterredSainsbury’sfrominternationalexpansionuntilrecently,butstrongmarketperformancehasledtorenewedinterest.
• Waitrose: WithtwostoresinU.A.EandonerecentlyopenedinBahrain,physicalinternationalpresenceislimitedtotheMiddleEast.Waitroseisinfiltratingothermarketsthroughitsproducts,developingrecognizedbrandstatusinplacessuchastheU.S.andCanadathroughcooperationwithotherstockists.
• Asda: Asdaiscurrentlyinvestigatingthedevelopmentofsixnewprivatelabelbrandsspecificallyforinternationalcirculation,andalreadyhastheperfectlaunchplatformthroughparentcompanyWalmart.Currentlytherearenoplanstoexpandphysicallywithnewforeignstores,withafocusonnationalgrowth.
• Marks & Spencer:AstrategyprioritizinginternationalexpansionisunderwayatMarks&Spencer,withIndiaandChinaatthecoreoffuturegrowth.Theretailerisalsolikelytore-openstoresincontinentalEuropeafterhavingfailedinthatmarketadecadeago.
Diversificationissettobealeadingtrend,asglobalchainsmoveintokeyareasandnewretailersjointheraceforforeignexpansion.ChinaandIndiapresentthemselvesastwokeytargetsforpotentialgrowth,withhighlevelsofinvestmentandconsumersseekingtoemulateWesternlifestyle.Asretailersexpandinternationally,producerswithstrongrelationshipsarelikelytobenefit,growingwiththeretailers.
Tesco Around The World
TOP 10 GLOBAL GROCERY MARKETS
800
700
600
500
400
300
200
100
€ BILLIO
N
US
704
bn
China3
77 b
n
Franc
e2
37 b
n
Japan
342
bn
Ind
ia 2
19 b
n
UK
216
bn
Germ
any
173
bn
Italy
146
bn
Russia1
33 b
n
Mexico1
29 b
n
US
734
bn
China6
09 b
n
Ind
ia 3
21 b
n
Japan
397
bn
Franc
e2
36 b
n
Russia2
14 b
n
Brazil2
13 b
n
UK
196
bn
Germ
any
184
bn
ITa
ly 1
50 b
n
2006 2010 (Forecast) 2014 (Forecast)
source: IGDGlobalRetailingReport2010
China8
75 b
n
US
857
bn
Japan
414
bn
Ind
ia 5
15 b
n
Russia3
70 b
n
Brazil3
27 b
n
Franc
e2
62 b
n
UK
223
bn
Germ
any
193
bn
Ind
on
esi
a 1
92 b
n
900
RetailerExpansionPlans
15SCB Partners for Board Bia, In Confidence
Groupon
DebenhamsOnlineTV
Summary OverviewRetailerswillseektotakeadvantageoftheincreasedconsumerinterestintheconvenienceofonlineshopping,aswellasimprovedconnectivityavailabletoconsumersthroughsmartphoneapplicationsandmoreengagingonlineexperiences.Asconsumers’trustofonlineformatsdevelops,retailerswilllookforwaystoamplifyconsumerspendviatheironlineandmobileplatformsaswellasremainvisibleandrelevantintheircustomers’day-to-daylives.
Thegrowthofbroadband,mobilecommerceandrelatedapplicationsaswellasuseofsocialnetworksandcrowdshoppingsiteswillenableretailersknowmoreaboutcustomers.Ofequalimportancewillbetheabilityforcustomerstohaveaccesstoallsortsofinformationaboutretailersandtheproductstheystockandsell.Thesenewchannelsofpurchasinganddialoguewillmeanastutesupplierscanselldirecttoitscustomers.Thegrowthofmobileappsmeansthatcustomerswillusetheirmobilesintheshopsandbasepurchasingdecisionsonresultsgeneratedbytheapps.
Homedeliveryfromm-commerceoronlineshoppingwillcontinuetogrowinpopularitywhichmeansthattheretailerswillcontinuetoevolvethelogisticsinthesupplychaintodeliverbest-in-classorderfulfillment.Atthesametime,Irishproducers,willneedtoincreaseefficiencyintheirsupplychaintobeapplicableforonlineretailplatforms
Instores,theautomationtrendofthepastfewyearswillcontinuetostrengthen,particularlyintheconveniencechannel,asretailerslooktocutdownonoverheadsandstreamlinethepayingprocess.
TechnologiesforChannelExpansion
“Social media will be increasingly important. Consumers are very tribal. Sites such as mysupermarket.com and other review sites will become easier
to access consumer reviews while shopping.”
Business planning Manager – Major Retailer
“Internet shopping is growing steadily, but many obstacles still remain. Logistics
for home delivery are poor in Ireland – especially as most homes have dual-earners and therefore delivery window
is small.”Ceo – Trade Body
“Our view is that online is going to come far more into play, whether it be via home delivery or pick up. We see neighborhood stores becoming more
important as people mix their purchase habits between big supermarkets and small neighborhood stores. We see that
as a channel for growth.”Commercial director – supplier
16SCB Partners for Board Bia, In Confidence
Developed Online Shopping ExperienceTheUKaccountedfor30%ofallEuropeanonlinesalesin2010,andisexpectedtogrowby14%in2011.Brands using social networks and crowd shopping sites (such as Groupon) to provide shoppers with special offers, are not only increasing revenue from advertising and click through, but also learning more about their customers via data capture.Thustheycanexpandtheirrelationshipandloyaltywithconsumers.ThisisatrendthatIrishbrandsandproducers(especiallysmallornewcompanies)canutilisetogaincompetitiveadvantage,andtoincreasebrandloyalty.
Onlineshoppingpioneersinclude:
• Groupon: AmericansuccessstoryGrouponhastakentheUKbystorm.Thecouponsitehassavedits50millionusers851millioninitsfirsttwoyearsthroughproductdiscounts.Customersgetheavilydiscounteddealsattheirlocalrestaurantsandshops,andthelocalmerchantsgetaninfluxofnewcustomers.ThisformatcouldsuitnewIrishbrandslookingtoincreaseawarenessamongstconsumers.
• Makro: WholesalerMakrohada‘TweetaPrice’campaign,allowingcustomersonTwittertodecidethepriceofselectedproducts.Thediscountappliedwasdeterminedbythenumberofre-tweetsthateachproductgot.
• Debenhams: Themulti-productretailerintroduceditsownonlineTVformatthatcanbealsoviewedviasmartphonesandYouTube.Byusingthewebsite’sclickandbuysystem,viewerscanpurchaseitemsfeaturedonthechannelastheywatch.
• Superquinn: TheIrishretailersignedadealwithperformancemarketingcompanyTradeDoublerinlate2010tostrengthenitsonlinebusinessin2011andbeyond.
• Mysupermarket.com: Onlinecomparisonwebsitessuchasmysupermarket.comgivecustomersinstantaccesstopriceandcontentcomparisonsandareanexcellentplatformforswitchingbrandsorretailers,bolsteredbydesignatedpagesfortopoffersandpersonalisedrecommendationsfollowingregularuse.
• M&S Social Media Success: Marks&Spencerhasthelargesttwitterfollowingamongstmajorfoodretailers,andoverthreetimesasmanyFacebookfansassecondplaceSainsbury’s.Regularupdatesfromthecompanyengagecustomersina2-wayconversationandhelptopublicisepromotionstakingplaceinstore.
• TV Shopping Channels: QVChassourcedlocally-producedproductsforsomeprogrammes.Forexample,FraserDohertytheyoungfounderofSuperJamappearedonthechannel.QVClooksforfoodproductsthatareuniqueandhaveastorybehindthem.
Both suppliers and retailers will have to adapt all new channels of purchasing and dialogue with customers. Prices will be increasingly transparent and thus competitive.
Therewillbeopportunitiesformarketing:astutesupplierswillbeabletoselldirecttoconsumers.
As Ireland develops its broadband infrastructure Irish products need to get up to speed with all new technologies so that they can take advantage of the benefits afforded. UK retailers and their established suppliers have had some time advantage.
TechnologiesforChannelExpansion
MySupermarket
SuperQuinn
17SCB Partners for Board Bia, In Confidence
M-CommerceThoughstillinitsinfancy,thefutureofdigitalshoppingisquicklybecomingacollectionofmobileretail,peer-to-peerlending,storedvaluecards,micro-philanthropyandprivatecurrencies.
•M-Commerce sales in the UK are expected to more than double in the next three years.In2009,2%oftheBritishpopulationusedtheirmobiletoshoponline,whileapproximatelyonethirdhadinternetontheirmobiledevice.(Source:GlobalMobileandM-CommerceTrends2011,Reportlinker.)
•75% of online retailers currently have a mobile strategy.By2015,thenumbershouldincreaseevenmore.AsmarketsinEuropeandtheMiddleEastoutpacetheUS,e-commercewillshiftitsmarketalignmenttofocusondifferentgeographies. (Source:ABIResearch,2010.)
•Asthenumberoftangibleproductsalesincreasethroughm-commerce,2015shouldseenumbersmovebeyond20%from6%especiallyasmobileinterfaceslikeeBay’s‘app’takehold.(Source:MobileMarketingAssociation,2010.)
Dozensofsmartphoneapplications(suchasGoogleShopper)willallowconsumerstolookupaproductbyscanningitortypinginthebarcode.Theappthenreturnsalistofpricesforthesameitematnearbystoresorthroughonlineretailers.
Retailers will need to ensure that they enable the shopper to make purchases whenever and wherever they want, which means mobile site optimisation and mobile commerce channels cannot be ignored.
ConsequentlyIrish producers will need to ensure that the pricing and product information of their products on these sites are correct (wronginformationmayleadaconsumertooptforacompetitorbrand)andthattheyhavethecustomerservicesupportinplace.
TechnologiesforChannelExpansion
GPSstorelocators,barcodescanners,loyaltypointsandshoppinglistsareallnowbecomingstandardfeaturesonretailers’apps,andeBayhasrecentlylaunchedafashionappwhichusesaugmentedreality.In the coming years, grocery sector retailers will use this technology to encourage sales by offering product and cooking suggestions via barcodes, product compatibility, and flash promotions.
