International Journal of Retail & Distribution Management

Emerald Article: The diversity of the UK food market: Reflections on present and future trends Barrie Clarke

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To cite this document: Barrie Clarke, 1985"The diversity of the UK food market: Reflections on present and future trends", International Journal of Retail & Distribution Management, Vol. 13 Iss: 1 pp. 14 - 19 Permanent link to this document: http://dx.doi.org/10.1108/eb018258 Downloaded on: 09-11-2012 To copy this document: permissions@emeraldinsight.com

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FOOD RETAILING

The diversity Reflections on p

Barrie Clarke The story of (he marketing of food in Institute of Grocery Distribution the UK is a fascinating one. The growth of the large multiples, the difficulties of retailer/supplier relationships, the development of fresh foods all these are significant features. In this article, Barrie Clarke pinpoints some interesting new features which are currently emerging: food trade development in which volume growth is no longer the sole overriding objective; unease at the "site auctions" to which major groups must submit themselves; and the realisation on the part of manufacturers that retailers have assumed "creative control" of the marketing process. This is a slightly edited version of a paper originally presented by Barrie Clarke entitled "Future trends in food retailing", at the School of Agriculture Conference in Aberdeen, which took place late last year. I'M fascinated at how frequently I hear people saying that 'food is the sex of the 80V. It's a very 'modern' concept and almost certainly begun by someone whose ideas are rooted in the 60's. I'm not sure what it really means but I assume it is that we have, in some sense, a passion for the taste experience. Perhaps it means that the 80's are doing for food what the 60's did for sex and the 70's did for beers with unBritish names we no longer feel guilty about enjoying them. One of my favourite writers, Iris Murdoch, understands the concept I think. She can bring a delightful foody sensuality to her writing. In 'The Sea, The Sea' she writes of "an orgy of fresh fruit, short cake biscuits, claret, whisky and turkish delight". And a certain eccentricity. Later her hero enthuses about a lunch which consisted
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of "fish cakes with hot Indian pickle and a salad of grated carrot, radishes, watercress and bean shoots". Well, the zaniness perhaps points out that food is first of all for eating by people, plain old folks with their unpredictable ways, messy kids and grannies and cousins; then by 'consumers' or 'shoppers' or 'socio-economic' groups as identified by marketeers. Uniformity is a dangerous assumption for marketing management. A summary of recent trends covering say the years 1970 to 1983 might include the following: retail power expands; volume growth for major grocers; price wars; fresh food opportunities; pressure on manufacturers; and producer-retailer links. There's no doubt that in the 70's there developed a world that looked substantially different from a decade earlier. In the 60's, marketing was about revealing a wonderful world of new products and experiences to an excitement-starved generation who'd never had it so good, and were still unaware of how good they could have it. The marketeer had only to tell them about it and they flocked to the stores who were allowed to stock it. The innovative manufacturer had the world at his feet. By the late 70's the retailers' part in the process was different. In 1982 the IGD organised a seminar entitled 'Multiples: a Recipe for Perpetual Growth?'. That the question could be asked at all testifies to the change that had occurred. Retail power was a reality. Central to the aspirations of the major grocery retailers then was growth in sales volume and they were spectacularly successful at obtaining it.

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of the UK food market resent and future trends

