THE UK GROCERY RETAIL MARKET Conversation Insight Innovation Analysis Innovation Insight Conversation

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16002 Kanzi Advertising_210x297mm_FC_WT.indd 1 13-05-16 09:37 The UK Grocery Retail Market CONTENTS Issue # 1, June 2016

UK Retailers Must Make 7 New Friends Jim Prevor says the UK supermarket chains should review their approach

Turn And Face The Change 10 Jim Butler talks to leading analysts and provides a comprehensive overview of the sector

Mystery Shopper Report 25 England Marketing has carried out a nationwide mystery shop of the produce aisles – find out which chain came out on top

The Stats Behind The Stories 38 Read Kantar Worldpanel's latest retail figures and discover the produce winners and losers

Four Things That Have Disrupted Asda 42 Ex Walmart man Bruce Peterson picks out four issues that have upset Asda's apple cart

Produce Central To Retail Growth 46 Chris Cowan argues that the fresh produce industry remains crucial to the long-term health of its retail customers

The Battle To Stand Out From The Crowd 52 David Shapley scours the shelves to discover differentiation strategies on the high street

READ THESE ARTICLES AND MORE Where Have All The Innovators Gone 60 producebusinessuk.com is the leading online Ex Tesco produce chief Peter Durose asks whether publication for produce buyers – sign up for the urge to innovate has diminished our free newsletters by scanning the QR code below or go to our website Join Us On The LPS Retail Tour 67 Claire Powell outlines the value of the retail tour at Editorial the London Produce Show and Conference Contact Kathy Hammond: [email protected] UK Grocery Retailer Directory 68 Head office postal, phone and website details for Advertising the top UK grocery retail chains Contact Linda Bloomfield: [email protected]

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“What the big chains need most now is innovation, new ways of thinking and operating that can help them get out of a difficult box”

6 The UK Grocery Retail Market RETAILERS MUST FACE TRUTH AND FIND NEW FRIENDS

By Jim Prevor

It may be an uphill battle, but mainstream retailers can compete with discounters. The key is that supermarket executives need not to think of things based on average costs, but on the wasted, low- JIM PREVOR production space in their stores and warehouses - in much the Founder and Editor in same way as mainstream airlines compete with discounters because Chief of Produce Busi- they use tools such as Saturday night stay and advance booking ness, the fresh produce requirements to distinguish between the business travelers willing industry's largest business to pay higher prices and the vacationers looking for a deal. publication for buyers, Jim is renowned worldwide as the Perishable Pundit he grocery retail market leaders in interest, as many of these executives had T the UK long ago saw the dangers compensation programs tied to short- of discounters and developed several term earnings and short-term stock competitive ranges. To maintain margins, performance; accepting lower earnings though, they often under-marketed and a lower stock price now in exchange these discount lines and even pulled for a stronger business a decade hence them from many stores. It is easy to say was not in their personal interests. that the cause of these actions - knowing the problem was coming, developing Under the high-price umbrella created a solution but never energetically by the margin aspirations of the major executing it – was because they were chains, the discounters mushroomed as publicly held companies. And, indeed, they had time and space to experiment, had management told the markets the the stores became nicer and thus more truth -- that the days of wine and roses acceptable to mainstream and affluent were coming to an end and that the consumers. But mainstream and affluent company had to accept significantly consumers changed as well. Today, if lower profit margins in order to avoid one sees a man walking around in a suit providing a price umbrella under which and tie, one is more likely to perceive discounters could flourish, the share him as a wage slave at some store than price would have suffered. an affluent man. We know the guy in a hoodie sweatshirt may be a dot-com Yet that does not actually excuse billionaire, and the holes in some bloke’s management from both taking the jeans don’t tell us he can’t afford a new actions necessary to sustain the long- pair. It is not cool to be stupid, and if the term value of the business and also to quality at a discounter is as good as that say the things that represent the truth. at a store with a Royal Warrant, well, In other words, it was not being public overspending is just not something that that was the cause of this failure to will add to one’s prestige. act; it was cowardice. It was also self-

June 2016 7 PRODUCE BUSINESS UK GUIDE

Overall what strikes one about the UK retail scene is how lonely the big chains are, but it is not surprising. After years and years of working to eliminate brands from the market, years and years of demanding transparency from vendors and years and years of alienating the global supply base, one thinks of the famous dialogue from A Man for All Seasons:

ALICE MORE: Arrest him!

MORE: Why, what has he done?

MARGARET MORE: He's bad!

MORE: There is no law against that. A Man for All Seasons (1966) WILL ROPER: There is! God's law!

MORE: Then God can arrest him. and operating that can help them only a short-term win, that the piper get out of a difficult box. What they must be paid, and even endorsing ALICE: While you talk, he's gone! do not understand, though, is that the cult of local has its price. Sure, their insistence on transparency, sometimes, British produce is the best MORE: And go he should, if he in practice the demand that every in the world, but, on some products, was the Devil himself, until he penny a producer can figure out how at some times, it is not. But if we don’t broke the law! to make should be passed on to the admit that, then we push sub-optimal retailer is, in fact, antithetical to the product and will it be a surprise that ROPER: So now you'd give the development of new and better ways we sell less than we could have if the Devil benefit of law! of doing business. What is the point of taste was the best it could be. a producer investing time and money MORE: Yes. What would you do? in new techniques if, once discovered, There are challenges unimaginable Cut a great road through the law the surplus produced is demanded by ahead for mainstream retailers. Hard to get after the Devil? the retailer? discounters are their problem of today, but the move to foodservice is steady ROPER: I'd cut down every law in How can the mighty brands come and sure, and the digital world is England to do that! to the aid of their customers when to evolving in unexpected ways – so the deprive them of the slightest margin risk may not just be online vendors; MORE: Oh? And when the last they were replaced with private labels? it may be that Amazon Echo, with its law was down, and the Devil But if the private-label products are Alexa personal assistant, just orders turned 'round on you, where priced low because they save the everything for people and not from would you hide, Roper, the laws branded marketer’s margins that were supermarkets at all. all being flat? This country's used for research and development planted thick with laws from coast of new products and used to finance Supermarkets will need all the allies to coast – man's laws, not God's efforts to grow the category, how are they can get to think through and – and if you cut them down -- and these same companies to aid their execute in this brave new world, but you're just the man to do it — do customers when their margins have they have cut a great road through you really think you could stand been wiped clean? their allies to stand as they do today. upright in the winds that would So there are scarcely any allies with blow then? Yes, I'd give the Devil The executives who dared not tell the means and inclination to assist. benefit of law for my own the shareholders and the City the safety's sake. reality of margin-compression also My advice would be that the first dared not tell shareholders and the job for supermarkets in the UK is to What the big chains need most now City, and even consumers, that taking turn to the supply base and start is innovation, new ways of thinking margin out of R&D and marketing is making friends.

8 Proud winners of three UK Fruit and Vegetable Awards 2016. Please visit us at stand 214.

acgoatham.com PRODUCE BUSINESS UK GUIDE TURN AND FACE THE CHANGE

By Jim Butler

he much-missed David Bowie was a T man of many talents and an artist possessed of preternatural foresight. It is of course not beyond the realms of possibility that his comprehensive intellectual armoury contained a grasp of the UK grocery retail market. their analytical hats, has lost its status, pliers? What about Brexit? Where’s the But surely that could not explain that as the convenient modern notion good news? whenever one examines the tumult of ‘shopping more, buying less’ gains within the UK supermarket sector, traction. Online shopping continues to In fact, does anybody know the lyrics to Bowie’s 1972 art pop hit, rise, though not necessarily at the pace anything anymore? Changes, spring to mind: ‘Ch-ch-ch- predicted by those same analysts. ch-changes/Turn and face the strange/ Well, first the good news. This is Ch-ch-changes/There's gonna have to In this post-recession maelstrom, not a downward spiral. According be a different man’. the supermarket chains grapple with to forecasts by the food and grocery one another and themselves and try research and training charity, IGD, Unquestionably, things are changing to weigh up the implications on their the UK food and grocery market will in the grocery market. Strongly held short- and medium- term profitability grow to be worth £200.6bn by 2020 (a convictions about the power of the [only the very brave ever seem to con- 13% increase on its mid-2015 figures). so-called Big Four (Tesco, Sainsbury’s template the long-term these days]. Indeed, IGD’s chief executive Joanne Asda and Morrisons) and concrete Denney-Finch believes that we’re liv- assumptions about the behaviour of Everything is changing and it’s ing through a genuine revolution in British consumers have been ripped changing faster than ever before. food retailing. Speaking at the Asia Pa- apart, never to return. The discounters Pronounced flux is the defining char- cific Retailers Convention and Exhibi- – Aldi and Lidl – are no longer mere acteristic. Brand loyalty schemes are tion conference in Manila last October, irritants in the eyes of the established being toned down and in-store promo- she proclaimed change was sweeping retailers. Their combined market tions are being reduced. Arguably through global food retailing. share and the fact that they are often the one thing we can reply on is that grouped as one, single force for low sensational talk of ‘price wars’ still prices, now singles both out as major dominates most media coverage of the players. The weekly shop, for so long grocery market. But is the UK market the bedrock on which so many hung still an attractive proposition for sup-

10 The UK Grocery Retail Market

Ch-ch-ch-ch- changes

“The revolution is so big and power- stores, in discount stores and online. ful, that no-one knows exactly what All these changes have an impact on “The revolution is so the future will look like,” she said. supermarkets.” big and powerful, that “While this is creating the most challenging conditions for food retailers Fraser McKevitt, head of retail no-one knows exactly I’ve ever seen, there are many op- and consumer insight at Kantar what the future will portunities too. Retailers around the Worldpanel, is another to acknowledge look like” world are responding creatively and the shifting behaviour of consumers. starting to build a new future.” Big trolley shopping in the expansive out-of-town superstores is slowing Shore Capital’s retail analyst Clive down, although it remains a very big Black recognises that the industry is and very important part of the market. going through enormous, rapid and challenging structural change. He be- “That (customers making less big lieves a number of factors have come shopping trips) is the direction the together to create this – most notably sector is heading in,” he states. He the changing habits of the modern says that money is flowing out of consumer. “People are eating more those big supermarkets in three food outside the home,” he points out, directions. “It’s going online, which “which is naturally a big challenge the big supermarkets retain, but much to supermarkets; people are wasting less profitably because it costs a lot much less food; they’re cutting down more money to deliver online. It’s also their calorific intake and eating more remaining in the supermarkets, but Joanne Denney-Finch, IGD food that is associated with health and via basket, not trolley, shops and that well-being. And they’re also shopping brings into consideration the range in different ways. In convenience you need in shops and how stores

June 2016 11 PRODUCE BUSINESS UK GUIDE

should be laid out. And then the third McKevitt notes that shoppers are en- one is the flow of those trolleys towards joying a golden period of cheaper grocer- discount retailers.” ies with like-for-like prices falling every month since September 2014 – it’s still of This perfect storm has hit the Big great concern for retailers who conse- Four hardest. quently struggle to grow their revenues.

