The UK Retail Scene

1. Developing Ghana: Agribusiness Opportunities The UK Retail Scene Laura Gould, FPJ November 2007

2. Developing Ghana: Agribusiness Opportunities Lockwood Press • Publisher of essential reading material for the UK fresh fruit and vegetable business and its suppliers worldwide since 1895 • Independent, family-owned publisher - team of 17 • Titles published include the weekly FPJ, bi-monthly supplements and the annual Re:fresh Directory. Since 1999, freshinfo.com has been the online face of the company • Organiser of Re:fresh Conference and Awards • Between 12,000 and 15,000 readers a week, from 57 countries • UK perspective, global appeal • The company is seen as a mouthpiece for the UK industry

3. Developing Ghana: Agribusiness Opportunities The UK Grocery Market • The four largest UK supermarket chains – Tesco, Asda, Sainsbury’s and Morrisons – represent around 75 per cent of grocery sales • Other key players – The Co-op, Waitrose, M&S, Somerfield, independents, discounters • Price wars an ongoing feature • Pressures – sustainability, environment

4. Developing Ghana: Agribusiness Opportunities Tesco • The UK's first supermarket superpower – first to reach annual profits of more than £2 billion • Nearly a third of the UK’s grocery market • One in every eight pounds spent in UK retailers is spent at Tesco • IGD: “Tesco has rewritten the retail bible” • Forecourt and convenience formats – Tesco towns • Four formats, 1,800 stores • International expansion – unstoppable?

5. Developing Ghana: Agribusiness Opportunities Tesco • Universal appeal • Three distinct ranges of own-brand products, from Value to Finest • Priced to attract all types of shoppers to its stores • More upmarket customers than M&S and Waitrose put together • Hung on to its "pile it high and sell it cheap" roots • 15 million customers a week

6. Developing Ghana: Agribusiness Opportunities Tesco supplier strategy • Sell everything! • Has rationalised supply base significantly in recent years • High degree of control over suppliers • Prefers exclusivity from key competitors and dedicated relationships • Encourages innovation in principle • But must fit in with the Tesco strategy otherwise a non-starter

7. Developing Ghana: Agribusiness Opportunities Tesco – the backlash? • Attracting a LOT of negative press • Negative attention from NGOs – ACS, Competition Commission • Profit levels have been described as “obscene” • Victim of its own success? • Capable of riding the criticism and likely to maintain growth surge at home and internationally • CEO Terry Leahy fends off criticism

8. Developing Ghana: Agribusiness Opportunities Asda • Owned by Wal-Mart since 1999 • Caught up with and passed Sainsbury’s • But failed to gain significant ground on Tesco • Pursued ‘every day low prices’ and value engineering strategies • Single supplier route in certain categories

9. Developing Ghana: Agribusiness Opportunities Asda • Recognised as a fair customer to growers • Works to lower margins than its main competitors • Quality specifications still high, but until recently, left more leeway • Now, as price war takes hold, this factor has become more balanced • ‘Every day low prices’ no longer a stand-out factor

10. Developing Ghana: Agribusiness Opportunities Asda supplier strategy • Rationalised supply base as far as possible - International Produce and a few key suppliers of UK produce • Huge pressure to maintain set margins • Close supplier relationships and great faith in those suppliers • Emphasis on cost efficiency rather than innovation • But everyone working to same targets

11. Developing Ghana: Agribusiness Opportunities Asda • A number of changes at board level earlier in the decade • Settled into life with International Produce as major fruit supplier and adapting to other changes • Andy Bond cemented as chief executive • Neither losing nor gaining ground quickly • Has significant potential financial backing • Vying for second place with Sainsbury’s

12. Developing Ghana: Agribusiness Opportunities Sainsbury’s • Was seen as the fallen giant • Lost leadership in mid-1990s after years of domination • Now has around 16 per cent of the market • Vying for second place with Asda • Has struggled for focus

13. Developing Ghana: Agribusiness Opportunities Sainsbury’s • Justin King has turned the seeds of recovery into the fruits of success • Has escaped the shadow of Tesco to re-establish its own identity • Jamie Oliver ad campaigns – Taste the Difference – innovation • Recent speculation of a takeover by Qataris abandoned – hard for the chain to bounce back? • A lack of continuity – now attempting to re-establish