• Amazon: Amazonrecentlyannouncedthatitsmobilecommercerevenuereached1.15billioninthelast12months(worldwide)andpredictedtherewillcomeatimewhenallretailerswillhavewebsitesthatareoptimisedformobileuse.
• Tesco: TheUK’sfirsttransactionalbarcodescannerfortheiPhonewaslaunchedbyTescoattheendof2010,enablingshopperstoscananygroceryitemandaddittoahomedeliveryorderinstantly.
• Marks & Spencer:Theretailerenteredthemobilee-commercemarketattheendof2010viaanewmobilesiteratherthananapp.Thenewsite(currentlyrestrictedtoclothing,homewareandtechnology)isexpectedtocovergrocerypurchasesaswellifthelaunchprovessuccessful.
• Sainsbury / Nectar: Sainsburycurrentlyhastwoappsonthemarket.TheSainsbury’sappincludesastorelocator,alistofdealsinstore,newsandpersonalisedoffers.TheNectarappisintendedforpeoplewhoshopinSainsbury’sandHomebaseandprovidesaccesstooffersformoreloyaltypoints.
• Waitrose: MuchliketheSainsbury’soffering,thisfreebrandappalsoprovidesshopperswithrecipesuggestionsandcross-sellingproductopportunities.
18SCB Partners for Board Bia, In Confidence
Implications1. Producerswillneedtokeepapacewithtechnologytrends
asbroadbandpenetrationanduseofmobileinternetincreasesinIreland.UKsuppliershavehadmorerecentexperienceofthis;assomeretailerslooktoconvergesupplychains,Irishsupplierswillneedtobeabletocompeteonthisfrontandbepreparedfornewrequirementsaroundpackagingandlabellingforexample.
2. Irishproducerswillhavetothinkcarefullyabouthowtheycancapitaliseonnewopportunitiespresentedbytechdevelopmentsandtheimplicationsthiscouldhaveontheirownproductionandsupplycapabilities.
TechnologiesforChannelExpansion
Rise of Food & Beverage AppsIntheIrishandUKgrocerysectors,potentiallytransformativeappsarealreadyspreading,mostoriginatingfromtheUS.Theseapplicationsarestillintheirformativestage,but have the potential to change the way consumers think about food and shopping over the coming five years.Consumersaretakingthesetechnologiesintotheretailenvironmentandbasingpurchasing
Good Guide TheGoodGuideprovidesshopperswithethicalratingsforthousandsofproducts.Thesearebasedonalonglistofhealth,environmentalandsocialcriteriausinginformationinthepublicdomain.
ScanavertThisallowsconsumerstosettheirowndietarypreferencesincludingallergies.Itthenwarnsthemifaproductisincompatiblewiththesesettingswhileshopping.
AUGByscanningthebarcodewiththeAUGApp,shopperscanfindhowfartheproducthastravelledtoreachthestore,theidentityoftheprimaryproducer,whethertheingredientsareinseasonandahistoricalrecordofprices.
CNET Scan and Shop Allowsyoutoscanaproductbarcode,accessuserreviews,comparepricesfromvariousretailersandorderonline.
Smart Phone Apps:
3.Giventhetransparencythattheinternetandmobilecommerceaffords,suppliersneedtobeawarethatexistingandpotentialcustomerswillexpecttobeabletoaccessaccurateinformationaboutproduce,ingredients,ecocredentials,pricingetc,allatthetouchofabutton.
4.Whileretailersareactivelyusingsocialmediaandappstoengagecustomers,Irishproducersmustactivelyconsiderhowtheycanusethesechannelstobuildtheirownbrandsandfollowing.
decisionsonresultsgeneratedbytheapps.Thoughmanyfoodappsarepreoccupiedwithrecipesandfinediningreviews,some offer very specific information liable to influence decisions made while shopping.Examplesshowingpracticalusesfornewfoodapptechnologyareshownbelow:
19SCB Partners for Board Bia, In Confidence
• Dairy Crest: Chilleddairyfoodsupplier,DairyCrest,hasimplementedParagonSoftwareSystemstohelpcentraliseitsUKdeliveryscheduling.Theautomatedroutingtechnologymakesforbettertransportplanning,transforminglogisticoperationsfromatraditionalmethodofstock-baseddeliveriestoaweb-basedcollaborativeplanningmodel.
• Waitrose: Transactionsmadeonlineathomeoratworkcanthenbecollectedfromtheretaileravoidingthein-storeexperience.Waitrosehasrolledouttheconceptto21newstores.
• Boots: In2011,Bootsisplanningtoopenadrivethroughnewstoreforfoodofferingsandpharmacyitems.
• In Store Digital Order: Asdaistotrialtheuseofin-storeorderinginthreeofitsstores(Bradford,GlasshoughtonandHyde).Customerswillbeabletoordergoodsfromanin-storedisplayoranonlinecatalogue,withproductsthendispatchedfromawarehousespaceonsite.TheCo-operativeisnowcombininghomedeliverywiththelatesttouchscreentechnologyviadigitaltouchscreenkiosksthatallowconsumerstoefficientlyselectadeliverytimeinstoreastheydotheirshopping.
Merger of Digital and Physical WorldRetailershavetoquicklyrespondtotheever-growingpopularityinhomedeliveryasthepreferredchoiceofshoppingfortime-poorconsumers.Logistics in the supply chain are being adapted to cope and deliver best-in-class order fulfilment operations. This expectation will also be passed on to Irish producers, who will need to increase efficiency in their supply chain to be applicable for online retail platforms.
Retailersareexpandingwithnewdepotsdedicatedtohomeshoppingpicking,andalternativecollectionoptionsarebeingofferedtotheconsumersuchasClick&Collectandin-storedigitalordering.
Examplesofrecentleadersinclude:
• Asda: Asda’sexpansionplansinhomeshoppingarematerialisingwiththeopeningofasecondsiteinNorthLondon,dedicatedtohomeshoppingdistribution.Asdaisextendingitsreachbydiversifyingitsofferingstoincludebetterorderingonline,pickingupinstorefacilitiesandefficienthomedelivery.Theirnewsitewillhelptofacilitatetheseservices.
Asda’sdedicatedHomeShoppingCentreinMorley,nearLeeds.Productsorderedonlinearepickedby500Asdaemployeesandplacedintotesreadyfordelivery.Twoconveyorsystemsof45metreseachuseacombinationofhorizontalandinclinedbeltconveyors,rollerconveyorsandpoweredbends.
• Tesco: Thefirstquarterof2011willseethecompletionofTesco’slatestdistributioncentreinNorthLondon.The23minvestmentwillhelptheUK’sNo1supermarkettoserviceitsdot.comandconveniencebusinesses.Tescoisalsotriallinga‘DriveThruClick&Collect’servicewhereshoppershavetheirgroceriesputintotheircarbootforthemfora2.3charge,andisplanningtooffercollectionfromitsvastnetworkofconveniencestores.
Single Channel Multi-Channel Cross-Channel Omni-Channel
• Customersexperienceasingletypeoftouch-point.
• Retailershaveasingletypeoftouchpoint.
• Customerseesmultipletouch-pointsaspartofthesamebrand.
• Retailershavea‘singleviewofthecustomer’butoperateinfunctionalsilos.
• Customerseesmultipletouch-pointsactingindependently.
• Retailer’schannelknowledgeandoperationsexistintechnicalandfunctionalsilos.
• Customersexperienceabrand,notachannelwithinabrand.
• Retailersleveragetheir‘singleviewofthecustomer’incoordinatedandstrategicways.
The Legacy The Reality The Aspiration The Ideal
TechnologiesforChannelExpansion
Evolution of Customer / Retailer Touch Points
20SCB Partners for Board Bia, In Confidence
New TechnologyRetailerswillcontinuetoslowlyupgradetheirtechnologyoffering,withhandheldITdevicesandvideotouchpointsfindingtheirwayin-storeoverthenextfiveyears.
The automation trend of the past few years will continue to strengthen, particularly in the convenience channel,asretailerslooktocutdownonoverheadsandstreamlinethepayingprocessasmuchaspossibleforcustomersthroughgreaterimplementationofself-servicecheckoutandmobilepoint-of-salesystems.
In-Store Technology Handheld TechnologyOverthenextfiveyearshandheldITdeviceswillincreasinglybeusedbyretailstafftobetterservicetheneedsofcustomersaswellasbycustomersthemselves.
Video TouchpointsRetailersareusingthenewestinterfacetechnology,suchasmulti-touchtoprovidefixedinformationpointsinstore.Thesepointscanprovidefloorplansandotherinformationinaninteractivewayforconsumers.
Self CheckoutsUSPizzeriaUNOhasimplementedmobileselfcheckoutsintheirrestaurants,allowingdinerstoplaceordersandpaysimultaneouslyminimizingwaitingtimeandmakingordersmoreaccurate.
Unmanned Kiosks: Wine KioskConceptstoresarecurrentlytestingnewformsofautomatedfoodandbeveragevending,completewithconciergeadvicethatprovidesrecommendationsbasedondiningmenus.
Personal TechnologySpontaneous OffersTesco’sfutureclubcardwillinstantlygiveshoppersspecialdiscounts,whichappearonthecard,basedonauser’spreviousbasketsandshoppinglists.
Location-Based ServicesLocation-basedserviceshavebecomeevenmorepowerfulwhentheycombinepersonalisedandpermission-basedreal-timenotificationsforrewardsatlocalestablishments.
Mobile PaymentSmartPhoneswillcontainindividualbankdetailsandcreditcardinformationinasingledevice,allowingconsumerstostreamlinetheirwallets.
Augmented RealityMobileaugmentedrealityappsareincreasinginpopularity,theincreasedinterestwillleadtonearly1.4billionworldwidedownloadsby2015.
Future Retail FormatsExperts Utility StoresNewformatswillblendtraditionalconvenienceshoppingwithcasualdiningcountersthatprovidefresh,ready-to-consumefoodandbeverages,ensuringspeedandqualityarenolongermutuallyexclusive.