relationship between suppliers and retailers. If you sell famous brands cheap you set at nought the tender loving care and tender loving money that has been lavished on them to build public awareness and perceived premium value. Notice that we are discussing traditional grocery products, for at the beginning of this period grocers were still grocers; selling a range of fresh foods certainly, but with concentration still heavily on traditional grocery items; provisions (cheese and bacon), canned and packed goods were predominant in most grocery shops including those run by the biggest high street names. The structural and market changes I have identified in discussing the big companies of course had equally farreaching effects at the smaller end of Though margins had to be slim to be the business, notably in the developcompetitive, growth in volume would ment of symbol groups. allow your business to grow in every sense. And grow they did in turn- The fresh revolution over, in size of store and total selling One of the most obvious changes in the area, by building big stores and by major chains' merchandising policies merger or acquisition. In promotional in the 70's was the move towards fresh spending, whether advertising or in foods. After some shaky starts, meat, price cuts. In buying power in the produce and dairy departments partimarket-place, in negotiation with cularly, became crucial to overall suppliers at the expense of smaller profitability. Rather more recently, but still in the period under discussion, retailers. Of course there were price wars with delicatessen sections and in-store one chain pitched against another. But bakeries were introduced to many there was growth for all from the soft existing stores and became essential for competition provided by the small new large stores. Quite recently fresh grocery shops which closed by the fish departments have brought further thousand. The chains were innovative variety into the big grocers' fresh food and dynamic, introducing new pro- operations. ducts and new efficient methods. Until now I've been discussing the grocery trade; this is the biggest identifiable group of shops in the food retail A new relationship Fighting price wars with brand names market and accounts for well over half was a clear symptom of a changing of all food spending. What of the other sectors? The effect on fishmongers was limited, if only because the fresh fish market had been declining and there were not many of them anyway. Family butchers and greengrocers have however been affected. Equally sales of fresh fruit and vegetables have mushroomed in supermarkets. And while there has undeniably been a reaction against factory-baked bread, family bakers find crusty competition from in-store bakeries in large supermarkets. Large mixed retail businesses had different relationships with the food market. Others produced varied and often successful food operations but only Marks & Spencer took major steps to impose themselves, and their success has been enormous. And so to the present. For the major retailers growth in sales volume remains an important objective. They all have ambitious plans to increase their selling area, the primary resource of any retail company. Some are participants in the current flurry of takeover/merger activity. Most are caught up in the intense competition for prime sites, the results being high prices in addition to the costs (often many millions) of actually building and stocking the new outlet. However a new group of trends is currently identifiable. These are: retailers' creative control; growth through added value; site wars; food for lifestyles; manufacturers adapting; and producer-retailer cooperation. What is the evidence for a new phase of food trade development in which volume growth is no longer the sole, overriding objective? First, the room for manoeuvre in
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a role to play in the marketing of food; in many cases they have assumed creative control of the whole process. But they are also adapting (and here an even tougher repositioning is called for) to consumer reaction against certain types of processed food. The recent upsurge of interest in labelling, food values, additives and nutrition in its media manifestations, is evidence of this reaction and so are the sales of certain products that claim the 'whole', large expensive efficient outlet pitched ie unprocessed, food label. in competition against a rival's equally large expensive efficient outlet, and N e w products this can only administer another twist Manufacturers' responses may be seen to the ratchet of new store investment in the introduction of products with criteria. Sainsbury's are among the reduced sugar, fat or salt, and retained leaders in developing new sites and re- or added fibre. Examples are sugar developing old sites; yet they have free muesli, canned fruit in natural diversified into DIY through the juice, lower sugar preserves, canned Homebase chain and into the United vegetables without salt, low fat milks States through the Shaws supermarket and spreads, wholemeal bread and group. biscuits, low salt crackers, low fat, low salt sausages. Adding up the values An equally important response by Increasingly then added value is the manufacturers to consumers' wishes aim and the strategy is marketing. has been in the growth of frozen and Consumer research, product develop- chilled convenience products and ment, media promotion of the store recipe dishes. 'brand' image are now standard retail In many of these areas encouragebusiness activities. ment by retailers has been the spur to Added value is created in two main innovation. ways. However by far the most important First, food retailers are concen- change in the supermarket's product trating on improving the standard of offer is the dominant place now held service offered to customers. In design by fresh food. Well-merchandised and decoration, space and comfort, efficiently-run fresh food departments car parking facilities, longer hours and add value in several important ways: a host of other areas which signific- 1. They offer higher margins than antly affect the customer's relationship traditional packaged groceries. with the store, retailers are determined 2. They contribute much to store to put their houses in order. There are ambience and attractiveness. parallels in the huge investments 3. They provide a means by which the currently being made by other retail store can distinguish itself from the sectors whether in DIY hyper- competition. markets or village pubs, fast food outlets or upscale fashion houses, the Cooperation and consistency 'shopping' environment is held to be And of course it is here that coopercrucial. ation between producers and retailers The second means of adding value is essential. The requirement of major has been, in cooperation with pro- supermarket operators is for sources of ducers and manufacturers, to create a supply in volume at a totally consistproduct offer that meets customers' ent and reliable quality level. To this requirements for quality, variety and end they have taken initiatives in several markets. presentation. Some have developed or acquired Manufacturers have begun to adapt to the fact that not only have retailers subsidiaries which supply them direct

