Retail

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Tesco chief calls for retailer-government parternships to tackle challenges

Dave Lewis Tesco boss

The rise of e-commerce was among the challenges for retailers – and nations – that Tesco CEO Dave Lewis raised during a speech today in London.

Saying that “increasingly the world is mobile first, “ Lewis said major online retailers report more than half of their UK transactions are completed on a smart device. “In the UK, digital retailing has doubled over the last five years to become a £10bn business.”

“As a business, we expect continued growth…the challenge for us is how to make our online business of tomorrow as profitable as our offline business yesterday,” he said.

But there are significant challenges the growth of digital  poses for the nation, too. “Digital operations have no real community footprint, far fewer employees and a far lower tax contribution.That should be a dilemma for the Exchequer. Without rebalancing to reflect digital business models the physical side of retail pays a higher and higher proportion of the total tax bill.

“Furthermore it will incentivise a swifter shift to infrastructure light, low employment business with little interaction with communities,” he said.
 

The growth of limited range retailers and convenience shopping

Lewis then went to talk about the rise of limited range retailers and of convenience shopping – in terms of physical shops – which he said have both affected profitability and growth. Limited range retailers have doubled since 2010 and the convenience channel is up 5% again this year.

“Our big stores are also seeing a high proportion of convenience shopping trips – 76% of Tesco convenience trips take place in our Extras or Superstores. But I don’t see this as a challenge per se – I see it as a shift in what customers want or need – and it’s our job to respond.   

“What I do see as a challenge is that whilst the customer was heading in one direction the industry was heading in the other…between 2007 and 2014 it added around 35 m sq ft,” Lewis said, going on to talk about the pain caused by having to close stores and halt construction on others.

 

The burden of higher structural costs when profits are at a low point

Lewis said the real challenge for the sector is that it is struggling with structural cost at a time of historically low profitability. While two years ago food inflation was running at 4%, now it’s -2.4%. That’s great news for customers but puts significant pressure on parts of the retail industry.

“In supermarkets profitability has sunk from 5% to 2% in five years and now we face significant new cost pressure. This is a potentially lethal cocktail,” Lewis said, going on to say that meanwhile property values have fallen but business rates are up. Tesco’s own business rates bill has climbed well over 35% in the last 5 years. “That’s an enormous pressure. Shops have closed. Businesses lost. Jobs sacrificed,” he said.

And on the UK’s National Living Wage, Lewis called for fuller debate, saying that while Tesco was supportive of the living wage when announced, “our concern, and the concern of many colleagues, is that there is pressure to increase base pay at the expense of benefits. We don’t think this is the answer.”

 Tesco boss Dave Lewis

Call for more government-industry consultation, collaboration

Lewis went on to discuss the need and – opportunity – for the retail industry and business to work closely with government on three issues.

“Firstly, I would encourage the industry and Government to sit down at the highest level and consult on the multiple policy changes that are affecting the industry, to share together the consequences of higher rates, the living wage and initiatives such as the apprenticeship levy,” he said.

Secondly, he called for partnership on employment, skills and training challenges.

And Lewis said health and food education is the third area with real potential for partnership and innovation.

“Millions of Britain’s shoppers are weekly Tesco customers.  We have more than 40 million transactions a week. And when we reformulate, we can remove billions of calories from their shopping trips.”

Tesco estimates it has helped save around 1,500 lives through joint efforts to reduce salt and its action on soft drinks means the average customer is now buying 20% less sugar in such drinks, examples of just some of Tesco’s health initiatives. “We make large scale contributions to heart health, cancer research and the fight against diabetes,” he said.

“I want to partner and innovate more on health. Not because I want to burnish Tesco’s image but because two thirds of supermarket shoppers want me to,” he said.

“We are uniquely placed to nudge millions of people every week towards healthier choices. Our customers want it and the government can benefit greatly from it… if we can meet in the middle ground. Nurturing growth – social value alongside economic value – in an era of extraordinary change needs a new level of collaboration.”

Lewis was speaking at the CBI conference. The CBI is the UK’s premier business lobbying organisation, providing a voice for employers at a national and international level.

Read the speech: http://www.tescoplc.com/index.asp?pageid=17&newsid=1242

Images: https://www.flickr.com/photos/tescomedia/albums

 

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Brands helping growth at Walmart China

Walmart China has launched the “100% Freshness guaranteed” campaign and is planning to open 100 more shops by 2016.

Walmart is so far the only international retail chain operating in China with its own nationwide logistics centre for perishables. “All the fruit and vegetable distribution today is centralised from our 11 platforms,” said Vincent Yeh, head of perishables procurement at Walmart China.

The depots are located at Shenzhen, Guangzhou, Shanghai, Beijing, Wuhan, Chengdu, Kunming, Xiamen, Shengyang, Taiyuan and Hangzhou. Walmart China is today busy building an international supply chain to directly source most of its imported fruit.