Hydroponics Withanincreaseindemandfromtheconsumerforfresher,morelocalandsustainableproduceitisunsurprisingthathydroponicscouldplayamajorpartinthelookandfeeloffuturesupermarkets.
Ocado Future Fridge Forecastingthepotentialforfridgestoevolveintosomethingtrulycerebral,offeringpredictive,fullyautomatedshoppingalteringthewayweshopandeatforever.
TechnologiesforChannelExpansion
21SCB Partners for Board Bia, In Confidence
Summary OverviewRetailerswillincreasinglyusecustomisedpromotionsandincentives,basedonconsumerdatafromloyaltycardsandonlineshopping,enablingretailerstogainvaluableconsumerprofilinginsights.Influentialmediapersonalities;includingcelebritychefs,amateurbutinfluentialfoodcritics,bloggersandothers,willimpactinitialstore-stockingdecisions;theymayalsodeveloppromotionalpartnershipsandrelationshipswithretailers.
TrendsinPromotions“About 18 months ago Flahavans made
a very conscious shift to dial up their Irish, locally sourced pedigree. They
are 95% sourced locally.”Marketing director – food Body
“Producer’s marketing campaign. They need to have a launch campaign and ongoing communications. It is a factor when we take a product – it helps, but
it’s not essential.”Marketing director – food Retailer
Retailer Promotions Retailerscontinuetocreate new promotions and incentives (loyaltycards,collaborationswithlifestylebrands,prizes)withwhichtomaintain consumer loyalty while also gaining invaluable consumer profiling insights. This gives Irish producers the opportunity to provide retail partners with promotions, such as discounted products or brand relevant prices.
Retailersarealsofindingnewwaystotapintonewfoodanddrinktrendscomingfromthemedia,whilealsoutilisingtheseincreasinglyinfluentialmediapersonalities;fromcelebritychefsallthewaythroughtoamateurbutinfluentialfoodcritics/bloggers. Irish brands also have the opportunity to gain insight from these new sources, and to seed product and favour amongst key personalities.
22SCB Partners for Board Bia, In Confidence
Promotionswillremainamajorcomponentofhowretailersprovidevaluetotheconsumer.Overthenextfiveyears,promotionswillbemoreandmoreaggressiveasretailersgrapplewiththenatureofamaturemarketwithlittleabove-inflationgrowth.Brandbundlingandco-promotionsaswellastriedandtestedstrategiessuchascouponsandloyalty-cardschemeswillbekeycomponentsofretailers’promotionalofferings.
ExamplesofRetailerPromotions:
• Tesco: Tescohasofferedapromotiononlightbulbs,wherebyeachsaleofenergy-savingbulbscanbeconvertedintoairmilesthroughtheClubcardrewards’programme.
• Loyalty Card Schemes: TheBigClubcardVoucherExchangepromotionfromTescooffersClubcardholdersthechancetoredeemtheirpointsatdoublevalue.Itrecentlycontributedtoan18%increaseinvoucherredemptioncomparedwiththepreviousyear.
• Sainsbury’s & Comic Relief:FortheannualcharitydriveRedNoseDay,Sainsbury’sisthesolefoodretailerstockistoftherednoses,andthusfeaturesprominentlyinassociatedTV,printpromotionsandcelebritylaunches.
TrendsinPromotions
The New InfluencersRetailbuyerscontinuetolooktofoodwriters,celebritychefs,bloggersandconsumerforumstokeepabreastofconsumerfoodtrends.Asconsumersalsolooktotheseinfluencersfortipsontastytreats,recipesandingredients,retailersandsuppliersmustalignwithconsumerinterestsandinfluences.
ExamplesofNewInfluencers:
• Olive Oil: Between1990and2010therehasbeena300%increaseinoliveoilimportsintheUK.Akeydriver,apartfromhealthbenefits,hasbeentheheavyuseofoliveoilbycelebritychefsontelevision.
• Food Programming: Between1990and2010therehasbeena7,000%increaseinthehoursoffoodprogrammingontelevision.
• Big Fish Fight Week: AiredonChannel4intheUKoveraweek,thisseriesofprogrammesfeaturingJamieOliver,HestonBlumenthalandGordonRamsaywasresponsiblefor:aweek-on-week45%increaseinsalesofsardines,coley,browncrab,whitingandspratsatTesco,Marks&Spencer’slargesteverweeklyfishturnoveranda167%increaseinthesaleofpollock(shownintheprogrammeasanalternativetocod)atSainsbury’s.
• Jamie Oliver: Thecelebritychef’s2008programmeFowlDinnerswasanuncompromisinglookattheBritishpoultryindustryandwascreditedwitha50%increaseinsalesoffree-rangeandorganicchickenacrosstheUK.
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Private Label DevelopmentsThebattlebetweenprivate label and brands is intensifying as private label ranges have continued to increase market share overthepastyears.Ithasprovedparticularlysuccessfulduringtherecessionasconsumersdowntrade,coincidingwithretailersde-stockingsomethirdpartylineswhileinvestinginthefurtherdevelopmentoftheirownbrands.Duringtherecession,tradingdownwithinstoreratherthanswitchingbrandsbecamepopularasconsumerslookedforlowerpricesandqualityguarantees.
PrivateLabelvs.Branded
Summary OverviewGrowthinprivatelabelwillslowintheUKoverthenextfiveyearsafteradecadeofhugegrowth.Despitethis,newprivatelabel‘brands’willcontinuetoappear,andretailerswillseektoexpandprivatelabelofferingintootherareasthroughtheuseofco-brandingandexclusivityarrangements.
“The multiples are encouraging people to switch to private label and consumers are far more receptive to
this given the economic backdrop. The pressure on branded manufacturers
will only continue.”Md – Major producer
“This will continue to increase and will see many manufacturers looking
to supply private labels instead of creating their own branded goods.
Private labels are no longer a cheap option and have become trusted (and
cheaper) brands in themselves.”Business planning Manager – Major
Retailer
“Tesco is encouraging people to switch to private label and consumers are far more receptive to switching from
proprietary to retailer brands given the economic backdrop. There is a lot of pressure on branded manufacturers
now and this will only continue.”Commercial director - supplier
100,00090,00080,00070,00060,00050,00040,00030,00020,00010,000
2009 2010 2011 2012 2013
• Grocery Market • Own Label Market
104,298 106,385 109,044 112,317103,267
49,78846,470 48,082 51,796 53,912
CurrentPrices(€m)
own Label Market by value at Current prices
200,000
WaitroseLuxuryBiscuits
Sainsbury’sBeGoodToYourange
Source:KeynoteMarketForecasts:FoodCateringandDrinkMarketFocus-2009
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PrivateLabelvs.Branded
Europe is the largest market for private label products globally. WithinEurope,theUnitedKingdomisthelargestprivatelabelmarketbysize,followedbyGermany.Private label penetration in the United Kingdom is forecast to well exceed 40% in 2011.
MostUKretailerscontinuetoemployabasic-middle-beststrategywiththeirprivatelabelranges,andthesameconsumerislikelytobuyfromallthreetierrangesdependingontheirneeds.However,thesuccessofprivatelabelsintheUnitedKingdomcanbepartiallygaugedbythefactthatconsumers are revelling in ‘premium’ private label categories.Privatelabelshaveconsistentlyemergedontopintermsofqualityandconsumerstodayassociateprivatelabelswithinnovationandtrustworthyquality.
AnotherimportantsuccessfactorhasbeenthedynamismandinnovationofUKretailers.Facedwithintensecompetitionfromotherplayers,theyhavecontinuouslyre-inventedtheirranges,andmodifiedproductstosuitchangingconsumerdemands.
Source:KeynoteMarketForecasts:FoodCateringandDrinkMarketFocus-2009
50
40
30
20
10
0
-10
Oct2008 Nov2008 Dec2008 Jan2009 Feb2009
• Budget • Premium • Standard
sales GrowthOwn Label food ranges, by quality tier (%)
Sainsbury’s Taste the Difference Sainsbury’s,facedwithincreasedcompetitionfromTesco,changeditsprivatelabelimagefrom‘lowprice’to‘premiumquality.TheTastetheDifferencerangewasrecentlythesubjectofthesupermarket’slargestproductlaunchtodate,ledbyasuccessfulcampaignfeaturingbrandambassadorJamieOliverthatcontributedtoa2.9%increaseinsales.
Sainsbury’s Bistro Range Anewlineofrestaurant-qualitypremiumreadymealslaunchedin2010undertheTastetheDifferencelabel,featuringstarters,mainsanddessertsfor2diners.
Chef Neil Nugent TheMichelin-starredchefheadedseveralaward-winningrestaurantsbeforemovingontoworkatAsda,Sainsbury’sandWaitrose,andhasrecentlybeenhiredbyMorrison’store-vampitsownlabelproductsaheadofananticipatedre-launch.
Tesco Own Brand Price Drop Forthefirsttimesince2007,Tesco’snewchiefexecutivehasinitiatedacross-the-storepricereductionsoneverythingfrombasicstotheTescoFinestrange,anindicationthatthefutureofTesco’sownlabelisprice-focused.
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Exclusive Deals Suppliersandretailerswillincreasinglyhavetheopportunitytoenterintoexclusivityrelationships,wherebyproducer-brandedproductsaresoldexclusivelyinanoutletwithnoretailerbranding.The result is defacto private labels without the prominent branding of the retailer, which can be off-putting to some consumerswhotendtofavourabrandedproduct.Furthermoretheproducerhastheopportunitytoretainandbuilditsownbrand.Exclusivityagreementsmaylastfrom2-5yearstypically.
Examplesinclude:
Canus Goats Milk SoapWholeFoodssignedanexclusivedealinMay2011withCanusGoat’sMilkSoapandwillbeginstockingits‘GrabandGo’productsinbulkacrossthePacificNorthwestandSouthwestinAmerica.ThepartnershipallowsWholeFoodstosetupsoapdisplayswhereconsumersselectfromseveralflavoursofunpackagedsoapsandputthemintoCanusbrandedbags.
