JEFF - Fresh Trends & Strategic Pathways -...

Food, Tech, Trends & Supermarket Strategies

London Produce Show 2015 Jeffrey Jackson

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A Bit of History How Retailers Became so Powerful

•  The Food industry consolida3on in the past 100 years led by grain –  Worldwide grain consolida3on: largely controlled by 6 companies

•  Cargill, ADM, Bunge, Glencore, Louis Dreyfus, COFCO •  95% of USA agriculture land in grains (including soy bean) •  Fer3lizers opened new lands, which led to new varie3es, monoculture

–  Worldwide factory food companies: largely controlled by 10 companies •  Coca Cola, Mondelez, Nestle, P&G, Pepsico, General Mills, Unilever, Mars,

Kelloggs, Johnson & Johnson

–  Worldwide meat consolida3on: largely controlled by 9 companies •  JBS, Tyson, Cargil, WH Group (purchased Smithfield in 2014), BRF, Vion, Danish

Crown, Nipon, Hormel •  Fer3lizers replaced livestock rota3ons and rapid feed grain expansion enabled

feed mills, feedlot and slaughterhouse industrializa3on beginning the 1960’s •  Gene3cs 3ghtly controlled

2 © Distribu(on under licence by Jeffrey Jackson only

Retail Supermarket Chains Power shi4 from vendors to Supermarket chains

•  Mass produced processed food •  Big food factories and selling vision of cooking as

necessary inconvenience •  Today, 70% of calories in USA diet

•  Mass market pricing model •  Store loca3ons and shopper propensity •  Big weekly trolley shopping trips •  Customer loyalty •  Private brands and ranging strategies •  In house logis3cs, DC’s, purchasing power •  Global FEU connec3vity to the world of supply

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Grocery, formerly one of the minor food trades, becomes by far the most important

© Distribu(on under licence by Jeffrey Jackson only

Retail Supermarket Chains Consolida@on of Super Power

•  UK: Big Four = 72.8% (down from 80%) £175bn grocery market

•  USA: WalMart, Kroger, Safeway, Costco = 70.5% supermarket share (£460 billion grocery market)

•  Australia: Duopoly with 80% ($88bn grocery market)

•  France, Germany, etc. > 60% share of top retailers

•  China: Top 10 now equals 30%. Total grocery spend surpassed USA in 2014 at £500bn

•  India: Total grocery spend to reach £460bn by 2020 by passing Japan in 2016 as third largest in world


Fresh ConsolidaRon Driven by Retail Supermarket Chain Consolida@on

•  Growth of chains and the mass market model –  Required scaled up vendors and facilitated:

•  Corporate scale fresh produc3on •  52 week supply solu3ons •  Na3onal distribu3on •  Supply chain service models •  Innova3on, automa3on, gene3cs, marke3ng, QA, Cat Mgmnt •  Supply globaliza3on •  Corporate scale “Fresh Ready Meal” convenience food produc3on

–  Era of consolida3on among vendors •  Category management, service and supply commitments •  Shim from trading to replenishment


Then Era of Retail Super Power Private Brands, Price Compe@@on & Vendor Disintermedia@on

Period Characterized By:

•  Retail strength & consolida3on

•  Direct purchasing & PB fulfilment

•  Tender process (“Gold Standard” applica3ons) and cost plus

•  FMCG Brand de-‐ranging & shelf space marginaliza3on

•  Retailers learning all supplier costs and squeezing vendors for fees & GM

•  Disintermedia3on of wholesale aggregators, importers, service providers

•  Advance of second 3er suppliers

•  Price compe33on, discoun3ng & on-‐pack pricing

•  Decline in Innova3on, data, reinvestment, marke3ng spend


Global Trends & DisrupRons New Roll of Food, Control of Food, Demand for Food & AGributes

•  The changing consumers •  New pathways for food spend •  Decline in retail supermarket chain power •  Food security


