Pathways to the food consumer

1
Pathways to the food consumer

• Steve Spencer
• Freshlogic

2
Change in the Australian food market

• Characterised by
• Concentrated supermarket sector
• Flourishing independents and specialists
• Diverse food service channels serviced by an
  array of independent wholesalers and specialists.
• Behind this
• Change driven by a number of factors that can
  each individually impact the food market
• Collectively needs better intelligence to
  understand

3
External pressure on our food chain

• Compelling global forces are changing the global
  food industry directly affecting the
  competitiveness and behaviour of participants
  engaged in the domestic Australian retail market

• Food retail
• Global expansion of European US chains
• Increased westernisation of diets in developing
  countries is led by global retailer offerings
• Strong expansion of retailer business models
  based on wide range and/or low price
• Increased commoditisation of conventional food
  lines
• Global scoring of retailer performance by capital
  markets

• Food production
• Mobility of know-how and capital to low-cost
  regions
• Rapid increase in production scale of major
  low-cost producers
• Virtually full visibility of market prices and
  production costs

• Food trade
• Escalation of trade flows in commodities
• Strong pressure for traditional exporters (EU and
  US) to reduce protectionism and support to farm
  production
• Improving technologies can land perishables into
  distant markets at high quality
• Fiscal barriers gradually being replaced by
  technical hurdles for access to protected markets

4
Share of spend
Spending by channel in 2007

• Various definitions (to suit standpoints)
• Meals eaten out of home growing faster
• True picture brings the gap closer

5
Mapping food categories (example) red meat
Major share of retail sales through grocery
chains, with a growing portion under direct
supply arrangements
FSS Retailer
Producer
Independent Retailer
Further Processing
Processing
Significant influence of wholesalers in servicing
non-grocery retail and foodservice channels
Meat wholesaler
Specialty Butchers
QSR
Takeaway
Dining out
Foodservice distributor
Beef and lamb value chain assessment
Event/leisure
Caterers
Institutional
Dominant or major flow of product to market
6
Mapping food categories (example) milk
FSS Retailer
Milk production
Processing
Largest volume flow of product
Independent Retailer
distribution franchise
Specialty Retailer
Significant channels for processors to sustain
brand presence and margin through direct route
distribution.
QSR
Takeaway
Cash and carry
Milk products value chain assessment
Foodservice distributor
Dining out
Event/leisure
Caterers
Institutional
Dominant or major flow of product to market
7
Mapping distribution channels (example)
institutional healthcare
Specialised retailers
Foodservice distributor
Food manufacturer
Hospitals
Caterers
Fresh food supplier
Specialist fresh food distributor(s)
In-house kitchen
Aged care
Drinks manufacturer
Chilled drinks distributor
Structure of the institutional healthcare channel
Institutional healthcare value chain assessments
Source Freshlogic based on private database of
establishments
8
Influence of the consumer
Shapers of choice
Changes in preference
Which shows up in changing market shares for
pathways to the consumer
Response from retailers, food service specialists
and suppliers
9
Influence of the consumer

• Shapers of choice
• Household structures
• Work-life mobility and balance
• Smaller homes
• More complex wants and desires
• Changing income levels and sensitivity
• Greater ethical concern
• Health aspirations
• Aging population

Changes in preference
Which shows up in changing market shares for
pathways to the consumer
10
Influence of the consumer
Shapers of choice

• Changes in preference
• Break down of meal times
• Shorter time given to preparing and eating food
• Greater time given to commuting - leisure must
  compensate
• Less planning, more eating on the go
• Affluence affords investment in lifestyle through
  fitness and diet
• Demand for smaller portions managed
  nutritional fix

Which shows up in changing market shares for
pathways to the consumer
11
Influence of the consumer
Shapers of choice
Changes in preference

• Which shows up in
• Shopping trip purposes are changing
• Focus on occasion rather than food
• Diversity in eating away from the home
• Sophistication and consciousness of take-away
• More diverse scope for premium
• Greater commoditisation of staple lines into
  private label

12
Large grocery under pressure?
Retailer same store sales v food price inflation
in 2003 to 2007
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Grocery - a fixation to be overcome?

• Access to the consumer
• Existing market share (fresh and packaged)
• Hard-wired their business processes to meet
  supply chain and product specifications
• The clout of advertising and promotion in the
  face of the consumer especially in fresh food
• The expansion of private label
• Behaviour in pricing and buying
• Focus on supply chain costs pushing costs back
  up the chain

14
The black box of foodservice information
Information voids
FSS Retailer
Independent Retailer
Specialty Retailer
distribution franchise
QSR
Processing
Primary production
Takeaway
Cash carry
Foodservice distributor
Dining out
Event/leisure
Caterers
Institutional
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Opportunity?

• Mastering convenience
• 3 dimensions
• Ease of shopping, product form, meal prep time
• Casual dining
• Institutional food (solutions)
• Speciality niches

16
Avoid pressure points
Processor manufacturer
Incentive to value-add
Primary producer
Competing brand proposition
Inadequate demand signals up the chain
retail
Import
Retail sector
primary production
wholesaling

• More selective
• product specs

• Extended retail trading hours

distribution
processing/ manufacturing
Fragmented supply sectors
Import
foodservice
Intermediaries gate keeping
Import

• Cost-push up the chain

Whole supply chain
Lack of competitiveness
Consolidation of suppliers
Value/margin capture
Growth pressure