Champney’s Spa ProductsFrom2004-2011Champney’sSpaProductshadanexclusivedealwithSainsbury’sbutfrom2011ithasforgedanewexclusivepartnershipwithBoots,joiningBootsotherexclusiveluxuryspaproduct,Sanctuary.
Oatmeal of AlfordSmallScottishoatmanufacturerOatmealofAlfordrecentlywentonsaleexclusivelyinthreeWaitrosestoresinScotlandandisalsoavailableonline.
StabiliserTM BeefAsmallgroupofYorkshirefarmersknownasBeefImprovementGroupsignedapartnershipin2010withMorrisonstosupplymeatfromanewtypeofsustainablebeefcow,calledtheStabiliserTM.
Co-Branding Co-brandinginwhicharetailers’brandisappliedalongsidethatoftheproducers.Thisisoftendoneinthecontextofonexclusivedeal.
Examplesinclude:
Davidstow CheddarThisco-brandedcheeseisuniquetoWaitroseandprominentlydisplaysitsexclusiverelationshiponthefrontofthepacket.
Heston Blumenthal’s Hidden Orange Christmas PuddingHestonBlumenthalcreatedanexclusiveChristmasPuddinginpartnershipwithWaitroseforChristmas2010thatincludedawholecandiedorangeinthecentre.TheproductwassopopularitsoldoutinstoresandcouldbefoundoneBayforupwardsof80.5.
Louis Chaurey ChampagneChampagnebrandproducedentirelywiththebrandingofaregularchampagnebottle.TheonlymentionofM&Scomesinthesmallprintwhichreads‘ProducedforM&S’.
Duchy Originals from Waitrose English RaspberriesThisbrandincorporatestheWaitrosenameintotheexistingdesignoftheDuchyOriginals,creatingasubtlepartnershipbasedontheirexclusivityagreement.
Marks & Spencer Oakham© ChickensMarks&SpenceristheonlystockistofOakham©chickens,aslower-growingbreedthatcomefromdedicatedUKfarms.EveryMarks&SpencerpackagethatcarriesOakhamprominentlydisplaysthelabelonitspackaging.
PrivateLabelvs.Branded
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RetailerPerspectiveonBest-In-ClassProducts
“It is going to be increasingly important to have products which are tailored to one
or two person families which will be cooked on the evening of purchase.”
Marketing director – Major Multiple
“Shelf-ready packaging is one area we feel our suppliers can improve upon”Marketing director – Major Multiple
“People want to cook but they remain time sensitive so they want ready meals that you have to prepare yourself, but which
have all the ingredients already selected and measured in one easy packet.”
Head of strategy & Business planning - Major Multiple
Summary Overview For Irish producers to grow market share and gain store shelf, an awareness of existing and future retail trends is an obvious pre-requisite. What is perhaps less clear is interpreting how each of these will impact a particular product or supplier. What retailers have made clear is that they expect suppliers to renovate and develop new products at the same time that they themselves are changing to enhance efficiencies and take into account areas of social and eco responsibility. So the environment is potentially pretty dynamic.
Manyconsumertrendsevolveslowlyandmanyofthethingsthatconsumersandretailersarelookingforfromsuppliersarealreadybeingconsidered,andindeedadoptedbyfoodproducers.
Whiletherewillbeanunderlyingawarenessoftrendsinformulation,packagingandpositioning,suppliersneedtoconstantlyreviewandupdateandnotesubtlechangesthatarehappening.Supplierswillalsoneedtoreviewtrendsinthecontextofthedifferentmarketstheyarelookingtoenter,aseachcountrywillhaveadoptedtrendstodifferentdegreesandofcoursehavetheirown.
Whatfollowsareexamplesofinterestingproductsthathavetappedintoongoingconsumerneedsaroundformulation,packagingandpositioning.
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need for variety: Consumersarealwaysonthelookoutfornewfoodstotry–newflavoursandtextures,andgenerallysomethingfreshandintriguing.Retailersarelookingfornewproductideas,newstylesofeating,exoticingredientsandprocessingtechniques.Specialtysalts,buttersandflavouredmeatsareontherise.
scan swedish Meatballs: Haveuntilnowlimitedtheirproductlinetoretainauthenticityasthe‘originalSwedishmeatballs’,advertisingarecipedatingbacktothe1800s.Yetnowthecompanyislookingintoexpandingintoarangeofmeatballstomeetconsumerdemandforvariation.
vogel Bread: HasbecomefamousforitsqualityanditsdiverseingredientselectionsuchasFlaxSeedandSoyabread,offeringuparefreshingalternativetobrownandwhite.
Healthy:Retailerswillcontinuethedrivetowardsfoodswithincreasedwellbeingbenefits,harnessingconsumers’growingfood-relatedhealthawarenessandgovernmentsponsoredinitiatives,suchaslowsugar,lowsaltandlowfat.Otherhealthareasincludefunctionalfoods,proteinorvitamin-enrichedanddiseaseprevention.
Cherrygood: ThefirstcherryjuicedrinkintheUKprominentlyfeaturesitshealthbenefitsinallmarketing.
Holme farm: Theirvenisonisstockedinmajorsupermarketsandadvertisedasanaturallylowfatmeat,‘fullofgoodness’,fromnaturally-raiseddeerthatgrazefreely.
Good4U:Healthfoodbrandthatspecializesinreadytoeatbeansproutsandshootshasjustlaunchedtheirfirstflavorof‘smartshots’,afunctionalenergydrinkmadeofwheatgrass,appleandlimethatisbeingtrialedinstoresinDublin.
Longer shelf Life products:Consumersarelookingforlongershelf-lifeproducts;equally,retailersarekeentoextendthetimethattheycanleaveproductonshelf.Additivesandprocessesthatextendshelflifeareofinterest.
AvtarHanda,aprofessorofhorticultureatPerdueUniversity,foundthataddingayeastgeneincreasesproductionofacompoundthatslowsaginganddelaysmicrobialdecayintomatoes.
CargillhasdevelopedafoodprocessingtechnologytocreateFressure™freshgroundbeefpatties,whichhavedoubletheshelflifeoftraditionalfreshburgers.
organic & natural: Thespotlightonorganic,naturalingredientsandfarmingprocessessuchasforagingforfruit,vegetablesandherbs,isgainingmomentum,championedbyculinarypersonalitiesandreflectingthetrendforareturntoallthings‘natural’.
natoora: Aspecialistonlinenaturalfoodgrocerthatstocksaselectionofforagedseasonalproduce.
organic Avenue:Containsraw,unprocessed,organicfruitswhichimprovethehealthofcustomers.
Ready to Go foods: Thesefactorshavealsoseenanincreaseindemandforcontrolled,manageable,completefoods,asconsumerslookforall-in-onesolutionswithmultipleflavourcombinations.Whatwillbethenewcerealbar?
Little dish:Aseriesofreadymealsforyoungchildrenthatfocuson
classic‘home-stlye’dishessuchasfishpie,pastabolognese,cottagepie,andpastawithpeas.
nescafé:Newcoffeeinapouchexperience,givingcustomersasingularhelpingcontaining,milk,coffeeandsugarforone.
The Bitterball:ThistraditionalDutchsnackhasbeenrevolutionizedbyChefThor,takingonnewflavoursandbringingitintothe21stcentury.
RetailerPerspectiveonBest-In-ClassProducts
Best-In-Class:FormulationRetailersareconstantlyonthelookoutfornewproductsthatanswertochangingconsumerlifestylesandbringoriginalandexcitingproductideastoretailshelves.
Whiletheseareasmaynotbenewtheexampleshereprovideinsightintowhatretailersconsidertobebest-in-class.
• Healthy• Organic & Natural• Fine Dining at Home• Hero Ingredients• Need for Variety
• Longer Shelf Life Products• Ready to Go Foods• Snack Foods• Technology
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fine dining at Home: ‘Stayingin’isthenew‘goingout’,asconsumershonetheircookingskills,hostdinnerpartiesandcreaterestaurantexperiencesathome.Retailerslookingforspecialityfoods,‘restaurantstyletake-away’diningoptionsthatgivethemashareofthe‘dining’market.
Mark & spencer:TheM&Sdining-inexperienceprovidesagourmetmealandwinefortwofor£10.
Tesco: The‘RestaurantCollection’offersconsumersdishestheywouldstruggletoconcoctthemselveseveniftheyhadthetime.
scratch: Scratchreadymealsaremarketedas‘Propercooking.Properquick’forpeoplewithlittletimewhostilldesirethehome-cookedexperience,includingalltheingredientsnecessary,evenherbs,seasoning,oliveoilandwhitewine.
snack foods: Consumersarelookingfornewsnackfoodoptions,fromallcategories.
Twix fino: Notpositionedaslighteroption;TwixFinoallowssnackingindulgencewithlessfatandcalories,freefromthestigmaofbeinga‘dietbrand’
savoury Crackers:Shiftingthereputationofthericecakefromthatofablandsnackfortheweightconscious;Kalloisdiversifyingtheirpalettewithnewflavours.
Marmite Cheese Bites :On-the-gosnackfood,singleportionmarmite-flavouredcheddarcirclestounwrap.
Hero Ingredients:Specificingredientsarebeingglorified,asproductshighlightauniqueingredient,withthefinestonesstandingouttobecomebrandsintheirownright.Consumersarealsolookingforingredientreduction–productswithlessthan5ingredients.
Bordier Butter: Jean-YvesBordier’sbutterfromSaint-MaloinFranceiswidelyregardedasthefinestbutterintheworld.
nielsen Massey:Makesarangeofvanillasdependingontheoriginofthebean,includingMadagascaran,Mexican,Indonesian&Tahitian,andhasinformationonitswebsiteonthespecificculinaryuseofeachparticulartype.
Technology: Anytechnologythatbringsaconsumerbenefitorretailerefficiencyisofinteresttotheretailer.
