The landscape of the grocery market is changing all the time and with consumers watching their spending and increasingly aware of what is on offer, they are seeing beyond the big four in a new light. The elements of the fresh produce industry once pushed aside when the big four supermarkets propelled their market share into dominance now stand as an increasingly attractive way forward.
Across the sector, there are a fair few new opportunities to be had by those with a keen eye for where the market will go next.
But how can the industry get a hold on these and secure their long-term future outside the cut-throat world of the major multiples?
Here, FPJ speaks to well-known players from the foodservice and wholesale sectors, as well as a supplier who has elected to operate outside the big four and an independent retailer who has pulled out all the stops to make the most of the business.
Foodservice foray
David Burns, managing director of Fresh Direct, is confident that the rapidly changing high street will open up more opportunities for fresh produce businesses, if they are ready to make the most of them. The foodservice supplier has just opened the second store of its retail arm, Roots, as a move into this evolving market.
“We initially tried to work in conjunction with the big four, but found the experience complicated and unpleasant, so we felt compelled to launch the venture independently,” Burns explains. “The first shop displays its ethos on a sign above the counter: ‘Fruit and vegetables come in all shapes and sizes; and they are usually happiest growing naturally in soil. Remember they are meant to be eaten, not framed.’
“If you set your stall out - literally or metaphorically - to sell quality produce, you will require persistence and bravery but it will prove worthwhile in the end, so stick to your guns,” he continues. “The challenge will be in resisting the temptation to appeal to a wider spectrum of the population by offering cheaper produce, but don’t try to tangle with the big four in a price war. The supermarkets will always be there, but there is no reason why you cannot co-exist with them.
“Retailers would probably be ill-advised to attempt to play the big four at their own game. Instead, concentrate on their weaknesses; choose products for flavour rather than appearance and invest in the training of your staff so that their product knowledge becomes formidable - unlike the norm in the big four, where the guy you are quizzing about asparagus was selling Zanussi washing machines last week and next week he will be in the clothing department. Make sure you can tell your customers why an Amalfi lemon is superior to the shiny, waxed jobs so familiar elsewhere and let them have a taste of the incomparable Alphonso mango, which is unlikely to appear in the supermarkets any time soon on account of its ugly appearance and relatively short shelf life. Dare to be different with your product range but, above all, listen to your customers and try to provide what they want.”
Burns is convinced that shopper loyalty to the big four will be tested through the economic downturn, as consumers shop around the multiples for the best offer and, inevitably, consider their options outside what they have been used to.
“There will always be a demand for these ‘sheds on the bypass’, as long as consumers value the convenience of one-stop shopping,” he admits. “However, hopefully, greater introspection with respect to expenditure will result in recognition of the fact that organisations that announce multi-million pound profits annually are not set up on a charitable basis and that someone, somewhere, is getting reamed…
“It is to be hoped that, in the absence of a governmental ‘Of-shop’ to protect us from the combined near-monopoly of the big four, consumers will elect to spend an increasing amount with specialist retailers and rediscover the pleasure of shopping outside the supermarket environment.”
Wholesale character
The wholesale sector is one that appears to be coming into its own in the midst of the economic downturn, with some of the more traditional customers - independent retailers and street markets - showing signs of a trading boost as consumers rethink their shopping routines.
Chris Hutchinson, chairman of the Spitalfields Market Tenants’ Association and managing director of wholesaler Arthur Hutchinson Ltd, says the trade is holding firm and will remain an alternative avenue for fresh produce suppliers. “The main opportunity in wholesale up until the recession hit has been the foodservice trade, which needs a level of service and expertise that we can provide,” he explains. “Since then, we have seen a definite resurgence in street market stalls all over London and the rest of the country, as consumers are looking for more value for money.
“However, the two main outlets for wholesale markets are still the independent retail and the catering trades, including everything from small to substantial operations and, in the case of Spitalfields, covering significant parts of the South East, such as London, Kent and East Anglia.
“The perception that wholesale markets are a dumping ground for fresh produce is something that suppliers have had to be educated about,” he continues. “Here at Spitalfields, the traders sell produce that is high quality, well presented and in many cases sourced exclusively from growers who have come away from the big four.”
The wholesale sector has long been in tune with production and the fine balance of supply and demand. This, Hutchinson says, sets the trade apart from the major multiples. “The supermarkets assume that fresh produce is grown in some kind of factory rather than on the land and that they can make orders and expect them to be met come wind, rain or shine,” he maintains. “We have a much better relationship with our growers.
“You cannot force Mother Nature and sometimes the supermarkets ask growers to go to work on a field when it is not ready, which is not good for the crop whatsoever.
“Back on the wholesale market, if a supplier says there will be a 24-hour gap, we will be sympathetic to that and work with them. At the same time, if there is a flush, we go to work with that, reduce the price and find customers for the excess.
“Instead, the supermarkets make programmes for promotions at the most inappropriate times. This year, for example, it was tomatoes at Easter, when neither Canary Islands nor British produce was at its best and supply was tight. I believe that tomatoes, like any other product, should be promoted in a flush but the trouble is that to do this you have to be flexible and make decisions based on a week’s notice, rather than months ahead, as it is at the multiples.
“To make matters worse, they then pay someone £5.80 an hour or so to sling the produce onto the shelves. If you are a supplier who has got to meet all of their many requirements and you go into their stores as a punter and see how your produce has been handled, not just by staff but by consumers, it is very disheartening.”
The 140 fresh produce businesses at Spitalfields thrive on the competition still alive and well on the market. “Everyone wants good produce to try to achieve good returns,” says Hutchinson. “The competition keeps everyone on their toes and it is a fantastic thing.”