this kind of growth game is steadily diminishing. Sites will always become available as the population shifts, attitudes and needs change. Yet they are by common agreement increasingly hard to find. This is particularly true of superstores so that a new optimum store size may be in the 15 to 20,000 sq ft region rather than 25,000-plus. Second, there is growing unease at the nature of the site auctions (not too strong a word) to which major groups must submit themselves; and growing cynicism about government and local authority planning policy. Such attitudes must lead to a reappraisal of investment strategy. New sites are being acquired and developed but the criteria for investment grow daily more demanding. And in the refurbishment of existing outlets, the development of new distribution and information systems, and new products research, there are plenty of areas able to benefit from a reallocation of investment money. The opportunity cost of a full-throttle race for sales area is well understood. A third constraining factor may turn out to be the high regional market shares already held by individual companies in some areas. This is notoriously difficult to prove but is put forward by those who represent smaller retailers as supporting the case against major companies which alleges 'unfair competition'. If regional market shares were to become 'an issue' a more circumspect attitude to expansion would be adopted by some retailers in some areas. Finally, there is the spectre of retail saturation or, more graphically, areas becoming 'overshopped'. This is a complex issue but suffice it to say that multiples are increasingly finding one
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RETAIL & DISTRIBUTION MANAGEMENT, JANUARY/FEBRUARY 1985

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with meat, dairy products, fruit and vegetables. Others have entered into direct trading relationships with producers who have been able to offer the kind of service and consistent quality needed. The result of these moves has been uninterrupted growth in supermarket sales of fresh product. In some cases as much as 50% of total supermarket sales are now in fresh food as against packaged groceries. I expect this growth to continue. And, subject to quality and availability criteria being met, I also expect absolute sales levels of fresh, as against packaged food, to increase steadily in an overall static market. Whole food to grow What do you mean by "fresh" food? It is a difficult word. 'Perishable' or 'short-life' may be better but the danger of misinterpretation remains. May I therefore restate the case by saying that I expect consumers will increasingly want to buy whole food, that is unrefined food, to which nothing has been added and nothing taken away. The successful Allinsons advertising campaign makes the point well. Such a restatement exposes the pejorative use of the words 'technology' or 'manufactured' too frequently heard from the hippy-crankbrown-rice school. Of course manufacture is necessary we have been making bread for millenia. Of course technology is essential we all benefit from improvements in the growing, harvesting, transporting, presentation and preservation of food. It also cuts through the rubbish about 'fast food' and 'convenience' by directing thought to the food itself rather than condemning it out of hand because of its presentation. A hot baked potato or a chilled recipe dish may both fall easily into the 'whole food' category. What then is the case for future growth in demand for the food, the whole food and nothing but the food? Breaking down the growth sectors identified earlier we find in addition to the snacks crisps, chocolate biscuits, carbonated drinks etc and convenience foods, the following: fruit juice, yoghurt, cheese, salads, breakfast cereals, nuts and pasta. Reflected in these products I see several different lifestyles, by which I mean loose sets of ideas and behaviour characteristics. We all share in all of them to a greater or lesser extent as they are ways of describing what the French call 'les flux', the flowing tides, of modern society. They are:
Les Flux 1 9 8 4 Health Enjoyment Cultural Ethnic Youth Mobility Work Family

NACNE and COMA reports are symptoms of concern about links between diet and illness. 'The Food Scandal', published earlier this year, claims to be a plain man's guide to NACNE and is a clear statement of one side of the argument. The authors regard as 'necessary developments' the following: breeding lean animals; reduction of fat content in processed meat products; better labelling of food. The great sales advance of fresh poultry particularly chicken and