Minus 8: Named after the freezingconditions in which the grapes are hand-pickedand pressed, Minus 8 is traditionally slow fermented from extraordinary wine. The process makes for a syrupy mellowness that is the perfect complement to tenderloin, foie gras or ice cream.
Refuel & Repair: Thissportsrecoveryready-to-usebeverageisahighproteindrinkfeaturingProdietFluidtechnology.Thisallowsthedrinktoincorporatehigherlevelsofproteininitwithoutincreasingitsviscosity,aidingrehydration.
RetailerPerspectiveonBest-In-ClassProducts
Best-In-Class:Formulation(continued)
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Artisan packaging: WithBordBia’sguidance,smallproducerscanusetheirsizeastheirUSP,emphasisingthelocal,artisannatureoftheirbrandandproductportfoliofromappropriatelydesignedpackagingandlabelling
Goat Island pepper sauce: Thecapsealribbonaswellasaproductiondateribbon,givestheimpressionthatitisbrewedandstoredinanartisanenvironment.
Glenrothes scotch whiskey: Usingahandwrittenlookforthetastingnotesonitslabelsandasimplecorrugatedcardboardouter-casingemphasisesthehandmadeartisanqualityofthewhiskey.
Transparency: Packagingwithproductvisibility,includingwindows,smallerlabels,andclearmaterials.Labellingwillbecleanerandmoreneutralinappearance,witheasytounderstandingredients’lists.
supermarket chain Migros: hasusedtransparencyinaneyecatchingwaywithitspackagingofIrishAngusfillet.Thetextureofthequalitybeefbecomesadesignfeature.
Innocent: ThefruitjuicemakerhasmadetheUSPoftheir‘VegPot’mealsthatonlythreeingredientsareused.
packaging Modernization:Newmaterial,freshdesigns,progressive,customizedorinteractivepackagingsolutionsareexploredasstandoutpackagingformatsthatdifferfromthenorm.
306 paper Bottle: Thisisanenvironmentallyfriendlysolutiontotheproblemofresalableplasticbottles.Itisthefirsttotallyrecyclablepapercontainermadefrom100%renewableresources.
wdaru’s Mnum:ThisJapanaeseteacompany’splayfulinteractivepackaginghasmadetheteaacultproductinJapan.
eco & sustainability:Majorretailers,viatheircommitmenttocorporateandsocialresponsibility,areleadingthedriveforsustainablepackaging.Retailerswilllooktocollaboratewithproducersreducepackaginganduserecycledandbiodegradablematerials.
Boxed water: 90%ofthecontainerismadefromrenewableresourcesandalsopromotestheirenvironmentalpositionontheexterior. steve’s leaves:Baggedsaladleavesadvertisedas‘onlywashedinspringwater’,thataregrownbynaturefriendlyfarmersthatbuildwildlifehabitats.‘Steve’hasaPhDinwatercress.
Labelling evolution:LabelsarelikelytoevolveasQSRcodesbecomethenorm,governmenthealthlabellingrequirementsincrease,andotherelementshavetotakeuplabelsurfacearea.
Meat Labelling:TheEUismakingapushforclearerfoodlabellingrulesonmeat,toallowconsumerstoidentifyexactlywherethefoodtheyhavepurchasedhascomefrom.
QR Codes:ThewineindustryhasembracedQRCodesontheirlabelsasatooltoenhancethebuyingexperience;frommakingrecommendationstoofferingpromotions.
RetailerPerspectiveonBest-In-ClassProducts
Thesameconsumerneedsthatdriveformulationtrendswillencouragepackaginginnovation.Packagingisamechanictoconveytrust,authenticity,varietyandenhanceconvenience.Retailerstakealead,aheadoftheconsumer,ingreen/sustainabilityissuesandlookingforpackagingsolutionsthatimproveefficiencies.
Whiletheseareasmaynotbenewtheexampleshereprovideinsightintowhatretailersconsidertobebest-in-class.
• Transparency• Eco & Sustainability• Extending Shelflife• On-the-Go• Artisan Packaging
• Packaging Modernization• Labelling Evolution• Retailer Friendly Packaging• Packaging Reduction
Best-In-Class:Packaging
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extending shelf-life:Thedrivetowardsgreaterchilledfoodscreatesaneedforpackagingmaterialswhichhelptomaintainfreshness.Retailersareincreasinglylookingforpackagingwhichboostsshelflifeofproductssuchasmeatanddairy.
McCains: A1mmwide‘IntegritySeal’isdesignedtoreducemanufacturingcosts,cutdownonfoodwastageandprolongingfreshnessandshelflife.
Tesco fresh and naked:UsesanewpackagingtechnologycalledBioptima,whichisfullybiodegradeablewhilealsohelpingpreventsaladfromdryingout.
Retailer friendly packaging:Suppliershavetomakesuretheirpackagingworkswithintheaimsofdifferentretailers’CSRprogramtmes(inrelationtopackagereductionandsustainability),andareshelfreadyforallin-storerequirements.
smurfit Kappa Machine systems: Producesshelf-readypackagingfordairy,cerealsandotherindustries.
sainsbury: SuppliersarenowprovidingretailerssuchasSainsbury’swithbrandedmulti-packcartonsdesignedtostackandsitonshelveseasilytherebymaximizingspaceandaidingstorageandstockcontrol.
Tesco: Havecreatedasystemthatisjustwheeledontothestorefloor,significantlycuttingshelvingtimeandproducthandling.
on-the-Go:Consumersareenjoyingfoodanddrinksduringtheircommute,attheirdesks,andgenerallywhileonthemove.Lunchkits,car-friendlybeverages,andotheron-the-gooptionsareofinterest.
nutella to Go:Holdingcookies,Nutellaandachocolatemilkallinonecontainercreatesaperfectlyindulgentandconvenientsnack.
Graze: ThisUKcompanyallowssubscriberstotailorready-to-gosnackstotheirlifestyle.Thesnackboxesaredeliveredaccordingtocustomers’preferredfrequency.
yorkshire provender soups:Aremarketedtowardshealth-consciousofficeworkersasaquickmealmadefromnaturalingredients,madefromtherecipesoffounderBelindaWilliams.
packaging Reduction:Retailersarefocusedonpackreductionasthispositivelyimpactsonallelementsofthesupplychainfromstoreandtransporttostackingandshelving.Formatsandstructuresarebeingadapted,e.g.bymakingstoreshelvessimplertoreplenishproductsappearbetterontheshelf;byoptimisingpalletuse;byreducingproducthandling;byimprovingtransitprotectionandevenreducingthenumberofvehiclesontheroad.
sainsbury’s Milk in a Bag:Thenewpackaginghasreducedwastageby75%,andinthecomingyearSainsbury’swillstockthefullrangeofitsmilksinthismoresustainableformat
Lincolnshire Herbs:LincolnshireHerbshaveredevelopeditspackagingfordeliveries.A20%materialreductionhasreducedtheneedforvehicleandstoragespace,enablinganextra10,200packsperlorryload..
RetailerPerspectiveonBest-In-ClassProducts
Best-In-Class:Packaging(continued)
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Oftenproductsneednotchangeatall,butrather,thepositioningoftheproductcanbeadjustedtohighlightbenefitsbasedoncurrentandemergingtrends.TrendareasthatmaycurrentlybeleveragedbyIrishproducersinclude:
Whiletheseareasmaynotbenewtheexampleshereprovideinsightintowhatretailersconsidertobebest-in-class.
Health Benefits:Suppliersmustfindwaystoemphasisethehealthbenefitsoftheirproductswhereverpossibletostayrelevanttohealthconsciousconsumers.
Cheerios: ProducerGeneralMillshasadaptedtheirbreakfastofferingsoitisnowahealthoption.
Reassurance through Heritage and personality: Heritagecredentialsofbrandsandproductstoincreaseconfidenceandconnectconsumerstobrandnarratives.Imagesofthefamilyfarm,personalmessagesfromtheproducer,andotherrepresentationsofprideandauthenticity,setinamodernway,reinforcethestory.
debbie & Andrew’s:Asausagecompanynamedafterthemarriedco-founders,whichadvocatestraceablesourcingandonlyusesporkfromsmallBritishandScottishfarmswithknownanimalwelfarepolicies.
James Chapman Butchers: Definethemselvesasa‘FamilyCompanysince1893’.Theirwebsitefeaturesfamilyrecipesthathavebeenhandeddownoverthegenerations.
natural Hook:Irishsupplierswillbeexpectedtoplaceastrongfocusonthenaturalqualitiesoftheirproducts.‘Natural’symboliseshealthy,premiumandethicalintheeyesofconsumers.
plum organics: Themakeroforganicbabyfoodhasreleasedaproductcalled‘Just’whichcontainsjustoneingredient.
Haagen-dazs: Whiletheircoreproductisnottypicallyassociatedwithhealth,theAmericanluxuryicecreamhasbeenrefittedforthehealthconsciousageintheshapeofthe‘five’range.Allproductsintherangecontainonlyfive(natural)ingredients.
Aspirational Ingredients: LargerIrishsuppliersofdairygoodsandingredientshavetheopportunitytoandpositionthemselvesasanaspirationalproductintheirownright.
philadelphia Cream Cheese: PhiladelphiaispromotingfurtheruseofthecheesebydisplayingalternativerecipesonitswebsiteandinTVandeditorialadvertisingcampaigns.
Lurpak:Advertisementsreferringsimplyto‘Lurpak’andrecipeswhichincludetheproductallformpartofaconcertedpushtoturnthebrandintoatradename.
food safety:Followingaseriesoffoodscaresovertheyears,consumerswillbelookingforproductswithasafehistory,backedupwiththefacts.
pasteurized eggs: Pasteurizedeggsbecamepopularamidbirdfluconcerns,andasaresulteggswhichhavebeenpasteurizedaremarkedwithaPtoreassureconsumersoftheirsafety.
deep dive provenance: ThestrongheritageandprovenanceofIrishproductsmustbeemphasisedateveryopportunity,alsohighlightingtheregionalheritagewithinIreland,toaddanelementofspecialismandlocalpride.