So far in the first semester, about 20% of the imported fruit sold in the shops has been directly sourced by the Walmart department. This represents about 200 containers of overseas fruit (like apples, citrus, pears, grapes, cherries and blueberries) and 1,000 units of tropical fruit from South East Asia (mainly bananas, dragon fruit, durians and pineapples). Imported fruit today represents 45-50% of all the fruit sold by the shops. “We believe we can still have larger sales of imported fruit, since it is helping us to differentiate us as an international chain,” Yeh said.

Citrus and durian the most popular in 2015

Citrus is the largest imported category, taking up about 40% of the directly sourced volumes, followed by apples (25%) and pears (5%). Citrus procurement at Walmart has more than doubled since October 2014, when the US was again given access to Chinese markets. Durians became the fastest growing item in 2015 (all sourced from Thailand). “It is increasingly popular this year due to its health benefits: it is considered a warm or energetic fruit, recommended for women and babies,” Yeh said.

Due to the same health trends, lemons were the fastest growing imported fruit in 2014. It is very popular for its antioxidant properties and benefits for the skin. Avocados and blueberries keep increasing in popularity too, for similar health reasons. Spain has appeared on the market with lemons and oranges, able to supply over a long period, though South Africa is the top source for citrus, between May and September, followed by Egypt, Spain (with late oranges between February and June) and Australia (between May and September).

Produce brands helping to sell

“In future we hope to sell more branded items, even well-known European brands. This is our next step towards quality,” Yeh said.

So far among the most famous brands sold there is Dole, Zespri and Sunkist. “Last year we started with Pink Lady, Blue Whale and Oscar; Truval is also one of our growing brands.” Fuji apples remain by far the best-selling variety in China , representing 90% of the volumes. The remaining 10% are Galas and Red Delicious. Imported varieties represent 30% of the total sales of apples at Walmart, mainly with Gala, Red Delicious and a few varieties from New Zealand (Rose and Queen). The main sources are Chile, New Zealand, the US and France. Stone fruit and grapes are also a future growth category according to Vincent. So far, cherries represent more than 90% of the stone fruit imported, with plums second with just 5%. The potential demand is there for other products like apricots, peaches, nectarines and flat fruit.

PE

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Suhol controls the entire supply chain

Suhol serves as the full service provider and category manager for the major supermarket chains in Oman, like the 30 Khimji hypermarkets, the largest chain in the country, Al Meera, Lulu, Spinneys (operated by Al Fair) and Spar.

The leading fruit and vegetable provider for the Omani market integrates the entire supply chain from production to import, logistics, wholesale and retail.

“We are the number one supplier of fruit and vegetables for the country, with an estimated 40% market share of imports and 60% of supermarket supplies,” states Abdul Latheef, CEO of Suhol Al Fayha Trading. Suhol serves as the full service provider and category manager for the major supermarket chains in Oman, like the 30 Khimji hypermarkets, the largest chain in the country, Al Meera, Lulu, Spinneys (operated by Al Fair) and Spar.

The company is run by the chairman Zahir Zahran from India and the co-founder Abdul Wahid, the local partner. Both have a vision of serving the Omani population with premium quality products at the most competitive price, via the shortest and most effective supply chain. Suhol provides more than 45,000 tons of premium fruit and vegetables a year to every market segment. Bananas are the top product category by volume, followed by apples, citrus, stone fruit, root vegetables (carrots, garlic, ginger, onions and potatoes) and leaf vegetables.

The main import sources for vegetables are Jordan and Iran in winter, and Holland in summer. Among the leading brands delivered by Suhol in Oman are Zespri kiwis, Apollo apples from New Zealand, Capespan from South Africa, Sun Choice and Ever Season citrus, Fruit Root apples, Dole pineapples (from the Philippines), True Cape apples, Bella apples by Nava (Italy) and Blue Whale and Copex from France. Despite its short shelf life, summer fruit is a major category distributed by Suhol, including peaches and nectarines, will all the supplies coming from nearby countries (Lebanon, Jordan, Syria, Turkey and Iran). Suhol’s concern for food safety is also high, since the group is ISO 9001 certified. “Delivering our customers a premium quality service is important for our customers as well.”

Photo courtesy of http://www.suholalfayha.com/gallery.html

A vision of integration and consistent development

Today, the company has more than 656 employees, having doubled in the last decade. “Our mission is also in line with the short and long term goals of consistent integration, aiming to multiply employment opportunities for both locals and expats,” said Latheef. Suhol is also present as an importer and wholesaler in the Al Aweer market of Dubai, Doha and recently Jeddah in Saudi Arabia. “Our long term goal is to establish ourselves as a dedicated, specialist retailer in other markets in the Gulf,” explains Khan.The group has already opened a fruit and vegetable store in Jeddah.

On the logistics side, Suhol runs its own fleet of trucks and has increased its storage capacity to over 2,000 tons. Its logistics centres are based in Sohar and Muscat, with a third one planned to be built in Halban by 2017. The group runs wholesale divisions in the markets of Muscat, Sohar, Nizwa, Salalah and Sur. Suhol is also the largest service provider for institutions and the food service sector. Among the famous brands supplied are KFC, Pizza Hut, Subway, Shangri La , Golden Tulip and Crown Plaza.

