IGD’s 2008 annual convention was memorable, not just for the expertise it attracted, but for the timely discussion of how the grocery industry is coping in a fast-changing economic climate.

Sustainability and changing shopper trends were key themes running throughout the day and all of the speakers offered valuable insights into the way the industry is changing to meet new economic, societal and environmental demands.
 

Alastair Sykes – IGD President, Chairman and Chief Executive, Nestle UK

Alastair opened his final Convention address as IGD President by giving an overview of the current economic state and explaining that sustained economic growth is now at an end. As well as growing economic pressures and decreasing property values, Alistair noted that household spending on food as a proportion of general income is also falling.

However, Alastair also commented on how the industry is working to help consumers, and how it will continue to supply value and absorb increased costs wherever possible. He highlighted the launch of PAS2050, the industry-standard methodology to measure a product’s carbon footprint – work that IGD’s Policy Issues Council has contributed to - and publicised the launch of ECR’s Guide to Sustainable Distribution, a document that will help to provide substantial environmental benefits and cost savings to businesses throughout the supply chain.

ECR’s Guide to Sustainable Distribution
 

Joanne Denney-Finch – Chief Executive, IGD

Joanne’s keynote speech outlined IGD’s latest and timely research, entitled “Adapting to Change”. The report looks at the changing habits of shoppers during the credit crunch, and found that while consumers are increasingly seeking value in their shopping, many do not consider themselves to be trading down on quality.

Shoppers are spending more time in different stores and also planning meals more thoroughly, taking advantage of promotions and discount offers. Convenience is showing signs of growth, as consumers leave their cars at home and walk to local stores. Locations for new store developments are becoming increasingly crucial.

Some consumers are reverting to “The Good Life”, and beginning to grow their own produce. Suttons Seeds have noted that 70% of their volume is now vegetable seeds. Frozen food is again on the rise, and consumers are showing signs of reverting to the comforting brands they have grown up with.

In turbulent economic times, it is usually discretionary spend that suffers first. Eating out is increasingly being replaced by a premium alternative to eat at home instead. Engagement with ethical shopping does not seem to have suffered, with 79% of consumers still making ethical purchases where possible.

Joanne concluded that companies proficient at adapting to change will be the most likely to succeed. Although consumers are economising in a World Turned Upside Down, many are not prepared to compromise their core values, so businesses must be clear about their strategies and keen to change.

IGD's Adapting to change research
 

Peter Kendall, President, NFU

Peter Kendall stressed the importance of cultivating sustainable supply chains. He raised the question of how the UK can maintain a strong global position and maintain food security when it faces issues such as rising transport costs, animal viruses, water scarcity and the loss of agricultural land.

Citing the example of the loss of 1 billion litres of dairy production this year alone, Peter Kendall emphasised the importance of creating a future where trading relationships are backed by fair contracts.

Speaking on behalf of British farmers, Peter stated that his priority was for the food industry to promote and practice sustainable supply chain operations.
 

Lucy Neville-Rolfe, CMG Executive Director – Corporate & Legal Affairs, Tesco

Lucy outlined Tesco’s approach to the altered trading environment, stating that Tesco’s continued success had been based on providing customers with what they want. She focused on three key areas for her address: the financial crisis, changes in society and climate change.

On the financial crisis, Lucy noted that consumers were increasingly worried about the rising cost of living, with evidence of promotional purchasing, buying more locally and the “pay day effect”.

On societal changes, while the growth of convenience was noted as lifestyles become busier, Lucy’s main concerns were focused on the internet revolution, our ageing population and the growth of Asia, in both economic and demographic terms.

Lucy also stated that although the environment remained a key priority, changes made must be affordable and benefit the business. Current economic challenges were compelling Tesco to find more efficient and cost-effective methods of doing business. Lucy highlighted how Tesco was improving operational efficiencies to drive down costs for customers, whilst opportunities in banking and personal finance would ensure that Tesco maintained its customer focus.

Carolyn Bradley joined Lucy on stage for a Q&A session, where they outlined some more recent Tesco initiatives, such as acquisitions in South Korea, the launch of their recent discounter range, adapting their ranges and the buy-out of the personal finance business from RBS.
 

Rick Bendel, Marketing Manager, Asda

Rick made a passionate call for action at the Convention, with a stark warning for those present. Retailers and suppliers needed to face the truth: what are customers really thinking?

Following a short Panorama clip, outlining the effects of the financial crisis on consumers, Rick argued that retailers and suppliers must copy their customers’ behaviour and examine cost bases vigorously.

Rick explained that Asda would be staying true to its EDLC credentials, claiming EDLC was a vocation – not a tactic. Reducing prices at a time of economic uncertainty was a “social responsibility”. Putting customers first was a priority, and profits were a consequence of this action.

Concluding his address, Rick stated that action taken in the next 12 months would affect the industry for the following 10 years. “Doing the right thing” would restore “low consumer confidence” in the industry.
 