David Gray, senior retail analyst at Planet Retail, sees some cause for opti- mism though. Whereas 18 months ago the sector was hamstrung by both falling value and volume – consumers were buying less as well as prices going down – today, volume has risen.

“Shoppers are putting more items in their basket,” he explains. “Which is a better situation than 12 months ago. It’s still a challenging situation, but it’s better.”

So what is driving this rise in volume? Broadly speaking, Gray attributes it to a general improvement in consumers’ financial situation. “The economy isn’t doing too badly,” he suggests, “there’s a bit more confidence. There are of course “I think the big supermarkets know some uncertainties around – the EU what the challenges are now,” McKevitt vote for instance – but generally there’s “The large says, “but they haven’t yet found the been an upturn in consumer confidence. supermarket groups device or the levers to stop that flow Which should lead to increase in volume.” not only became of money.” One area where the retailers – the Big detached from their Black picks up on this point. His analy- Four in particular – have taken positive customers they sis leads him to conclude that stronger steps is in simplifying their price propo- treated them management at the Big Four – which, sition. Granted, this has happened in as idiots” lest we forget, still control 75% of the direct response to the discounters enter- grocery retail sector – is finally paying ing then winning the so-called price war, dividends. “They have realised some of but it has led, in Black’s view, to a more their limitations,” he says. “In addition, honest relationship with the customer. some behaviour that wasn’t sustainable “Absolutely,” he says. “Because in all or in anyone’s interest, never mind the honesty the large supermarket groups consumers, has changed, so rather than not only became detached from their continuing to open new stores they’ve customers they treated them as idiots. concentrated on making their existing Those customers, particularly two or stores more effective.” three years ago, really needed those supermarkets to have a stronger price Falling Values and proposition because their budgets were Simplification under so much pressure. And that’s why they went to Aldi and Lidl.” One of the biggest challenges facing the UK grocery retail market in 2016 remains The superstore groups, Black believes, falling values. The value of food retail thought they were more intelligent; had Clive Black, Shore Capital sales continues to fall; in short, that’s more customer insight and therefore put deflation. And while that may seem like forward very complex propositions and good news for consumers – tried to fool their customers. Evidence

PRODUCE BUSINESS UK GUIDE

TURN AND FACE THE CHANGE By Jim Butler

of this was extensive coupons and There seems to be a general shift in A retailer’s main objective is to be vouchers, promotions between where retailers are putting their money profitable at the end of the day. I groceries and fuel, lots of promotions, then. They’re taking it out of loyalty think there’s a lot of work gone into lots of multi-buys and lots of price schemes and putting it into lower premium own labels, premium own matching claims. In his estimation, prices, which Gray believes is what brands – if you can get consumers it was behaviour that took some time customers ultimately want. To that to trade up, then you can make a to change. end, Sainsbury’s has halved the value lot more margin on a premium own of Nectar points and it recently stopped brand. So it’s not just about a race “We are in a pattern now where brand matching with Asda (a move that to the bottom in terms of pricing. there has been major progress in inspired Tesco to announce it would Tesco is investing in health and simplification to reduce the complex- honour any Sainsbury’s Brand Match wellness ranges, they’re investing in ity of the proposition to customers,” coupons until June and which prompted re-launching healthy lines, [it is] re- he argues. “A far more stable, simple one media outlet to claim that Tesco launching its Tesco Finest range and and straightforward, and ultimately had ‘parked its tanks’ on Sainsbury’s trying to get consumers to buy higher lower-priced proposition, and also far lawn). Morrisons has retained its loyalty margin products.” more simple and cost-effective busi- scheme, but not its price-matching nesses to support that price proposi- discounts. And Tesco has cancelled its But price remains the dominant tion and strengthen the balance sheet. Clubcard Boost programme, reportedly factor – for consumer and retailer So there has been some quite funda- to the chagrin of a significant number alike – in the sector. Especially when mental structural change. I wouldn’t of its legion of customers. it comes to those everyday staples say that the industry is out of the tun- that shoppers generally know the nel, so to speak, but there is certainly “There is a bit of a margin hit,” notes price of – bread, milk, eggs and the light at the end of the tunnel where Gray, “but they are also taking with like – where there has been extensive there wasn’t a couple of years ago.” one hand and giving with another. price matching and discounting of

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OVERVIEW OF UK'S MAJOR SUPERMARKETS Overview of UK’s major supermarkets Overview of UK’s major supermarkets

1 Founded 1 Founded 1929 1869 1920s 1899 1844 British, family-owned Walmart, American British, 9% by the Mutual business owned Owner British British, family-owned Walmart, American British, 9% by the Mutual business owned British until 1996 since 1999 Morrison family by eight million members Owner until 1996 since 1999 Morrison family by eight million members Welwyn Garden City, HQ location Welwyn Garden City, Holborn, London Leeds, Yorkshire Bradford, Yorkshire Manchester, England Hertfordshire Holborn, London Leeds, Yorkshire Bradford, Yorkshire Manchester, England HQ location Hertfordshire

Total stores Total stores 3,535 1,304 525 490 2,800

Large stores c20 Asda Supercentres 250Large Tesco stores Extra (c2085,000 Asda sq Supercentres ft; 1000 staff) Large stores 250 Tesco Extra Large stores (85,000 sq ft; 1000 staff) Large stores 479 Tesco Large stores 490 superstores 479 Tesco 597 supermarkets 490 superstores Store 178 Tesco Metro 597 supermarkets c210 Asda Superstores Expanding small 178 Tesco Metro c210 Asda Superstores Expanding small Store (44,000 sq ft; 500 staff) Convenience stores store format formats Convenience stores (44,000 sq ft; 500 staff) Convenience stores store format formats Convenience stores Convenience stores M local’s 140 stores all Convenience stores 707 Sainsbury’s Local M local’s 140 stores all 1,755 Tesco Express 707 Sainsbury’s Local c295 Asda Supermarkets sold in 2015 1,755873 Tesco One StopExpress c295 (100Asda-250 Supermarkets staff) sold in 2015 873 One Stop (100-250 staff) Own stores ✓ ✗ ✓ ✗ ✗ outsideOwn stores UK? ✓ ✗ ✓ ✗ ✗ outside UK? Total staff Total staff 310,000+ 161,000 160,000 117,000 62,000 Total grocery Total grocery 28% 16.5% 16% 10.6% 6.2% market share (-0.7%,28 since% May ‘14) 16.5(-0.1%%) 16(-1.3%%) 10.6(-0.4%%) 6.2(+0.1%) market share (-0.7%, since May ‘14) (-0.1%) (-1.3%) (-0.4%) (+0.1%) Premium Premium Finest Taste the Difference Extra Special M Signature Truly Irresistible range Finest Taste the Difference Extra Special M Signature Truly Irresistible range Website tesco.com sainsburys.co.uk asda.com morrisons.com co-operativefood.co.uk Website tesco.com sainsburys.co.uk asda.com morrisons.com co-operativefood.co.uk

16 The UK Grocery Retail Market

“If Aldi or Lidl had been a believes that the Big Four’s obsession of its products compared to brands publicly listed company, with price has been to their detriment and that has had a positive effect for I don’t think they’d still – it is quite simply a battle they can them. It has succeeded in that goal. be in the UK” never hope to win. However, this shift in perception hasn’t come cheap. Aldi has spent “Price seems an easy instrument to more in marketing comparatively fix,” he says. “Simply make it cheaper than Sainsbury’s in recent years.” and demand will increase. It’s classic economic theory. However, once Black adds: “I think it’s fair to competition is put into the equation it say the rate of leakage from the Big doesn’t look that simple any more. It’s Four to the discounters has slowed a myth that the Big Four can compete down. But the discount Genie is out on price with discounters due to of the bottle and you can’t put it the very nature of the discounters’ back. Aldi and Lidl are here to stay business (smaller lines). It’s impossible but their recent growth might start for the Big Four to mimic that.” to decelerate. They’ll continue to open new stores but they’re going to One of the secrets to the discounters’ have to fight a bit harder for their success, Evanschitzky believes, has trade. Whereas two years ago, short of been their ability to re-focus the placing their customers in a taxi, the David Gray, Planet Retail minds of UK consumers and make big four were pushing their customers price the primary consideration when in the direction of the discounters.” they go food shopping. He claims that once customers feel late. However, the price reduction “They (the discounters) have comfortable that the pricing in a on everyday items has broadened managed to educate the customers superstore has sufficiently narrowed to include a far wider range of lines, in such a way that they now to discourage a trip to a discounter dragging several fresh fruit and firmly believe that price is the alternative, then other factors come vegetable items into the fray. most important factor in retailing. in: choice, ease of parking and of ease Therefore, the point of comparison of checkout services. “In that respect, Gray argues that casting the net will always be the discounter – and moves on price are big pre-conditions wider – in the hope to get customers there is no way any of the Big Four can to allow the other elements of the through the door and then make your beat an Aldi or Lidl on price – no way!” superstore proposition to work for margins on premium lines – only the superstore and its customers. All makes it more difficult for retailers In its most recent set of grocery the work that’s being done now will to make money. “The discounters share figures (published on May 4 for lead to a gradual improvement in have come in and really disrupted the the 12 weeks ending April 24) Kantar superstore performance,” he says. market,” he states. “If Aldi or Lidl had Worldpanel noted that the Aldi and been a publicly listed company, I don’t Lidl axis maintained its record share Health Check think they’d still be in the UK. They high of 10.4% – with Aldi on 6% and came in to the UK in the early 90s and Lidl on 4.4%. McKevitt predicts that We are just over halfway through didn’t deliver their first profits for they’ll have 14% market share by the second decade of the 21st Century over 10 years. If that was a publicly 2020, and without the availability of a and in the middle of the greatest listed company shareholders wouldn’t reliable crystal ball, most would agree shock to the system the Big Four stand for a market entry of 10 years right now with his assessment that have ever experienced since rising to without profits. So in effect they’re there’s still room for them to grow. prominence in the early 90s, so how reaping the rewards of their ability to healthy are Tesco, Sainsbury’s, Asda take a long-term view. If you look at “There are still some people that and Morrisons? Tesco in the US, five years, no profit, won’t enter their stores,” says Gray, the plug was pulled. Lidl and Aldi – “but to a substantial degree they Tesco remains the largest single they’re willing to stay 10 years and get have changed the UK consumers’ superstore group, with 28% of the retail that reward and I think to a degree perception of a discount store. Aldi market, followed by Sainsbury’s on 16.5%, that’s what they’re getting now.” has done a fantastic job with its Asda with 16% and Morrisons on 10.6%. Professor Heiner Evanschitzky, chair advertising and marketing. It has done Black regards Sainsbury’s as the most of marketing at Aston Business School, a great job in changing the perception stable of these four operators. “It has a

June 2016 17 PRODUCE BUSINESS UK GUIDE high specification customer base,” he doesn’t seem to know where it is at discovered in trials across the Pond, this says, “and I think it will continue to the minute.” brings with it a new set of challenges. plough its own furrow at the higher end of the market.” As for the discounters, well, they’re Gray notes: “I think Amazon doing becoming mainstream. They’re offer- Amazon Pantry makes sense because Tesco, meanwhile, is engaged in a ing more premium products – which it’s what Amazon is good at – putting massive programme of reconnecting suggests opportunities to those in stuff in a box, putting long shelf-life with its customers. Black notes that the food industry. As McKevitt puts it, items that don’t need any attention this involves material price invest- they are no longer solely about being into a box and sticking it in a distribu- ments and simplifications as already cheap; their message today is all tion system. Starting to deliver fresh outlined, plus major changes to its about value. perishable items is a whole new ball supply chain and major changes to game. The costs are in distributing how its stores are configured. “We It’s nothing new to predict that perishable items because it’s so dif- expect Tesco to stick to what it was online shopping will continue to grow, ficult from a logistical point of view.” 10 years ago and that is a shop that but the analysts’s perspective has anyone can shop in when it had broad altered in recent times. Although Gray Black shares the pessimism: “We appeal,” he explains. believes this growth is slowing some- expect Amazon to appear, but we what, however, he notes it is still the don’t expect it to be in charge of the grocery market in 10 years time or 20 years time.”

