Even the ‘glass half full’ among us are braced for yet another challenging year. But just how challenging? The Grocer asked industry leaders to gaze into their crystal balls…

The panel:
Clive Black (CB), head of research, Shore Capital stockbrokers
Andy Bond (AB), CEO, Asda (pictured left)
Tim Hurrell (TH), managing director, The Co-operative Food
Jonathan James (JJ), independent retailer
Peter Kendall (PK), president, National Farmers’ Union
Dave Lewis (DL), Unilever UK chairman
Paul Lindley (PL), founder, Ella’s Kitchen
Tom Lindsay (TL), partner at Spayne Lindsay & Co
Stuart MacFarlane (SM), president, InBev UK & Ireland
Lucy Neville-Rolfe (LN-R), corporate affairs director, Tesco
Richard Pennycook (RP), finance director, Morrisons
Younus Sheikh (YS), managing director, Bestway Cash & Carry Group
Charles Wilson (CW), CEO, Booker

 

Q. Will 2010 be better or worse for the food industry?
DL: Worse. High unemployment levels, fragile consumer confidence, retail deflation driven by competition, and commodity cost increases in the second half will be very challenging.

AB: There’s no doubt retailers were flattered in 2009 by the effect of inflation. Headline comps many have become accustomed to are a thing of the past.

SM: Worse for a number of reasons: price inflation driven by tax, VAT, unemployment and input cost increases.

RP: Better, because we won’t be passing on so much inflation to our customers.

PL: Better. Consumers will spend more, there will be lots of sunshine, just enough rain and bumper harvests, and the pound will find stability against the euro/dollar.

CW: Worse. The economy will be poor after the election but independent retailers and caterers will have a better year.

CB: Solid. With steady demand, low inflation and broadly stable pricing, food will remain a good defensive bet.

TL: Worse. Retailer pressure on pricing will intensify while input costs go up.

TH: Overall it will be worse because inflation will be low and competitive pressures will continue.

 

Q. Who’s going to be our next Prime Minister?
SM: Cameron with a working majority.

CW: A hung parliament. Tony Blair might be selected by Lord Mandelson to save the country.

PL:: Cameron, for a change.

YS: Cameron, although voting will be characterised by public apathy.

TL: Hopefully Cameron but it’s going to be too close for comfort.

JJ: David Cameron is as convincing a leader as the Tories have had in recent years but I don’t think it’s a done deal.

 

Q. What is the greatest battle the industry faces?
SM: Government meddling: unnecessary regulation and the threat of tax rises.

CB: A collapse of sterling. If double-dip recession emerges and a new political regime does not grapple effectively with the debt, currency markets will sort it out with inflation.

JJ: Getting the consumer to really understand value. The past year has caused confusion. Nobody really understands a product’s true worth as everything has been on promotion.

PK: As far as primary producers are concerned, we’ll see the EU pesticide withdrawals begin to bite in 2010, reducing output and adding cost.

AB: There are challenges like the recent VAT increase ahead, but what matters most to customers is price. Whatever the rate of VAT, or level of inflation, we aim to be better value than anyone else.

 

Q. What’s the biggest issue we aren’t worrying about yet?
PL: Ethics. I’ve seen a preview copy of a new film for release in the spring called Food Inc. It raises all sorts of questions about how we grow, process, market and consume food. It’s massively powerful and will open lots of cans of worms.

CW: Stagflation.

RP: Water security.

DL: At a consumer level people are worried about the environment and sustainability issues, but they’re probably not worried enough.

LN-R: The biggest issue is the one people are worrying about - climate change. Ten years ago, the businesses that were successful embraced the internet. In the next decade those that will thrive will be the ones, like Tesco, that tackle carbon emissions head-on. We are getting on and doing this by reducing our own emissions and helping customers and suppliers.

 

Q. What will happen to organic in 2010?
PL: It will grow, especially as the recession recedes. If the fledgling Organic Trade Board can become effective, the bar can be raised significantly.

PK: Organics may benefit if the economy picks up but I think the winners will be local and regional lines regardless of the economic outlook.

CB: The organic market will grow but the recession has been more than a body blow and its progress has been set back years.

CW: Roughly the same.

DL: It will grow, providing the value proposition improves.

TH: The organic market will decline in 2010.