Outside supply
There are a number of ways in which the big four seduce suppliers, not least the promise of high-volume programmes. There are, however, a number of suppliers who have elected to cherry-pick contracts from outside the major multiples to give themselves a better spread of customers and ensure that their entire business is not based around one customer.
Simon Ball, managing director of Hazeldene, has made a conscious decision not be a salad supplier to the big four retailers in an attempt to spread time and effort across a more diverse customer base.
The Wigan-based salad processor supplies a wide range of customers, from high-street food chains Subway, Greggs and Wagamama to food manufacturers Northern Foods, Greencore and Melton Foods and retailers Spar, Somerfield and Iceland.
The firm, part of the William Jackson Food Group, turns over £18 million a year.
“We are trying to focus outside the big four,” says Ball. “We made a decision not to become a salad supplier to the big four, but we are involved with the major retailers through food manufacturers. If you are dealing with the big four, you are talking about volume, but we are all about being able to react quickly and be flexible.
“Our vision is to become the preferred salad supplier to the foodservice sector, convenience retailers and food manufacturers in the UK by taking steps along the way. We have set ourselves a target of winning £5m in new sales this year and we want a good split across our customer base.”
The company has formulated a strategy that works outside the big four retailers and will continue to reach out and diversify.
Finlay Dawson, commercial director, helped put together the action plan as part of the new management team. “If you go back 12 months, we decided we needed a bigger customer base because we had four main customers and half the business was with retail customers, for which demand is very seasonal,” he explains. “We have tried to maintain our relationships with the customers we already had and take on new customers, who give us steady business throughout the year.
“We deliberately decided that we did not want to become a supplier to the big supermarkets because they are very demanding and we knew that this would not leave us the time to focus on other customers.”
Independents’ day
Gonalston Farm Shop on the Trent Valley floor between Nottingham and Newark opened back in August 2003, when 73 customers made some £600 on the first day of trading.
The business has grown steadily since then, with the store now making more than 2,000 transactions a week and holding its own against competition from big four retailers in nearby towns and cities.
Georgina Mason, who co-owns the store with her husband Russ, insists that the farm shop has a long-term future because it is a “unique” package. “The major retailers cannot replicate this,” she says. “The nearest to what we offer is Waitrose, but even that is not the same. We buy as much local produce as we possibly can - for example, last year we sold 10,000 punnets of strawberries and 2,500 bunches of asparagus from Southwell, which is less than 10 miles away.
“We are not a shop that you could call cheap, but we try to be good value and we do as many offers as possible, while selling top-quality product. We are never going to be as low price as the supermarkets because we do not have the buying power, but customer numbers have remained buoyant and the spend has never stopped growing, even in the downturn.
“I think what sets us apart is the shopping experience. There are the people who shop with us because they want quality, then there are people who want the customer service that we can provide, as well as those who are just passing but are so impressed that they come back.”
A VIEW FROM THE OUTSIDE
David Burns, managing director of foodservice supplier Fresh Direct, considers the advantages that growers, suppliers and consumers may reap from staying away from the big four.
From the grower and supplier perspective, operating outside the major multiples means not having to spend thousands of pounds every year on repeat analyses for radioactivity, heavy metals and pesticides; a massive reduction in paperwork; no requirement to supply clone-like produce of identical size, shape and colour; no exposure to reneging on volumes should retail sales not match expectations; and no exposure to reassessment of previously agreed prices (never a change in your favour - in effect, a unilaterally declared retrospective discount!). The greatest advantage may be the retention of your ability to truly be your own boss rather than subservient to whole ranks of power-drunk middle-management from an outside organisation. You will be able to develop a broader customer base, thereby establishing greater security against the possibility of critical damage to your business by external decision-makers - in short, you won’t have all your eggs in the one basket.
Furthermore, your extended customer base will be unlikely to presume to dictate such matters as price, with a resultant improvement in your profit margins, or harvesting deadlines, letting you decide when your crops are ready.
Another advantage is that you will have no outlays on machinery and staff for fancy packaging, not to mention the cost of the packaging itself - and companies like Fresh Direct positively do not want any fancy packaging, which would require time-consuming stripping-off, with a subsequent cost for recycling or landfill disposal.
From the shopper’s perspective, if supermarkets disappeared tomorrow, which aspect of the experience of visiting them would they miss the most? Shoehorning their car into an inadequate space, knowing that sooner or later a less careful individual is going to inflict a £600 dent in your wing? Beaming with appreciation at the philanthropic largesse displayed on the sign that informs you that you are entitled to two whole hours of free parking? Waiting in a 30-yard queue at the Cashline machine? Fumbling for the £1 deposit for your trolley? Smiling at the posse of security personnel at the entrance while each of them impassively assesses your criminal potential? Queuing at the deli counter knowing that a further, more awe-inspiring queue awaits you at the check-out? Getting ready to say “no” three times - no, I don’t need help with packing; no, I don’t have a loyalty card; and no, I don’t want to contribute to the destruction of the rainforest by accepting a school voucher when I consider it the government’s job to make sure our seats of learning are adequately equipped? Perhaps what you would miss most of all is that final stomach-clenching moment when you must pass through the security tag detectors, which seem programmed to randomly sound a loud alarm for no reason, with the resultant humiliating attention of the entire security team - gleeful now - while the whole world looks on.
You may wonder why young children in a supermarket always seem to be crying. Perhaps they are simply giving a more honest appraisal of the entire experience.
No comments yet