So why is Amazon even considering it? For Gray it’s about embedding more customers into the extended Amazon family. “The idea is to build people into the Amazon ecosystem, so you have Amazon Prime membership and then you can use its Pantry service. You can get Movies, you can use all those services… It’s building loyalty and almost creating… the future of subscription services is certainly value.”

Trends

Health is an important trend. Evan- schitzky notes how recent regulations on sugar content (and other unhealthy substances) have brought this to the And with Morrisons also ‘going fastest growing area of the grocery attention of mainstream shoppers. back to the future’ in Black’s analysis, market. Of course, this has ramifica- He thinks supermarkets remain very by focusing on the safety net of its tions for superstore profits – and it’s good at capturing these trends and idiosyncratic Yorkshire roots as a high still proving more cost-effective at turning them into business service, high fresh food store, it is this point for superstores to fulfil opportunities. Asda feels the most vulnerable. most online orders – because it costs more to establish dedicated forms of As more people eat out of the home “It feels exposed to Aldi and Lidl at consolidation and distribution. the foodservice sector will continue the sharp end of the discount spec- to grow – both in size and importance. trum,” he states. “And the capabilities And then there’s Amazon – the big, Black expects innovation within this of Tesco and Morrisons in fresh food fat elephant in the room. Its Amazon arena to make great strides in the is stronger than Asda at the moment. Pantry service already delivers long forthcoming years. It’s certainly going through a diffi- shelf-life items and it is seemingly only cult time at the moment – it’s losing a matter of time before this evolves into Convenience is another key factor market share. One senses it needs perishable items such as fresh fruit and to take into consideration. McKevitt to re-find the art of selling, it really vegetables. But, as the behemoth has recognises that consumers will

PRODUCE BUSINESS UK GUIDE pay a premium for products that one does it,” he sighs. “We’ve done “It’s a myth that the Big are expedient. He explains: “By research on the elderly that confirms Four can compete on convenience I’m thinking ready meals their purchasing power, brand affinity price with discounters” of course, but also microwaveable and the like. The market is ripe for a rice, lazy garlic; people will pay a lot new entrant” of money to have a lot of effort taken out of their life in that way. People are Every analyst Produce Business UK also living in smaller households than spoke to agreed that the UK grocery they were decades ago which impacts retail market should remain an upon how they eat – people are eating attractive proposition to suppliers, on their own a lot more these days despite the turmoil and challenge. so smaller portions, easier to cook Black even argues the UK market has portions.” retained its high-end status and while not the be-all and end-all in terms of As the consumer demographic international prestige, it remains changes, the opportunities extend a vital market in Western Europe. beyond formats and products. Evanschitzky points to our aging population as a key sector that is being failed by the current retailers. Professor Heiner Evanschitzky, “Someone needs to capture that huge Aston Business School segment and I’m puzzled why no

OVERVIEW OF UK'S MAJOR SUPERMARKETS Overview of UK’s major supermarkets

2 3 Founded 1913 1904 1930s 1970 1884

John Lewis Partnership Aldi Süd, German Schwarz, German British British Owner since 1937

Atherstone, Bracknell, Berkshire West London Deeside, Flintshire Paddington, London HQ location Warwickshire

Total stores, UK 620 346 600 860 852

Large stores - wide Average 20,000sqft, also Medium sized stores, 15,000 sq ft stores Lidl range of food and non Store have 60 convenience principally focused on as standard Lidl Express food items; smaller formats stores frozen foods Simply Food stores

Own stores ✓ ✓ ✓ ✓ ✓ outside UK?

Total staff 28,000 91,500 17,000 23,000 83,069 (inc 46 John Lewis) Total grocery 6% 5.2% 4.4% 2% n/a market share (+1.3%, since May ‘14) (+0.1%) (+0.9%) (n/a)

Website aldi.co.uk waitrose.com lidl.co.uk Iceland.co.uk marksandspencer.com

1 Morrisons’ began life as a market stall in 1899; its first shop opened in 1958 This information is correct as at May 2016 subject 2 Aldi entered the UK in 1989 to the accuracy and currency of publicly available 3 Lidl entered the UK in 1994 data sources including company websites UK Grocery market share Total Till Roll figures (Source: Kantar Worldpanel, 24 April 2016)

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“In the next 25 years there’s every In concluding though, Evanschitzky “There are still plenty of prospect that the UK will be the is prepared to stick his neck out: largest single [European] population, “We’ll still have four big chains in 20 opportunities out there. outside of Russia,” he says. “Therefore years, the market share of discounters Classic marketing done the market will need supplying. Other will have reached a natural satura- right will still bring countries aren’t reproducing at the tion (perhaps around 20%) and 1-2% great results” same rate – population is falling. That profit margins will be the new normal is not the case in the UK.” for the Big Four. There’ll be a sizeable up-market niche with considerably McKevitt concurs: “The take home higher margins. As so often in busi- grocery market in the UK is worth ness, the ‘middle’ is the largest, but about £104bn, and although the over- least profitable segment.” all market might be sluggish it doesn’t mean there aren’t categories within it So as long as retailers adapt to that aren’t performing well. And cer- changing consumer behaviour, adjust tain brands are doing well too. There to lower profit margins, find ways are still plenty of opportunities out of making online shopping profit- there. Classic marketing done right able, reconfigure stores to allow for will still bring great results to people.” smaller, more convenient shops, resist the temptation to fixate on price and Gray argues it’s about the Big Four simplify their offer all will be fine. acclimatising to the new normal. Previ- ously they could count on overall profit Get all that right and retailers of Fraser McKevitt, margins as high as 5% – much higher every hue can, like our dear old friend, Kantar Worldpanel than on the Continent. Since the ar- Mr Bowie, be heroes too. rival of the discounters there has been a reset of what can be achieved, he says.

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FCF2017_Advert_PBUK guide_A4.indd 1 23/05/2016 18:53 ENGLAND MARKETING MARKS TO M&S! MARKS TO GIVES TOPRESEARCH IN-STORE PRODUCE and Conference 2016 Published for theLondonProduceShow May 2015-April 2016 Mystery Shopping Report

Contents

Background 27

Aims of the Project 28

Methodology 29

Key Findings and Observations by the research Team 30 The overall winner is M&S 30 Observations made by the Researchers 33 Performance over time by Retailer 34 Improvers & Non-Improvers 34

Cumulative Performance on Aspects Measured 36 MYSTERY SHOPPER - PAGE 27

Background

In April 2015, England Marketing and overall good customer service, a day and, of course, to tackle some was commissioned by support the growth of the category. of the serious health issues the nation ProduceBusinessUK.com (PBUK) to faces by facilitating a propensity undertake a year-long programme The vast majority of the fresh towards of mystery shopping around produce sold in the UK is marketed healthier eating. the UK. under the retailers’ own banners, rather than private brands, which While on-shelf price has undoubtedly It is generally recognised that the means that fresh produce suppliers been the primary focus of the fresh produce supply chain does have relatively little control over the supermarket sector in recent years, a great job of delivering top class way that their customers present this research did not wish to compare produce to the country’s major their produce once it is in store. stores on price, as that tends to be supermarket chains. Once that There is therefore a significant the focal point of many other produce is in the hands of those onus on supermarket operators research projects. Instead, we looked customers, however, this industry to do as much as they can to beyond the price to what we is reliant upon them to maintain encourage consumers to buy more considered to be the most important the quality of those fruit and fresh produce, to eat the national elements of the in-store offer. vegetables, and through attractive recommended guidelines of five displays, effective staff knowledge portions of fruit and vegetables

‘...As Consumers as well as researchers we are very discerning...’.

Mystery Shopping Report May 2015 - April 2016 Published for the London Produce Show and Conference 2016 M YSTER Y SHOPPER - PAGE 29

Methodology

England Marketing and PBUK agreed on a list of monthly visits to 12 UK England Marketing devised a locations in key geographical regions of England, Scotland and Wales. ratings sheet (Appendix 1) to grade These were as follows: the following aspects of each store on a scale of 1-5 Location Month Cambridge May 2015 Vegetables Leeds June 2015 Well stocked Bristol July 2015 Attractive display Swindon August 2015 Effective promotions Coventry September 2015 Style of packaging Sheffield October 2015 Range of produce Ashford, Kent November 2015 Fruit Edinburgh Reading December 2015 Well stocked Cardiff January 2016 Attractive display Manchester February 2016 Effective promotions Edinburgh March 2016 Style of packaging Manchester Newcastle April 2016 Range of produce Newcastle Promotions During each visit, two researchers The findings were fascinating visited each store and came to and you can access the entire Number of Gondolas a joint decision on the ratings year’s worth of archived reports Range on Aisle End after exiting the store. Whilst at http://www.producebusiness there is inevitably some level uk.com/more/produce- The Store of subjectiveness in some of the mystery-shopper. Leeds Appeal of Signage/Instore Message judgements, the principal aim Aims of the Project was to build in a consistency of This is the final report. Fresh produce stands out measurement across the year that To travel the country to visit a Sheffield ensured a fair assessment of each Cleanliness in-store sample of stores in the network store in each location, as well as of each major UK retailer to rate each store group across the piece. Cleanliness Outside store the presentation of its fresh produce in terms of stocking levels, The scores that each store received Helpfulness of staff attractiveness of displays, signage, for each of the individual elements product placement and promotions. Coventry Cambridge were aggregated to provide an average score per store each To test the knowledge and month. We produced a report helpfulness of fresh produce on the location visited, some staff on a range of issues. Cardiff commentary on the key findings and, as the project developed, To compile monthly and aggregated Swindon we also began to deliver a league tables that highlighted the Reading Ashford, Kent cumulative analysis. performance of each chain in each Bristol location and as a whole.

