Review of the Year 2008

At the start of the year, we said 2008 would be all about the credit crunch. We were right, only it was a crunch far worse than we - or any one else for that matter - had dared predict. As the global banking system reached near-meltdown, no-one in grocery was too big to resist the aftershock. While Bakkavör and Premier Foods were busy measuring their debt mountains, Tesco was posting its worst figures in a decade.

Yet, the downturn brought opportunities. It was the year when the discounters finally came of age and own-label became an opportunity rather than a necessity.

And, with more than 80% of food and drink categories managing to increase in value against 12 months ago, as this week's Top Products Survey reveals, people are realising the resilience of grocery.

Economy aside, the Government's obsession with turning everyone into teetotal gym freaks continued. Alcohol was given a duty slap in the face, cigarettes forced to run for cover and fat towns told to get into shape .

Here are the weird, wonderful and woeful moments of 2008.


Best NPD - Veg Pot launch and Monster Munch revamp
Is it a soup? Is it a ready meal? No, it's something altogether more weird and wonderful. Innocent Tasty Veg Pots are the smoothie king's bold attempt to prevent the innovation halo from crashing down upon its head. Veg Pots arrived in September as a four-strong range of vegetable-based ready meals, each of which contain three of the recommended daily intake of vegetables. The company claims that a Veg Pot washed down with an Innocent smoothie can take care of all the five-a-day in one sitting. And, my, do they taste healthy.

Available in Moroccan squash tagine, Thai coconut curry, Tuscan bean stew and pea & broccoli rice flavours, they make for a substantial lunchtime snack and don't leave you craving an extra bite to eat - something all too rare in the world of health food. Then again, at £3.49 a tub you'd be disappointed not to be sated.

Our relaunch of the year? That has to be the retrofit of Monster Munch. The brand's 9% sales drop, coupled with the Wispa-fuelled glorification of nostalgic foods, clearly inspired some wistful thinking in Walkers' head office, as marketers yearned to reach out to an audience of misty-eyed young men.

Come September, Monster Munch's snazzy metallic blue packet and Dreamwork's-style monsters were jettisoned and back came the crudely sketched trio of mutants, and the gob-sized crisps that we all used to happily munch while watching the A-team. A step backward to a step forward, we say.


Man of the year - Bolland leads Morrisons' comeback
When Marc Bolland replaced Bob Stott as Morrisons CEO two years ago, it was very much a case of "Marc who?"

The suave Dutchman took over at a time when the retailer was the media's whipping boy - it had just suffered six profit warnings in a year and the first loss for 36 years. There weren't many industry watchers prepared to back the mild-mannered Bolland, who was dismissed after more than 20 years at Heineken, as a mere marketeer.

But their misgivings were unfounded. The turnaround under Bolland has been nothing short of sensational, with the icing on the cake a barnstorming 8% rise in like-for-like sales for the third quarter. By comparison, Tesco managed just a 2% sales increase.

Bolland has led a drive to refresh store formats, focusing on Morrisons' unique Market Street proposition, and to increase the supermarket's range. There are currently 12,000 more SKUs in store than two and a half years ago.

He has also introduced new lines of organic, Eat Smart, Fairtrade and free-from produce, while earlier in the year, Morrisons became the first supermarket to source 100% British meats. The strategy is working. Morrisons under Bolland is attracting 700,000 more customers a week compared with two years ago.

The retailer's celebrity advertising campaigns, featuring Richard Hammond and Denise Van Outen, have also helped, being fresh and bang on message. "Advertising is just part of the jigsaw puzzle, telling the story of what's in the stores," says Bolland.

The Dutchman has even had the confidence to start flashing the cash. He is set to fork out £223m for 38 stores from The Co-Operative Group and has bought the freehold for its 920,000 sq ft regional distribution centre in Sittingborne, Kent, with the purchase and construction work expected to total £82m.

While his three big supermarket rivals have been looking over their shoulders at the likes of Aldi and Lidl, Bolland has been quietly and confidently winning back the customers Morrisons lost, and attracting a whole lot more.


Worst cop-outs - a long wait for nothing much to chance
The Food Standards Agency doesn't do dynamism. It took a year's worth of meetings, consultations, academic workshops and buffet lunches for the FSA to decide that its much-maligned Nutrient Profiling Model was - wait for it - "scientifically robust and fit for purpose".

Needless to say, it wasn't a view shared by everyone. "Unpredictable", "unscientific" and "disproportionate" were some of the more printable responses that exploded from the mouths of miffed suppliers.

