The world is changing … business is changing … presenting new and difficult questions.
Our planet is reaching critical limits. Our economy is undergoing major surgery. And our technology is leaping ahead. These are momentous times … and food … and consumer goods … are at the very heart of it.
We're the biggest industry by far ... employing about a third of the world's population.
We draw on a big share of global resources … we shape the landscape … and affect every species on the planet. Diet ... is central to public health … vitality … and culture.
So we can surely claim to be the world's most important industry.
But we're dealing with some very big challenges.
We're striving to build a more sustainable food system. We face a fragile economy... a mature market ... and an ageing population.
Our shoppers are better informed and more demanding. And competition for resources is forcing up costs.
So these are testing times and many companies find it hard to see a route to further growth. We need new solutions … and as always consumers hold the key.
We've all learned how to adapt to consumers … but the pace and complexity is making it difficult.
Shoppers are getting access to more and more information … and factoring more into their value equation … health, sustainability and localism.
We can either view this as fragmentation … adding cost and complexity … or as diversity … giving us new ways to add value.
There's truth in both views … but today, let's focus on the positive … and look at all the opportunities emerging from change and diversity.
We've got to think about ethics, health, technology and quality.
And for each of these, I'll look at where shoppers are heading, what industry is doing and where we can find new growth.
Ethics. Every company is being watched more closely and judged by higher standards.
And the public is increasingly aware of the impact of their food choices. Most people want to do the right thing … and make the right decisions. But it's complicated … and few people have the time and expertise to do the research.
So shoppers want to delegate some of the responsibility and they're seeking advice on where to put their trust.
39%, given the opportunity, would restrict their choice of food to those products checked and endorsed by a third party organisation.
This form of validation is bound to play a bigger role. It might sound threatening but it can be a way to reap a return from all the ethical improvements you've made … and will make.
Consider Fairtrade … one of the marketing successes of our time … now 66 times bigger than ten years ago and a 3 billion pound market worldwide.
And there are many good reasons to keep progressing on values.
We asked shoppers in five European countries to predict what they'll buy more of in two years time.
And in all five countries, shoppers expect to spend more on every ethical type … including local food, Fairtrade, free range and sustainable products.
What's more, nearly a third of UK shoppers see ethical values as a reason to try a product for the first time.
And consumers around the world are willing to reward companies for behaving responsibly … and will recommend an ethical brand to a friend.
You have to be patient … but the long term return on your investment here is potentially enormous. Almost every food company is making good progress on sustainability.
Here are just a few examples:
- Adnam's has produced a carbon-neutral beer.
- Three double-six three converted waste cooking oil into bio-fuel and cut carbon emissions by 85%.
- Tesco has opened the world's first zero carbon supermarket.
- Sainsbury's has the world's largest fleet of electric vans.
- Greencore has three zero-waste production sites.
- Kraft removed 2,000 tonnes of packaging through its Kenco refill packs.
- Heinz helped its tomato growers to cut water usage by half.
- And M&S is selling coffee which is organic, Fairtrade and Rainforest Alliance certified.
There are hundreds more examples like these … with many more in the pipeline.
And we are beginning to get some credit.
Consistently... the two industry sectors recognised by consumers worldwide … as making the fastest progress on sustainability … are retailing and food manufacturing.
For shoppers, sustainability is largely about waste … and their attitudes are hardening.
Last year the talk was about reducing waste … now it's about eliminating it.
Already, 36% of shoppers claim they're en route to becoming zero waste households. And a further 33% aspire to this.
So companies could gain enormous credit by helping householders to make the next leap … from reducing … to eliminating waste.
Energy will be another theme of the decade. According to the International Energy Authority, world demand for oil will grow by a quarter over the next 20 years … for coal by a half … and for electricity by three quarters.
It claims we need to invest 26 trillion dollars … and yet in the last two years, spending has been dramatically cut. No wonder we're all planning for rising energy prices … and so are shoppers.
Already, 11% share a car with other families for their grocery shopping trips. And almost a quarter would like to do all their regular grocery shopping on foot.
Now there's an incentive for convenience stores to provide more fresh food … and use online ordering to extend their range.
Local is still a live trend and the government's Big Society concept could accentuate this. It's another opportunity for our industry to build loyalty … and we have some excellent models.
