A show of defiance or an exercise in one-upmanship? Call it what you will, but the speakers at this year’s IGD conference could hardly be accused of ducking the issues.
Forget grocery convention, this was more presidential election. Big on passion and soundbites, light on concrete solutions, the conference held a mirror to the uncertainty engulfing the business world as the mood flitted between anxiety and ebullience faster than you can cry Franklin D Roosevelt.
“The only thing to fear is fear itself,” proclaimed Justin King, echoing the words of the former president who led the US out of recession after the crash of 1929.
Asda’s marketing director wasn’t so sure. “Our customers are bleeding. We need to cut through the noise to see the devastation going on in this country,” warned Rick Bendel, raising the melodrama to new heights. “The decisions we take in the next 12 months will define the future of our business and the grocery industry for the next 10 years.”
Most peddled a cautious optimism, based on the hope that the credit crunch has been hyped out of all proportion. However, King stood out, insisting Sainsbury’s was well equipped to deal with the economic climate. “I envisage many companies reining back investments but our intention is to invest during the downturn,” he trumpeted.
So is Bendel’s doom-mongering accurate or have we talked ourselves into a crisis before it’s even arrived? The theme of the event – The World Turned Upside Down – could barely have been more clear as to the change that has come about in the past year. Nobody can predict the fate of the global economy and as such it is difficult to forecast the challenges facing the food industry in the coming years.
King summed it up best: “You don’t have to land it on a sixpence two or three years out. You start by staying true to what you stand for but responding to changes as quickly as you can.”
The feeling is that if any industry can cope with a recession, the grocery industry can. As one drinks industry executive put it, “People will always need food.”
However, in a vote, 50% of delegates said there would be no upturn in the economy until 2010, while almost three quarters said the supplier-retailer relationship had acquired a more short-term focus over the past year.
“We’re experiencing an unprecedented economic downturn,” said consumer analyst David McCarthy. “Consumers aren’t going to come out of this without scars.”
Latest Government figures show the number of people unemployed rose by 164,000 in the three months to August, the biggest increase since 1991. The total now stands at 1.79m. “At the moment we’re okay. The problems may come if unemployment hits the two million mark,” said one supplier.
“There are lots of things to fear,” warned Morrisons marketing and communications director Angus Maciver. “We’re running out of oil and food, the Chinese are buying everything from Africa, we’re running out of milk and pork and the banks have stopped lending.”
But Maciver’s tongue was lodged in his cheek. The subtext was that Morrisons continues to outperform the market, with sales up almost 10% over the past month. Indeed, each of the big four is growing sales despite the financial meltdown and the much-hyped march of the discounters.
“Our fast-moving industry is better positioned for the road ahead than almost any other,” said IGD chief executive Joanne Denney-Finch. “We will always be needed. We will always be in the vanguard.”
Where agreement was reached across the whole industry was that the consumer would dictate the winner and losers from the economic crisis, although once again there was conjecture as to what this would mean in practice.
“Consumers in a cash squeeze will become more promiscuous with less brand loyalty,” said McCarthy. “One in 200 shoppers changing their behaviour can affect a company’s profitability by 5%.”It was not a view shared by all. “In times of stress we return to brands we have known all our life,” said Denney-Finch, adding that “consumers are best served when retailers, branded manufacturers and own-label blend their capabilities”.
But the relationship between retailer and supplier is strained and has been heightened by recent own-label offensives by Tesco and Sainsbury’s. A survey showed 30% of delegates felt the relationship between senior managers of retailers and suppliers was confrontational. This rose to 39% between buyers and account directors, with 20% saying it was extremely confrontational.
Unilever’s UK & Ireland managing director Irwin Lee stressed the need for the industry to stick together during uncertain times. “When we work and collaborate together we can make a big difference,” he said.
Others were not so keen to offer an olive branch. “Some brands have been found wanting,” said King. “Some have been trying to drive through huge cost increases thus increasing the price differential between branded and own label.”