Retail specialists Suhol handles the entire fruit and vegetable section for its major retail customers, such as Khunji hypermarkets. It provides all the staff and installations, and runs the the supplies and merchandising daily. “We are just renting the space and are running the entire section,” Latheef said. At Khunji hypermarkets, Suhol provides a large assortment of more than 300 items. It also includes local vegetables cultivated in Oman, such as aubergines, okra, capsicums, cucumbers and tomatoes.

“Modern retail chains are generating significant growth for the production business as well,” he said. Indeed, modern retail is growing twice the market average of about 15% every year, and its relative market share within the food retail panorama is still only around 10%. Suhol, for instance, handles the entire category with the fast growing retailer “Anhar Al Fayha,” which is expanding with the launch of other new retail concepts like “Liwa, Bid Bid ad Mabalah” hypermarkets, both opened in 2015. “Anhar Al Fayha is planning to open 5-6 new hypermarkets every year. We are helping them by efficiently handling their fruit and vegetable sections,” Latheef said.

Oman retail panorama, 10% market share


PE

This interview first appeared on page 18 of edition 139 (Sept/Oct 2015) of Eurofresh Distribution magazine. Read more of that issue online by clicking on the magazine image below.

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Colruyt Group sees increase in citrus sales

Priorities for the Colruyt group include innovation in e-commerce, and helping consumers choose healthy and sustainable products via ‘simplicity in retail’.

Belgian retail group Colruyt reports that it gained market share in 2014/15 despite tough competition. In Belgium, where the retailer competes with the hard discounters Aldi and Lidl as well as Carrefour and Delhaize, it says its market share rose to 31% based on revenue from its store concepts Colruyt Lowest Prices, Spar and OKay. (The group is to focus its expansion efforts even more on OKay, its proximity store concept.)

Colruyt Group also managed to keep its operating margins stable in 2014/2015, with a gross margin of 24.9% of revenue and EBIT margin of 5.6% of revenue. In what it described in its 2014/15 annual report as a “challenging market environment”, its reported revenue grew 3.1% to €8.9 billion. “Due to the pressure on the sales prices, the volume growth was not fully reflected in revenue growth. Price pressure was brought about by price deflation, competition and the consumer trend towards cheaper products,” it said. The group’s net profit was weighed down to €331 million after recording a fine of €31.6 million imposed by the Belgian Competition Authority.

Wholesale & Foodservice

Colruyt’s wholesale and foodservice segment accounted for 17.1% of its consolidated revenue. Revenue from these activities rose 3.5% on last year to €1.5 billion. The wholesale segment includes deliveries to independent storekeepers in Belgium (Retail Partners Colruyt Group) and France (Coccinelle, CocciMarket and Panier Sympa). Wholesale revenue declined slightly (-0.5%) due to food price deflation.

source: Colruyt Group 2014/2015 annual report

Managing complexity to offer simplicity

“Our stores and wholesale activities in Belgium, France and Luxembourg continue to operate in an environment with fierce price competition and low consumer confidence,” Colruyt said in the report. One of its strategies in light of this is ‘Simplicity in Retail’. “Offering simplicity means, for example, helping consumers to make healthy and sustainable choices. This is why we continue to work on the quality and nutritional value of our own brand products, and on a more sustainable range of fish products and better working conditions at our suppliers and partners in risk countries,” it said.

“In order to be able to offer simplicity, we are also focusing on innovation. This is why we are targeting retail solutions in the e-commerce market and why we are the first Belgian distributor to make mobile payments possible in all of our web shops and stores. We are also pleased with the federal government’s plans to amend the laws governing e-commerce so that we can become a bit more competitive in relation to our neighbouring countries.”

Using audits to improve working conditions

In keeping with its commitment to improve working conditions at its suppliers and partners, Colruyt Group started carrying out regular audits in the food sector in 2013 and reports that they “do really lead to an improvement of the working conditions.” It plans to carry out at least 270 audits this year, representing an investment of over €200,000. “With this, we are well on our way to achieving our targets: all food-processing companies have to be audited at least once by June 2016 and all vegetable and fruit producers have to be audited at least once by June 2018.”

New headquarters for Retail Partners Colruyt Group

Among other highlights in the report, Colruyt said its wholesale division, Retail Partners Colruyt Group (including Spar and Alvo stores, independent Mini Markets and independent storekeepers), finalised its relocation to a new head office in Mechelen (in Antwerp province) at the end of October 2014. Two automations were also implemented in the high-tech distribution centre also located there, one in the empty goods section and another in the collection circuit for vegetables and fruit. The offices and the distribution centre have a combined surface area of 62,100 m2.

Support for Belgian pears and apples

A large-scale campaign was started at the end of August 2014 to promote the sale of Belgian pears. The Belgian pear growers had a surplus of pears due to the Russian import ban on European agricultural products. The group purchased 160 tons of pears of Belgian growers at the fruit auction. Around 550 stores of Colruyt, OKay and Spar offered the pears to their customers.