Mystery Shopping Report May 2015 - April 2016 Published for the London Produce Show and Conference 2016 M YSTER Y SHOPPER - PAGE 29

Methodology

Mystery Shopping Report May 2015 - April 2016 Published for the London Produce Show and Conference 2016 MYSTERY SHOPPER - PAGE 31

Indeed, Morrisons was top of the retailers, as its stated aim has been relatively large proportion of shelf table on several occasions in the to focus on convenience stores, and space given over to fresh produce. first few months, and at the halfway nearly all of the city centre stores mark of the research, would were small format convenience Tesco, similarly dedicates a good probably have been seen as the stores. However, in the overall amount of space to fresh produce, favourite to top the final table. scheme of things, despite the but its scores fell down as the Waitrose also performed better in limitations of their small size and shelves were not always as well the first half, but a combination low scores on the range of fresh stocked as we felt they should of a drop-off in the performance produce available, they generally be, and its promotions were of Morrisons and Waitrose with did as well as Aldi and Lidl on stock not particularly imaginative or M&S coming out of the pack and levels, and so we felt that it was appealing. maintaining its own performance legitimate to incorporate the scores better across the geographical in the overall analysis to give a fully regions meant that the rounded view of the marketplace. London-based chain emerged as the front-runner as the race entered Whilst Waitrose performed well in 3 the finishing straight. of the locations, its performance was quite inconsistent and what let It was all rather close when it came it down most was the fact that the down to the line. shelves were not always well

Store Aggregated Score

M&S 4.00 Maybe it is down to staffing levels, or perhaps it is just proving too Morrisons 3.96 difficult to keep up with demand in Waitrose 3.95 the larger format stores, but it is an easy conclusion to draw that if Asda 3.88 there was more capacity to ensure that the shelves were stocked Tesco 3.84 to meet day-round demand, it may well be possible to sell more Sainsbury's 3.74 produce and allow the great British Lidl 3.32 public more opportunity to buy and consume their 5-A-Day. Aldi 3.30 Co-op 3.23

Key findings and observations by the research team Interestingly, when we look at the stocked. We would ask whether scores by region, there was no this is a function of Waitrose’s Our research team started out produce. Happily, we’d say that the across all 16 aspects measured. demonstrable pattern; for example customers being extra-demanding on this project with a good base best far outweighs the worst. it might have been reasonable for the wide range of fruit and knowledge of the leading retail We don’t feel that there was any to expect higher scores for Asda vegetables on offer or just that chains and their fresh produce Overall Winner - M&S inevitability in this outcome. and Morrisons in their Northern they don’t have enough staff to offers. But having travelled around Marks & Spencer pipped Morrisons Despite M&S having a reputation heartlands, but this was not the keep up? 4,000 miles to reach the 12 towns at the post in the final reckoning for being high-end and a good case and on the other side of the and cities and visit one sample with a final aggregate score of fresh produce offer, the fact coin, Waitrose was not a stronger Sainsbury’s only came out top in store from each of the top nine 4.0 compared to 3.96 for the that we measured performance performer in the South compared one month, in Ashford, Kent. grocery retailers in all of those long-time leader. nationwide, as well as against so to the North. locations, we have added a huge many different criteria meant that Otherwise its performance on being amount to that core knowledge As you might expect, analysis of every chain was able to perform While there were times when the well stocked and running effective base and seen examples of the best the scores illustrates that M&S well in certain months – depending research team felt that the promotions was surprisingly and worst of the supermarkets in achieved the best overall scores by on the approach of each store. Co-op perhaps didn’t deserve to be average, considering that terms of their approach to fresh achieving good, consistent scores measured against all the other Sainsbury’s generally has a Mystery Shopping Report May 2015 - April 2016 Published for the London Produce Show and Conference 2016 MYSTERY SHOPPER - PAGE 31

Store Aggregated Score

sure that the fruit and veg staff at the key purchasing moment - Month Monthly winner veers towards encouraging people to must get asked about these points while they are in store, rather than eat their 5-A-DAY and that was in and for the most part they were not to rely on the external influences May 2015 Morrisons evidence on shelves around the UK. very well informed. Whilst the more such as TV and magazines to This is important, as a recent survey helpful of them offered to go and drive sales. June 2015 Waitrose conducted by England Marketing find out, we feel that the retailers, found that the number of portions of perhaps with the support of the • Each chain has clear areas where July 2015 Morrisons fruit and vegetables eaten per day suppliers, could be doing a lot it can improve. None were able to August 2015 Morrisons still hovers around 3.5 mark. more to make sure their staff are show that their stores in different educated and give their shoppers regions could maintain the level September 2015 Morrisons accurate information on fruit of consistent performance that is • While not wishing to perpetuate and veg in order to encourage required for a branded chain to live October 2015 Asda a stereotypical view of the country greater sales. that many would prefer to ignore, up to the core values it espouses November 2015 Sainsbury's and the reputation it wishes to the research team did generally uphold with its customers. December 2015 Waitrose find a correlation between the Our 5 Key friendliness and approachability of Recommendations • While some in-store colleagues January 2015 M&S fresh produce staff and how far • Retailers would be well served if were able to answer our questions north they were in the country. they could convey the same amount well, every produce team member February 2016 M&S Every group scored better for of enthusiasm about their displays is an extremely important March 2016 M&S staff in the northern cities than in We’d say that it appeared that most enormously between locations and and promotions of fresh produce as representative of the fresh produce the south. of the retailers have consistent stores. But one of the worst when they seem to manage for branded industry. They are truly on the front April 2016 Waitrose policies across stores for stocking, being questioned about where ambient products. More creative, line when it comes to consumer promotions and displays. But we waste produce goes was better-designed and targeted and education and the lack of informed The Monthly winners - above took in the whole stores during our Sainsbury’s, whose representative clearer point-of sale displays and comment was quite disturbing at visits and this seemed to be more said it all goes to landfill – hadn’t messaging could bring back a times. Staff training is one area evident with ambient products than that member of staff been educated sense of theatre to the produce that can certainly be stepped up, vegetables to eat on the go, as fresh produce, where there was in this important area, or even read aisles. both to improve their ability to evidenced in Sainbury’s, Tesco notable inconsistency. their own website? On the other keep the produce aisles looking and M&S. hand, Sainsbury’s staff did perform • There is a clear need to ensure great and to enable them to “fly the With the questions we asked each well at times – one fruit and veg that shelves are well stocked flag” for fresh produce by offering • Asda seemed to lead the way month, we found that the fruit and manager even managed to throughout the day and replenished customers accurate and around the country in terms of veg staff on the shop floor were not persuade the researcher to buy regularly. Ensuring this of course purchase-informing advice. its offer of different pack sizes always particularly knowledgeable organic and non-organic tomatoes adds to the attractiveness of suitable for different household about the products they were to taste the difference! displays, and will drive people to sizes and meal occasions. Also, handling, or some of the issues respond to persuasive promotions. Observations Asda, in almost all stores, was that customers might enquire Given that there is so much in the • There has been a tangible particularly good in supplying about. This can of course be simply press about the health benefits of • Serving ideas are still few and far increase in the prepared ranges exotic fruit and vegetables. down to the individual who was fresh produce, pesticides, organics, between – there is more scope for over the course of the year; for However, its staff were not questioned, and therefore varies British produce and so on, we feel retailers to educate their customers example Tesco and Asda have always that well informed and our launched 5-A-DAY snack packs researchers felt that this could and Aldi, Morrisons and Tesco be a drawback when it comes to have launched “make your own” increasing sales of these items. soup packs. • “Mini” vegetables seem to have • Innovation also seemed to taken off, with mini courgettes and noticeably increase across the mini leeks to name but a couple. ‘We hope our findings influence the fresh produce industry to work year, with good examples being the • While innovation is of course introduction of mixed berry packs geared largely to generating closely with retailers to deliver an even better proposition of fruit and ranges of cut fruit and additional sales, it also therefore and veg, to encourage the British public to eat more healthily’.

Jan England - England Marketing

Mystery Shopping Report May 2015 - April 2016 Published for the London Produce Show and Conference 2016 MYSTERY SHOPPER - PAGE 33

Jan England - England Marketing

Mystery Shopping Report May 2015 - April 2016 Published for the London Produce Show and Conference 2016 MYSTERY SHOPPER - PAGE 35

Performance over time by Retailer Morrisons, although second overall, 12-month period, which perhaps Taking the monthly aggregate declined significantly from October reflects negative coverage in the Cumulative Performance on Aspects Measured score for each retailer and plotting onwards. Although the Bradford media over the same period about Well Stocked Rating a trend line, we can see that all based chain still managed to come Morrisons performance. 5 Tesco Asda Morrisons Sainsbury's M&S Waitrose Aldi Lidl Co-op retailers except Morrisons and Lidl a close second to M&S overall, its showed some improvement over performance was heavily skewed 4 the 12-month period, albeit that by the positive start to the year. It Tesco and Waitrose had the most is the one retailer that showed a 3 imperceptible upward trends. marked trend of decline over the 2 Attractiveness of Display Improvers and Non-Improvers 5 Tesco Asda Morrisons Sainsbury's M&S Waitrose Aldi Lidl Co-op 4 3 2 M&S - improver Effective Promotions Tesco Asda Morrisons Sainsbury's M&S Waitrose Aldi Lidl Co-op 5 Asda - improver 4 3 2 Waitrose - improver 4 Style of Packaging Tesco Asda Morrisons Sainsbury's M&S Waitrose Aldi Lidl Co-op ‘After 12 months of travelling the Tesco - improver 5 Sainsbury's - improver 4 country, it ‘s very clear that there Co-op - improver 3 is some way to go in increasing 2 the appeal of fresh produce’...