On Sainsbury’s recent switch-and-save campaign, he noted: “Customers are switching away from brands without us trying, so we’re effectively kicking a moving ball. But branded producers should feel challenged rather than threatened.”
If there was a theme to emerge from the convention it was that price – or rather value (as host Michael Buerk noted, “'cheap' is a dirty word in this industry”) – would assume greater importance than ever before.
“Customers are doing without. We need to make sure they don’t,” said Bendel. “Are we brave enough to reduce prices for more than three days and do it permanently?”
“We need to focus more on price, especially the price of fresh food,” added Lucy Neville-Rolfe, Tesco’s executive director, corporate & legal affairs, whose reference to the English Civil War at the start of her presentation dovetailed nicely with the bloody price war being fought on the shop floor.
Not everyone was consumed with the low-cost agenda. Mark Price launched a typically resolute defence of the Waitrose model. “We are not buffeted by what the stock market does in any one day. We are not answerable to shareholders. We take a long-term view.”
An upbeat Peter Marks also saw an opportunity. “Customers have lost confidence in big corporations. They’re wary of corporate greed. Ethics is at the heart of everything we do.”Amid the prophecies of hope and doom, the issue of sustainability – earmarked as a central theme of the conference – was somewhat overlooked.
The consensus, however, was that the issue should not be sidelined during tougher times.“When people start to feel the pinch, the price of the weekly shop becomes far more important, but it’s vital that we don’t lose focus on other areas such as health and sustainability,” said IGD president Alastair Sykes.His stance was supported by a poll of delegates, of whom 48% said sustainability was a long-term commitment. Just 10% said it would be put on the back burner during a recession.
So has the food industry’s world really turned upside down in the past few weeks? The last word, inevitably, is left to King.“Fear itself is corrosive and consumers are convinced that the light at the end of the tunnel is a train. In a year’s time, I’d like to think we’ll be wondering what all the fuss was about... but I think we’ll be asking when is it going to end?”
Forget grocery convention, this was more presidential election. Big on passion and soundbites, light on concrete solutions, the conference held a mirror to the uncertainty engulfing the business world as the mood flitted between anxiety and ebullience faster than you can cry Franklin D Roosevelt.
“The only thing to fear is fear itself,” proclaimed Justin King, echoing the words of the former president who led the US out of recession after the crash of 1929.
Asda’s marketing director wasn’t so sure. “Our customers are bleeding. We need to cut through the noise to see the devastation going on in this country,” warned Rick Bendel, raising the melodrama to new heights. “The decisions we take in the next 12 months will define the future of our business and the grocery industry for the next 10 years.”
Most peddled a cautious optimism, based on the hope that the credit crunch has been hyped out of all proportion. However, King stood out, insisting Sainsbury’s was well equipped to deal with the economic climate. “I envisage many companies reining back investments but our intention is to invest during the downturn,” he trumpeted.
So is Bendel’s doom-mongering accurate or have we talked ourselves into a crisis before it’s even arrived? The theme of the event – The World Turned Upside Down – could barely have been more clear as to the change that has come about in the past year. Nobody can predict the fate of the global economy and as such it is difficult to forecast the challenges facing the food industry in the coming years.
King summed it up best: “You don’t have to land it on a sixpence two or three years out. You start by staying true to what you stand for but responding to changes as quickly as you can.”
The feeling is that if any industry can cope with a recession, the grocery industry can. As one drinks industry executive put it, “People will always need food.”
However, in a vote, 50% of delegates said there would be no upturn in the economy until 2010, while almost three quarters said the supplier-retailer relationship had acquired a more short-term focus over the past year.
“We’re experiencing an unprecedented economic downturn,” said consumer analyst David McCarthy. “Consumers aren’t going to come out of this without scars.”