The New Consumers: Influencers

•  Cooking shows, compeRRons and reality cooking shows •  Internet accessible recipes: expanding the repertoire from 4-‐5 rota3ng weekly

meals •  Alice Waters: from fast food to slow food •  Sam Fromartz: “Organic Inc”, “In Search of the Perfect Loaf” •  Dan Barber: “The Third Plate •  Wendell Berry: “The Unseoling of America” •  Michael Poulon: “Botany of Desire”, “Omnivores Dilemma”, etc. •  Jonathan Safron Foer: “Ea3ng Animals” •  Eric Schlosser: “Fast Food Na3on” •  Karl Webster: “Food Inc” •  Barbara Kingsolver: “Animal, Vegetable, Miracle” •  Michael Moss: “Salt Sugar Fat” •  Marion Nestle: “Food Poli3cs” •  David Perlmu[er: “Grain Brain” •  Eliot Coleman: “ The New Organic Grower”


The New Consumers “New Rela@onship with Food”

•  Millennials •  Desire to be authen3c (“in the dis3lling vortex of social media..”)

–  Want fresh, health, wellbeing, ethical, sustainable, convenient, local, “free from”, flavor, –  Want to know the provenance and how the food is produced, sustainable, ethical, safe –  Want a shared experience (sharing economy, CSA’s, League of Kitchens, “The Farm”,

etc.) –  Desire to create is up, Time to create is down; Hands on to hands off –  Less waste

•  Average 3me in the kitchen to prepare a meal –  1980 60 min –  1990 45 min –  2013 32 min

•  Shopping frequency is up, basket size is down: –  65% now baskets v 35% trolley –  Top-‐up trips to local markets

•  Convenience, convenience por3ons and snacking foods •  Ethnic demographic and ethnic food tastes •  Seeking excitement, experience, aoributes and diversity in their food


The New Consumers Health and Wellbeing

•  “Free from” (USA > $12bn & growing) •  Local foods (USA $12bn to $20bn by 2019) •  Organics (USA $40bn, 85% penetra3on, growing 10% p.a.) •  Weight management = $60bn spend in US

–  35% USA obesity rate – doubled since mid 80’s •  Vegetarian: 16m (5% of popula3on) in USA -‐half of which are vegan

–  2014: $47m sales of vegetarian/vegan labelled food in USA •  Food Safety & traceability (FSMA) •  Non GMO (Nov 2014: EU States can individually ban): France, California •  Paleo, gluten, lactose, sodium, preserva3ves, fat, etc. •  Func3onal ingredients •  Super Foods: Ancient grains, berries, oils, milks, greens, beans, seeds, powders •  Diet meal and ingredient providers •  42% of consumers have reduced sugar consump3on; 38% reduced fat •  The WHO says more than 2bn adults overweight (39% worldwide) and 42m

children under age 5


From Farm to Table New & Shi4ing Pathways

•  Replacing single store loyalty with mul3ple formats and new pathways –  Frequent small shops and browsing for food inspira3on, searching for aoributes,

comparing prices and exploring convenience , diversity, experiences


Discounters Polariza@on: Save on basics, spend extra on luxury

•  Fastest growing supermarkets in UK

•  A format onto itself –  Consumers trust that prices are lower-‐true EDLP –  Award winning PB –  Low OH, adequate SKU’s, global, vendor loyalty –  Effec3ve PR & marke3ng, WIGIG “treasure hunt” –  Winning the middle class war

•  Close to 60% penetra3on in Australia •  1 in 3 customers is middle to upper class

•  Driving price wars and chaos at Supermarket Chains •  Driving division between “Center” and “Periphery” of store

–  Center: big food, health & beauty, beverage, cleaning supplies, basics, long life

–  Periphery: Fresh produce, meats-‐butcher, seafood, floral, nursery, bakery, ready meals, dairy, café, coffee, organic, local, ar3san, etc.