 

Q. What will be the next piece of government legislation on public health?
JJ: Minimum-priced alcohol.

PK: It certainly won’t be a meat-free Monday diktat; if that ever happened I think we’d push for McCartney-free playlists.

CW: More restrictions on selling alcohol.

YS: Restricting the public to eating two packets of crisps each a day.

TH: Probably something to do with products aimed at children.

DL: Adopting the recommendations and blueprint of the Public Health Commission’s report ‘We’re all in this together improving the long-term health of the nation’ would be a great start to tackling public health in a more collaborative way at the start of a new decade.

CB: The commencement of rationing of healthcare by lifestyle.

SM: We have enough legislation as it is it would be good to see government enforcing the raft of laws that already exist.

 

Q. What do you predict the rate of VAT will be come the end of 2010?
JJ: The new Chancellor will have to take some unpopular decisions early in the Parliament. Putting VAT up to 20% will be one of them.

SM: 19%.

CB: 19% but will it be applied to food at a low rate?

TL: 17.5% increasing to 20% in 2011.

YS: 20%.

CW: 20%.

TH: 17.5%.

PL: 17.5%.

 

Q. What will be the biggest acquisition of 2010?
SM: Cadbury by Kraft.

PL: Sainsbury’s - either as the acquirer or the acquired, just to hedge my bets.

CB: Aside from Cadbury, Reckitt Benckiser in consumer healthcare.

 

Q. What will be the best-performing grocery stock?
PL: Tesco.

CW: Booker.

SM: AB InBev.

YS: Morrisons.

CB: Tesco (retail), Greggs (mid-cap) and Unilever (manufacturers).

TH: If the Co-operative were listed it would be them. 

 

Q. Who will be the next boss of Morrisons?
PL: Paul Foley, with an each-way bet on Sir Ken Morrison.

CW: Richard Pennycook is a good man.

YS: Judith McKenna.

CB: Mark Gunter (internal)/Mark Price (external).

 

Q. What is the single-biggest thing the next government can do to help the food industry?
YS: Keep multiples’ power in check and maintain a fair operating stage for all.

AB: The planning regime, as it stands, restricts supply and competition which has an adverse effect on choice and the prices people pay. We believe the new assessment is a proportionate measure that will help the UK economy.

LN-R: Less regulation and in particular do not increase regulation by introducing a so-called competition test.

PK: The development of an early warning system that monitors agricultural output relative to our EU competitors, so that potentially damaging trends and their causes are identified and addressed before they affect the UK’s ability to secure its food supplies.

CW: Clamp down on duty-avoided alcohol. It currently costs the taxpayer about £700m and can create huge problems for independent retailers.

DL: Recognise the scale and contribution of the industry to the UK economy and proactively champion its development.

 

Q. What’s keeping you awake at night?
PK: The number of dairy farmers still leaving the industry.

JJ: The continuous onslaught of the major multiples into the convenience sector.

TL: The prospect of a hung parliament.

CW: Tesco.

TH: My partner, Liz, coughing.

YS: Only the owls in my garden.

 

Q. Who will win the football World Cup?
PL: Spain.

CW; JJ; PK; YS; DL; TH: England.

CB: Brazil.

TL: Ivory Coast.

SM: Spain (beating England in the final with Rooney sent off).

 

Q. Will the industry have agreed on one, standard nutritional labelling scheme by the end of the year?
No: 78%
Yes: 22%

 

Q. Will an ombudsman be in place by the end of the year?
No:67%
Yes: 33%

 

Q. In 2010, will reducing the carbon impact of your business be a) the highest business priorityb) important but there are other greater prioritiesc) of little or no importance?
a.9%
b.73%
c.18%

 

Q. If the average price of a pint of beer is currently £3.00 what do you predict it will be at the end of 2010?
£3.23 average

 

Q. Where will the FTSE 100 be at the end of 2010?
5760 average

 

Q. The price of a branded white loaf of bread is currently £1.14. What do you predict it will be at the end of 2010?
£1.19 average

 

Q. If the price of an average packet of 20 cigarettes is currently £5.25 what do you predict it will be at the end of 2010?
£5.67 average



Read more
Review of the Year 2009 (12 December 2009)
The Grocer review of the decade: the Noughties in a nutshell (12 December 2009)