14. Developing Ghana: Agribusiness Opportunities Morrisons • Started as a stall in Bradford - 1899 • Today, more than 370 stores nationwide – nine million shoppers each week • Fourth-largest player in the UK • Chairman – Sir Ken Morrison – roots in fresh produce. Retiring in New Year – booted out by the City • Struggled to come to terms with expansion and integration of Safeway from March 2004, causing first-ever fall in pre-tax profits in its 37 year history • But long-term prospects remain promising • Firmer focus on fresh – Market Street

15. Developing Ghana: Agribusiness Opportunities Morrisons • Different perspective on relationships with suppliers • Over three-quarters of suppliers say their trading relationship with Morrisons is satisfactory or better than satisfactory, with only 11 per cent describing it as “poor” • High degree of trust and mutual respect • Manages almost every aspect of its commercial operation in-house

16. Developing Ghana: Agribusiness Opportunities Other key players • Waitrose – premium, mainly South East, three times Re:fresh award winner • Marks & Spencer – food category has helped drive overall business growth • Somerfield – 2006, sale of Kwik Save fascia “Our aim is to be…the leading local fresh and convenience food retailer” • The Co-op – focus on fresh/Fairtrade • The convenience market – taking a firm grip - ACS • Discounters - Aldi and Lidl - gaining ground

17. Developing Ghana: Agribusiness Opportunities What does the UK consumer want? • The consumer is the most critical element contributing to a brand • More sophisticated and knowledgeable – organic, Fairtrade, healthy eating • Interest in the UK in food generally is on the up • Farmers’ markets, opening of Whole Foods Market – keeping the big four on their toes

18. Developing Ghana: Agribusiness Opportunities What does the UK retail buyer want? • Best varieties • Innovative solutions • Most efficient supply strategy and overall business models • High quality • Consumer focus • Constant drive for improvement throughout the chain • Extreme cost efficiency

19. Developing Ghana: Agribusiness Opportunities Category Management approach • A term coined in the UK in the late 1990s • IGD definition: “The strategic management of product groups through trade partnerships which aims to maximise sales and profit by satisfying consumer and shopper needs.” • IGD: “Category management is a continual, long-term business philosophy, often approached through a series of short-term projects that involve a close working partnership and the sharing of information by retailers and suppliers.”  

20. Developing Ghana: Agribusiness Opportunities Results of category management • Retailers have stronger relationships with suppliers and growers • Increasingly interested in the breeding process • Technical expertise improved within retailers • Realisation of the importance of knowledge sharing throughout chain • Growers and suppliers have seen the value of greater customer involvement

21. Developing Ghana: Agribusiness Opportunities Areas of concern • The nature of the relationship between supermarkets and their suppliers • ie. buyers and buyer power – the extent to which the main parties are able to obtain lower prices from their suppliers as a result of their size and importance to the supplier’s business, as opposed to those justified by reduction in costs • Two parties – differing objectives • Suppliers seek higher prices while supermarkets want to buy at the lowest – inevitable tension • Suppliers argue that the power of the supermarkets has the ability to drive down suppliers’ prices to unprofitable levels

22. Developing Ghana: Agribusiness Opportunities Areas of concern • In May 2006, the Office of Fair Trading (OFT) referred the supply of groceries by retailers in the UK to the Competition Commission for investigation. • The commission has identified many practices as adversely affecting the competitiveness of suppliers and distorting competition • While supermarket costs have reduced and profits increased, suppliers’ expenses increased – without returns to match

23. Developing Ghana: Agribusiness Opportunities Supplier opportunity • Based on co-operation and partnership with key players in the chain – breeders, growers, distributors, exporters, customers and their consumers • Safe, high-quality and tasty products • To capture market share with innovative varieties and supply chain efficiencies that benefit the entire supply chain and create consumer satisfaction • Capitalise on consumer interest – ‘foodies’

24. Developing Ghana: Agribusiness Opportunities Re:fresh 2006 DVD Thank you!