IGD’s 2008 annual convention was memorable, not just for the expertise it
attracted, but for the timely discussion of how the grocery industry is coping
in a fast-changing economic climate.
Sustainability and changing shopper trends were key themes running throughout
the day and all of the speakers offered valuable insights into the way the
industry is changing to meet new economic, societal and environmental demands.
Alastair Sykes – IGD President, Chairman and Chief Executive, Nestle UK
Alastair opened his final Convention address as IGD President by giving an
overview of the current economic state and explaining that sustained economic
growth is now at an end. As well as growing economic pressures and decreasing
property values, Alistair noted that household spending on food as a proportion
of general income is also falling.
However, Alastair also commented on how the industry is working to help
consumers, and how it will continue to supply value and absorb increased costs
wherever possible. He highlighted the launch of PAS2050, the industry-standard
methodology to measure a product’s carbon footprint – work that IGD’s Policy
Issues Council has contributed to - and publicised the launch of ECR’s Guide to
Sustainable Distribution, a document that will help to provide substantial
environmental benefits and cost savings to businesses throughout the supply
chain.
Joanne’s keynote speech outlined IGD’s latest and timely research, entitled
“Adapting to Change”. The report looks at the changing habits of shoppers during
the credit crunch, and found that while consumers are increasingly seeking value
in their shopping, many do not consider themselves to be trading down on
quality.
Shoppers are spending more time in different stores and also planning meals
more thoroughly, taking advantage of promotions and discount offers. Convenience
is showing signs of growth, as consumers leave their cars at home and walk to
local stores. Locations for new store developments are becoming increasingly
crucial.
Some consumers are reverting to “The Good Life”, and beginning to grow their
own produce. Suttons Seeds have noted that 70% of their volume is now vegetable
seeds. Frozen food is again on the rise, and consumers are showing signs of
reverting to the comforting brands they have grown up with.
In turbulent economic times, it is usually discretionary spend that suffers
first. Eating out is increasingly being replaced by a premium alternative to eat
at home instead. Engagement with ethical shopping does not seem to have
suffered, with 79% of consumers still making ethical purchases where possible.
Joanne concluded that companies proficient at adapting to change will be the
most likely to succeed. Although consumers are economising in a World Turned
Upside Down, many are not prepared to compromise their core values, so
businesses must be clear about their strategies and keen to change.
Peter Kendall stressed the importance of cultivating sustainable supply
chains. He raised the question of how the UK can maintain a strong global
position and maintain food security when it faces issues such as rising
transport costs, animal viruses, water scarcity and the loss of agricultural
land.
Citing the example of the loss of 1 billion litres of dairy production this
year alone, Peter Kendall emphasised the importance of creating a future where
trading relationships are backed by fair contracts.
Speaking on behalf of British farmers, Peter stated that his priority was for
the food industry to promote and practice sustainable supply chain operations.
Lucy outlined Tesco’s approach to the altered trading environment, stating
that Tesco’s continued success had been based on providing customers with what
they want. She focused on three key areas for her address: the financial crisis,
changes in society and climate change.
On the financial crisis, Lucy noted that consumers were increasingly worried
about the rising cost of living, with evidence of promotional purchasing, buying
more locally and the “pay day effect”.
On societal changes, while the growth of convenience was noted as lifestyles
become busier, Lucy’s main concerns were focused on the internet revolution, our
ageing population and the growth of Asia, in both economic and demographic
terms.
Lucy also stated that although the environment remained a key priority,
changes made must be affordable and benefit the business. Current economic
challenges were compelling Tesco to find more efficient and cost-effective
methods of doing business. Lucy highlighted how Tesco was improving operational
efficiencies to drive down costs for customers, whilst opportunities in banking
and personal finance would ensure that Tesco maintained its customer focus.
Carolyn Bradley joined Lucy on stage for a Q&A session, where they outlined
some more recent Tesco initiatives, such as acquisitions in South Korea, the
launch of their recent discounter range, adapting their ranges and the buy-out
of the personal finance business from RBS.
Rick Bendel, Marketing Manager, Asda
Rick made a passionate call for action at the Convention, with a stark
warning for those present. Retailers and suppliers needed to face the truth:
what are customers really thinking?
Following a short Panorama clip, outlining the effects of the financial
crisis on consumers, Rick argued that retailers and suppliers must copy their
customers’ behaviour and examine cost bases vigorously.
Rick explained that Asda would be staying true to its EDLC credentials,
claiming EDLC was a vocation – not a tactic. Reducing prices at a time of
economic uncertainty was a “social responsibility”. Putting customers first was
a priority, and profits were a consequence of this action.
Concluding his address, Rick stated that action taken in the next 12 months
would affect the industry for the following 10 years. “Doing the right thing”
would restore “low consumer confidence” in the industry.