LIDL and ALDI winning the hearts of “Maidstone mums”

The Food Healthy, AGribute Driven, Convenient

•  Redefined health and value proposi3ons •  Fresh, ethical, organic, sustainable, whole of crop,

provenance, local-‐urban, less waste, “free from” •  Ethnic, exci3ng, authen3c, ar3san •  Snacking, convenience and health

–  Cut fruit, salads, bagueoes, wraps –  Pre-‐packs expanding but pack sizes shrinking –  Snackables with biggest growth in share of spend

•  Berries, Cherries •  Nuts •  Grapes •  Cut fruit, salads •  Mandarins (Halo, Swee3e) •  Snacking tomatoes


Fruit Share of Trade Shi4s Share of spend $ Biggest growth in “snackable” products

7% 17%

14%

9% 9%

20%

9%

10%

22%

22%

USA cut fruit sales of US$30bn

The Food Healthy, AGribute Driven, Convenient

•  Fresh chilled Ready Meal race is on –  Par3cipa3on, quality, variety and convenience

•  Diets, ingredients and por3ons •  Protein subs3tutes •  Healthy, “Free” and Super foods

–  Greens, sweet potato, beet, avocado, sea asparagus, kale, Moringa, etc. –  Goji, Acai pots, Chia, Quinoa, Muesli, Hummus, Teff, etc. –  Yogurts (Chibani–Agro Farma-‐Bead) –  Juices, Soups, Dips, Sauces, Dressings –  Herb growth 10-‐12% p.a. past 10 years


Fresh Chilled Ready Meals Intersec@on of retail and foodservice

•  Categories –  Salads, cut fruit, cut vegetables, kits –  Juices –  Soups, dips, sauces, dressings –  Side dishes –  Meats, seafood –  Ethnic –  Organic –  Vegetarian, ancient grains –  Pasta, pizza, risooo –  Quiche, pies –  An3pasto –  Wraps, sandwiches, single serve salads –  Super food-‐juice “pots” and pouches –  Snacking –  Desserts


•  In the second half of the 1900’s Big food successfully sold a vision of cooking as a necessary inconvenience

•  Currently, 70% of USA calories come from processed foods

•  In the past decade, there has been a prolifera3on of studies showing the poor health effects of highly processed foods

•  25 biggest USA food & beverage companies: 2014 down 4.3% to 45.1% of $418bn industry

•  Consumers are abandoning “center of store” processed foods: decline of 2.5% in frozen and 1% in canned sales in 2014

•  Cambell Soup CEO Denise Morrison: “moun3ng distrust of so-‐called Big Food, the large food companies and legacy brands…”. Has purchased Bolthouse carrots.

•  Conagra slashed 2015 profit projec3ons and fired CEO

•  Kram has reported sluggish earnings and made top management changes

•  Kellogg’s sales have dropped 5.4% over past year

•  McDonalds reported 2014 as worst year in memory – sales down 7% and profit down 15%

•  Cambell’s, Mondelez, Hain, Hormel, JBS, GM, Hershey, 3G, etc. all announcing acquisi3on targets of healthy, snacking, high protein, “free from”, organic, all natural….. Valua(ons are climbing

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Decline of Big Food, Fast Food & Processed Food Forced to put “healthy” food acquisi@ons on front burner


•  Popula3on growing from 7.2 bn to 9.6bn by 2050

•  Need 70% to 100% more food by 2050

•  2008 > 50% urban and growing to 60% urban by 2030 –  Today, 2.6bn farmers on 5 acres or less: 40% move to urban

•  Humans will need to produce more food in next 40 years than they did in the previous 10,000 put together.

•  1 out 7 people (900 million people) worldwide are chronically undernourished – food insecure: UN FAO es3mate

•  1 out 3 food kg produce worldwide is wasted (1.3bn mt p.a.). –  World produces enough calories but distrib-‐current food systems = waste –  Now illegal in France for retailers to destroy edible food –  Harvest Power: 40 USA plants: from landfill w/gas to renewable energy

•  USA has $180bn of food waste per annum.

•  1 in 6 children in USA go hungry despite $60bn in government food nutri3on spend and 50,000 foodbanks


Food Security Feeding People – Global Sta@s@cs

And, global food prices have doubled from 2005 to 2014 (FAO)

•  Pressure on sustainable produc3on, the environment and health –  Obesity, diabetes, malnutri3on, food borne illnesses from food systems & processed foods –  Biodiversity loss, erosion, deser3fica3on, water use, run off contamina3on –  Soil fer3lity decline with perennial cropping, monoculture and chemicals –  Over fishing –  Urban sprawl –  Biofuels