The FSA will point to the removal of the protein cap as evidence of a softening of its position on HFSS foods. But in reality, the review offered no reprieve to the healthy foods, such as raisins, honey, marmite and cheese, that still fail the model thanks to its flawed 100g-serving base. A final review is expected early in the new year.

The similarly drawn-out Competition Commission inquiry ended in April when it delivered the less than radical verdict that, all things considered, grocery retailers were delivering a good deal to consumers. The outcome left indies ruing a missed opportunity to address key issues such as buyer power and unfair planning laws, though the industry does now face the prospect of a self-regulating ombudsman - if retailers ever agree on its remit.


Biggest charm offensive  - Aldi's MD gets schmoozing with the media
A year ago, the deep discounters almost never gave interviews. But in 2008, Aldi had a change of heart.

Just as the worsening economic climate provided the ideal opportunity in which to try and win over shoppers, Paul Foley was let off the leash by the company's bosses in Germany. First to secure an interview with the newly outspoken Foley was, of course, The Grocer.

Several national newspapers duly followed suit. And the public clearly got the message - Aldi's sales figures have rocketed by 24% for the year to November [TNS].


Most promiscuous celebrity - Vickery gets around a bit
Winner of the Jamie Oliver/Gordon Ramsay award for baking your cake and eating it goes to Phil Vickery. In addition to becoming the face of Aldi in a two-year deal to promote the booming German discounter's products, Vickery made regular TV appearances, launched a book on getting schoolkids into the kitchen and can be seen rustling up a paella in Nintendo's latest TV ads. World domination awaits in 2009.


Top handbag moment - Mark Price vs Sir Stuart Rose
This case of handbags, or should that be shopping-bags, at dawn started when Price claimed Waitrose's food was 10% cheaper than Marks & Spencer's. Rose refuted the claims, arguing that a basket of 546 products was, in fact, 6% cheaper at M&S. Things came to a head at the M&S interims in November. "I'm happy to have a price competition. We'll get Mark round and have a ding-dong," said Sir Stuart - in jest, we think.


Story of the year - Tesco and the return of the tertiary brands
The Grocer broke countless exclusives in 2008. But the story of the year has to be Tesco's launch of a range of so-called 'tertiary' brands in September to stop customers defecting to the discounters.

Tesco, remember, was the supermarket that developed the three-tier own-label strategy of good (Value), better (standard) and best (Finest). But the return of tertiary brands, not seen since the mid-1990s, was Tesco's acknowledgement of a change in shopping habits, as it aimed to widen its range at the budget end of the scale to appeal to shoppers too embarrassed (or too picky) to buy value lines.

The first hint Tesco was serious came in the Republic of Ireland, with a dedicated Cash Savers aisle launching in each store, grouping cheap products across multiple categories in the same area.

But two days ahead of the UK launch, The Grocer broke the story of a new 400-strong discounter range on our website. With names like SunSip, Country Barn and Daisy, the strategy has divided opinion, with research showing that it is confusing some shoppers. On the other hand, the Q3 sales figures show the range now accounts for 5% of UK sales. And Tesco is adding a further 200 lines in the New Year, also revealed this week by The Grocer.


Biggest non-event - Rooney tipped for Hovis ad
It was news fit to have Warburtons and Kingsmill trembling in their floury aprons. In August, Wayne Rooney was tipped to be the star of the much-hyped blockbuster Hovis ad. Premier Foods had apparently budgeted £30m for the ad and Rooney was to make £150,000 out of the appearance. The Telegraph ran the story, but before Warbies could wave a blank cheque in front of Stevie Gerrard, Premier discredited the rumour.


Gloria Gaynor moment - Stefan Barden, the man that said no to M&S
When Marks & Spencer demanded across-the-board discounts from its suppliers, the last thing anyone expected was for one of its biggest suppliers to say "no". But that's exactly what Northern Foods boss Stefan Barden did, kissing goodbye to its £45m-a-year Italian ready meals contract.

Under Project Genesis or "Project Genocide" as it was soon dubbed, Marks & Spencer demanded a 2% price cut from its suppliers, plus a 1.5% marketing charge and further cuts of up to 3.5% if sales volumes increased. Suppliers complained bitterly about M&S's aggressive negotiating tactics - but Northern was the only one to publicly reject the new terms.

It was the definitive 'I will survive' moment of 2008, and Northern probably will - but at a cost. About 730 Northern employees lost their jobs when the contract ended, and the company's Fenland Foods facility was mothballed.

That said, Northern was not the only company to make a stand against a major customer this year. Taypack, which supplied a third of Asda's potatoes, won applause from growers for scrapping its deal with the retailer after pricing negotiations broke down at the cost of 86 of its 220 posts through voluntary redundancy.