Angus Maciver, Marketing Director, Morrisons
Angus Maciver told IGD’s Convention of the need to cater for customer demands
in times of economic upheaval. In his address to delegates, he explained that it
was their task to responsibly provide what the customer wants, deliver efficient
distribution, and make a profit.
Speaking of Morrisons’ recent experience, he noted that evidence of the
economic downturn had been reflected in the growth of their value ranges at the
expense of its premium ranges. Morrisons, however, pride themselves in their
food specialist positioning, and Angus highlighted their high level of British
and local sourcing, and their careful control over the route to market for many
products.
In addition to their innovative supply chain approach, Angus pointed out that
Morrisons has made advances in areas such as carbon and waste reductions, but
more crucially, sustainability initiatives need to be good for business as well
as for the planet. Any schemes must hit the “sweet spot” of businesses.
His advice for the future very much echoed Tesco’s guidance in emphasising
that successful businesses will be based on consumer demands. Making choices
easier for the customer and running an efficient operation will also offer
protection in a challenging economic climate.
Greg Peterson, Managing Director, Kellogg’s UK
Greg discussed the long-term commitment of environmental sustainability and
set out future targets for Kellogg’s to make tangible improvements to its
business.
Greg noted that Kellogg’s UK had already been working on sustainability
initiatives for a number of years, and had generated significant cost savings
for the business as a result. However, he explained that businesses need
certainty in their environment in order to actively make changes.
Kellogg’s aims to reduce the amount of CO2 it emits by 20% before 2010
through optimising machinery and working with other industry bodies. Another aim
is to send zero food or packaging to landfill by 2015, a plan already operating
in Kellogg’s Germany. Kellogg’s is also working on minimising the amount of
packaging it uses, and is aiming to make all packaging fully recyclable, as well
as reducing water usage by 20% before 2020. Finally, Greg noted that Kellogg’s
is fully endorsing the ECR programme to reduce transport miles, and has set its
own target of reducing miles by 20% before 2012.
Irwin Lee, Vice President & Managing Director, P&G UK and Ireland
Irwin Lee based his speech on the principles of balance, twinning value with
innovation, global with local and transactional with transformational
relationships. He emphasized that the consumer is boss, and the only way to grow
in tough times is to stay focused on delivering value and innovation for
consumers.
He warned the audience that such intense focusing on price could drive the
industry to commodification and maintained that consumers still embrace value
above price. Showing the audience some of P&G’s new products, such as the new
resourceful Ariel Excel Gel product and Olay Regenerist Three-Point Cream, Irwin
explained how cost pressures can spark creativity and that the power of having a
wide portfolio is important for meeting the needs of a diverse range of
consumers.
The key concluding emphasis of his speech was on collaboration – the ‘working
together to achieve a higher order’ agenda which will ultimately create more
value for consumers, retailers and suppliers, and improve the grocery industry’s
future success.
Peter Marks, Chief Executive, The Co-operative Group
In an upbeat assessment of the Co-operative Group’s prospects for the future,
Peter Marks gave the audience an update on the progress of the business as it
strives to make itself the nation’s “premier community retailer”. Looking back
on the history of the Co-operative, Peter claimed that the business had been too
fragmented, and whilst rivals had grown and come to dominate, the Co-operative
had in the past been inefficient and slow to react.
Following the merger with United Co-op, 80% of national Co-operative trade is
concentrated into one single business, and Peter hinted at an increasing
consolidation in the Co-operative movement.
The re-branding process is well underway, with a target of 4,500 outlets by
the end of 2009. A three-year plan to double profit and grow sales by 22% is set
to be achieved a year early, following the expected integration of the
Somerfield business.
CSR is no longer an optional extra, Peter claimed, and the Co-operative had
made significant progress in this area. The Group is widely recognised for its
ethical agenda, and the banking arm is “respected and trusted” at a time when
the industry is in turmoil.
Peter also commented on their successful membership scheme, noting that on
average, members spend twice as much in-store as non-members.
Mark Price, Managing Director, Waitrose
Mark began his address by discussing the history of Waitrose, part of the
John Lewis Partnership. One of Waitrose’s distinguishing features is the fact
that it is a partnership owned by its employees. He felt that this put Waitrose
in a strong position to weather the economic storm and greatly influences staff
motivation.
This ownership model, according to Mark, is an effective way to maximise
value for everyone involved in the business, including suppliers, and the
positive culture it creates offers commercial advantage.
He described culture as, “the sediment of past transactions” and cited this
as just one important reason for centring a business around a positive employee
culture.
IGD Convention 2009
Next year's IGD Convention takes place on 13th October 2009. To register your
interest and receive more information when it is available, please email
conferences@igd.com