This is merely a useful start-point for thought on future developments in the food market. It takes known eating habits and moves to social description rather than the other way round, and I find that reassuring. Of course in chancing one's arm by forecasting a consumer market we are forced to put the social description first or at least to support prediction by reference to our view of social trends. My view is that the health-enjoyment style is the one to watch over the next 10 years. It suggests a trend in people's eating patterns that should offer great opportunity to producers of fresh food and manufacturers of health or 'treat' products. But it will be keenly monitored by the retail trade whose key position in the marketing process will grow stronger. My summary of food retailing in the next decade is: (i) Growth through segmentation (ii) Service wars (iii) Food for health and enjoyment (iv) Information-led partnerships between (v) Retailer/Manufacturer/Producers Why single out health and enjoyment? Health is very much a part of people's hopes for themselves. In surveys it scores higher than any other benefit. We are prey to fads and fashions of all kinds at present as I shall mention again, but the impulse towards healthy eating is emphatically not just a fleeting fancy. At government level the recent
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not gloomy, but worth a notice. The Henley Centre for Forecasting have described the importance for the future of what they call the 'Household Economy'.
Home economics

turkey portions over the past year, is I am sure regarded as a healthy step in the right direction even if taken for reasons of price rather than in deference to the health lobby. Informed care for the body is increasingly part of our education system whether in food preparation or physical education classes. And improvement in general standards with more young people remaining at school and more progressing to higher education will only strengthen people's grasp on the importance of a relevant diet. The spectacular success of the anti-smoking lobby is of interest here too, not because the situations are parallel but on the more general level of attention to activities perceived as health-related. Part of many people's enjoyment these days is in sport and a desire for physical fitness. It is here that health and enjoyment run together. The involvement of sporting activity and personalities with brands like Mars and Lucozade illustrate the connection. At a Food Marketing Institute seminar in Dallas in May a speaker referred to our customers of the future as being 'tougher, smarter and looser'. Tougher because better educated and more experienced; looser because less bound by traditional restraints and more self-indulgent. Finally a word about convenience which in all this fun and fitness we cannot ignore. As a selling proposition it will undoubtedly support the health and enjoyment styles. 'Fresh convenience' products will continue to grow: recipe meals and chilled desserts are good examples. In the vegeterian category, divested of its cranky image, convenience has clear potential as anyone will know who has tried to
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entertain a family day in day out on imaginative ways with nuts, pulses, rice, pasta and vegetables. It can be done and it's delicious, but very time-consuming. So there will be great opportunities to work with the trade on product development. At the same time retailers will wish to provide services designed to differentiate them from their competitors.
Serving a service

In-store restaurants, or DIY microwaves, free carrier bags, help with packing, 'carry-out' services, home delivery, party-trays, menu leaflets, and fresh flower despatch services are all in operation now. Producers who can introduce methods of presentation that genuinely add to this development will be welcomed. Variations on existing concepts such as hampers suggest themselves; seasonal fruit and dairy 'collections' with a strong regional branding; cross merchandising ideas involving other growth markets like wine; the elaboration of enjoyable/leisure meal occasions like picnics and parties; highlighting religious or secular festivals at the different seasons by involving fresh foods. This is the upside of the service assistance imaginative producers or suppliers will offer to the trade. And notice that ideas are involved, not just products. The other side is the need to help keep costs down. One of the greatest services the trade will continue to offer to customers is low prices. Thus, productivity at every stage in the chain is essential, and few factors will find greater favour. A note of caution now about future good times for producers and retailers;

