Here comes the crunch!

The credit crunch and rising inflation will make it even more important to provide competitive prices and work hard on good availability and excellent service

The coming year promises to be one of the most challenging our industry has faced in recent history. There has been a shift in geo-economics at a global level, which is feeding through to UK consumers. The combination of the credit crunch and rising food inflation, now both established in the economic cycle, will be far more influential in 2008.

Despite the recent cut in interest rates, many will have less disposable income and I expect consumers to be more careful about spending.

Food prices have been exceptionally stable over the past 10 years and we have a generation of consumers that will not remember the inflation we experienced in the 70s and 80s.

Consumers have come to expect reliable supplies of low cost food. It's vital we continue to offer our customers that good value.

We are also experiencing new pressures on supply lines as availability tightens in certain areas - notably wheat and grain-based products. Our younger colleagues in the industry will have to develop new skills and learn quickly to operate effectively in an inflationary climate.

In this changing economic landscape we will need to work even harder than ever on the basics: providing good availability, value pricing and excellent service.

There are a number of other shifts in the UK consumer market offering great opportunities for the industry. The increasing awareness of healthy eating will require product innovation and an adjustment to range assortments. We've already seen many suppliers responding positively to this challenge. These changes are already feeding through to purchases from our warehouses. Packaging is becoming a big issue and consumers will expect to see a reduction alongside an increase in recyclable material.