Clarence Court eggs:AllClarenceCourteggsprominentlydisplaythenameofthefarmerwhoproducedtheparticularbatchofeggs.Inthiscase,fromMabelPearmanoftheCotswolds.
The Cheese House :DenhayfarmssuppliescheddartoWaitrose’sownlabelrangeandalsounderitsaliasasTheCheeseHouse,whereeverythingisinthehandsofasinglecheese-maker,onlythecompany’s3rdcheese-makersince1950.
RetailerPerspectiveonBest-In-ClassProducts
• Health Benefits• Natural Hook• Food Safety• Deep Dive Provenance
• Reassurance through Heritage and Personality
• Aspirational Ingredients• Other Trends
Best-In-Class:Positioning
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SupplyChainAdvancements
“The key is to have a supply chain which can supply each store with a range that
fits that particular area’s audience.”Head of planning & forecasting –
Convenience symbol Group
“There have been far more brands operating in Ireland than in the UK due to customer loyalty, but as the
customer demands more value, a range rationalisation similar to the one in the
UK will take place in Ireland.”Md – Major producer
“Private label will continue to grow and manufacturers will look to supply private
labels instead of creating their own branded goods. Today private labels are no longer a discount option and have become trusted brands in their
own right.”Marketing director – Major Multiple
Summary OverviewRetailersarelookingtostreamlinetheirsupplychainstoachievecostsavingsandimproveefficiencies,whilesimultaneouslycomplyingwithevolvingenvironmentalguidelinesandcontendingwithotherconsiderationsandlimitations.Newwarehousinganddistributionmethodsarebeingdevelopedwithcollaborationandsustainabilityinmind.
Thoughconsiderablecostreductionexerciseshavebeenundertakeninrecentyears,retailerscontinuetolookforwaystotrimresources,intheformoflabourandcashcosts,fromtheirdistributionlogistics.Newsoftwareandhardwaretechnologiesareprovingincreasinglyvaluableinmonitoringstocklevelsanddistributinggoodsmoreefficiently.
Retailersarerationalisingtheirstocktosimplifycomplexproductranges,reducetheassortmentandoptimiseshelfandwarehousespacespace.Thissimplificationoftheshoppingexperiencealsomakesiteasierforcustomerstoshopandithelpsretailerstoreduce‘out-of-stock’occurrences,increaseefficiencyandprofitability.
Simultaneously,managementiscontinuallyidentifyingmethods,includingworkingwithregionalexperts,toconfirmstockisrelevanttolocalisedtastesandneeds,andnewtechnologyismakingitpossibletomanagealargerandmoretailoredbaseofsuppliers.
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Warehousing & DistributionOverthenextfiveyearsretailersexpecttoinvest heavily in the modernisation of their warehouses and distribution systems, optimisingpotentialsavingsandaccommodatingnewchannelssuchashomedelivery.ThetrendwillbetowardsfewerbutbiggerwarehousesthatachieveeconomiesofscaleandalsosupportCSRexpectations.Retailers will be looking for producers to meet them halfway on this path of consolidation.
• Collaboration in the Supply Chain: Improvementsinsupplychainefficiencyandcostreductionarethemaindriversforbusinesscollaborationwithsuppliersinthefoodandgrocerysupplychain.
• Sustainable Distribution: RetailersandproducersareseekingtobolstertheirCSRcredentialsbymakingtheirdistributionmoresustainable,throughinitiativesthatdemonstratesignificantchangesindistributionoperations,suchasconsolidationdistribution,upgradingtransporttechnology,optimisingloadfillandre-thinkingtransportmodes.Retailersareconsciousoftheircarbonfootprint,andarelookingforopportunitiestoreducethiswhileworkingwithenergyconsultants.
Logistics Maximisingcontroloverstock,streamliningthesupplychainprocessandextendingshelflifeviasupplychainefficiencyarehighontheagendaformajorretailers.Newtechnologiesarebeingimplementedtoinformdistributionmoreeffectively,tighteningthesupplychainasmuchaspossiblewhileensuringstocklevelsarestillstable.Improveddatacollectionmethodsarealsobeingimplementedtoensurestockisrelevanttolocalisedtastesandlifestyleneeds.• Automated IT Systems:Producersandretailersare
increasinglyimprovingtheirITsystems,whileworkingoffthesamesoftware,whichishelpingtostreamlinesupplychainoperations,improvetransportplanning,minimizecostsandweb-basedorderstiming
• Customised Product Ordering:Streamliningthesupplychainreliesonaccuratepredictionsoflocalbuyingpurchasesandproductpreferences,andretailersareincreasinglyworkingwithregionaloutletmanagerswhenmakingorders,astheyarebestplacedtounderstandregionalneeds.Useoflocalknowledgepresentsopportunitiestointegratesuppliersintotheeverydaylocallifeoftheircommunityandcustomers.
RationalisationRetailersarelookingtostimulateasmuchcompetitionbetweenproducersaspossiblethroughrangerationalisation,whileimprovedsalesdataallowsstockmanagerstomicromanageranges.Furthermore,retailersaretailoringtheirofferingtoanincreasinglytime-poorconsumerwhonolongervalueschoiceforchoicessakebutdemandsacuratedchoiceofdesirableproductsonly.
Warehousing & DistributionThesupplychainisconstantlylookingtocost-savingtechniquesandtowaysofimprovingefficiency,whilstsimultaneouslysatisfyingtheever-increasingenvironmentaldemandsandlimitationsimposedonretailersandproducers.Newwarehousinganddistributionmethodsarebeinginnovatedwithcollaborationandsustainabilityatthehelm.
Collaboration and Consolidation in the Supply ChainCollaborationinthefoodandgrocerysupplychain,inordertoimproveefficiencyandreducecosts,isacontinuoustrendintheUKgrocerymarket.CompaniessuchasReedBoardall,theUK’slargestsingle-sitefrozenconsolidator,workswithmostofthesupermarketchains.
• Tesco, Asda, Sainsbury’s, Morrisons and Iceland:Tesco,Asda,Sainsbury’s,MorrisonsandIcelandallconsolidatefrozengoodsdeliveriesfromReedBoardall,atemperature-controlleddistributioncompany.Itswarehousehasafleetofover160tractorsand240refrigeratedtrailers.
• Co-op and Somerfield:ThePrimaryandCommercialDivisionofCo-operativeFoodSupplyChainLogisticspartnerswithSomerfieldoperationstoofferarangeofcollection,deliveryandstoragesolutionsforallCo-opandSomerfieldsuppliers.
• L’Oréal and Asda:L’OréalandAsdastartedtheirsupplychain-ledcollaborativerelationshipin2005,withtheobjectiveofimprovingforecastaccuracy,in-boundservicelevelandon-shelfavailability.
SupplyChainAdvancements
UK Turnover £42.254m £19,963m £4,418.2m £18,420 £2,122 £12,900m £10,360.5m £15,410.0m
# of dCs 26 20 9 25 4 26 8 N\A
Av. stock Level(Days)
10.3 8.8 15.6 9.02 9.3 4.2m 0** 891.4m
# of stores serviced
2,545 890 223 359 695 4,048* 624 427
# of Cases delivered
2.0bn 1,043m 217.1m 1,170m 149.2m 474.1m 199.4m 891.4m
# of vehicles 1,854 1,311 379 1,853 328 1,285 717 653
# of warehouses N\A N\A N\A N\A N\A N\A N\A 14
*excludingotherstoresandindependents**VirtualStock
RetailerSupplyChainOverview
34SCB Partners for Board Bia, In Confidence
€670m
€464m
€336m
€293m
€269m
€258m
€244m
€232m
€202m
€164m
€146m
€135m
€98.7m
€75.3m
€71.7m
€52.5m
€41.2m
€29m
€13.5m
SustainableDistributionTheretailindustryhas the highest spend of any industry in the UK on sustainability.WhileretailisconsideredaresponsiblepartyfortheUK’sclimate,retailersrecognisethatupto90%oftheenergyconsumedcomesthroughitssupplychains,andindeedsuppliers.As retailers focus on the carbon footprintoftheirsupplychains,andcreatepoliciesforcarbonabatement,they will increasingly demand best practice from their suppliers.
Examplesofretaileractivitiesinclude:
• Marks & Spencer: Marks&Spencerhasmoveditssupplychainof300,000generalmerchandiseproductsfromroadtoraildistribution,cutting750,000roadmilesandsavingaround800tonnesofCO2eachyear.
• John Lewis/Waitrose: JohnLewishaspledgedtocutitsemissionsby15%overthenext10years,andannouncedinMarch2011itsplanstobuild150renewableenergycentresacrosstheUKtohelppoweritsstores.Waitroseiscurrentlybuildingabiomass-poweredenergycentreatEastCowesontheIsleofWight.Theyalsostatedthattheywillbeaddressingotherfactors,includingfuelcombustion,refrigerationanddeliverytrucks,aswellasthird-partycontractdistribution,un-recycledwastedisposal,andwatersupplyandtreatment.
• Taylors of Harrogate: Theteaandcoffeesupplier,hasawardedaten-yearcontracttoPDPorts,whichwillsavethecompanyaround100,000roadmileseachyear.
• Nestlé:Nestle’scommitmenttoreducingitsroadtrafficby20%by2012hasledtoashiftfromroadtorailforitsYorktoScotlanddeliveries.
• Unilever:Identifiedincreasedload-fillopportunitiesandcarbonreductionthroughdouble-stackinganddouble-decktrailers.
• Wincanton: Europe’sleadingsupplychainproviderhasreduceditscarbonemissionsbyover4.5%overthelast3years.Thecompanyspendsover£100millionayearonenergy,andachieveditsreductionthroughnetworkoptimisationandbackhaulingtoincreaseloadfactors,fuelefficientdrivertraining,usingdouble-deckandteardroptrailersandIntroducingmovementsensorsandre-lampinginbuildingstocutelectricityusageinits245warehouses.