Most timely exit - Will Chase and Tyrrells crisps
By offloading Tyrrells crisps to Langholm Capital in April, not only did farmer-turned-entrepreneur Will Chase avoid an 8% increase in capital gains tax by the skin of his teeth, he also dodged the biggest financial crisis in 80 years. Tyrrells continues to perform strongly in the premium crisps market, but would a company with a turnover of £13m really have fetched close to £40m in the current climate? At least if Langholm's investors want to drown their sorrows, they know where to turn: the new vodka production business Chase chose to hang on to.


Sauciest ad - Orangina gets all sexed up
Forget Cadbury's drumming gorilla, there was only one truly show-stealing mammalian performance in 2008. Step forward Dr Pepper Snapple Group's Orangina TV ad featuring gyrating, voluptuous animal temptresses. In the weeks following the ad's debut in August, the ASA received more than 150 complaints about its overtly sexual tone, which climaxed (ahem) with animals sitting astride bottles that spurted open in unison.


Most resilient brand ambassador - Iceland sticks with Kerry Katona
Amid accusations of drug-taking and smoking while pregnant with her fourth child, speculation was rife that Iceland's love affair with Kerry Katona was destined to end, especially after a slurred performance on ITV's This Morning . But no, Iceland has stuck with the former Atomic Kitten for its Christmas ad campaign, although it remains to be seen whether Katona will still be flogging cheap pavlovas in 2009.


Biggest deal - Marks takes The Co-op back to the big time
The Co-operative Group is back - and it means business. Half a century ago, The Co-op, with its iconic 'divi' scheme, was the UK's largest grocery retailer. Having long been overtaken by the multiples, CEO Peter Marks hatched a plan to "propel the society back into the premier league of food retailing" and in July swooped on Somerfield in a £1.57bn deal.

When the deal completes in February it will transform The Co-op into the UK's fifth-largest supermarket and largest c-store chain, with 2,972 stores, Marks has promised the acquisition will give shoppers competitive prices and an improved range. Plans are already afoot to relaunch its Everyday Value range.

Despite the deteriorating economy, the Co-op Group has had a storming year. Not only has it completed last year's merger with United Co-op ahead of schedule, it's also carrying out the largest rebranding exercise in UK corporate history, revamping stores at a rate of 15 a week. By New Year's Eve, it will have refurbished more stores than McDonald's and Starbucks combined own in this country.

In September, it also recorded its 11th quarter of consecutive growth. Barring any indigestion from Somerfield, this growth is set to continue into 2009. Classy.


Dodgiest ruling - Pringles are actually cake
"Let them eat cake," said Marie Antoinette. Perhaps it should have been "let them eat Pringles"? For earlier this year, P&G won a landmark appeal to make Pringles non-VATable. In the High Court, P&G argued the snack's non-potato ingredients and unnatural shape set them apart from crisps, and claiming Pringles were more akin to cakes or biscuits as they were made from dough. The judge, bizarrely, agreed.


Chief optimist - Justin King looks on the bright side
Been made redundant? Mortgage payments increased? House repossessed? Never mind - you can just Switch and Save, says self-confessed optimist, Sainsbury's chief executive Justin King. By swapping from brands to own label customers can "dial out" inflation in store, whatever that means. Negative equity is merely a "theoretical concept" for most homeowners, adds King.

"Repossessions are rising, but are a long way from historical recessionary peaks," he said in November. "I don't want to downplay people losing their jobs, but unemployment only started rising in the UK four months ago."

Quoting Franklin D Roosevelt's 1933 speech on The Great Depression, King pronounced "the only thing we have to fear is fear itself" at IGD's annual conference. "Relentless reporting" on the credit crunch had created "a climate of fear out of step with current reality", he later added. King's dogged determination to remain upbeat was evident in his Big Interview with The Grocer.

Citing the troubles at M&S, he said he was "confidently communicating to his people" that Sainsbury's would not be next. Come the announcement that Sainsbury's first-half pre-tax profit was up 13.3% to £258m on sales up 7.6%, his words looked pretty prescient.


Lost opportunity - Woolies turns down Walker's timely offer
Back in August, Iceland boss Malcolm Walker and a consortium of businessmen offered £50m for Woolworths' 815 stores and the staff pension deficit. The Woolies board, and new CEO Steve Johnson, who sold Focus DIY for £1, thought Walker had undervalued the business and no deal could be reached. Come the autumn, Woolworths' problems had spiralled out of control as its trade insurance was withdrawn. Cashflow problems and administration soon followed.

Walker described the rejected Woolworths deal as "a missed opportunity" - an opportunity missed by Woolies, rather than him, as it turned out.