Range of Products 5 Tesco Asda Morrisons Sainsbury's M&S Waitrose Aldi Lidl Co-op Aldi - improver 4 Vegetables 3 Morrisons - Non-improver 2 Fruit

M&S, Tesco and Lidl scored where we were surprised most by Morrisons and Waitrose tended to highest at keeping their shelves the poor performance of have the widest range of produce well stocked – this was interesting Sainsbury’s, which was outshone in all stores; the researchers found as they are all three at different by Asda and M&S consistently more exotics and unusual stages of the retail spectrum and delivered what we considered to be vegetables in these stores, though the findings reveal that it is the most effective in-store the perceived ability to market 3 Lidl - Non-improver equally viable to be well stocked promotional initiatives for produce. them effectively to the at the premium and discount customer differed. ends of the scale. The general style of packaging was best in Waitrose and M&S, which is M&S has had the most attractive no great surprise given their on-shelf displays. This is an area premium-end status. Asda,

Mystery Shopping Report May 2015 - April 2016 Published for the London Produce Show and Conference 2016 MYSTERY SHOPPER - PAGE 35

Range of Products 5 Tesco Asda Morrisons Sainsbury's M&S Waitrose Aldi Lidl Co-op Aldi - improver 4 Vegetables 3 Morrisons - Non-improver 2 Fruit

Mystery Shopping Report May 2015 - April 2016 Published for the London Produce Show and Conference 2016 Morrisons takes a slightly stood out and was easy to find, M&S, Sainsbury’s and Waitrose were different approach to aisle ends, both Morrisons and Sainsbury’s consistently the cleanest stores and probably because of this, always scored highly. Asda just both inside and out, which was in achieved the highest rating for the took the ‘prize’ for the best our view one of very few categories range of produce on display. Asda signage, but Sainsbury’s and that may have been entirely and M&S were consistently higher Waitrose were close behind. predictable before the research scoring on their aisle ends as well. took place. Tesco’s recent foray into Gondolas, the moveable displays farm-based brands came right at Waitrose, M&S and Sainsbury’s that customers can walk around, the end of our research period also had the most helpful and have declined during the research and therefore had no impact, but best-informed staff throughout the period and seem to be largely initiatives such as this might mean year, though every chain showed a dedicated to flowers and herbs. that this particular research degree of inconsistency across its category may see some changes in network. In terms of how well the fresh the next 12 months. produce section of the store

Final aspects measured

Rating of range of aisle end 5 Tesco Asda Morrisons Sainsbury's M&S Waitrose Aldi Lidl Co-op 4 3 2

Appeal of signage 5 Tesco Asda Morrisons Sainsbury's M&S Waitrose Aldi Lidl Co-op 4 3 2

Fresh produce stands out 5 Tesco Asda Morrisons Sainsbury's M&S Waitrose Aldi Lidl Co-op 4 3 2

Cleanliness in store 5 Tesco Asda Morrisons Sainsbury's M&S Waitrose Aldi Lidl Co-op 4 3 2

Cleanliness outside 5 Tesco Asda Morrisons Sainsbury's M&S Waitrose Aldi Lidl Co-op 4 3 2

Helpfulness of staff 5 Tesco Asda Morrisons Sainsbury's M&S Waitrose Aldi Lidl Co-op For a copy of this report 4 3 please contact us: 2 [email protected] www.englandmarketing.co.uk ENGLAND MARKETING Bio-Protection - 24 hours a day, 365 days a year

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For further information please contact [email protected] or Larry Boulton on 07525 926155 www.bioshieldsystems.com PRODUCE BUSINESS UK GUIDE THE STATS BEHIND FIVE YEARS IN PRODUCE THE STORIES

Producebusinessuk.com Following relatively buoyant updates its readers every growth of 1.1% (boosted by an four weeks on the latest early Easter), the UK grocery retail figures. Here is the retail market has slowed. most recent update, from early May, to give ales were up just 0.1% year-on-year you a flavour of what’s S in the 12-week period ended April 24, The Potato market happening in the 2016, and the slump was mirrored across remains the largest market – go to www. every major supermarket. produce sector, however producebusinessuk.com/ it has been joined in insight for your regular All of the major UK grocery the £1bn club by the statistical fix. supermarkets have posted a decline in Berries+Currants market. their sales, notes Kantar Worldpanel, with the situation not being helped by falling prices, as grocery inflation remains at -1.5% and the price war shows WHAT ARE THE no signs of going away. LARGEST LINES IN “Consumers are enjoying a golden THE PRODUCE period of cheaper groceries, with like- for-like prices falling every month since MARKET? September 2014,” reveals Fraser McKevitt, Potatoes remain the largest Asda's disappointing head of retail and consumer insight at type, however Berries+Currants run continues; Kantar Worldpanel. are a very close second its share of the 1. POTATOES £1.1bn marketplace is 16% “Nearly two years of falling prices means the average household is spending 2. BERRIES+CURRANTS £1.09bn £78.10 a week at the supermarket, so 3. APPLES £861m consumers have saved more than £400 4. TOMATOES £711m annually than if prices had risen at the 5. BANANAS £561m same rate as the last decade.”

Promotions down

At the same time, McKevitt points out “This change has been evident across that yet lower prices are not the result of every grocer but most notably at more groceries being bought on promotion. Sainsbury’s, where only 7% of deals are now multi-buys. Straight price-cut “In fact, promotional levels fell in the deals tend to offer greater discounts, so last year – in the past 12 weeks 38.5% shoppers will see these as a welcome of spend was on promoted goods, a benefit across the market.” decline from the 39.8% last April,” he Fraser McKevitt, says. “Retailers are aiming for simplicity Kantar Worldpanel in their pricing and only a quarter of promotional spend is now through multi- buy deals – a 24% drop on last year.

38 The UK Grocery Retail Market

FIVE YEARS IN PRODUCE FIVE YEARS IN PRODUCE KWP Data Ending 27th March 2016 KWP Data Ending 27th March 16

Berries+Currants have Avocados have more than Lemons+Limes have seen gone from strength to doubled in value over the highest growth over strength, now valued at the past 5 years, helped the past year, but over 5 over £1bn, predominantly by growth in shoppers and years, Avocado and Kale are driven by Blueberries growth. increases in frequency. two of the top 5 performing.

OVER THE PAST YEAR, OVER THE PAST 5 YEARS, WHICH PRODUCE WHICH PRODUCE LINES HAVE SEEN THE LINES HAVE SEEN THE HIGHEST GROWTH? HIGHEST GROWTH? Year on Year value growth. Year on Year value growth. £1 million minimum spend £1 million minimum spend in both periods. in both periods.

1. LEMON+LIME +44.5% 1. BEAN SPROUTS +366.2% 2. FENNEL +44.3% 2. KALE +241.9% 3. DATES +38% 3. GINGER +168.8% 4. SWEET POTATOES +37.4% 4. AVOCADO +161.1% 5. KALE +36.7% 5. SHARON FRUIT +147%

Purchasing flat overall market volume growth of 1%. Kantar Worldpanel says volume SUPERMARKET growth has not been robust either, “Individual households have stopped WINNERS with the modest increase (on a per increasing the amount of groceries household basis) recorded in 2015 and they buy and while it is tempting With the market flat, 2016 to date, having disappeared. to correlate lower volumes with the battle is all about the uncertainty surrounding the retailers’ share. The Purchasing levels are now flat, European Union referendum there is no recent winners on that according to McKevitt, which means evidence that supermarket purchasing front are Lidl, Aldi, the only the increase in the number of has any significant link with consumer Co-operative and Waitrose. British households is sustaining the confidence,” he explains.

June 2016 39 PRODUCE BUSINESS UK GUIDE

THE STATS BEHIND Lidl & Aldi “While not growing market share, THE STORIES Sainsbury’s will be happy enough to Lidl is leading the way, although Aldi retain its position as the best performing is not far behind. Both have maintained Big Four supermarket for the 10th their combined record share high of consecutive month, with market share 10.4% which they first reached last month, stable,” McKevitt explains. and Kantar Worldpanel says it’s looking likely they’ll reach 14% by 2020. Tesco

Lidl was the fastest- Sales were also down at Tesco, by 1.3% growing retailer over the latest to £7.12m, which McKevitt claims is 12-week period, with sales up by reflective, in part, by its store disposal 15.4% to £1.12m, as shopper numbers programme. increased by 648,000. Morrisons An average At Aldi, sales were up by 12.5% to family buys fruit £1.53m. The discounter added an Likewise, Morrisons is still feeling the additional 732,000 shoppers in the impact of having less store space than last 12 weeks – more than any other last year – this period sales were down by retailer. 2.6% to £2.69m.

The Co-operative Food Asda

Against the difficult market And Asda’s “disappointing run” backdrop, the Co-operative’s continues, says McKevitt. Asda now 66 renaissance continues; growing its commands a 16% share of the market, TIMES A YEAR sales by 3.3% year-on-year to £1.57m. down from 16.9% thanks to a sales fall of 5.1% to £4.07m. The Co-op’s market share has risen to 6.2% as refurbished stores and Inflation update an improvement in range has meant shoppers are visiting more frequently Kantar Worldpanel puts and spending more per trip. grocery inflation at -1.5% for the 12-week The british Waitrose period ended April, 24 2016 – the 21st Waitrose also gained market share this consecutive period period, up by 0.1% to 5.2% on the back of of grocery price produce 1.5% sales growth to £1.32m. deflation. market is Big Four struggle This means shoppers worth are now paying It was a different picture for the less for a biggest retailers, however, with the latest representative 12-week period marking the first time basket of that each of the Big Four supermarket groceries than 11.3 77 operators has simultaneously witnessed they did in 2015. TIMES a drop in sales since April 2015. Falling prices BILLION Sainsbury’s reflect the impact of Aldi and Lidl and the An average family Sainsbury’s was still the best-performing market’s competitive response, as well as buys vegetables 77 retailer, although its sales fell back by 0.4% deflation in some major categories such times a year [to £4.1m] – the first time it has dipped into as fresh and processed pork, butter, decline since July last year. It still retained and crisps. its 16.5% share of the market.

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THAT HAVE Asda's cheese DISRUPTED ASDA got moved

By Bruce Peterson

With Asda singled out on page 38 as being the most vulnerable of the Big Four to the discounter challenge, we asked Bruce Peterson, the former senior vice president of perishables at Walmart Stores, Inc, for his take on the recent performance of the northern-based supermarket group

uch has been written in the past share position in the UK. They ran M 24 months or so regarding the outstanding stores, they had engaged performance of Asda. Once thought associates, and offered a compelling of as a “retail darling” of the UK, consumer value proposition. Asda’s recent financial performance has caused many to wonder “what However, I recall a story that was happened?” Year over year sales told to me about Sam Walton. I was have been underperforming and told that the biggest fear that Sam bottom line contribution has missed had was the SUCCESS of the company! expectations. Now this may seem counterintuitive, but Sam’s worry was that it is often Despite my background, I certainly the case that the decisions that are can’t claim to have any “insider made within a company get WORSE as knowledge “of the inner thinking of the company achieves success. This the company, or its parent Walmart. is primarily because you can make a But observing both organisations from bad decision in a position of strength the outside, and tempering that with and not immediately impact the the experience I had while working Bruce Peterson – Peterson Insights, USA company’s performance, whereas if with Walmart, I can offer some you make a poor decision when the tangible explanations of how I feel company is struggling, it has every they have got to where they are now. suggest high criticism of Asda, but chance of becoming fatal! And I would suggest that studying that’s not the intent. Asda would also give insights to what This is where arrogance can creep is happening to many retailers, both Arrogance in. I remember sitting in a room, in the UK and elsewhere around the having a beer, with the then chief world. In no specific order, I think the There is a fine line between executive officer of Asda along with issues come down to: “confidence” and “arrogance”. Asda’s several of his senior managers. I was management had earned the right with my boss, and several of my direct • Arrogance to be supremely confident in how reports. Asda’s CEO told the group • Losing sight of their core value they ran their business. They had that Walmart was fortunate to have proposition successfully competed against the acquired Asda because now Asda • Their “cheese” got moved best retailers that were in the UK, could show Walmart how to run food! • New competitive channels of and in the case of Tesco, one of the Now after giving careful consideration distribution best retailers in the world. They had to the career impact of punching gone from being a dairy company out one of our division’s leaders, I Using the word “arrogance” would to holding the #2 retail market remember thinking just how good

42 The UK Grocery Retail Market

“The biggest fear that Sam Walton had was the SUCCESS of the company!”