Retailersandproducersareusinginnovativesupply-chaininitiativestomaketheirdistributionmoreeco-friendlyandtoenhancetheirCSRcredentials.Recentinitiativesaredemonstratingsignificantchangesindistributionoperations,resultingintherunningof‘fewer’or‘friendlier’milesandvastlyreducedcarbonfootprints.Elementsinvolveconsolidatingdistribution,upgradingtransporttechnology,optimisingloadfill,andre-thinkingtransportmodes.
SupplyChainAdvancements
17.7%
12.2%
8.9%
7.7%
7.1%
6.8%
6.4%
6.1%
5.3%
4.3%
3.8%
3.6%
2.6%
2.0%
1.9%
1.4%
1.1%
0.8%
0.4%
ShareOfCC&SSpend
Retail
Oil&Gas
IndustrialGoods
Utilities
Technology
Construction
Travel&Leisure
Food&Beverage
Telecoms
P&HGoods
Insurance
Banks
Pharma&Medical
Chemicals
Automotive
FinancialServices
Media
BasicResources
RealEstate
UK SPEND ON CLIMATE CHANGE AND SUSTAINABILITY 2010 BY INDUSTRY
Source: Verdantix€ MILLION
WaitroseEastCowesbiomasspoweredenergycentre
JohnLewisDistributionCentre
UnilieverWarehouseSolutions
35SCB Partners for Board Bia, In Confidence
Customised Ordering SystemsAlongsideautomatedorderingsystems,retailersareworkingwithregionaloutletmanagerswhenplacingorders,astheyareasbeingthebestqualifiedtounderstandthelocalneedsoftheircustomers,basedonregionaltastesandlifestyles.
Retailershavecompetedheavilyonpriceinrecentyears,butaneffectivemeansofgainingcompetitiveedgeinthefutureisexpectedtobelocalisation.Streamliningthesupplychainreliesonaccuratepredictionsoflocalbuyingpurchasesandproductpreferences,andreductionoffooddisposal/unsoldfood.
ThebestindependentretailersintheUKandIrelandhavelongknownhowtofacilitatethelocalprofileneedsoftheircustomers.Fromtheproducttheysell,tothewaytheydisplayit,fromtheirstoredesigntothewaytheyadvertise,theyuseeverybitoflocalknowledgeopportunitytointegratethemselvesintotheeverydaylocallifeoftheircommunityandcustomers.Examplesinclude:
• Sainsbury’s:Theretailerisincreasinglyfocusingonspecialisedproducts,withSainsbury’sstoremanagersandstaffspeakingtocustomersaboutlocalproducts,whichtheythenendeavourtobuyinforthestore.
• Morrisons:Morrisonshasadoptedadegreeofdecentralisedbuying,byallowingstoremanagerstomakedecisionsaboutbuyingforcertainstoresbasedonlocalcustomerfeedback.
LogisticsThoughmuchworkhasbeendoneinrecentyears,retailersarestilllookingatwaystotrimtimeandcostfromtheirdistributionlogistics.Newtechnologiesareprovingincreasinglyvaluableinmonitoringstocklevelsanddistributingstockmoreefficiently.Knowledge-basedmethodsarealsobeingimplementedtoensurestockisrelevanttolocalisedtastesandneeds.
Automated IT SystemsTheimplementationofimprovedITsystemsandsoftwaresuchasParagon,OmPromptandAldataishelpingtostreamlinesupplychainoperationsbetweensuppliersandretailers.Withproducersandretailersworkingoffthesamesoftware,itishelpingtominimisecosts,reducethetimetakentoreviewweb-basedordersandhelpwithbettertransportplanning.
• Marks & Spencer:M&SwillusethesoftwaredevelopedbyQuantumRetailTechnologiestomanagetheend-to-endinventoryforecasting,replenishmentandorderplanningneeds.Theywillusethesoftwaretoanalysesalesvolumesandlocalisedcustomerbehaviourtodecide,forexample,whetheritisbettertostocksandwichesat9amor3.30pmforaparticularstore.
• Waitrose:WaitrosehasimplementedanewAldatasoftwareorderingsystemintheirtemperature-controlledfrozendistributioncentres.Resultshaveshownabetterbalancebetweenhighavailabilityandlowinventorylevelsandthetimetakentoreviewordershassincehalved.
• Kimberly Clark:GlobalFMCGmanufacturerKimberlyClarkhasextendeditscontractwithOmPrompt’sCarrierConnectorderautomationtechnologysystem,providingcrucialvisibilityacrossthesupplychain.ThetechnologyhasbeenusedintheUKandmorerecentlyinEasternEurope.
• Tesco:Tescohasrecentlyrevampeditsstockreductionprocessacross14internationalmarketsbystandardisingitsITsystems.Thishasresultedinincreasedefficienciesandreducedcosts.
SupplyChainAdvancement
Quantum Retail Aldata
OmPromt
Tesco Warehouse
36SCB Partners for Board Bia, In Confidence
RationalisationGroceryretailershavetofindnewwaystomaketheirofferingasrelevant,seamlessandphysicallyaccessibleaspossibletofitconsumers’conflictingdemandsforvarietyandstreamlined,editedselection.Theyalsoneedtocatertoconsumerswhoarebecomingincreasinglysophisticatedwiththeirgrocerypurchases,andwhohavecometoexpectfreshproduceondemand.
Retailers are rationalising their stock in efforts to simplify complex product ranges,reducetheassortmentandoptimisespacedevotedtoproducts.Thissimplificationoftheshoppingexperiencealsomakesiteasierforcustomerstoshopandithelpsretailerstoreduce‘out-of-stock’occurrences,increaseefficiencyandprofitability.
Forretailers,anunderstandingofproductloyaltyandtheprofilesofconsumerbasketsiscrucialwhendetermininghowshoppersmayrespondtothede-listingofanitemandtheresultingimpact.Ranges need to be skilfully edited, making sure that retailers have the right consumer data to de-list products to minimise loss of custom.
• Asda:TheWalmart-ownedretailerhasbeencuttingbackonrangesforanumberofyearsandhasrecentlyremovedevenwellknownbrandsfromitsshelvessuchasICan’tBelieveIt’sNotButterandPrincesTuna.
• M&S:M&SisutilisingRFIDmonitoringtechnologytomicromanageitsstockbetterforeachstore,givinglocalshoppersmoreofwhattheywant,andofferingsmallersupplierstheopportunitytogaintriallingcontractsforcertainstores.
• Morrisons: Morrisonshasmaderationalisationoneofitsnewkeyinitiativesbysimplifyingitsmorecomplexranges.Itisforexamplecuttingdownonitscurrent16kindsofbalsamicvinegar.
SupplyChainAdvancements
Product Rationalisation:
Driving out non-value adding stock
Drive Growth & Profit
Consider Delisting
Improve or...
Improve or...
Ma
rgin
Turnover
37SCB Partners for Board Bia, In Confidence
Appendix:ImplicationsforIrishProducers
Summary OverviewThissectionisdesignedtostimulatethinkingforIrishsuppliersbysummarisingthemajortrendscoveredinthereport.Byunderstandinghowtheretaillandscapeislikelytoevolveinthecoming5years,producerscanthinkofhowtoadapttheirproduct,packaging,pricing,marketingandlogisticstotakeadvantageofemergingopportunities.
Imagestogohere FoodForThought
1
2
3
Product
Formation NPD
Packaging
Innovation
Product/ Brand
Positioning Marketing
& Promotions
Distribution and
Supply Chain
4
5
ThechangingretaillandscapewillprovidebothchallengesandopportunitiesforIrishproducers.The economic uncertainty for both UK and Ireland will inevitably cause problems for some as consumers look for value price points.Ridingthestormwillbeparforthecourseintheshorttermatleast.
Suppliers will need to adopt methods to retain any presencetheycurrentlyhavewithUKretailersasthesecompaniesbringtogethertheirsupplynetworks.Togainafoothold,supplierswillneedtoassessthecostsarounddoingthisintermsoftheundoubtedpricepressureslargeretailerswillputonthem,andconsiderthingssuchasco-brandingorexclusivity.Onceasuppliertheymustcontinuetolookatcompetitorsandwhatnewproductsareemergingintheirspace,reviewtheirownUSPsandassesswhethertheycanstretchtheirbrandofferingsinordertoretainthecontracts.Given the fragility of these relationships, the producers must always be looking ahead and be considering other options.
Theobviousbenefitsof quality and provenance have to beconsideredasessential elements of the brand and marketing mix thatsuppliersadopt.Labelling,productinformation,brandingandcommunicationswillneedtobeconsistentandreallyensurethattheproducts stand out from the crowd ascompetitionwillwithoutdoubtincrease.Whateverhelps,beitcelebritychefallianceorspecificstorepromotions,thenthesuppliersshouldatleastconsidertheprosandconsandalsoconsiderifit’ssomethingagroupoflike–mindedproducerscoulddotogether.
Any continued decline in the independent retail sector
willpresentchallenges
perhapslessanticipatedsomeyearsago.Ifthesearereplacedbyconvenienceoutpostsoflargesupermarketchains,producers will need to be creative in how they retain market sharewhencompetingwithUKandcontinentalbrands.Theywillneedtoconstantlypromotetheirproducts,stay high on the radar of the buyersandeducateaboutthebenefits.Irish consumers will need to be enticed to stay to buy Irish as local and not be seduced by non Irish ‘local’ brands.
Thedevelopmentsintechnologywillhaveavarietyofeffects.Ease of access to information byexistingorcurrentcustomersoftheirproducemeansallsuppliers will need to be clear about pricing, ingredients, any eco-credentials etc.Supplierswillalsoneedtokeepabreast–ifnotahead-ofretailshoppingtrendssothattheyarewellplacedtobeconsideredasasupplierforanyofthelargeroutlets(forexample,packagingformats,inventorycontroldevelopmentsandsoon).Online and mobile commerce will not be going away,theyarepartoftheshoppingmixformanyconsumersalready.Suppliersneedtoembracethemandeducatethemselvesastowhatthiscouldmeanforthem.Theywillneedtoconsiderasmanyroutestomarket(channels)thatworkforthem.Couldtheysupplynicheproductstoashoppingchannelforexample?
