JEFF - Fresh Trends & Strategic Pathways -...
Transcript of 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
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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
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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
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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
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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
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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
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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”
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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
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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
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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
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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.
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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
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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
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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
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• 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
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• 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
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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
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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
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Increased Demand in Asia Asian GDP growth, Popula@on and increasing compe@@on for Supply
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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
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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.
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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
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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
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The Past and the Future Past 100 years -‐ next 25 years: Disrup@ons & Shi4s
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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
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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
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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
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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)
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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
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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.
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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
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• “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
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Retail Supermarket Chains The Threats
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Retail Supermarket Chains Three Objec@ves
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• 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
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• 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
Retail Supermarket Chains Strategies for the Future
Retail Supermarket Chains Strategies for the Future
• 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
38 © Distribu3on under licence by Jeffrey Jackson only
Retail Supermarket Chains Strategies for the Future
• 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”
39 © Distribu3on under licence by Jeffrey Jackson only
• 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
40 © Distribu3on under licence by Jeffrey Jackson only
Retail Supermarket Chains Strategies for the Future
• 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
41 © Distribu3on under licence by Jeffrey Jackson only
Retail Supermarket Chains Strategies for the Future