June 2016 43 PRODUCE BUSINESS UK GUIDE these people THOUGHT they were! when the market changes. store. You might call this “death by a And I would suggest that any time As you can read elsewhere in this thousand cuts”. that the leaders of any company get guide, the UK marketplace came focused on their perceived strengths, under dramatic assault from the One of the best examples of this instead of constantly challenging recession-fuelled rise of Aldi and Lidl happening to other sectors is music. I themselves to learn and get better, at the discount end of the market. have the opportunity to guest lecture they begin a slow slide to facing a This put Asda in a difficult place. It at a number of universities, and one challenging future. no longer had an expense structure of the first questions I like to ask is that allowed it to be the retail when the last time you bought a CD No one is “bullet proof”. If you’re price leader in the market and still was? Naturally, no one can remember! successful, sooner or later, that feeling maintain the margins it required to It’s all downloaded. So now, all of the of arrogance will catch up with you. sustain profitability. Not only that, but revenue and margin that CDs used Waitrose was simultaneously making to deliver at a retail store is gone. Lost sight of core hay at the upper end of the market. So Take this same thought process and value proposition at the other end of the scale, Waitrose consider the huge array of products took command of the high margin, that you once bought at a store, and Asda grew its business the way it did convenient shopping experience. With now you get through other channels. because of a very simple consumer the proliferation of the Supercentre value proposition. WE Sell For Less!” format that had worked so well in the All of this adds up to a challenging The ‘That’s Asda Price’ pocket tap past, Asda now had stores that were time for Asda. But these challenges became synonymous with consumers no longer inexpensive and were not are not isolated to them by any saving money. necessarily seen as the convenient means. Retailers all over the world places to shop. are facing many, if not all, of these But it’s very easy to lose sight of very same challenges. Frankly, I would that. With hindsight, one of the If that wasn’t challenging enough, bet on Asda as opposed to some other bad things about being acquired by bricks and mortar retailers have come retailers, to be able to cope with these Walmart was that it created a capital under a new threat from the ever- issues and restore its performance structure to explore other businesses. tough challenge of distribution. levels because Asda has an historic The main one of note was the “George” foundation of binding together to clothing brand in Asda’s stores and New competitive channels overcome challenges. supercentres. Both of these things of distribution were exciting to Asda because they Maybe it’s a geographical thing, allowed it to expand its focus into If the deep discounters such as Aldi or maybe it’s just the nature of the general merchandising. While this and Lidl were challenging enough people who have run the business, grew revenue quickly and presented with their low operating costs, the but I’ve always felt that Asda has new retail experiences for UK internet wreaks havoc with bricks and always had an “ us against the world” shoppers, it also did two other things. mortar retailers. mentality. I believe this cultural It took the focus away from what had attitude will help them to do the made Asda successful and it increased A consumer now has the ability to necessary things to remain a retail the expense structure. shop a virtually unlimited assortment force in the UK market. and have a retail price attached to that This approach would have been fine assortment that is very attractive. One Bruce Peterson –Peterson if all things had stayed the same in of the beauties of a Supercentre format Insights, USA the marketplace. But it didn’t take was that it was a “one stop shopping” into account what would happen if experience. This can be very attractive Bruce Peterson is now president of someone moved Asda’s cheese! to people who have busy lives and don’t Peterson Insights, Inc., a consulting want to spend time shopping from company he founded to specialise in The “cheese“ got moved store to store. But, for many modern helping fresh food companies success- consumers the internet represents the fully navigate through a wide variety In the ‘90’s, a very popular business ultimate in convenience. of complex challenges. book was “Who Moved My Cheese”, by Spenser Johnson. The gist of the book The challenge to Asda and other described the turmoil that occurs when retailers, is that the consumer now a company has a working business has several different channels to model for the current marketplace, but obtain the products that were once sees that model come under pressure only offered at your preferred retail

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16158-V2-Veiling-ad-A4-home of quality.indd 1 19/05/16 13:41 PRODUCE BUSINESS UK GUIDE PRODUCE CENTRAL TO RETAIL

GROWTH By Chris Cowan

The British retail produce their basket size by. The two balance market is worth more than each other out and when put into the £11 billion annually, making context of an evolving population, I it larger in sales than dairy would argue that there is really very products and only second to little difference one way or the other. alcohol among the grocery What about convenience?, I hear sector’s ‘super’ categories. Chris you cry. Once again, it’s true that Cowan of Kantar Worldpanel the convenience channel has picked analyses recent performance up in the last year, but our data still and looks to the future suggests that the consumer is doing a ‘main shop’ every 13 days or so. One During 2015, sales of wholehead/ thing that has changed is that they are unprocessed fruit overtook wholehead/ increasingly doing that main shop away unprocessed vegetables for the first from the largest superstores. time and now the two sides of the produce coin represent £5.1bn and £5bn The leading beneficiaries of that respectively. The processed side adds trend are the discounters and In the a further £1.2bn (but this excludes ‘on produce category and everywhere the go’ fruit). else, when it comes to the retailers, I’m sure you’ll be reading elsewhere in this Despite often negative press guide that the clear hot topic on the surrounding the nation’s inability to minds of the industry is Aldi and Lidl. reach its recommended daily intake The two retailers overindex in produce, target of 5 A DAY, produce is unique in pushing 14% market share versus being the only category bought by 100% their overall grocery share of around of the population. Brits, on average, 10%. Both have seen strong absolute make a shopping trip featuring fruit or growth in line with greater numbers veg every 3.5 days. of store openings but both have also made a good call in putting produce One of the ongoing ‘myths’ being at the heart of their offers. Aldi has perpetuated by the national press is hit the right notes with its “Super 6” that British shoppers are drastically marketing campaign, while Lidl’s “Pick changing their shopping behaviour. of the Week” initiative has also made a Things have changed, that much is true. strong impact. But over the last five years, the average shopper has increased how often Their growth has been phenomenal they shop by about 4%, which is the for almost five years now, but it is same amount that they have reduced instructive of their rise to know that in

46 The UK Grocery Retail Market

the last year alone, 17 million British of the domestic season. The other households have bought produce in possibility is that we will we see some either Aldi or Lidl. The engine for their retailers take a stronger stance on a growth has been their ability to engage British seasonal offering and encourage shoppers and encouraging them to suppliers to plant and grow more in keep coming back, again and again, British soil to extend seasons and spending more each year across every up volume. category. There surely isn’t a much better way to drive incremental sales. Will Aldi and Lidl continue to grow? Their growth in recent years has The largest single produce sector exceeded most people’s expectations, remains the potato category – at £1.1bn, probably even their own, especially the but it has been joined in the £1bn club way they have approached achieving by berries. The soft-fruit sector has such a large market share in relatively seen double digit value and volume small timeframe. Is this just a blip growth over the past few years, mainly or will the surge continue? With a thanks to driving more consumers commitment to continue opening large into the category, extensive marketing numbers of new stores, the chances are and promotions and it seems, better that there is more expansion to come, availability of consistently good but the key to the long-term results for product. Apples, at £860m, comes in the discounters will undoubtedly be third on the produce podium. the response of the major supermarkets chains. It hasn’t really come to pass For those of you who are operating yet, but are they going to find new and in what might now be considered niche innovative ways to market their points categories, however, there is increasing of difference and win that important evidence of an emerging trend for battle for shopper minds, spend and smaller categories to move from loyalty. relatively obscure positions towards the accepted mainstream. Avocados Are we driving demand to drive are perhaps the best examples of that, sales? Increasingly the focus of Kantar’s having more than doubled in value in work is looking at why shoppers buy the past five years and our figures hold – or don’t buy – particular categories. a number of similar examples of stellar That has to start with an in-depth growth for products that are able to understanding of consumers. We have demonstrably provide a better value introduced new measurement tools profile to consumers. into our work to help the industry build that understanding, which is helping But what does the future hold? some categories turn around poor Obviously, it's virtually impossible to long-term performance by resonating make cast-iron predictions, as there with different shopper demographics. are numerous ways the market could We are also tracking the key trends pan out in the short-medium term, but that are started in foodservice before I think there are three key topics that making the step into retail. will stand at the forefront of the next few years of evolution.

How strong is the desire to have what we want, when we want it? With greater year-round supply available to shoppers, we might expect to see the “Will Aldi and Lidl continued blurring of the traditional continue to grow?” “seasonal” palate with an increased desire to buy favourite lines outside

June 2016 47 PRODUCE BUSINESS UK GUIDE

PRODUCE CENTRAL TO RETAIL GROWTH Maybe there are more questions With most retailers seeing strong By Chris Cowan than answers, but that’s nothing new. growth in the tropical salad fruit, as It’s how you solve the challenges that well better year-round availability, it’s defines your success or failure. not surprising that the shopper base has grown by 3m households during Spotlight on Berries the last few years – nearly one in three British households now buy avocados. Arguably the standout performer within the produce market over the It’s easy to attribute much of this past few years, the berry category growth to the ‘instagramming’ effect has grown from strength to strength, which has certainly exceeding £1bn in the last year (up grabbed headlines from £790m in 2012). Blueberries in the past have been the primary catalyst for this – responsible for 43% of the berry category’s growth during this time, and adding £130m in annual sales on their own. However, strawberries and raspberries have not lagged behind – they have also added £95m and £70m and now the three berry category leaders represent 96% of all sales.

Yes, year-round availability has played a pivotal role in driving shopper engagement in the category outside of the typical seasons and all three of these have achieved double-digit growth and increased market penetration, but a lot of the couple of years success can also be put down to well- and, with 14m active monthly users in targeted marketing. Most blueberry the UK on the social network site, it’s consumption happens during weekday easy to see why. However, we must not breakfasts, for instance, while you’ll forget that in the average week, still find strawberries eaten throughout the only 2% of the population will actually week in the early evening. It could be eat avocados that have been bought at argued both of those facts have been one of our supermarkets. caused by clever marketing. The headroom for growth is clear – What’s clear now is that there remains there’s a great untapped population a gap at lunchtime and in the early to go after and an open court of afternoon and if we look at the retail opportunity to extend the reach snacking solutions that have begun to of avocados. Even those that come to the fore from a number of berry are eating them already companies, we’d expect that gap to be are only doing it twice per closed in the coming months. week and there’s little reason to think that Spotlight on Avocados continued 20%+ growth is achievable if the supply The avocado market has been one can match demand. of the great produce success stories of the past five years – seeing double digit growth in each year and has now managed to climb above the £100m mark in annual retail take home sales.

