Retailers will have to work harder than ever on scale efficiencies in 2010, says Kevin Hawkins
How will grocery fare this year? In The Grocer's Preview of the Year, there were some less-than-stimulating ruminations by "industry leaders" that failed to present a coherent scenario for 2010. So here are my own thoughts on what is very likely to happen and what should happen.
The most powerful influence on our industry will be the reality of low food inflation, which, given the maturity of the market, equates to its rate of growth. As most consumers see their disposable income eroded by higher taxes, competition will intensify, discounting will be rife and the drive for further supply chain efficiencies will accelerate.
As in the past, this means at least one of the leading retailers will fall behind the pack while the squeeze on the smaller players, especially the independent c-stores, will tighten. The Groceries Supply Code of Practice will have little effect in this market except possibly to make it more difficult for the more hard-pressed retailers to fight back.
Scale economies, brand strength and NPD will remain the conditions of success. While further consolidation in the upper reaches of retail is blocked, we may expect more of it in manufacturing and wholesaling in the wake of Kraft/Cadbury, with consequent job losses.
Premium products enjoyed a revival in the latter part of last year, but this seems unlikely to continue and the outlook for organic is worse. Falling rates of commodity inflation will increase pressure on farm profitability and here again scale economies and productivity growth will distinguish producers who do well from those who don't. The consolidation of food output in larger units will continue.
The role of government in the food industry will diminish as cuts in spending force its withdrawal. There is little point in producing strategies for the next 20 years if there are no means of implementing them. A cost-cutting rationalisation of the three-way departmental involvement in diet and health is long overdue, as is the scrapping of any regulations that inhibit agricultural productivity. This includes the more costly targets imposed by the climate change lobby.
Finally, if we seriously want to avoid a resurgence in food inflation, we must invest in GM as the only practicable way of increasing food security. A final showdown with the flat-earthers is long overdue.
Kevin Hawkins is an independent retail consultant.
More opinion
How will grocery fare this year? In The Grocer's Preview of the Year, there were some less-than-stimulating ruminations by "industry leaders" that failed to present a coherent scenario for 2010. So here are my own thoughts on what is very likely to happen and what should happen.
The most powerful influence on our industry will be the reality of low food inflation, which, given the maturity of the market, equates to its rate of growth. As most consumers see their disposable income eroded by higher taxes, competition will intensify, discounting will be rife and the drive for further supply chain efficiencies will accelerate.
As in the past, this means at least one of the leading retailers will fall behind the pack while the squeeze on the smaller players, especially the independent c-stores, will tighten. The Groceries Supply Code of Practice will have little effect in this market except possibly to make it more difficult for the more hard-pressed retailers to fight back.
Scale economies, brand strength and NPD will remain the conditions of success. While further consolidation in the upper reaches of retail is blocked, we may expect more of it in manufacturing and wholesaling in the wake of Kraft/Cadbury, with consequent job losses.
Premium products enjoyed a revival in the latter part of last year, but this seems unlikely to continue and the outlook for organic is worse. Falling rates of commodity inflation will increase pressure on farm profitability and here again scale economies and productivity growth will distinguish producers who do well from those who don't. The consolidation of food output in larger units will continue.
The role of government in the food industry will diminish as cuts in spending force its withdrawal. There is little point in producing strategies for the next 20 years if there are no means of implementing them. A cost-cutting rationalisation of the three-way departmental involvement in diet and health is long overdue, as is the scrapping of any regulations that inhibit agricultural productivity. This includes the more costly targets imposed by the climate change lobby.
Finally, if we seriously want to avoid a resurgence in food inflation, we must invest in GM as the only practicable way of increasing food security. A final showdown with the flat-earthers is long overdue.
Kevin Hawkins is an independent retail consultant.
More opinion
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