•  Top Soil: 24 billion tonnes lost per year •  Desert: 6 million hectares created per year •  Forest: 17 million hectares of trees lost per year •  Fish: 20% of 1980’s stock at 2013 •  Water: 160 billion tonnes of aquifer volume lost per year •  Livestock: (30% of earth surface & 50% of all an3bio3cs) crea3ng global warming: 10bn killed pa in USA •  Water to food

–  287 litres per kg potato –  3,000 litres per kg crisps –  1,200 litres per kg dry maoer potato –  1,800 litres per kg dry maoer rice –  1,000 litres per boole of water –  15 litres per cup of tea –  150 litres per cup of coffee –  15,415 litres for kg of beef –  17,196 litres for kg of chocolate


Problems Wrought by Food Systems Food Model Deple@ng Key Assets and Crea@ng Health-‐Hunger Crisis

-‐  76 litres per pint of beer -‐  122 litres per 4oz of wine -‐  3,929 litre per kg of chicken -‐  5,037 litres per kg of cheese -‐  2,400 litres per hamburger -‐  124 litres per 16oz Diet Coke -‐  170 litres per 7oz of orange juice -‐  2,722 litres per cooon T Shirt -‐  10,849 litres per pair of jeans

Food Security Weather Extremes Adverse Impact on Yields and Environment

•  Climate change is the new norm: Global Warming, el Nino, la Nina, floods, droughts and increased weather extremes.

•  10 of 10 hooest year in 140 year history of record have occurred since 1998.

•  Water is primary medium of climate change –  California (50% of USA FFV) worst drought in

“history” and reportedly in 1,200 years –  the OECD Environmental Outlook to 2050,

highlights the baseline scenario projec3ng a 55 per cent increase in global water demand, from 3500 km3 in 2000 to 5500 km3 in 2050

•  Weather fluctua3ons and global warming extremes major impact on crop yields, water

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Climate change could have a "huge impact" on China, reducing crop yields and harming the environment, the country's top weather scien@st has warned, in a rare official admission. Zheng Guogang – China’s top weather expert told Xinhua news agency on March 22, 2015


Increased Demand in Asia Asian GDP growth, Popula@on and increasing compe@@on for Supply


China GDP growth 7%

India GDP growth 6.5%

Indonesia GDP growth 6%

Western Euro GDP growth 1.4% NA GDP growth 3.2%

Food Security – Feeding Asia GDP, Urbaniza@on & Changing Diets to Double Demand

•  Pressure from feeding Asia next 25 years

–  China 2014 surpasses USA as worlds largest grocery market +/-‐ £500bn

–  India becomes 3rd largest grocery market reaching £460bn by 2020

–  Asian market requirements next 25 years •  100% increase in demand for

livestock •  90% increase in demand for dairy •  60% increase in eggs

–  2014 China fruit imports up 28% again

–  Speed of growth driven by retail chain consolida3on, smart phones – online shopping, home delivery

•  FFV purchases at supermarkets –  USA 70%, World average 50%, China 20%

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China joins the WTO

Rapid increase in fruit imports

to China


The China Century The Constraints to Feeding 1.5 billion People

•  20% of world’s popula3on, 9% of arable land, 7% of fresh water •  Arable land per capita is <.1ha; only 40% of world’s average •  67% of arable land is marginal low yielding •  60% of cul3vated land is affected by drought, flood and salinity •  10% -‐20% of arable land contaminated with heavy metals •  Fresh water per capita is 2400 cubic meters: 25% of the world average •  Ongoing food safety crisis: 80% of consumers are “dissa3sfied •  Climate change •  World’s largest food importer •  World’s biggest consumer of rice, soybeans and wheat •  World’s largest soybean buyer and will be largest corn buyer by 2020 •  For every one kilogram of extra lamb meat consumed in China, an extra 65 million lambs

will be required. •  For every one kilogram of extra beef consumed in China, an extra 6.5 million caole will be

required.


The China Century “Farm Diplomacy” to Feed the People

•  Chinese officials have made agricultural trade and investment a significant component of diplomacy with expected increases in the role of Government officials in agricultural trade and investment.