Biggest U-turn - Labour turns around on tax
We all know governments give with one hand and take with the other. True to form, on the day Labour declared a VAT cut to 15%, it announced taxes on alcohol were rising by 8%. Just three days later, after realising the consumer would have to pay more than 30p extra for a £9 bottle of vodka, it decided to let spirits off. In a year of policy-changing u-turns on everything from biofuels to bendy bananas, this was by far the quickest.


Sweetest deal - Dunsmore goes to Magners
When former S&N boss John Dunsmore took over as chief executive of C&C, maker of struggling Magners, he got himself a pretty tasty pay deal. If he meets share performance targets over the next three years he would net a share package worth £5.8m. Though speculation persists the company might be sold, its fortunes have already improved - following 12 months of decline, the share price has held steady at around €1.30 since his arrival.


Flop of the year - smoothie move fails to go smoothly
Blink and you missed it. This year’s award for the most spectacular brand belly flop goes to Nestlé and the Boost Juice Bar chain for their joint attempt to take on Innocent with a new grocery-focused smoothie range.  Launched with a fanfare in April but no more by September, Boost Smoothies were touted as ‘functional’, unlike their merely fruity competitors.

All four variants contained extra ingredients such as ginseng, guarana or green tea (to give them a ‘boost’) and the launch was supported by a £5m campaign. All to no avail, however, as Nestlé pulled the range just five months later. To be fair, sales in the category had just taken a severe turn for the worse.

“We entered a category that had grown 31% in 2007, but at the time of our exit was in 14% decline,” Jon Walsh, Nestlé’s business director, said defending the move.

Smoothies stalwart PJ Smoothies also took a hit. PepsiCo is pulling it this month having failed to stem sliding sales. Market leader Innocent has not been immune from the consumer move away from smoothies, its like-for-like sales slumping 20% in the six months to September. However, the end of the age of Innocent & Co is probably some way off yet.


Coolest customer - Brakes' McKay stays chilled
Despite handing over interest payments of more than £60m on debts of £1.3bn, Brakes Brothers boss Frank McKay claims to feel "perfectly at ease" with the business's progress. So at ease, in June Brakes shelled out an estimated £20m to buy loss-making wholesaler Woodward Foodservice.

"No-one has been immune to the credit crunch, but we have successfully combated any kind of pressure," he said.


That was the year that was - 2008 in review

January
The new year kicked off with two grocery retailers making dramatic u-turns. Iceland agreed to withdraw demands for a 2.75% settlement discount on invoices following a supplier revolt, while it was revealed that Sainsbury's had called time on its ill-fated automated picking system for ambient goods at its Waltham Point DC. Morrisons put down a marker for the year by winning the Christmas trading battle. At 9.3%, sales growth was more than 4 percentage points ahead of the industry average. Symbol groups and independents were the big losers, with sales down 2.5% and 3.7% respectively. The Government announced a new set of initiatives to tackle obesity. Plans included a single approach to food labelling, smaller portion sizes for energy-dense and salty foods, and reduced exposure of children to high in fat, sugar and salt (HFSS) foods. Palmer & Harvey McClane topped the list of The Grocer's Top 30 Wholesalers, ahead of a resurgent Booker.

February
Marks & Spencer became the latest retailer to get tough with its suppliers. M&S's controversial new Project Genesis, quickly dubbed Project Genocide, demanded all suppliers accept a 2% cut in prices and further cuts of up to 3.5% in price based on how much their sales grew with M&S. Jamie Oliver came out in favour of Guideline Daily Amounts by putting front-of-pack GDAs on his new food product range. The move put Oliver at odds with his employer, Sainsbury's, a pioneer of the traffic light system. The proposed merger between co-ops Milk Link and First Milk collapsed after the two parties failed to agree on a valuation for the businesses. A deal would have given the combined co-op a 25% share of Britain's raw milk supply.

March
Sir Ken Morrison finally hung up his boots after 56 years at the helm of the family supermarket chain. His legacy was a 65.8% increase in full-year pre-tax profit to £612m. "He's been an inspiration to retailers here and further afield," said Andy Bond. A report from the Food Commission accused Cadbury and 300 other manufacturers of continuing to use additives linked to hyperactivity in children. Later in the month, the European Food Safety Authority concluded the additives did not pose a significant risk to children's health. Retailers were left fuming after the Government proposed plans to force cigarettes under the counter in a bid to keep them 'out of sight, out of mind'.