Similarly, Colruyt and OKay supported Belgian growers of Jonagold apples with a short-term campaign at the start of November last year. “Due to the abundant harvest and export problems with Russia, the Belgian apple growers were faced with a surplus. Colruyt and OKay offered pure pressed apple juice made from 100% Belgian Jonagold apples. The apple juice was sold under the own brand Boni Selection. Each store was supplied with around 500 bottles, which amounted to a total of 165.000 bottles,” according to the group’s 2014/2015 annual report.

Citrus sales at Colruyt

Sales of lemons were up 25%, oranges 12% and grapefruit 6.5% in volume for the first six months of this year, compared to the same period last year according to Colruyt’s product promotion manager Tony De Bock. “In citrus fruit we sell oranges, clementine, grapefruit and lemons,” he said. Over the course of the year, Colruyt offers lemons from Spain and South Africa, and oranges from the following countries: Spain (for eating and juicing), South Africa (for eating and juicing), Italy (“blood” oranges), Morocco (for juicing) and Egypt (for juicing). Clementines are sourced from Spain, Cyprus (mandora), South Africa (the Orri Club has been introduced) and grapefruit comes from the US and South Africa.

Colruyt’s product promotion manager Tony De Bock

Rise in sales of iceberg and multi-colour lettuce

In terms of lettuce sales, De Bock said the sales volume from January to June was up 3.5%, compared to the same period last year, with 75% of the lettuce grown in Belgium. “We import from Spain and Holland, but that is mainly the iceberg lettuce. We see the most positive evolution in iceberg and multi-colour lettuce,” he said.

Produce quality requirements

“Our quality requirements are always the same,” De Bock said. Colruyt requires Global G.A.P. and BRC certification.

JB

 

Video about Colruyt Group’s 2014/2015 annual report

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How Spain’s fruit and vegetables market is evolving

Nielsen’s retail services account manager, Gema del Castillo Tamayo, shared insights into today’s Spanish consumer and where opportunities for growth lie.

Is there scope to increase retail sales of fruit and vegetables in post-recession Spain? At the AECOC Fruit and Vegetable Congress in Valencia in June, Nielsen’s retail services account manager, Gema del Castillo, shared insights into today’s Spanish consumer and where opportunities for growth lie.

Signs of economic recovery

Del Castillo started by looking at whether the market is on the road to recovery. Effectively, European consumer confidence continues to improve, she said, but it is yet to return to pre-crisis levels, namely before the big recession hit Europe (in about 2008). Nielsen data shows that In Spain, consumer confidence has reached levels not seen since 2010. There was 3% growth in the Spanish GDP in the first quarter of 2015, while the CPI fell 0.7%.

Other indicators, such as an increase in employment, car registrations, sales of electrical appliances and electricity consumption also augur well for believing that a recovery has started. The hospitality business, for instance, has stabilised, with beverage sales showing growth since 2013 and for the first time in six years the number of establishments has started to increase again. But Del Castillo warned this is a bit of a wobbly start to recovery that is accompanied by uncertainty.

What’s happening with FMCG sales?

Nielsen’s analysis shows that despite a decline in Spain’s population last year, demand strengthened, though with the downside of a drop in retail prices. Compared to 2013, the value of retail sales last year fell 0.4% and prices 1.1% but the volume was up 0.7%. For fresh produce specifically, sales were 1.2% and prices 1.8% lower as the volume rose 0.6%. But compared to last year, retail sales to this April were up 0.7% in value and 1.1% in volume and prices up 0.4%, with the respective changes for fresh produce being +0.3%, +1.2% and -0.9%. Thus overall the context is one of improved demand and a slowing of the drop in prices.

Key components of the fast-moving consumer goods industry during the first quarter of this year were:

  • Strong pace of new store openings and concentration of the top retail chains
  • Supermarkets and superstores are gaining share from specialist and traditional stores
  • A slowing in relation to the increased market share of private label goods (they have since started to grow again)
  • A stable level of deal proneness

Price-sensitive, bargain-hunting shoppers

On the latter, Del Castillo highlighted that, according to Shoppertrends 2015:

  • 24% of consumers will change stores depending on which one offers the best sales promo
  • 37% rarely change stores but do actively look for the special offers
  • 20% say they know the prices of all the articles they buy regularly
  • 46% say they  know the prices of most of the articles they buy regularly and notice when there is a price change
  • 72% of shoppers believe that food prices have risen in the last year

The last figure shows that while there’s been a deflation of prices, many households have not perceived it, she said.

Trends in fruit and vegetables sales

Last year, fruit and vegetables accounted for 11% of Spanish consumers’ shopping spend, up from 10% in 2011.

Sales in the main categories have grown in volume thanks to lower prices. For fruit, it is oranges that are the winners, representing about 27% of the total fruit volume sold in the 12 months to April this year in Spain. Add mandarin sales (7% of the total), and citrus fruit accounts for one in every three fruits sold. Apples (11%) and bananas (10%) were next hottest in demand.