•  During 2013, Chinese leadership set forth a new food security strategy that was reiterated in the Communist Party’s 2014 “Number One Document” on rural policy. S3ll asser3ng that China must ensure domes3c supplies as primary food source. –  Boost domes3c produc3on –  U3lize overseas resources in a way that ensures a dominant role for Chinese

companies in the supply chain

•  China Ministry of Agriculture “Go Out Policy” investments: –  Foreign agriculture –  Agriculture supply chain


The China Century “Farm Diplomacy” to Control the Supply

•  Signing FTA’s with food supply countries – liming barriers for more imports of fresh foods –  New Zealand, Australia, ASEAN, Chile, Peru, Pakistan, Mexico, Canada, etc.

•  President Xi to LAC in 2015: “$500 billion in trade and $250 billion in investment by 2025”

•  Premier LI 2013/2014 mee3ngs with Central & Eastern Europe highligh3ng agriculture as a major area for investment and reached agreements on meat imports from Romania & Serbia

•  Chinese foreign direct investment into Europe doubled year on year in 2014 (Baker & McKenzie) with investors spending $4.1 billion on the UK/Con3nent’s food and agriculture, more than any other sector.

•  Acquisi3on of Smithfield by China’s WH Group put it in top 4 worldwide meat companies

•  COFCO: $10bn war chest to become next Cargill in grain

•  Ongoing worldwide investments in fruit produc3on, meat processing, dairy processing


The Past and the Future Past 100 years -‐ next 25 years: Disrup@ons & Shi4s

© Distribu(on under licence by Jeffrey Jackson only 25

Dilemna’s 1.  GMO vs. feeding 9bn popula3on 2.  Livestock, grazing, fer3lizers vs. methane-‐global warming, deser3fica3on 3.  Virtual water: Asia & EU are net importers-‐ USA 92T gallons p.a. 4.  Mono-‐cropping, biofuels, subsidies, soil conserva3on, waste, input run off

Ba[le for Share of Stomach Technology Enabled & AGribute Driven


Technology: Web, online shopping, crowd source delivery, algorithms, social media, apps, etc. A[ributes: Price, fresh, convenience, health, sustainable, ethical, safe, local, provenance, etc.

How does the future look?

The Rise of Local, Urban Supply & Slow Food Movement 25% of Food to be Local Sourced by 2025 from Current 5%

•  456 millon hectares (size of EU) now cul3vated around world ci3es (2014 Journal of Environmental Research Leoers)

•  Farmers markets , CSA’s, Sharing, FoodHub, FoodEx, LocalFoodSystems, Locavore Index (OED word of yr 2014):

–  8,268 farmers markets in the USA. (Sprouts, Fresh Thyme…) –  Expanding alterna3ve distribu3on systems (Overstock, localharvest)

•  Sustainable Food Trust model: Thomas Haroung 1,800 acre Danish biodynamic organic estate feeding 45,000 customers

•  Food Enterprise Zones (FEZ): 17 now in the UK. Local UK farming worth £100bn to economy. Government crea3ng zones and incen3ves to boost local food chain economies, joining up farmers, manufactures, retailers and researchers.

•  USDA created $96.8m aid/grants in 2015 for local farming, farmers markets and farm to school food programs

•  A[racRng private investments as well: e.g. Farmland LP –  Have purchased 6,750 acres near ci3es in Oregon, California –  Leased to 21 organic farmers and ranchers for urban, organic,

sustainable farming and livestock

•  Protected and verRcal farming: Bright, Terrasphere, Freight Farms and glass – local/less freight/less waste


The Future Retail Formats

•  Old supermarket paradigm –  Real Estate driving propensity and loyal –  Demographic lead product ranging –  Disrupted by discounters, ethnic, warehouse stores

•  Today’s paradigm-‐ separa3on of formats –  Discount formats –  Smaller more “experien3al” formats

•  Inspired food theater, grazing, ready meals, cafes, sampling laboratory, “town hall” engagement

–  Disrupted by hyper-‐localiza(on, convenience, online shopping, price wars

•  Future paradigms –  Center of store: online purchases, Click n’ Collect,

home delivery from stores ac3ng as local flexible warehouses

–  Neighborhood stores: fresh “periphery” store formats – fresh food hubs

28 © Distribu3on under licence by Jeffrey Jackson only

The Future eCommerce & Disrup@ng the Disruptors

•  Pure web and pure retail to fall behind –  eCommerce growth with “local” brick & mortar retailers outpaces Amazon over past 5 years –  Consumers want same day delivery and more flexibility with dissa3sfac3on