April
The worst-kept secret in grocery was finally confirmed after The Co-op admitted it was in "serious discussions" to buy Somerfield. Carlsberg and Heineken's £7.8bn takeover of Scottish & Newcastle was approved. The deal saw Heineken take control of S&N's UK and Ireland business and split the international businesses with Carlsberg. Mars became the world's biggest confectionery company following its $23bn purchase of Wrigley. To cap a big month of deal breaking, farmer-turned-entrepreneur Will Chase offloaded his Tyrrells crisps business to Langholm Capital for £40m.

May
It took two years of investigation for the Competition Commission to conclude that grocery retailers were delivering a good deal for consumers. The Commission's lacklustre findings were upstaged by the shock intervention of the OFT over alleged price fixing between the multiples and major suppliers. Northern Foods walked away from its Italian ready meals contract with M&S after chief executive Stefan Barden refused to accept the revised terms of Project Genesis. Sainsbury's declared its recovery complete after hitting the three-year sales targets set out in its Making Sainsbury's Great Again plan.

June
New figures from Food From Britain showed food and drink exports had soared 9.1% in 2007. Another success story in the deepening economic gloom was frozen food, annual sales of which leapt 4.2% to £4.7bn. Retailers struggled to keep on lid on prices as food inflation soared to 12.6%, while Aldi announced ambitious plans to open a new store every week for the next five years.

July
July saw the long-anticipated demise of buying group Key Lekkerland. Rival wholesaling giants Booker and Palmer & Harvey McLane hungrily snapped up nine of Key Lekkerland's national accounts, while JW Filshill picked up its Scottish accounts. Dairy producers were left disappointed after the FSA gave fresh backing to its controversial Nutrient Profiling Model, though some cereals were thrown a lifeline by the removal of the protein cap. The FSA then gave manufacturers a further headache by setting tough new salt-reduction targets for 2012. The Co-operative Group completed the purchase of Somerfield in a deal worth £1.56bn. M&S, meanwhile, began trialling branded products for the first time at stores in the north east of England.

August
The Co-op pulled off a coup by persuading its influential CEO of food retail Guy McCracken to delay his retirement until after the integration of Somerfield had been completed. The first signs that the economic downturn was starting to have an impact on sales of organic produce came in the shape of dismal results from Whole Foods Market, which reported a pre-tax operating loss of £9.4m. Tesco continued on its quest for world domination by buying out Royal Bank of Scotland's 50% stake in its retail services joint venture for £950m. Walkers, meanwhile, got all nostalgic by relaunching Monster Munch in its original form.

September
Branded suppliers were left reeling after Tesco and Sainsbury's launched high-profile campaigns to promote their own-label ranges at the expense of branded products. Two weeks later Tesco upped the ante even further by bringing back the tertiary brand with the introduction of a 350-strong Discount brands range. Innocent unveiled its first move into food – a four strong range of Veg Pots, billed as a tasty hot snack and filling alternative to soup. The news came as figures showed the total amount spent on smoothies in the UK had dropped 6% in the previous six months.

October
Supermarket chiefs stuck their necks out to pronounce food price inflation had peaked. At the IGD convention, however, Asda’s Rick Bendel sounded a cautionary note, warning industry executives that as recession approached “the decisions we take in the next 12 months will define the future of our business and the grocery industry for the next ten years”.Ocado announced plans to branch out into non-food for the first time. The online retailer reported losses of £39.7m for 2007, but said it expected to have turned a profit for 2008. Procter & Gamble launched credit-crunch-busting Ariel Excel Gel, which it claims could wash clothes effectively at a temperature as low as 15 degrees.

November
PepsiCo said it planned to ditch its PJ Smoothies brand early next year after a failed attempt to reposition it at the lower end of the smoothies market. Sainsbury's defied the economic gloom with a 7.6% rise in first-half sales. Justin King attributed the success to Sainsbury's "universal appeal". Richard Lancaster resigned as managing director of Netto. The discounter also announced job losses and scaled back its expansion plans. Following months of speculation, Woolworths finally fell into administration, sparking a scramble to buy up its estate of 815 stores.

December
There was concern for suppliers as first Premier Foods, then Bakkavör, reduced their level of trade insurance. Premier announced it was axing its Robertson's jam brand, best known for its controversial Golly logo, which was axed in 2002. Morrisons ended the year as it had begun, by announcing stellar quarterly sales growth of 8.1%, trumping Tesco, whose sales growth slowed to just 2%. Independent store owners were left seething after the Government pressed ahead with it plans to bring in a total ban on the display of tobacco. C-stores have until 2013 to comply, two years after the deadline for the supermarkets. And, marking the end of an era, Woolworths announced its stores would be closing on 5 January, having failed to find a buyer.


View The Grocer's definitive Top Products 2008 survey...

View our Campaigns of the Year 2008.