As for vegetables, potatoes formed 29% of the volume sold over the same period and tomatoes 16% and together they account for nearly one in every 2kg of vegetables bought, but just 31% of the total vegetable spend. Next highest in volume came onions (9%) and peppers (5%).

Nielsen’s household panel data shows fresh produce is accounting for an increasing share of the value among all shopping missions, but particularly in the case of routine ones, which are those involving the biggest spend. It is also increasing across all retail channels, but above all in supermarkets and superstores. The latter are gaining ground, moving from 51% in 2008 to 58% in 2014 in terms of fresh produce sales, compared to 49% to 42% for traditional and specialist grocers.

Opportunities for growth: online and convenience channels

Del Castillo said that as growth opportunities, two areas that have already seen major gains outside Spain are the online and convenience channels.

“The online channel is growing at a much faster rate than offline,” she said, displaying figures showing the value of online fresh produce sales value grew 14.7% for the 12 months to April 2015 while offline sales rose just 2.2%.

Fresh produce accounts for a smaller share of the online shopping basket – for fruit it’s 17% for offline and 9% online –  however there are big opportunities for staples such as potatoes.

The key to increasing online sales is to “earn trust through reliability“, Del Castillo advised, and ways to do this include offering customers a refund if they’re not happy with the produce delivered. In her own experience, Del Castillo said the melon delivered to her by online suppliers is usually much tastier than what she picks herself in person.

“More and more shoppers are buying fresh products online despite retailers being sceptical about the potential of this channel for them. The consumer is definitely ready to do part of their fresh product shopping online, all that is lacking is the retailers’ investment to sell these products online properly,” she said.

The convenience channel, which includes a broad range of outlets including petrol stations, fitness centres and airport and train station shops, is also very promising. Sales of convenience products, such as pre-cut and prepared fruit, salad and vegetables in the UK’s leading supermarkets, are worth €1.7 billion a year, according to Nielsen Scantrack Grocery Multiples data.

JB
Photos of Gema del Castillo by Roger Castellón courtesy of AECOC

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Spinneys, the Premier Supermarket Retailer in the Middle East, Joins GLOBALG.A.P. as a Member

Spinneys, the Premier Supermarket Retailer in the Middle East, Joins GLOBALG.A.P. as a Member.

Fine Fare Food Market LLC, which operates Spinneys, the premium supermarket retailer in the Middle East, has become the first in the region to join GLOBALG.A.P. as a retail member. This is in line with the company’s strategic decision to support a sustainable sourcing policy in order to benefit their farming partners, the environment, and their customers.

The company operates hypermarkets and supermarkets in Qatar, Lebanon, Egypt, Jordan and, through a franchise agreement, 30 stores in the United Arab Emirates (UAE). GLOBALG.A.P. Membership confirms the company’s commitment to supporting initiatives that assure sustainable and safe products for consumers.

By December 2015, Spinneys UAE plans to import only GLOBALG.A.P. certified fruits and vegetables from South Africa, Morocco, Egypt, Tunisia, Kenya, and Europe. In 2016, the retailer will expand its sourcing policy and work with producers from other countries, including Sri Lanka, Australia and USA, to help them achieve GLOBALG.A.P. Certification.

“We welcome Spinneys as a member in our GLOBALG.A.P. Community,” said Kristian Moeller, CEO of GLOBALG.A.P. “This move will make GLOBALG.A.P. certified produce available also to consumers in the Middle East ‎and opens up a very interesting market for certified producers.”

First established in 1924 by Arthur Spinneys in the suburbs of Alexandria Egypt, Spinneys sold high quality fresh produce, grocery, and baked goods at a fair price and in a fresh and friendly shopping environment. By 1960, it had grown into a chain and succeeded in opening additional retail outlets in Lebanon, Palestine and Jordan and supplying food for petrol exploration teams across the Gulf region.

Spinneys opened its doors in Lebanon’s old Beirut Souks in 1948, followed by additional stores in various parts of the country in the 1970s, but unfortunately the stores closed due to the civil war at that time. Thirty years later, Spinneys pioneered the concept of a hypermarket in Lebanon and re-opened its doors in 1998 through one big store and seven other standalone outlets, in addition to regional expansion in the Middle East.

Spinneys was ranked one of the world’s 50 best grocers by UK based retail magazine The Grocer in 2013.

source: GLOBALG.A.P. media release

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“It’s time Italy became more competitive”

One of the main aims of Gruppo Lillo and its MD and LD brands is to make the most of the Italian origin of their products, seeking out the best price/quality balance by combining it with real, constant convenience.

Gruppo Lillo, Italy’s 2nd-ranking retailer in the discount segment and 3rd in terms of turnover, has made itself a name for genuine, constant convenience with its MD and LD brands.