48 The UK Grocery Retail Market

How have Berries +Currants grown over time? Berries have grown by over £300m over the past five years.

How have Berries +Currants performed over the past 5 years? The Berry market has continued to grow from strength to strength.

11.2.2 11.1.1 303 0 OtOthherer ToTotatal Marketl Market How is the Berry BBeerrriesries++CCururraranntsts 383.86. 6 Market Split and how 5151.4.4 SStrtraawwbbeerrryry 121.27. 7 5959.1.1 BBlacklackbbeerrryry have they performed 262 6 VVoolulummee over the past 5 years? SSppenendd RasRasppbeberrryry 1011.701.7 Blueberries have been the BBlulueebbeerryrry 898.95. 5 standout berry type, moving 1919.8.8 BBlulueebbeerryrry 1818.4.4 494.97. 7 from 18.3% share to 25% value RasRasppbeberrryry 48.8 share, and seeing almost 90% 48.8 2525 Blackberry 1818.3.3 Blackberry value growth. 171.78. 8 Strawberry 3 2.7 Strawberry 3 2.7 202.03. 3 5252 w w/e/e 01 01 Apr Apr 12 12 5252 w w/e/e 27 27 M Marar 1 166 VVaaluluee Sha Sharere % %

June 2016 49 PRODUCE BUSINESS UK GUIDE

How have Berries+Currants grown over time? Berries have grown by over £300m over the past five years.

How have Avocados grown over time? The avocado market has more than doubled in value over the past five years.

How have Avocados performed over the past 5 years? The Avocado Market has seen continued growth in both value and volume over the past five years.

50 C

CMY

K PRODUCE BUSINESS UK GUIDE THE BATTLE TO STAND OUT FROM THE CROWD

David Shapley, veteran of more than half a century reporting on the fresh produce industry, looks at the latest on-shelf trends, as UK grocery retailers look to differentiate their offers in a tough By David Shapley competitive environment

It’s easy to think that everything and Lidl, it could be argued, was helped we see in the market is new, but the along by a lack of focus from within the UK supermarkets have been fiercely big four on what lurked beyond their competitive on fresh produce since their corporate boundaries. arrival on the scene shortly after the Second World War. Both German owned chains had progressed steadily on UK shores to this It’s certainly fair to say, however, that point, making gains on localised rather the competition has intensified in the than national footprints, but as the current decade. In fact, competition has impact of the recession, which kicked in continued to amplify since last year's during 2008, began to make itself felt on London Produce Show and Conference. consumers, Aldi and Lidl were ready to pounce. From a miniscule proportion of Until the 2000s, the sector was still the retail pie at that time, the rise has dominated by a small group of multiple been remarkable - today Aldi and Lidl Shining a light store operators, led by the ‘big four’ of hold more than 10% of the UK grocery on the shelves Tesco, Asda, Sainsbury’s and Morrisons retail market, with every indication and also including Marks and Spencer, Waitrose and the Co-op. Each was reasonably distinctive and each had its own particular consumer ‘fan’ base.

Particularly amongst the big four though, the latter part of the last decade saw the beginning of a noticeable swing towards homogeneity, as each chain appeared to become more and more interested in matching their nearest rivals – mostly on price – and less on their own distinct identities.

Discounters were not new on the scene, but this was their chance to make a mark. It may be exaggerating to say they snuck up on the blind side, but the rise of Aldi

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that their presence will continue to cause for a major rethink by the bigger It is on the shelves, however, that the expand in the near future. Both have supermarket chains at a time when real battle can be seen taking place. ambitious ongoing store opening their own performance has arguably programmes and both have enhanced been under greater negative scrutiny Price promotion is a constant and their image to win the hearts and than at any time in the past. in many cases, it is being increasingly minds of shoppers on product, not just inked to a new wave of "sub branding". price. The first response was predictable. Tesco, as the highest profile example, Everyone scrambled to try and find recently launched a range of British The charm offensive was not ways to cut cost and prices. Head sounding brands - Nightingale Farms, exclusive to the consumer either – office cutbacks, shake-ups, relocations Redmere Farms, Rosedene Farms, both have also made waves in UK and meltdowns have inevitably taken to give itself a cosier, home-grown, trade waters too, winning several place. Suppliers have been squeezed straight from the farmer image. It major trade awards and building a as hard as ever. Expansion plans have provoked a decidedly mixed reaction, solid presence in the nation’s psyche. been shelved, large stores have been as people realised the brand merely shed and smaller stores sought, as consolidated home-grown product Aldi recently won praise from the attention moved from internal navel from several farms, and would also National Farmers' Union by signing gazing to defence against the discount included the imported equivalent. up to its "fruit and veg" pledge, and invasion. promising to fund all promotions Several chains have also come itself, rather than taking the The marketing machines have gone up with a response to the general traditional route of seeking funds into overdrive, as the chains battle it criticism by press and public from producers. It is supporting Team out to prove who is cheapest - in the alike over the waste generated by GB¹s athletes in the build-up to and national and local media and on TV aesthetics-driven standards. There during the Rio 2016 Olympic Games and radio. has been plenty of positive coverage and British produce now accounts of initiatives to introduce ranges of for 40% of sales. Lidl meanwhile has become the official supermarket of the English football team (let’s hope the ‘German’ support means we take better penalties at Euro 2016 in the summer!) and it supports professional sports coaching for children too.

At the same time, both have bolstered their fresh produce sections by carrying more lines and achieving more consistent quality levels on- shelf, while maintaining the ultra- competitive price structures that made their name.

As discounters have increased their footfall, taking literally millions of shoppers away from their bigger and previously more illustrious competitors, so Waitrose has seen excellent growth and M&S has performed reasonably well on food too. With the premium and discount ends of the market in rude health, it has been the middle ground, so carefully curated for themselves by the big four over the preceding 15 years or so, that has been hit hardest. There has been

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mis-shapen, or ‘ugly’ fruit and veg. have also been increasing sightings of imported fruit by the consumer of But at a trade level, some of that has green fruit arriving on shelves around course, and one response is to label been tempered by the insistence that the country. fruit or vegetables as "New Season". this perfectly edible and safe product This is OK, but the consumer is is being bought and sold too cheaply, What else? Well, peppers are no pretty savvy these days and it is often labelled as "market value" or longer just peppers defined by traffic often questionable how long this "basics", which essentially just gives light colours or a range of sizes; information is valid once any crop, the non-discount chains a cheaper they are being defined by variety from any country, gets into full swing. way of competing on price with their names such as Mirabelle, Ramiro and lower-priced rivals. Chiquino. And garlic is offered not just Despite media and public concern individually and in netted packs but over unnecessary packaging, there are The premium retailers have, as they also in strings. Seaweed has joined plenty of new types of presentation often do, done it slightly differently samphire on the shelves, and coconut that are still continuing to develop as at times – Waitrose has made a virtue shells are now presented as the merchandisers search for the magic of marketing weather-damaged natural container for their milk. formula: fruit from its own orchards and M&S has developed a concept that also Seasonality will always be a factor • The healthy message sent out by markets small volumes by stressing for retailers and consumers alike, and the blueberry industry has had that certain speciality lines will only it will continue to be stressed in-store a major be available in limited quantities for and in advertising campaigns. But the • Impact on sales of not just blue- short periods. demand for year-round supply throws berries, but all soft fruit, with up as many questions as answers. If punnet sizes becoming larger and It may be a tough environment seasonality is important and research fruit offered in mixed punnets competitively, but some of the on-shelf illustrates that most consumers with other berry fruit. developments suggest that there is struggle to recognise where their • Looking towards the snack on- still plenty of room to introduce new produce has come from – won’t the the-go and lunchtime markets, we lines and concepts, even in what many drive to remove every traditional gap are also seeing the emergence of would consider to be mature sectors. in the supply calendar eventually snack packs of berries, as we have mean seasons are blurred into seen for some time with grapes, The mushroom category, for obscurity. Produce such as cherries and that trend is extending into example, are not just buttons, cups and apricots have thrived on their tomatoes and peppers too. and opens, or whites and browns. lack of availability at the shoulders of • The ripe and ready concept has There is now an incredible range seasons in recent years – when those been around for some time – it is of product and pack sizes available, gaps have disappeared, where will now more advanced by technol- led by a plethora of speciality the incentive be to raise prices and ogy, but also presented by some exotic varieties, many of which margins to retain the sustainability retailers in a special cabinet as a were virtually unknown a decade of the crop? permanent feature. ago. These been joined by branded • Asda goes as far as offering avoca- "woodland types"', while another More examples of this exist: the dos in cartons at three different indication of a step-change in the domestic asparagus season, famed levels of maturity. ways produce can be merchandised and lauded for its brevity, now • The Leeds-based retailer has also has seen specific health benefits lasts far longer than its traditional introduced a pack of oranges that attached to mushrooms. An Irish six-week summer season; British includes a squeezer. mushroom pack at M&S recently was strawberries are moving ever close to • Easy peelers sold in bowls as well defined as containing extra Vitamin C. becoming year-round commodities, as in punnets, and often adorned and the soft-fruit revolution has also with leaves are now being seen on- On another front, tomatoes, already seen a fast-paced increase in UK- shelf way beyond the traditional operating in an arena that provides an grown raspberries, blueberries and Christmas trade. This merchandis- apparently inexhaustible pack choice blackberries. ing trend is spreading year round of sizes and variety, has expanded and is also now evident from time even further to include new shades of Imports are a significant proportion to time with oranges. red, orange, yellow and gold. Following of the market, and they need • Lemons have been sold in dual the US favourite that until now has promoting too. There is less natural packs with limes for some time, failed to take off in the UK, there recognition of the seasonality of but another emerging trend has

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THE BATTLE TO STAND OUT FROM THE CROWD By David Shapley

The on-shelf battle to been to identify them as speciality such as avocados, mangoes, apricots differentiate is constant regional varieties from sources such and cherries. as Italy and the United States. • On the vegetable front, there seems • Family-sized cartons weighing a to be an increasing trend to develop kilo or more have also taken off. more interest in carrots by using Beginning with mangoes, the concept inventive names for particular types, has now extended to include easy extending the character beyond the peelers, apples, plums, avocados, historic precedent set by Chantenay. strawberries and even cherries. • Onions have not quite gone in this • There is greater demand for exotic direction, but there are plenty of fruit, which has meant that new moves to pep up the category - Tesco, specialities are arriving in the for example, is offering a pink, marketplace packed at source and branded variety alongside the normal often individually wrapped. white, brown and red. • Marks and Spencer is selling • Root crops, led by potatoes and ‘exclusive’ mini apples packed in a onions in larger carry home bags tube. The idea originated from New regularly feature, while it has been Zealand with the Rockit variety, but a case of back to the future for some, has now been expanded to include UK as larger scale pack offers are re- production. introduced to last a family far more • Size is playing a bigger part than than the timeframe of their ever in helping to segment the fruit weekly shop. categories - in the case of pineapples and oranges, more fruit is being While the supermarkets struggle described on pack as "Giant" and to differentiate themselves as all- another alternative description "King" encompassing brands, the battle to stand also is becoming popular. Originating out from the crowd in produce is ongoing. in the United States on dipping If you want to make progress supplying strawberries, there are several Kings the UK market, it pays to watch the now in the UK, spanning products shelves closely.