•  Local stores becoming the flexible warehouses of the future for online “same day” shopping fulfilment

–  Cheaper shipping costs for home delivery –  Faster fulfilment with either home delivery or Click ’n Collect –  For example: WalMart 4,500 stores. 90% of Americans within 10 miles-‐ web sales up 30% to $10bn in 2014

–  A comScore survey from 2014 indicates that 40% of purchases are made between searching in store and purchasing online or vice versa

•  Amazon strategies no longer game changers –  Warehousing not as effec3ve as local stores for inventory –  Algorithms for ordering, sales op3miza3on, delivery, etc. now common –  Subsidized shipping strategy to be “last man standing” is being “Disrupted” by crowd sourcing and

hyper-‐localiza3on –  No na3onal retailers with Amazon anymore – took customer data-‐ sourced mfr direct –  To succeed must become retailer or must become local for cost effec3ve and rapid inventory

fulfilment (acquire Postal Service)


The Future The Home Delivery “Last Mile” – Gekng Easier with Technology

•  Today, the field of home delivery providers is over crowded, expensive and subsidized by the vending plakorms (“free” or cheap delivery)

–  The majors (DHL, FedEx, etc) –  The Postal companies –  The courier companies –  The store trucks and service contractors –  The fresh “box” business: meals, recipe/ingredient, fresh commodity boxes –  The restaurants

•  The space is busy with M&A as eCommerce heads towards $3tn global industry

–  Rocket Internet, et.al. acquiring worldwide restaurant delivery and NOW the “box” business

–  Postal companies diversifica3on of asset u3liza3on as post business con3nues steep decline

–  The majors building local last mile courier infrastructure to connect asset intensive long haul world

•  Tomorrow, the food home delivery space will dominated by “on demand” crowd sourced plakorms that become “logisRcs” companies

–  UberessenRals: CEO Travis Kalanick “Transform into full fledged logis3cs co” –  Rocket Internet, GrubHub, Zomato: restaurant delivery :

•  Rocket =“Global Online Takeaway Group” valued at $3.5b: 39 countries, 64 global markets, 140,000 restaurants, 78m orders per month

–  Postmates, FLUC, Doordash, Deliv, OnFleet: Crowd source same day delivery: –  Instacart: 4,000 shoppers, 17 ci3es, $3bn valua3on; Ocado –  Bla Bla Car, LYFT, Sidecar: ride sharing (BlaBla acquired Carpool.com and others) –  SherpaShare: Analy3cs app 30 © Distribu(on under licence by Jeffrey Jackson only

The Future Click ‘n Collect

•  Grocery online sales remain low but globally >55% are willing (2015 Nielsen Study in 60 countries)

–  Ramped up of Click ’n Collect can drive online over 20% –  Developing countries (e.g. China 46%) and Millenials (30%)

driving the shim to buying groceries online

•  Online shopping –  4.5bn smart phones-‐ mobile apps –  At home, on the go and even while in store browsing the aisles

•  66% of European stores have implemented –  France: from 1 to 3,000 pick up points in 2014

•  Click ‘n collect grocery will out perform home delivery (except Asia & urban dense developing economies due to traffic, parking, carts) and “depot” systems (post offices, convenient stores, schools)

–  63% of Tesco orders are fulfilled via C’n C

•  Currently driven by health, cleaning supplies, beverage, center of store -‐ 30% of online purchases but only 14% of store sales


The Future AGributes-‐ from Investment theme drivers to expecta@on

•  A[ributes of Offer: –  Center of Store: Lowest price, best value

–  Periphery of Store: Sustainable, healthy, fresh, local, safe, quality, provenance, ethical, humane, nutri3onal, func3onal, superfoods, farm direct, ar3san, organic, “free from”, convenience, Fairtrade, all natural, less waste, less packaging, demys3fied labels, vegan, “ea3ng as an act of agriculture”, etc.