One of the main aims of Gruppo Lillo and its MD and LD brands is to make the most of the Italian origin of their products, seeking out the best price/quality balance by combining it with real, constant convenience. However, Luigi LaMontagna, the group’s head fruit and vegetable buyer, warned that Italian customers already know what they want and are not prepared to spend too much just because the product has been grown in Italy. As the MD and LD buying chief explained: “Italian consumers know exactly what they want: competitive prices without sacrificing the quality of the fruit. For many years, Italian fresh produce supplies have been standing still under the Made in Italy banner. Nowadays, saying the fruit is Italian is no longer reason enough for its being really good, just as the fruit does not have to be expensive to be of good quality. With more produce of high quality available at competitive prices from competitor countries, Italian consumers have understood that they can demand more.”

Competitiveness is indispensable

“I think the time has come for the Italian produce sector, particularly in the south of the country, to become more competitive and go out and earn a market share,” said Luigi LaMontagna. “By that I do not mean that they should cut costs at the expense of the workforce in the fields. On the contrary, it is precisely at that point that more care should be taken of the resources, as without quality no business can survive. I think that the best way to be competitive is to make a genuine effort to work together, joining forces and generating commercial synergies That is not easy, bearing in mind that 90% of Italian agriculture is made up of smallholdings. PGIs and DOs are doing sterling work to uphold quality, but they cannot go too far and when it comes to selling, everyone is flying their own flag. With fewer interlocutors there would be fewer obstacles, and together it would be possible to negotiate better deals and be more competitive. It is difficult but not impossible: just look at the example of apples in the north of Italy. They are well organised, highly efficient, negotiate as a group and grow stable volumes of fruit of very high quality that fetches good prices.”

New habits, new demands

It is true that the crisis has hit consumption among Italy’s volume retailers. It is also true that end consumers have changed their habits and demands, buying less fruit but demanding better quality. Even so, in spite of the general downward trend, LaMontagna asserts that sales of niche products not only have not fallen but are in fact increasing their market share. Exotic fruit imports and organic produce are clear examples, as both segments have achieved strong loyalty. The ready-to-eat boom is another example of a niche market that is prospering in these changing times and responding to new demands. A product that is ready to eat fits in perfectly with the modern habit of working at a distance from the home. Immediate consumption, a high quality product and a reasonable price are the perfect trio of advantages to spawn commercial success, as we are seeing nowadays in Italy, owing to its convenience,” LaMontagna explained. 

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Lillo Group S.p.A. Lillo Group SpA is one of the biggest Italian volume retailers operating in the discount channel. Its MD and LD brands are present throughout the country. In 2014 it achieved sales worth €2 billion and its market share reached 15%, making it the second-ranking Italian player in this sector. The history of the Lillo Group is that of Patrizio Podini, the sole director, who was born in Bolzano and has been active in the retail sector since the 1960s. In 1994 he decided to invest in the southern Italian regions and founded MD Discount, which continued to grow until it “disembarked” at national level in 2014 with the acquisition of the LD Market chain, with its widespread presence in the north of Italy, from Gruppo Lombardini. This created a nation-wide scenario that now boasts over 720 points of sale and a staff of over 5,000, and can shift hundreds of millions of boxes a year through six depots. The main one is at Gricignano di Aversa (province of Caserta), which covers 64,000 m². This high-tech logistics jewel was built to be sustainable, thanks to a photovoltaic installation with 9,727 solar panels, which provide enough power to supply a village of 700 houses, and to the use of LED lighting.

GO 

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Why retailers must focus more on delighting consumers

Retailers need to be more consumer-centric, says Stephan Weist, national category director for fruit, vegetables, flowers and plants for Rewe, one of Germany’s leading supermarket chains.

Retailers need to be more consumer-centric, says Stephan Weist, national category director for fruit, vegetables, flowers and plants for Rewe, one of Germany’s leading supermarket chains.

A certain amount of product diversity is important, but it must be meaningful for the consumer, he stressed.

Speaking during a panel discussion at the London Produce Show in June, Weist said achieving a change in a product, such as in the degrees Brix, might be a technological achievement, but if the consumer can’t taste it, it won’t drive sales.

“And that’s what it’s all about.”

Customers are looking for outstanding eating quality and will pay good money for it, but they won’t come back just because of a product’s technical aspects. This is something many retailers in Europe need to pay more attention to. “I see in many places, that the change has to become more consumer-centric,” Weist said.

What has changed in recent years is the ability to better measure consumer data, to find out “whether you delight consumers enough.” So, for example, retailers can adjust package sizes such as of salad so the price is right and the food stays fresher. They are doing this better, but there’s still a lot of room to grow, he said.

Stephan Weist, national category director for fruit, vegetables, flowers and plants for Rewe

Give consumers more choice, but don’t overwhelm them

Speaking to ED after the panel discussion, Weist said tomatoes are an example of a category that has undergone a lot of product diversification in the last decade in terms of different tasting varieties.

“You have tomatoes which are extremely sweet down to a tomato which tastes like almost nothing and we have them all on offer, unfortunately even the ‘bad’ ones, because they serve as a price entry but for cooking they’re still fine.

“Today, if you look in an average shop, you have about 20 different varieties of tomatoes so I think we have to reflect on whether we’re getting too complex for the consumer at the end of the day,” he said. This is particularly important in Germany, where consumers want to be in and out of a shop fast.