Latest Government figures show the number of people unemployed rose by 164,000 in the three months to August, the biggest increase since 1991. The total now stands at 1.79m. “At the moment we’re okay. The problems may come if unemployment hits the two million mark,” said one supplier.
“There are lots of things to fear,” warned Morrisons marketing and communications director Angus Maciver. “We’re running out of oil and food, the Chinese are buying everything from Africa, we’re running out of milk and pork and the banks have stopped lending.”
But Maciver’s tongue was lodged in his cheek. The subtext was that Morrisons continues to outperform the market, with sales up almost 10% over the past month. Indeed, each of the big four is growing sales despite the financial meltdown and the much-hyped march of the discounters.
“Our fast-moving industry is better positioned for the road ahead than almost any other,” said IGD chief executive Joanne Denney-Finch. “We will always be needed. We will always be in the vanguard.”
Where agreement was reached across the whole industry was that the consumer would dictate the winner and losers from the economic crisis, although once again there was conjecture as to what this would mean in practice.
“Consumers in a cash squeeze will become more promiscuous with less brand loyalty,” said McCarthy. “One in 200 shoppers changing their behaviour can affect a company’s profitability by 5%.”It was not a view shared by all. “In times of stress we return to brands we have known all our life,” said Denney-Finch, adding that “consumers are best served when retailers, branded manufacturers and own-label blend their capabilities”.
But the relationship between retailer and supplier is strained and has been heightened by recent own-label offensives by Tesco and Sainsbury’s. A survey showed 30% of delegates felt the relationship between senior managers of retailers and suppliers was confrontational. This rose to 39% between buyers and account directors, with 20% saying it was extremely confrontational.
Unilever’s UK & Ireland managing director Irwin Lee stressed the need for the industry to stick together during uncertain times. “When we work and collaborate together we can make a big difference,” he said.
Others were not so keen to offer an olive branch. “Some brands have been found wanting,” said King. “Some have been trying to drive through huge cost increases thus increasing the price differential between branded and own label.”
On Sainsbury’s recent switch-and-save campaign, he noted: “Customers are switching away from brands without us trying, so we’re effectively kicking a moving ball. But branded producers should feel challenged rather than threatened.”
If there was a theme to emerge from the convention it was that price – or rather value (as host Michael Buerk noted, “'cheap' is a dirty word in this industry”) – would assume greater importance than ever before.
“Customers are doing without. We need to make sure they don’t,” said Bendel. “Are we brave enough to reduce prices for more than three days and do it permanently?”
“We need to focus more on price, especially the price of fresh food,” added Lucy Neville-Rolfe, Tesco’s executive director, corporate & legal affairs, whose reference to the English Civil War at the start of her presentation dovetailed nicely with the bloody price war being fought on the shop floor.
Not everyone was consumed with the low-cost agenda. Mark Price launched a typically resolute defence of the Waitrose model. “We are not buffeted by what the stock market does in any one day. We are not answerable to shareholders. We take a long-term view.”
An upbeat Peter Marks also saw an opportunity. “Customers have lost confidence in big corporations. They’re wary of corporate greed. Ethics is at the heart of everything we do.”Amid the prophecies of hope and doom, the issue of sustainability – earmarked as a central theme of the conference – was somewhat overlooked.
The consensus, however, was that the issue should not be sidelined during tougher times.“When people start to feel the pinch, the price of the weekly shop becomes far more important, but it’s vital that we don’t lose focus on other areas such as health and sustainability,” said IGD president Alastair Sykes.His stance was supported by a poll of delegates, of whom 48% said sustainability was a long-term commitment. Just 10% said it would be put on the back burner during a recession.
So has the food industry’s world really turned upside down in the past few weeks? The last word, inevitably, is left to King.“Fear itself is corrosive and consumers are convinced that the light at the end of the tunnel is a train. In a year’s time, I’d like to think we’ll be wondering what all the fuss was about... but I think we’ll be asking when is it going to end?”
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