Rob Morren, ABN Amro:
“Should the food sector return to the drawing board?”
The glass is full, according to Rob Morren, sector banker for Food at Dutch bank ABN Amro. The Netherlands are exporting more, consumers spend more on food, business invests in sustainability and innovation. The food sector couldn’t complain during the crisis, after all, people need to eat, but all the signs for success are now green. Continuing at the current rate isn’t the most sensible choice. “Nowadays, the sector has to navigate a rough sea,” Rob says during the network meeting of Food Delta 2.0. To take chances and manage risks, the food sector might have to return to the drawing board.
Origin becoming more important
The number of consumers paying attention to the origin of fruit and vegetables is increasing, according to research done by GfK and ABN Amro. Trends differ per country, but it is a continuing trend. Turnover of quality marks is still growing considerably, and sustainability is at the top of the agenda of the food sector, although it might get jammed. Consumers in Europe have been taught to buy on price, in the Netherlands, the volume of food and drinks sold during promotions is slightly higher than the European average. The UK peaks at 50 per cent. “If supermarkets continue to compete on price, it would be disastrous. It will change, because manufacturers are now paying the bill. They can help retailers even more by adding value: new products and concepts so that shoppers become more generous and more loyal.” Fair shares indirectly decide the position and contribution of the supplier. That is the market share in fresh compared to the total market share of the formula. Chains with a score higher than 100 therefore have a relatively high percentage of their turnover from fresh. Data and insight in the production process (where does this apple come from?) are therefore becoming increasingly important.
Impact of Brexit
The food sector will continue to be in the dark regarding Brexit for a while longer. According to ABN Amro, the best strategy is to strengthen contacts with buyers, and to also develop a plan B and C, should the market be lost. “Many companies at the time were taken by surprise by the Russian boycott, although it was known in advance that Russia could quite easily block market access. You must have scenarios ready for disappearing markets,” Rob says. One tip is to look at the products exported from the UK to Europe, an alternative market might be found in those. “The export share in goods from the UK to the Netherlands is larger, 21.6 billion euro compared to 20.1 billion import.”
Composition of the population
One trend that has been getting attention for a while now, but that hasn’t really been engaged with by the sector yet, is the various target audiences in relation to the channels where they buy their food. Older people eat less and have other needs; the amount spent in retail by baby boomers is considerably higher than the amount spent by Generation X and Millennials. “It’s wise to look at your own company from every perspective,” Rob says. “Look at the product, the channel, the consumer and the countries.”
Food entrepreneur of tomorrow
Other developments that make it difficult to navigate, are the amount spent via the online channel, the shortage of skilled workers (both technicians and commercial people who are strong in negotiating with buyers), and players such as Amazon and Google who are now focusing on food. The food entrepreneur of tomorrow has to be aware of four important themes: the position in the supply chain, managing risks, digitisation, and sustainable development goals (SDGs). The importance of SDGs is sometimes underestimated. “Sustainability of companies such as Ahold, Tesco and Unilever are based on 17 goals to make the world better. Compare your own impact to that same image, so that you speak the same language. Sustainable brands from Unilever show a growth 50 per cent larger than that of other brands.”
It’s difficult to change the position in the supply chain. The buyer power within retail lies with five purchasing organisations, and the only way around them is to supply directly to the consumer. “We don’t see that happening on a large scale in the short term. The initiative Shobr –market place for manufacturers – recently stopped before they were even operational. INS, a platform based on block chain technology, is a development responding to this, but it’s difficult for all initiatives to find an efficient distribution system.
In the short term, we don’t expect major changes in this yet.” There are opportunities in product development and new technologies – such as robotisation – that can make the production process more efficient.
“Innovation is becoming more important, many companies are in exploitation mode and underestimate the need to explore the balance between those two. Moreover, because of pressure on the labour market, it’s becoming more important to bind your workers to you. For example, data analysts and staff that can strengthen the cooperation with retailers and food service companies.”
Publication date: 12/7/2017
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