Briefly, the suggestion is that in a socalled 'post-industrial' society, attitudes and circumstances will combine to increase the level of (variously defined) economic activity carried on in the home. Much of this is likely to be concerned with the growth, processing and preparation of food and hence represents a threat to the 'formal' economy which includes production, manufacturing and distribution. On Henley's calculations in a 20-25 year timescale a figure of 4,814bn (1981 prices) or some 20% of consumer food spending could be 'threatened'. Of course the method of calculation is open to question but with increased leisure and the healthy, 'natural' life sought by all classes and types, there is more than a ring of truth here. In any case retail 'services' will have altered substantially by the first decade of the new millenium. Teleshopping and home delivery will be commonplace. The economics of breaking bulk at massive distribution centres may have altered if control can be easily maintained at smaller local centres by information technology. We may be a long way from a revival of clamour for three acres and a cow but watch out for a 'Good' Lifestyle involving an increase in home production supplemented by eating out and electronic ordering in! In Tiburon, California, there's a Safeway supermarket that flies in red Radiccio Lettuce from Italy and Gammelost cheese from Norway, sells a Grand Chateau 1978 Burgundy at over $100 and lobster (from the tank) at $8 or more per pound. The prize in the store's coupon game is . . . you guessed . . . a night at the opera for two. Now this is clearly adding value to sales and its achieved by a straightforward proposition suited to the people's needs or (in this case) wishes. If you have been shopping in a mining area recently you will have seen a

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similar market force in action under but it is my belief that partnerships between producers, manufacturers and quite other circumstances. retailers, based on sophisticated information networks, will have enormous Variety Back on earth, regional tastes will be impact on the food industry in the last catered for with more positive deter- years of the century. This will be true mination. The IGD is presently work- for marketing as indicated, but even ing with the NFU to create a Country more important in the creation of new Foods Directory which has naturally a distribution systems, supply channels strong bias towards regional pro- and product handling techniques. ducers. It will be possible to allow for Increasingly manufacturers and fads and fancies among fickle or trend- their trade customers are linked conscious groups; to manipulate pack- together by computers so that the size and packaging methods to suit efficiency of the order-to-invoice promore sensitively the customers of a cess has been revolutionised. Inforparticular outlet. mation on sales, stocks and product For producers and manufacturers availability at any stage in the chain, there is a clear message: variety not will enable replenishment to be carried uniformity will attract, provided cost out at the time most appropriate to the profiles are not altered beyond store's trading pattern, which is crucial of course for 'fresh' product, however recognition. In the mid-70's, according to Hen- defined. Producers must become an inley, a leading biscuit company pre- tegral part of the information network. dicted that biscuit brands would be Membership will be vital in restrucrationalised from 800 to 500 by the turing present business to meet deearly 80's. Instead the number has mands for higher standards and often essential for obtaining new contracts. grown to over 1,000. It may be necessary for smaller proIt used to be received wisdom that the pressure of own label would wipe ducers to join together not only to out second and third brands in many supply the volumes needed but also to grocery markets. In some stores, join the information partnerships: especially the dynamic 'convenience' investment in technology for neither is sector, this has occurred, because of cheap but the two activities are inexlack of space and necessary emphasis tricably linked and it would be unwise on width of range rather than depth. to ignore them. Agencies and brokers But a revese trend has also been at can provide essential links on a costswork and, to take Sainsbury's as an shared basis. Food From Britain and example, despite a 50% + penetration the NFU marketing people understand by Sainsbury brand products, the the need for this sort of working number of other brands has risen con- together and have advice and help to offer. siderably in recent years. The rewards of the information-led Finally, a company that has built a remarkable food business on quality partnership will be considerable: for and a restless search for interest and the trade, the producers and most of variety is Marks & Spencer. Their atti- all the consumers, whose individual tude to suppliers is legendary but it has tastes will be supplied when they wish, as much to do with innovation and where they wish at a price they are happy to pay. energy, as discipline and rigidity. May I conclude as I began with a In a fragmented, multi-faceted society, profitable ideas do not need to well-known writer. George Orwell was become blockbuster million pound a most perceptive critic. In The Road successes overnight. Somebody, some- to Wigan Pier he wrote; "I think it where may be in touch with just the could be plausibly argued that changes people who will beat a path to your of diet are more important than changes of dynasty or even of religion. door. The Great War, for instance, could never have happened if tinned food Information networks Finding those customers is the problem had not been invented. Yet it is curious how seldom the all-importance of food is recognised. You see statues everywhere to politicians, poets, bishops, but none to cooks or bacon-cutters or market-gardeners. The Emperor Charles V is said to have erected a statue to the inventor of bloaters, but that is the only case I can think of at the moment." By working together to meet people's wishes we too shall eventually be able to join the inventor of bloaters 'Up Where We Belong'

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