>>It’s time for new food sector models, says Neal Hattersley, business adviser, Bexley Council Enterprise Agency
The biggest fact affecting the food sector recently has been the 33% increase in per capita real incomes in the UK since 1993. Some people have done much better than others and it is this affluent subsector that is creating the opportunity for lifestyle food choices, such as ‘free from’ and organic.
Over this period also, the major multiples have created an oligopoly and will continue to put strong downward pressure on supplier prices. Now they are creating metro stores, capturing the commuter in town or near transit stations with once-a-week top-up shops and the lunchtime dip, all at higher prices than within their supermarkets.
The newly affluent want convenience, quality and social caché. But, critically, they also seek everyday value for money.
But are there other and new ways of reaching such consumers? Farmers’ markets continue to thrive. Many say their products are better than M&S food and Waitrose, but they are hugely expensive in the eyes of the average consumer. Yet, despite the high prices, lack of national distribution and generally chaotic organisation, nearly 1% of retail food value is being channelled through them. They are enormously profitable relative to other food producers and retailers.
In contrast, traditional fruit and vegetable markets struggle. In Kingston, a major London regional market town, the number of fresh stalls has declined by 35% since 1993.
But in central London, Borough Market has become a focal point for regeneration. Producers find it profitable, in some cases essential, to travel 200 miles to sell fresh produce two days a week. The punters are certainly rich and many come back for more.
Within Bexley Belvedere we have discussed a number of trends and ideas. Selling good, freshly prepared food by weight for ordinary people is a good tactical plan for a business with available capacity, but it seems
to buck the economic buying trend. The decline of delis and independents is quantifiable, but the buoyancy of Booths and Waitrose seems equally certain, while the plethora of new entry artisan producers and concept outlets seems to imply substantial change to the upmarket sector.
There aren’t many sectors where Britain can claim world-class leadership. However, with little acclaim, the UK has achieved leadership in complex distribution and chilled food. But if you believe the chattering classes, the French have a better lifestyle and better quality food. A visit with open eyes will find a different picture. Bread baked in-store at Asda is a better product than delivered at 25% of French shop bakeries. This variation in quality is a reason why France is the EU’s second biggest market for prepared food.
So what if we could combine our skills in distribution and food production to deliver a farmers’ market experience to an out-of-town store at a convenience store price? What if that raised the fresh gourmet market value penetration to 5% or more of national food spend? What if these lower consumer prices, achieved by scale efficiency and technology, still offered double the margin that the major retail oligopoly are ever going to give producers and made a distribution profit?
In other words, use modern technologies to deliver and retail local food for local people. This would involve a regional, food-only distribution network operated as a profit centre and dealing with all regional artisan farmer producers to provide shops with a full range of seasonal fresh produce as well as ambient deli. This network could supply stores of all sizes with fresh produce to help them create a food market ambience rather than that of a supermarket.
So, I hear you ask, will Asda sit back and watch us do this? Doesn’t Waitrose do it already? Remember: this is for regional foods only and some of the producers will be too small to get stocked nationally by a major.
It’s not just my idea. The East Midlands Development Agency is looking at new business models for food. A report hits the streets next month. I don’t know what it says, but I do know it’s driven by economics, not fancy social trends. It will happen. The question is where and when.
The biggest fact affecting the food sector recently has been the 33% increase in per capita real incomes in the UK since 1993. Some people have done much better than others and it is this affluent subsector that is creating the opportunity for lifestyle food choices, such as ‘free from’ and organic.
Over this period also, the major multiples have created an oligopoly and will continue to put strong downward pressure on supplier prices. Now they are creating metro stores, capturing the commuter in town or near transit stations with once-a-week top-up shops and the lunchtime dip, all at higher prices than within their supermarkets.
The newly affluent want convenience, quality and social caché. But, critically, they also seek everyday value for money.
But are there other and new ways of reaching such consumers? Farmers’ markets continue to thrive. Many say their products are better than M&S food and Waitrose, but they are hugely expensive in the eyes of the average consumer. Yet, despite the high prices, lack of national distribution and generally chaotic organisation, nearly 1% of retail food value is being channelled through them. They are enormously profitable relative to other food producers and retailers.
In contrast, traditional fruit and vegetable markets struggle. In Kingston, a major London regional market town, the number of fresh stalls has declined by 35% since 1993.
But in central London, Borough Market has become a focal point for regeneration. Producers find it profitable, in some cases essential, to travel 200 miles to sell fresh produce two days a week. The punters are certainly rich and many come back for more.
Within Bexley Belvedere we have discussed a number of trends and ideas. Selling good, freshly prepared food by weight for ordinary people is a good tactical plan for a business with available capacity, but it seems
to buck the economic buying trend. The decline of delis and independents is quantifiable, but the buoyancy of Booths and Waitrose seems equally certain, while the plethora of new entry artisan producers and concept outlets seems to imply substantial change to the upmarket sector.
There aren’t many sectors where Britain can claim world-class leadership. However, with little acclaim, the UK has achieved leadership in complex distribution and chilled food. But if you believe the chattering classes, the French have a better lifestyle and better quality food. A visit with open eyes will find a different picture. Bread baked in-store at Asda is a better product than delivered at 25% of French shop bakeries. This variation in quality is a reason why France is the EU’s second biggest market for prepared food.
So what if we could combine our skills in distribution and food production to deliver a farmers’ market experience to an out-of-town store at a convenience store price? What if that raised the fresh gourmet market value penetration to 5% or more of national food spend? What if these lower consumer prices, achieved by scale efficiency and technology, still offered double the margin that the major retail oligopoly are ever going to give producers and made a distribution profit?
In other words, use modern technologies to deliver and retail local food for local people. This would involve a regional, food-only distribution network operated as a profit centre and dealing with all regional artisan farmer producers to provide shops with a full range of seasonal fresh produce as well as ambient deli. This network could supply stores of all sizes with fresh produce to help them create a food market ambience rather than that of a supermarket.
So, I hear you ask, will Asda sit back and watch us do this? Doesn’t Waitrose do it already? Remember: this is for regional foods only and some of the producers will be too small to get stocked nationally by a major.
It’s not just my idea. The East Midlands Development Agency is looking at new business models for food. A report hits the streets next month. I don’t know what it says, but I do know it’s driven by economics, not fancy social trends. It will happen. The question is where and when.
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