•  Today, these aoributes are owned: –  Center of Store: by Discounters with award winning PB offer, EDLP and no “hi/lo”,

promo3on, gimmicks

–  Periphery of Store: by many current businesses (WholeFoods, BIO, SimplyFresh, POD, etc) and driving the investment themes for thousands of start ups establishing tech enabled retailers and new pathways to consumers

•  Tomorrow, consumers will start taking these aoributes for granted. –  Current new pathway prolifera3on of “farm direct”, recipes & ingredients, specialty

stores, etc. will then decline as the “proof of concept” aoributes become commonplace.


Retail Supermarket Chains The Threats

•  Old format and behaviour paradigms –  Broad ranging, price discoun3ng, high sterile aisles –  Focus on buying, buying direct, squeezing vendor margins

•  Declining customer loyalty – shopping mul3ple stores

•  New pathways from farm to fork

•  Frequent small shops, smaller basket sizes, less waste, less volume

•  Lack of real global fresh industry skill, rela3onships, experience and merchandising acumen

•  Price wars: race to the booom

•  Percep3on and aoributes of fresh offer. Out of stock and lack of fresh food. Wal Mart lesson?

•  Inefficient ver3cal integra3on into produc3on & buying


•  “Center of store” compe33on – new pathways, no loyalty, best price: –  Discounters and award winning PB gaining consumer equity –  Online commerce from stores and warehouses –  Health, cleaning, etc.: 14% of store purchases but 30% of online –  Decline of big processed food

•  “Store Periphery” – new pathways, “aoributes”, consumer experience: –  Have lost consumer equity in the periphery –  Return to hyper-‐localiza3on and viability of small neighbourhood formats –  New pathways for food procurement

•  Producers and ar3sans become tech enabled retailers •  Specialty retailers: POD, BIO, green grocers, etc. •  Restaurant and meal home delivery •  Local food systems, Food hubs, farmers markets, FEZ, urban farming, CSA, Food Trusts •  Amazon Fresh, Google Express, Fresh Direct, Instacart, etc.

–  Connec3ng smaller specialty retailers and wholesalers

•  CompeRRon for supply –  Best local produc3on through aggregators/wholesale markets finds new pathways to consumers –  Overseas suppliers: demand from Asia for Southern Hemisphere contra seasonal produc3on crea3ng supply

risk •  Choice of Asia and America’s appearing more aorac3ve than UK

–  China “Go Policy” and “Farm Diplomacy” encouraging investments, FTA’s •  America’s, Africa, Eastern Europe, Oceania

34

Retail Supermarket Chains The Threats


35

Retail Supermarket Chains Three Objec@ves


•  Capture and establish BRAND EQUITY in the periphery food a[ributes consumers are now seeking.

•  Grow market share with the opRmal foot print of “pathways”: local-‐fresh convenient stores, supermarkets and online.

–  As consumers take ranged product “aoributes” for granted and the “supply disrup3on” proof of concept recedes:

•  Decline in “farm direct”, boxes, kits and ingredient models •  Decline in speciality formats: organic, ethnic, vegetarian, warehouse, health •  Increased consumer browsing, grazing, sampling and seeking inspira3on for fresh •  Local food will finds it’s way through vendor partners leveraging local infrastructure

•  Flawless execuRon with fresh industry exper3se and sufficient store level authority

Retail Supermarket Chains Strategies for the Future

•  Full line stores: –  Strategic loca3ons: urban and suburban hubs –  Right sized center-‐of-‐store ranging tailored to demographic –  Drive center-‐of-‐store with Online sales and fulfilment strategies from fewer full

line stores ac3ng as flexible warehouses •  Flawless service levels and robust online interface solu3ons •  Click ‘n collect from every loca3on or home delivery

–  The “Discounter” equity in low price and WIGIG category will erode to point of non-‐dis3nc3on with forces of online shopping, less browsing, hard to compare Private Brands, transparent price comparisons qualifying all as Discounters, and Millennial's consumer behavior.