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GONE? By Peter Durose

Since Peter Durose left his position as Produce Director at Tesco he has worked as a consultant across various sectors, most recently technology. PBUK asked him to analyse the use of technology to deliver added value to the consumer.

it so much and why the sector has We have all seen how the discounters successfully managed to become have become increasingly successful so much more competitive, while by increasingly combining their providing lower and lower prices that traditionally very competitive price have been passed onto the customer. position with good quality and availability. This has narrowed the Over many years, growing, harvest, gap between themselves and the storage and packaging technologies larger supermarket chains. We have have all played their role in improving also seen how the bigger players have quality, availability and price, as well responded by becoming cheaper, as extending seasons to allow product which has put price pressure on to be sold at lower prices all year round. the whole supply chain. It is not unreasonable to suggest that this But, when I asked myself whether focus has placed increased pressure that rate of change and level of on margins for suppliers and retailers improvement has continued since we alike and that has set both sides of the entered the new millennium, I could equation the challenge of continually only answer that on reflection it finding ways to be leaner and more has not. cost effective. Peter Durose There are many new technological Those types of pressure on margin advancements coming to the market are surely going to reduce the amount t is now over 20 years since I joined such as MAP, MMP, Ozone and It’s of capital available for investment I Tesco Stores Ltd in the produce Fresh! ethylene removal. However, in technological innovations, category and somewhat more even whilst I am writing this, I’ve seen particularly in an industry that has surprisingly (to me at least!) nearly that the chief product officer of Tesco, always survived on considerably lower 10 years since I left the company. As Jason Tarry, has felt the need to issue margins than other areas of the food I now work with It’s Fresh, bringing an invitation for suppliers to innovate. business. innovative solutions to the fresh The question has to be then that if produce industry, a decade would seem the retailers still want innovation a good distance from which to review and the suppliers are still keen to the levels of innovation within the innovate why does it feel that the rate produce sector driven by technology. of innovation and its adoption has slowed down? I fear that the simple Produce has always been a sector answer to that question is that for that has thrived on change, adopting the last seven to eight years since the new ways of working, innovation financial crash, the pressure has been and technology. It is in no small part so focused on driving down price that What's the the reason why I enjoy working in quality and innovation has suffered. bright idea?

60 The UK Grocery Retail Market

“If the retailers still want innovation and the suppliers are still keen to innovate, why does it feel that the rate of innovation and its adoption has slowed down?”

June 2016 61 PRODUCE BUSINESS UK GUIDE

WHERE HAVE ALL THE INNOVATORS GONE? By Peter Durose

AN UNEQUALLED PRODUCT IN TERMS OF LIFE, TASTE, QUALITY AND AVAILABILITY

Whilst many innovators such as and yet in such a turbulent and of the big challenges for the produce It’s Fresh! will point to the positive ultra-competitive market how business is to make a real leap forward returns that can be achieved by can suppliers make long term in improving quality and I think the investing in their technologies and in investment decisions without answer is to harness complementary my view, justifiably claim that they a reciprocal commitment from technologies to optimise the potential make sound business sense, there are retailers? improvements that their innovation still hurdles to jump related to that offers. If that takes place, we will see cost and price challenge: So, in such a challenging and a real step-change in the product competitive market, how can the quality being delivered to customers • The net return may be better but sector drive forward investment in and consumers. does the buyer have responsibility new technology that will advance for all of the components that the product offer to customers and It is of course easiest for me to use make up that return such as waste, provide better long-term quality, an example from my own field. We store labour savings, food waste safety, availability and ultimately firmly believe that a combination costs, customer complaints price? of It’s Fresh!, a unique ethylene • The nature of retail buying removal system, MAP / MMP, anti- can often mean that personnel The first challenge is to stop looking bacterial activity and potentially changes are relatively frequent. at It’s Fresh! and the other new ozone treatment, when added to all With those changes often comes technologies out there as competing of the improvements that have been a change in perspective or indeed with each other for your spend - in achieved already, could provide the direction reality, the majority do not. They are customer with as yet unachievable • Ultimately, the supply base is dealing with different supply-chain, quality, availability and flavour. responsible for purchasing and on-shelf and at-home issues and using the new technologies therein lies the real opportunity. One

62 C M Fresh, delicious Y

MY CY and full of flavour CMY

For more information contact: Iain Forbes, The Garden Marketing & PR Bourne End Business Park, Cores End Road, Buckinghamshire SL8 5AS +44 (0)1628 535755 [email protected] www.usaapples.com PRODUCE BUSINESS UK GUIDE

Are retailers missing out The next question to answer of A brand that explores the potential of on bags of potential? course, is how that can be achieved new technologies and commits to supply profitably when there is a drive on the an unequalled product in terms of life, part of all the main retail players to be taste, quality and availability. as cheap as possible. I’d argue that in the absence of a current market leader For such a fast-paced sector to embrace that wants to take a leadership position new technology will always require on quality considerably ahead of all of belief, because it takes time. By investing its competition, then perhaps the real in new technologies, the industry has to answer is for something that has been embrace the potential of doing things absent from the produce sector for a differently and weigh that potential long time – a real brand, offering a major against the potential of retaining the point of difference. status quo. There is plenty of proof out there that things could look brighter if Being able to deliver on the values the right decisions are made. And the of a brand that offers a real point of stark fact staring us in the face is this - if difference in terms of technologically the industry is prepared to carry on delivered product quality that really with its current low level of change and delights customers through life and taste innovation, there is little hope on the at home would surely change the nature horizon that we will ever see a time when of several produce categories. their operations and product sales are driven by anything other than the lowest This would be a brand that delivers common denominator… better flavour, which is ultimately what all customers want. A brand that …Price. does that by nurturing and enhancing varieties that have previously been ignored by the supermarkets as not possessing the robust natural characteristics required to survive the current limitations of the supply chain.

64 Leading company in the fresh fruit and vegetable packaging

• The “F” side ventilation system grants a longer shelf-life thanks to the elimination of condensation at POS.

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Innovative Packaging Solutions

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The UK Grocery Retail Market

JOIN US ON THE LPS RETAIL TOUR

By Claire Powell

On the final day of the London Produce Show and Conference each year, you can enjoy a fact-finding tour of the UK retail scene.

oining us last year was a group J that hailed from a range of diverse backgrounds including: international retailers, suppliers, growers, innovators, exporters, academia, charities, media, diplomatic representatives and the PMA.

In the first year of the retail tour, we visited six stores in west London, taking in supermarkets in Battersea, Cromwell Road and finishing at Wholefoods in Kensington. Building on that, 2015 saw experience on the tour, we do not and, who knows, we may be able to us travel east to visit seven stores in contact the stores in advance. Despite fit in another impromptu sightseeing Camden, Limehouse and finishing at the fact that we are very well behaved tour on the way home! If you haven’t Canary Wharf. Here we were treated and we do not take photos, there is signed up already, ask one of the team to a hosted visit, to Waitrose’s flagship always the risk we could be asked on reception at Grosvenor House if we store, by key members of their retail to leave; but thankfully this hasn’t still have availability. and trading team. happened yet! All previous delegate So, what can you expect from this We’re planning to travel to the feedback has been year’s tour? If you can join us, we’ll south of London, visiting Lidl, Aldi, overwhelmingly positive: enjoy a take-away breakfast from Sainsbury’s, Tesco, Asda and Waitrose Grosvenor House and depart at 8am supermarkets. This excellent “The retail tour was really on our dedicated executive coach, diversity and variety of retailers and interesting and useful.” returning to the hotel by 3pm. You’ll store formats will help you compare receive a detailed, tightly-organised key factors from packaging, range, “Excellent insight into schedule for the day, plus headlines advertising, and availability to the British supermarket on the stores we’ll be visiting. We’ll customer service, merchandising and industry.” give you the inside track on what quality. to look out for in each store, before “I didn’t enjoy the tour… descending en masse into each store. Throughout the day, there will be ...I LOVED the tour!” opportunities to discuss the tour, It’s worth pointing out that in network or just catch up over lunch, order to give you a truly authentic so do join us. We are a friendly tour

June 2016 67 PRODUCE BUSINESS UK GUIDE UK GROCERY RETAILER DIRECTORY

tesco.com sainsburys.co.uk asda.com Tesco Stores Ltd Sainsbury's Supermarkets Ltd Asda House Tesco House 33 Holborn Southbank Shire Park London Great Wilson St Kestrel Way EC1N 2HT Leeds Welwyn Garden City +44 (0)20 7695 6000 LS11 5AD AL7 1GA +44 (0)113 243 5435 +44 (0)800 505555

morrisons.com co-operativefood.co.uk aldi.co.uk Wm Morrison Supermarkets PLC The Co-operative Group Aldi Stores Hilmore House 1 Angel Square Holly Lane Gain Lane Manchester Atherstone Bradford M60 0AG Warwickshire BD3 7DL +44 (0)161 834 1212 CV9 2SQ +44 (0)845 611 5000 +44 (0)1827 711800

waitrose.com lidl.co.uk iceland.co.uk Waitrose Limited Lidl Iceland Foods Ltd Doncastle Road 19 Worple Road Second Avenue Southern Industrial Area Wimbledon Deeside Industrial Park Bracknell London Deeside Berkshire SW19 4JS Flintshire RG12 8YA +44 (0)370 444 1234 CH5 2NW +44 (0)1344 424680 +44 (0)800 328 0800

68 B:216 mm T:210 mm V:171 mm B:303 mm V:160 mm T:297 mm

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UK GROCERY RETAILER DIRECTORY

marksandspencer.com farmfoods.co.uk budgens.co.uk Marks and Spencer Group plc Farmfoods Ltd Booker Retail Partners GB Limited Waterside House 1507 Coventry Road Budgens Londis House 35 North Wharf Road Yardley Widewater Place London Birmingham Moorhall Road W2 1NW B25 8LW Harefield +44 (0)20 7935 4422 +44 (0)121 700 7160 Middlesex UB9 6NS +44 (0)800 298 0758

ocado.com nisalocally.co.uk Ocado Group plc Nisa Retail Limited Titan Court Waldo Way 3 Bishops Square Normanby Enterprise Park Hatfield Business Park Scunthorpe Hatfield North Lincolnshire Hertfordshire DN15 9GE AL10 9NE +44 (0)1724 282 028 +44 (0)345 656 1234

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To discuss how Chiquita can make you happy, simply call John on 07775 850847 or 07810 183605. © 2016 Chiquita Brands L.L.C. Brands © 2016 Chiquita L.L.C. Brands of Chiquita trademarks logo are and Chiquita Chiquita