Differentiation has also been seen with peppers, with the Padron peppers popular for frying and the longer pointed peppers, with a higher sugar level, enjoyed raw. Weist said Rewe is seeing ‘certain growth’ in pepper sales, adding he thinks “growth comes with meaningful differentiation, but meaningful not for the industry but for the consumer.”

On salads, Weist said what stands out most is the growing assortment of pre-cut salads. But in standard salad ingredients there is only slight growth. “We might see growth in the overall category but because it has become more fragmented into more varieties we don’t necessarily see the old varieties, like iceberg or a standard lettuce, growing.”

Seedless grapes dominate in Germany

Asked about trends in grape demand, Weist said Germany, and most countries of Europe, are leaning strongly towards seedless grapes.

“What we have seen lately is the arrival of new and more interesting varieties, which have a very particular taste, though that’s still more or less on test levels because there’s not a lot of fruit available there yet.”

Overall, the whole family of light-colored seedless grapes are the top-selling grapes in Germany, he said.

Rewe generally offers its grapes in open bags but does use some clam shells for its price entry options. It sources from Europe – mainly Italy and Spain. Weist said better storage technologies and the extension of earlier and late varieties has seen the market share of this European production increase.

Some exotics becoming less ‘exotic’ to Germans

“After years of growing our display, but not necessarily our sales, like most other retailers, I think we have three categories of tropical fruit today,” Weist said.

One covers produce such as avocados, mangoes and pineapples, which have become a daily entry for German households. Excluding bananas, these three are Rewe’s top sellers in tropical produce. Weist said he no longer considers them tropical fruit, “but they still run in the statistics as such.”

“This is a category which we’re extremely happy with. We almost exclusively sell pre-ripened fruit in this segment and it’s running well,” he said.

Then there’s lesser known produce which Weist said is taking off now. “Things like sweet potatoes and all the chili varieties and exotic herbs are becoming increasingly popular. I would still call them exotics, but they are becoming more a standard because people know how to use them. Maybe it’s a spinoff of all the growth in the burger industry right now we see in Germany.”

As for the ‘real’ exotics, such as the kiwano and curuba and so on, Weist said these are products that are “interesting to know but unfortunately not good to sell.” He said that could be because consumers are less familiar with them, or that they look nicer than they taste.

How Rewe aims to be consumer centric

Asked how Rewe has innovated in terms of fruit and vegetables, Weist said it has developed a lot of technical expertise designed to have fresher products on its shelves. “This is not only a refrigerating technique, it’s also distribution technique. It’s about determining the right size of units. Let’s say classical category management work, which we do, and so I think consumer centrism is what it’s all about.

“If we think about what’s important for the consumer, we will find customised solutions in many shops. It is not one solution for every shop but we customize and maybe that’s the innovation you will see in our stores.”

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Exploring Waitrose’s biggest store – Canary Wharf

About 15% of turnover at Waitrose’s Canary Wharf branch is from sales of fruit, vegetables, salads and flowers.

Waitrose’s three-storey, 73,000 sq ft. Canary Wharf branch is its biggest store and the one with the highest sales.

Officially a ‘Food, Fashion & Home’ store, it also has one of the biggest fruit and vegetable sections of all Waitrose branches. About 15% of the store’s turnover is from sales of fruit, vegetables, salads and flowers.

ED toured this Waitrose flagship store in early June as part of the London Produce Show and spoke to Buying Manager for fruit Jocelyn Clarke and Department Manager Anselm Colom.

Clarke said Waitrose is doing particularly well in produce, highlighting that while the retailer holds about a 5% share of the UK grocery market overall, its market share for fresh produce is higher, typically around 8%. “In terms of location we’ve got the best of all worlds here,” Colom told ED about the Canary Wharf branch, “we’ve got many customers who do a big shop, and hundreds of thousands who do small top-up shops, we’ve got people passing by, local residents, workers, people travelling into London – all sorts of different demographics.

“Our biggest challenge is physically trying to stock all the shelves all the time – it’s absolutely relentless but a nice problem to have.”

A big focus on fresh produce

Fresh produce is one of 13 sections in the store and includes the food-to-go offering. Clarke said there is saying in retail that if you don’t get produce right then customers go no further. At Canary Wharf, the fruit and vegetables section sits at the front of the store and there is a big focus on it, she said.

There are typically two layouts for the fruit and vegetable section – a summer and a winter one. The summer layout started in mid-April with soft fruit moved to the front, apples and citrus cut back a little and moved to the back, and more space for exotic and stone fruit and less for vegetables. “But we wouldn’t dream of moving potatoes, bananas or salads, they stay where they are all the time,” Colom said.

The top sellers: berries and citrus

Clarke said that over the course of a year, the branch’s top sellers are berries but at Christmas, citrus is the clear-cut best seller, as in the UK it is traditional to include some in Christmas stockings. The UK, Spain and South Africa are the main sources of the fruit in the store.