•  Smaller “local” store formats for fresh periphery and essenRals –  The convenient neighbourhood refrigerator: open, acquire (e.g. Woolworths – Thomas Dux) –  The local fresh food hub

•  Shiq focus from buying to selling fresh –  Staffing the stores and product teams with industry savvy specialists who have more authority, know

the product, how to merchandise and do more than inventory replenishment


•  Establish top quality fresh experienRal “store periphery” –  Shim focus from marke3ng to merchandising

•  Merchandising “local”, seasonal, ethnic, ar3san, diversity offers •  Full bins and staffed by consulta3ve industry experts •  Engage, entertain, inspire, interact •  Produce department signs and communica3ons around health, provenance, etc.

–  Consumer experien3al shopping, inspired food theatre, butchers, fruiterers, bakers, baristas, ready foods, cafes, grazing, sampling laboratory, “town hall” daily shop engagement

–  Offer differen3a3on beyond price •  Consumers now looking for fresh quality and willing to pay •  Take this category out of the “Discounter’s” domain

–  Fulfil the food ATTRIBUTES consumers now require –  The new “fast food” grab’n go center –  The inspired meal and ingredient center –  Drive home delivered online sales from local stores as fresh food hub, cura3ng

total local fresh offer of ingredients, recipes, catering, ready meals 37 © Distribu3on under licence by Jeffrey Jackson only



•  Home Delivery –  Partnering or replica3ng the InstaCart model –  Postmates, Rocket Internet, UBER or crowd source model for home delivery

•  Dispose of the verRcal in fresh and reduce overheads –  Buying offices, farms, produc3on, packing, abaooirs, manufacturing, QA, etc.

•  Strengthen vendor relaRonships: establish partnerships and alliances for driving sales and market share

–  Crea3ng co-‐dependent transparent vendor – supermarket rela3onships •  Consumer uptake and sa3sfac3on is a shared objecRve •  A stall or shim is a loss for both

–  The right product, right range, right price from leading vendors who are best posi3oned to manage the category management variables that create and sustain purchase intenRon and sales velocity

–  Collaborate around merchandising to the shared customer – the consumer

–  Engage the vendors for in-‐store training



•  Establish vendor supply partnerships and alliances for a compeRRve edge in fresher, be[er quality, innovaRon and reliable supply –  MUST WIN with produce –  The vagaries and variables of weather, yield, gene3cs, costs, supply & quality

fluctua3ons, local supplies, total manifest disposal strategies, etc. are best lem to the experts

–  The sophis3ca3on of managing supply complexiRes, producer por�olios, QA, traceability, FSMA, inventory, cold chain, value adding, packaging, cer3fica3ons, WHS, etc. are best lem to the experts with exis3ng infrastructure

–  Simplify and make the vendor commercial rela3onship transparent around share, volume, sales and margin targets

–  Leave supply chain, quality, supply, packaging, innova3on, ranging and merchandising strategies to the experts

–  Consider “kiosk” trials (IGA – Harris Farm) –  Shorten the supply chain of “fresh” with vendor DSD on more frequent

deliveries •  “Picked today and in stores tomorrow”


•  Build a fresh produce online business fulfilment model leveraging vendor verRcal infrastructure chain and logisRcs

•  Develop or license dedicated smart phone App and Social Media suite: –  Connec3ng to consumers for engagement, insights, feedback, reviews, loyalty , news

–  In store browsing that connects to online shopping

–  In store browsing that pings shoppers with targeted marke3ng, discoun3ng, promo3ons, loyalty rewards and meal inspira3on: Geofence, Boogiespot, SessionM

–  Recipes linked to shopping lists: BigOven, Taste-‐Coles

–  Shopping lists that create orderly trip maps through the store

–  Scanning that demys3fies labels providing transparency on nutri3onal, allergen, calorie, glutens, gene3cs, provenance, age, cer3fica3on, traceability: Noom, Zipongo, VirginPulse

–  Scanning that provides recipes, meal inspira3on, 3ps

–  Educa3onal informa3on, ac3vi3es, nutri3on, cooking that engages children

–  Health, wellbeing, convenience, sustainability connec3vity



•  Understanding your customers and leveraging the scan data, loyalty credit card data, social media, internet tracking –  Data mining for

•  Consumer led ranging •  SKU demand an3cipa3on •  Consumer insights •  Targeted marke3ng, discoun3ng and promo3ons •  Feedback and reviews •  Building loyalty •  Consumer engagement •  Increased business performance and Innova3on



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