Angus Maciver, Marketing Director, Morrisons

Angus Maciver told IGD’s Convention of the need to cater for customer demands in times of economic upheaval. In his address to delegates, he explained that it was their task to responsibly provide what the customer wants, deliver efficient distribution, and make a profit.

Speaking of Morrisons’ recent experience, he noted that evidence of the economic downturn had been reflected in the growth of their value ranges at the expense of its premium ranges. Morrisons, however, pride themselves in their food specialist positioning, and Angus highlighted their high level of British and local sourcing, and their careful control over the route to market for many products.

In addition to their innovative supply chain approach, Angus pointed out that Morrisons has made advances in areas such as carbon and waste reductions, but more crucially, sustainability initiatives need to be good for business as well as for the planet. Any schemes must hit the “sweet spot” of businesses.

His advice for the future very much echoed Tesco’s guidance in emphasising that successful businesses will be based on consumer demands. Making choices easier for the customer and running an efficient operation will also offer protection in a challenging economic climate.
 

Greg Peterson, Managing Director, Kellogg’s UK

Greg discussed the long-term commitment of environmental sustainability and set out future targets for Kellogg’s to make tangible improvements to its business.

Greg noted that Kellogg’s UK had already been working on sustainability initiatives for a number of years, and had generated significant cost savings for the business as a result. However, he explained that businesses need certainty in their environment in order to actively make changes.

Kellogg’s aims to reduce the amount of CO2 it emits by 20% before 2010 through optimising machinery and working with other industry bodies. Another aim is to send zero food or packaging to landfill by 2015, a plan already operating in Kellogg’s Germany. Kellogg’s is also working on minimising the amount of packaging it uses, and is aiming to make all packaging fully recyclable, as well as reducing water usage by 20% before 2020. Finally, Greg noted that Kellogg’s is fully endorsing the ECR programme to reduce transport miles, and has set its own target of reducing miles by 20% before 2012.
 

Irwin Lee, Vice President & Managing Director, P&G UK and Ireland

Irwin Lee based his speech on the principles of balance, twinning value with innovation, global with local and transactional with transformational relationships. He emphasized that the consumer is boss, and the only way to grow in tough times is to stay focused on delivering value and innovation for consumers.

He warned the audience that such intense focusing on price could drive the industry to commodification and maintained that consumers still embrace value above price. Showing the audience some of P&G’s new products, such as the new resourceful Ariel Excel Gel product and Olay Regenerist Three-Point Cream, Irwin explained how cost pressures can spark creativity and that the power of having a wide portfolio is important for meeting the needs of a diverse range of consumers.

The key concluding emphasis of his speech was on collaboration – the ‘working together to achieve a higher order’ agenda which will ultimately create more value for consumers, retailers and suppliers, and improve the grocery industry’s future success.
 

Peter Marks, Chief Executive, The Co-operative Group

In an upbeat assessment of the Co-operative Group’s prospects for the future, Peter Marks gave the audience an update on the progress of the business as it strives to make itself the nation’s “premier community retailer”. Looking back on the history of the Co-operative, Peter claimed that the business had been too fragmented, and whilst rivals had grown and come to dominate, the Co-operative had in the past been inefficient and slow to react.

Following the merger with United Co-op, 80% of national Co-operative trade is concentrated into one single business, and Peter hinted at an increasing consolidation in the Co-operative movement.

The re-branding process is well underway, with a target of 4,500 outlets by the end of 2009. A three-year plan to double profit and grow sales by 22% is set to be achieved a year early, following the expected integration of the Somerfield business.

CSR is no longer an optional extra, Peter claimed, and the Co-operative had made significant progress in this area. The Group is widely recognised for its ethical agenda, and the banking arm is “respected and trusted” at a time when the industry is in turmoil.

Peter also commented on their successful membership scheme, noting that on average, members spend twice as much in-store as non-members.
 

Mark Price, Managing Director, Waitrose

Mark began his address by discussing the history of Waitrose, part of the John Lewis Partnership. One of Waitrose’s distinguishing features is the fact that it is a partnership owned by its employees. He felt that this put Waitrose in a strong position to weather the economic storm and greatly influences staff motivation.

This ownership model, according to Mark, is an effective way to maximise value for everyone involved in the business, including suppliers, and the positive culture it creates offers commercial advantage.

He described culture as, “the sediment of past transactions” and cited this as just one important reason for centring a business around a positive employee culture.
 

IGD Convention 2009

At the IGD Convention 2009 on 13th October hear how leading industry figures are leading their businesses – and the wider community – through the economic turmoil and towards an efficient and ethical future. Speakers include Justin King (Sainsbury's), Sir Terry Leahy (Tesco), Andy Clarke (Asda) and Marc Bolland (Morrisons).

Find out more and book your places here