The berries cooler, located on the right at the very front of the store over summer, was rarely without a customer during ED’s visit and is replenished several times during open hours. Clarke said there is still a lot of opportunity to expand sales of berries – particularly blueberries – as the household penetration of this product is still relatively low.

Organic produce has small but loyal customer following

Organic produce accounted for 5-6% of total produce sales in the week ED visited. Colom said it used to generally be a bit higher but some weeks can still get up to about 12%.

Waitrose has a high market share in organic which is going from strength to strength. The new Waitrose Duchy Organic design was seen in store on berries. Clarke said this design would be seen on other fruits in the coming weeks.

Private labels and provenance

While private label – also known as own brand – products account for about 45% of Waitrose products overall, in the case of fresh produce this soars to 90-95%. Some brands are seen in salads, then there is also co-branding of Waitrose and Pink Lady, which sells well. Otherwise it is all about the Waitrose brand

Clarke said that Waitrose branches in country locations do see interest in local produce, as do stores in Scotland, such as for Scottish-grown strawberries.

Grapes must have crunch, texture, flavour

At the time of speaking to ED, Colom said the grapes on the branch’s shelves included the black seedless Sweet Sapphire, seedless white grapes including Sugraone and Prime,  and Early Sweet, and in red seedless, Flame.

“We look for crunch, great texture and really great flavour – a lot of aromas and sweet/acid balance,” Clarke said. “Cotton Candy was a good seller last year and we’re going to do more of it this year. Sable’s done exceptionally well and Italia is very popular.” She said Waitrose mainly sells seedless grapes, typical of the UK market. It doesn’t sell Red Globe and stocks only a couple of seeded varieties over the course of a year.

Fully automatic ordering

Colom said Waitrose uses an elaborate algorithm-based ordering system based at its head office so people in positions such as his no longer do ordering. The system factors in weather data, sales history, demand, space at a branch, and so on and “works out what we can sell for every single product.”

His priority is to ensure the stock thus ordered indeed reaches the store shelves. “It’s critical to do an off-sale check before we start in the morning, so we know what don’t have.” Also, given the short shelf life of fruit and vegetables, date rotation and quality are critical. “We do quality checks all the time.”

Much attention is also paid to ensuring the country of origin is on the ticket for each item, a legal requirement, “that’s absolutely critical,” he said.

Continuous replenishment

Most of the stock comes into the branch at night. Three deliveries of fruit and vegetables take place then, and another mid-afternoon, as well as 3 ambient deliveries, and various other special and additional deliveries.

A maximum of about 7-8 people in total work in Colom’s Fresh produce section at one time and while the shelves are filled through the night, during open hours they spend most of the time replenishing stock.

Colom said he is proud of the quality of the produce on the shelves and, in particular, of the deep knowledge of some of the partners (staff) on the section, such as on the different fruit and vegetable seasons. If you want to know about new Jersey potatoes in late April/early May, British asparagus in May, strawberries in June, certain apples in June and July, and so on – look for the person wearing the ‘fruit, veg & flowers specialist’ apron.

Waitrose: http://www.waitrose.com/
London Produce Show: http://londonproduceshow.co.uk/
Read more about Waitrose in our article: Waitrose banks on omnichannel strategy

JB

 

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M&S still growing ahead of market in food

In its latest annual report, the UK retail chain said despite the most competitive food market of recent years, it delivered like-for-like growth in every quarter and maintained its margin.

M&S says 2014/15 was an outstanding year for its food business “in a sector that continues to go through profound change.”

In its latest annual report, the UK retail chain said despite the most competitive food market of recent years, it delivered like-for-like growth in every quarter and maintained its margin. “We have a clear and distinct offering and our growth plans look clear and achievable,” it said.

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M&S has two divisions: Food, which accounts for 57% of its turnover, and General Merchandise, which accounts for the remaining 43%. Overall, it has 33 million customers through its 852 UK stores and e-commerce platform. Worldwide, M&S has 480 wholly-owned, jointly-owned or franchised stores in 59 territories across Europe, Asia and the Middle East. “Our International business now includes a fast-growing standalone Food operation, meaning that more people around the world can enjoy our delicious, innovative food products,” it said.

M&S said innovation remains its core strength as a speciality retailer. “In Food, we showed that we are at the forefront of discovery and creativity,” it said.

Expansion of convenience format: Simply Food

M&S said it opened 67 new stores during the year. Of these, 62 were its Simply Food convenience store format, taking its total to 504. It said franchise partners play a key role in this growth and in March it opened its 200th Simply Food store through a partnership with BP.

“We expect Food space to increase by 4.5% in 2015/16, again driven by growth in Simply Food store numbers,” the chain said in its report.

“The Simply Food format plays into evolving shopping habits. People are shopping more regularly and more locally, meaning that our convenience format is one of our key differentiating factors.”

M&S said it has “a strong pipeline with the fastest Food store opening programme planned in M&S’s history.”

“The UK food market will remain challenging but we are well positioned with a store format that caters for how shopping habits are changing.” 

source: M&S