Unlocking Growth in Challenging Times

Joanne Denney-Finch, Chief Executive of IGD addressed the QMS Marketing Conference in January 2012. Points she made –

In 2009 46% of shoppers said they were prepared to pay more for premium products but in 2011 that figure had fallen to 30%. Only 5% of consumers expected to be better off this year. Meat consumption continues to grow against a background demand for quality and ethics.

Going forward the secret is to arrive at the future first. Priorities of consumers will be primarily: 1 – To shop within budget 2 – provenance and 3 – store experience.

Signals that cause us to reach these priorities are:
Difficult to budget, planning of meals, varying diet, quality and price comparison, avoiding waste, choosing products to reflect ethical believes, and great results every time they cook.

Last two years consumer spending has fallen but that is no surprise since meat inflation in 2011 was 6% and wage inflation only 1.4%. So there is a gap in disposable income.

Consumer characteristics – 4 in 10 shoppers are likely to check price.
Over 50% check price of every item.
Customers are spending more time researching what they are going to buy.

7 in 10 shoppers say promotions are important in choice of store. Demand is going up and down in waves, sales are hard to predict and profit margins hard for retailers to achieve. They are exploring other ways to grab customer's attention.

1 in 4 British shoppers now cook from scratch and that is no surprise since they are rediscovering cooking evidenced by the 21 million who watched the Great British Bake Off series. Under 35s especially are looking for more recipes and ideas. Sainsbury's with their Live Well for Less range include advice on buying meat.

Shoppers are looking for more than just information. Meal deal promotions and not just ready meals.

The simpliest way to save is to decrease amounts wasted. It is estimated that could account for £50 per month to the average family so avoidance of meat waste could save £1.3 billion per year. There is evidence that people are switching to low waste products.

There is mounting interest in provenance with shoppers happy to receive smaller quantities to get best quality. Despite the financial climate 25% of Scottish shoppers expect quality to be play a large part of their meat purchasing decisions.

More than 8 in 10 say the way food is produced is “fairly important” to them.

More information is being put on-line and if that information is not there consumers are suspicious. The conclusion has to be that the economy is not eroding the case for assurance schemes.

The majority feel that shopping for food is a chore and so anything that makes it more fun and interesting helps shoppers into a positive frame of mind. That is not easy for you to influence and certainly not in isolation but working in partnership you can make a real difference.

We are going to see some very dramatic changes in food stores over the next 10 years as on-line shopping continues to grow. Retailers will need to devise new ways of attracting people away from their screens and into their shops.

Enhancing the Shopping Experience

1 Cooking and tasting meat is great theatre and could be increasingly effective in store.
2 Digital screens and Wi-Fi so that customers can use their smart phones to help them choose products. Show whatever you like as long as it helpful. It might be cooking methods or product accompaniments. Some lower tech could be merged but a multi-channel future will be vibrant.

Shopping habit predictions expected across a wider variety of outlets in the future. Most specialist butchers are carving out a strong position based around quality, local sourcing, exceptional service and unique speciality “it has never been more important to communicate these strengths as people shop around for value. These specialist businesses are a good bet for growth.

They need to build local heritage with QMS supplying the invaluable support.

“Most people succeed in business by doing the ordinary extraordinary well and consistently. You get more % points from that than anything else.

The Scottish red meat industry has many strengths – fine products, strong identity and great potential. It is at times like these that the best businesses and the best organisations make the fastest progress and make the greatest advantage.

Cabinet Secretary Richard Lochhead on being asked about suuplies of beef going forward said that food production should be at the heart of the debate on CAP discussions. The drop in sheep numbers is not because of forestry. We need to have policies in place to have those long term ambitions.

Mark Thomson, Business Unit Director, Kantar Worldpanel made a presentation on the shopper landscape in 2012, what it means to you.

There has been a roller coaster over the last few years. Now consumer confidence is still at rock bottom we have gone through the phases from credit crunch to recession to bounce back and austerity so consumers are now more prepared if it happens again.

Christmas was a standard Christmas and not special. Loyalty continues to be the focus. Reward shoppers for shopping in their particular shops and coupons are more tangible and effective than price reductions.

Up to Christmas 2011 the average market growth in grocery was 4.8%. In UK Tesco and Asda were the losers and Sainsbury's and Morrison's gained. In Scotland Tesco's market share rose 2.6% to 31.3% against an average growth in Scotland of 2%. Sainsbury's and Aldi in Scotland also were winners. Certain areas were affected more because of austerity measures affecting local areas greater. So these figures have to be treated as an average.

Local is Still Important

30% of shoppers said “I try to buy local produce” and organic is less relevant.

Impact on Red Meat

Red meat growth is slowing while poultry, bacon and sausages continue to grow. There was big inflation on lamb that caused consumers to move away from it. In beef there was a move form joints to stewing mince but beef won overall through its versatility.

Red meat is fundamentally important to the shopping basket, is the largest element in the grocery market and appeals to 91% of shoppers.

Promotions

Depth of deal has grown. 45% bought on deals in 2011 but with red meat inflation at 5.3% the choice was to buy it on a deal or go for cheaper product. Poultry deals gained in popularity while there were fewer beef deals. So how do promotions work?

There are spikes and troughs and the options are:

1 Try and increase the depth of deal.
2 Widen the promotional window ie increase the number of weeks on the deal.
3 This does not build long term growth but you have to promote to create the noise to attract customers in. The trend now is that retailers are not giving away as much with promotion of red meat.

6% more shoppers in Scotland will buy premium and their propensity to shop up is better here in Scotland.

There is no one size fits all. It is not all about money off sporadically. It must be tactical with different marketing mechanics across different types of shoppers and shops.

Premium fits better as an evening meal occasion.

Meat balls evidence that shoppers are willing to trade up if they see benefits. They are bought by 1 in 4 shoppers and showed a 7% increase in volume.

Key Themes for 2012

1 Local but with value for money.
2 Versatility.
3 Shoppers with kids especially are cutting back.

It is important to understand the changing consumer and their consumption.

After lunch Jim McLaren, Chairman of QMS led a question and answer session. The first question why QMS spent so much on acquiring data such as we had heard? He said that it was Unilever that said that half of our marketing doesn't work, the question is what half. He stressed how important it was to have the proper trends to use the marketing to the greatest effect.

Questions put to the panel included what is the real value of the assurance schemes to the consumer. Answer – shoppers wan to know more, celebrity chefs and cookery programmes stress the role of provenance. There is “value equation where the quality aspect is absolutely vital to shoppers especially those buying premium cuts of meat.

Is there a case for butchers? Kanatar said they still have relevance but is an industry sector that needs to work harder. A good model works well within its local community. They are not so strong as supermarkets who try to “lock in shoppers”. IGD said shoppers are telling us they want speciality shops, they value advice and high quality of service as long as it matches with value for money.

Question – what are the opportunities for red meat on-line? Answer – the future is rosy and there should be significant growth ahead. Retailers who ignore on-line are mistaken. On-line retailers are upping their game with videos and specifically being able to select cuts, see the size and almost feel via imagery. It is as if you were at the counter yourself. Use of smart phones and virtual stores will grow. It is a fast moving environment that you must keep in tune with. The surprising figure of 4.8% being he figure for on-line grocery sales was not massive. It was felt that touch feel and compare is still very relevant. The view was that the on-line market is a young persons market. Proportion of spend has not changed but consumer expectations have. They may shop on-line one week and in store the next. In future marketing needs to be more than one channel.