38SCB Partners for Board Bia, In Confidence
examplesexplanationInsightOffer Innovation in Flavour and Texture Retailerswanttobeseenas
innovators,andwanttobringnewandinventiveproductstoconsumers
• Flavouredmeat• Pulledmeat•Useofspecialtysaltsandbutters
Healthy Options Basedonpublicandgovernmentpressure,CSRandagrowingconsumerdemandforhealthyproducts,retailersarelookingfornewhealthyproducts
• Lowsugar• Lowsaltandfat• Functionalfoods• Protein,calciumorvitamin-enriched•Diseasepreventionoptions•Hearthealthy• Small,portion-controlsizes
Convenience for On-The-Go Products Conveniencestoresareofferingconsumersoptionsforeatingbreakfastduringcommute,lunchatdesk,andall-daysnacking.
• Single-serveitems•On-the-gobreakfast• Lunchpacks• Snacking
Restaurant-Style Partially Prepared Foods Stayinginisthenewgoingout.Specialtyfoods,hostingitemsand‘restaurantstyletake-away’optionsprovideashareofthe‘dining’market.
• Premiumreadymeals•Near-readyingredientpacks•Multiplecoursespacks• Partneringwithothersectors(e.g
wine)toofferacompletemeal
Increase of Healthy Snacking Protein-ledsnacksareontherisewithothercategoriesalsoofferingpossibilities
• Seafoodsnacks•OnTheGobeefproducts•DairySnacks
Longer Shelf Life Abilitytomakeproductslastlonger,inparticularproduce,includingmeats,fruitsandvegetables,addingsaleslifeforretailers
• Ingredients/additivestoextendshelflife
• Farmingtechniquestoextendshelflife
Reduced Ingredients Retailerwillrespondtoconsumersincreasingdemandforfeweringredients,lessadditives
•Allnaturalreadymeals• Singleingredientsnacks•Campaign,fornaturalqualityof
Irishproduce
Consumer Focus on Feed Consumersareincreasinglyawareofwhatanimalsarerearedon
• ‘Grassfed’positioningemphasisedonpackaging
• ‘Grassfed’PRcampaignfocusedonpremiumendofmarket
Focus on Freshness Retailersarelookingfornewwaystodeliverfreshness
•Developmentofnewpasteurisationmethods
•Developnewtransitfriendlystates(aswithcheese)whereendmarketcanrehydrateproduct,andextendshelflife
Appendix:ImplicationsforIrishProducers
Product Formulation
39SCB Partners for Board Bia, In Confidence
examples of opportunitiesexplanationInsight
Retail Expansion Will Happen in Convenience
Retailersarefocussingamajorpartofgrowthontheconveniencechannel
•Conveniencesizeproducts•Chasenewbusinesswithsmall
conveniencechains• Shelfreadypackagingfor
convenience•Caterforlogistics/deliveryneedsof
convenienceformat
Interest in Aesthetic Modernisation Asretailersfocusonre-imagingtheirstores,theyarelookingformodern-lookingproductsthatlookgoodonshelves
•Modernisegraphics•Moderniselogoandfonts•Modernnostalgia
Product Visibility Retailersindicatedthatconsumerswantlabelsreducedtoprovideincreasedvisibilityoftheproductitself
• Labelsizereduction•Useofplasticwindowsonfacade• Transparentpackagingmaterials
Sustainable Packaging Pressurefromconsumersandlegislatorsincreasespriorityofsustainable
•Reducedpackagingandrefillpacks• Biodegradablematerials• Re-usablepackagingwithsecondlife•Carbon-neutralpackaging
More Single Households, and Need for Easy-Serve Items
Retailersarelookingforoptionsforsinglehouseholdsorindividuals
• Single-serveportions•Gourmetmealsforone• Ingredientbundlesforsingleserve
cooking
On-the-Go Packaging Consumersareincreasinglyeatingonthego,incar,atdeskorwhilemulti-tasking
• Single-serveportions• Easytograbergonomicshapes•Nocutleryoptions•Microsizes,i.e.capsulesize• Softformatssuchastubesand
pouches
Longer Shelf Life Abilitytomakeproductslastlonger,inparticularproduce,includingmeats,fruitsandvegetables,addingsaleslifeforretailers
• Packagingthatextendsshelflife• Specificpackagingforlonghaul
logistics
Artisan Look Packaging Smallproducersemphasisingthelocal,artisannatureoftheirbrandandproductportfolio
• Imagesoffarm(withmoderntwist)oringredients
• Notefromtheproducer• Special‘artisan’touches,seals
Packaging that Responds to Conditions Newmaterialsmayenhancetheconsumptionexperience,prolongingthefreshnessofingredients.
• Nanotechnologypackaging•Materialsthatincreasethefreshness
andpotencyofingredients
Packaging
Appendix:ImplicationsforIrishProducers
40SCB Partners for Board Bia, In Confidence
examples of opportunitiesexplanationInsight
Retail Expansion Will Happen in Convenience
ConveniencechannelwillhavefewerSKUsbutmoreopportunitiesforheroproducts.
• Focusoncoreheroproduct.•Coreproductneedstobethebest-
in-class,emphasisecorecredentials
Online Grocery Shopping will Double in 5 Years
Onlineretailwillgrowrapidlyasconsumertrustintheformatandbroadbandpenetrationincreases
• B2Cdirectsalesopportunitiesforsupplierswiththeirownsites
•Caterfornewdistributionneedsofonline retailers
Irish Provenance not a Major Benefit in UK
UKretailersandconsumersappreciateIrishproduct,butarenotcommittedtoitanddonotseethekeybenefits
• BuildreputationofIreland• Focusonregionaladvantages,
Focus on Value Retailerswillcontinuetolookforlowpricedproductstostockinstore
•Reduceproductioncost• Reduceprice•Reducelogisticscost• Justifypricethroughquality
Brand Value Shifting to Retailer Retailers’ownprivatelabelbrandsareastrusted,orevenmoretrustedinsomecases,than‘brands’
•Considerprivatelabelifbrandbuildingpresentsachallenge
•Collaboratewithprivatelabelbrandsonco-brandedexclusiveproducts
Healthy Credentials Inherenthealthycredentialsofproductsisexplainedandhighlighted.
• Labellingtodenotehealthcredentials•Windowsinpackagingtoshow
ingredients
Sustainable Production Methods Retailersbelievetheyhavearoleinvettingproducersforsustainableproduction,i.e.useofgrassfedlivestock,andmaintainingnaturalmilkyieldingcycles
• PRcampaign• Packagingemphasis• Retailerfocus• Recycledpackagingmaterials• Seekrelevantsustainability
certificationforlabel
Consumer Demand for Reduced Ingredients
Increaseinterestinproductswithlimitedingredientsandemphasisonpurity.
• Emphasislimitedingredientslist• Useofvocabularysuchas“only”
Positioning
Appendix:ImplicationsforIrishProducers
41SCB Partners for Board Bia, In Confidence
examples of opportunitiesexplanationInsight
Reduction of Consumer Food Waste Retailersareconsciousoftheirroleinencouragingconsumersnottoover-purchaseduetopromotion
•Groupon/groupbuycampaign• PRcampaignusingIrishtraditional
processmethodsashookfor‘lessismore’positioning
QSR Codes Will Become Common in 5 Years
QSRcodingwillbecomeincreasinglyprevalentonpackaging,offeringconsumersincreasedproductinformation
• Providingrecipes• Provideinformationabout
manufactureandprovenance• Tellproductstories
Smart Shopper Promotions Increase Retailersarewatchingconsumerstakeupcleverpromotionsorgroupbuy/onlinecouponsavings
• ParticipationinGrouponorsimilar•Datacaptureofconsumerdatafor
directcommunication
Media Personality Influence Asfoodanddrinkincreasesasapopularculturesubject,theamountofinfluence,fromfood-relatedmediapersonalityincreases
• Seedingproductwithtopchefs• InvitefoodcriticsforFoodietripsto
Ireland•Monitorfoodmediaprogramming
fornewproduct/cookingtrends
User Generated Opinion Amateurfoodcriticsandreviewersnowhaveanincreasedinfluenceonline,withtheirimpartialandtrustworthyproductfeedback
•Monitoronlinereviews&coverageforconsumerfeedback
• Productseedingwithinfluentialbloggersandreviewers
•DigitalPRcampaignforIrishbrandsamongstamateurcritics&reviewers
Digital Promotions IncreaseindiversityofproductpromotionsviaonlineplatformssuchasFacebookandTwitter
• Increasedpresenceonsocialnetworkingsiteswhererelevant
• Innovativeonlinediscountingcompetitions&campaigns
examples of opportunitiesexplanationInsight
Tightening Product Ranges Manyretailersarelookingtorationalisetheirrangetocutoutshelfspacewastageandgivetheircustomersacuratedproductprofile.
•Offerdifferentiatedproductstomaintainrelevance
•Giveretailerssupply-chainsolutionsandflexibleterms
Convenience Stores – Fresh Produce Smaller/conveniencestoresinboththe UK and Ireland look to add more freshproducetotheirstoreofferings,.
• FocusonsalescallstostockistsoutsideoftheBig4
• Logisticsforfreshproducesupplytosmallconveniencechains
•Offertriallingperiodsforpotentialconveniencestockists
Overseas Markets Majorretailerswilltargetoverseasexpansioninthefollowingyearscreatingakeysupplieropportunityfornewmarketpenetration.
•Offerretailerslogistics/transportsolutionsforoverseasoperations
•NPDhonedspecificallyforemergingmarkets
•Marketresearchintotastepreferences/tastesofemergingmarketconsumers
Unified Market ManyretailersviewUKandIrelandasoneunifiedmarket,creatinganopportunityforIrishproducerstopenetrateboththroughthesamesupplychain.
•Alignsupplychainanddistributionmodelforunifiedmarket
•Offerretailerssolutionsforobstaclescausebycentralisation
Distribution & Supply Chain
Promotion
Appendix:ImplicationsforIrishProducers