- In Soham, Budgens houses the town police station.
- The Waitrose Community Matters scheme supports over 8,000 causes.
- Morrisons is helping over 23,000 schools through its Let's Grow initiative.
And General Mills equipped a fleet of buses as mobile youth centres. It led to a 40% reduction in crime in those areas.
So companies of every type … through their ethical values … are finding new ways to build trust and loyalty … and also energise their employees.
But let me move on. What about health?
Here again, information promotes diversity and this creates opportunity.
And almost a quarter of shoppers would like to guide their diet by getting a personal genetic profile. I have done it myself. I wanted to check that I'm not vulnerable to my family's recurrent illnesses. So I took a DNA test.
Fortunately I turned out to be no higher risk than anyone else, so I didn't have to change my diet … and the odd responsible Gin and Tonic remains in place.
But others of course will be affected … encouraging more innovation around nutrition.
It's why Nestlé has formed a new division dedicated to personalised nutrition.
And why Unilever is studying the diet of Stone Age man to find inspiration for healthy new products.
There's also a quiet revolution underway for mainstream food … with the UK at the forefront.
Already the national intake of trans fat has fallen by more than half … and according to the FSA that's a direct result of industry action.
Salt and saturated fat are also down.
Who would have imagined...that we'd be able to reduce sat fat in McVities digestives by 80%? Or to halve the salt in Walkers potato crisps and cut saturated fat by 70%.
It's certainly not easy … but with hundreds more companies working on this, we're transforming the nation's nutrition without making any real sacrifice to taste.
And there's more to come … with the help of technology.
We can also use nanotechnology to make things taste better and with fewer calories.
Let's have a look at some other benefits of technology … The digital age is still being built … at incredible pace.
Think back to the year 2000. The internet was painfully slow … no Broadband or WiFi. We knew nothing of the iPod … never mind the iPad or the iPhone. A Blackberry was a type of fruit. It was before MySpace … Facebook … YouTube and Twitter.
We've seen all that emerge in just ten years and the best is yet to come....
Right now … we're all trying to figure out how smart phones will change our lives … and the grocery shopping experience. There's enormous experimentation around the world.
- In the US, Best Buy is sending special offers to smart phones when their customers enter the store.
- Meijer has an app for finding products in their outlets.
- And in Starbucks you can use your phone to find your nearest store... earn loyalty points and pay for your coffee.
- In the Netherlands, Albert Heijn shoppers can build a shopping list by photographing products.
- Here in the UK, Co-operative shoppers can see an aerial photo on their phone... of the farm that grew their food.
- And in Sweden... ICA shoppers can find nutritional information about dairy products through their phones.
So we can see where it's heading. In the future, when we swipe a product over our mobile, we'll get several options.
We'll be able to compare prices and check the rating from other consumers. We'll be able to see how it contributes to our dietary targets.
And we'll be able to find out more about the ingredients, the environmental credentials and how, where and when the product was made.
Any product not providing this will create suspicion.
Already 14% of shoppers say they avoid grocery products if they can't find out how and where they've been produced … and another 46% picture themselves doing this in the future.
Smart phones will also be used for personalised promotions and loyalty schemes. Shoppers will be able to photograph what's in their fridge and cupboard to get recipes online.
Payment at the tills will be instantaneous … perhaps with the help of a retina scanner. And ordering online will be quick, fun and personal.
The technology we need is already available ... although that's the easy bit.
When we tested views about smart phones for food shopping, we found only a small minority of enthusiasts.
However, most would like anything that helps to save time, reduce stress and make life simpler.
At the moment we have phone app anarchy … thousands of disconnected services … many based on flimsy data.
So the challenge... is to gather all the right information, connect it together and present it in a way that makes shopping better and easier.
We need to own this. It will be hard work … but worth the effort … because it unlocks the potential for differentiation.
And if we don't do it … others will … and it won't be accurate.
Technology promotes differentiation in other ways too.
Online shopping can remove the limit of shelf space … and encourage new ways to get products from producer to consumer.
Amazon is one example … manufacturers banding together could be another.
Physical stores are bound to respond … by innovating, adding excitement, using the space differently and making the shopping trip much more of an event.
It will all create room for more premium and speciality products. Even in the toughest of times, shoppers use their ingenuity to achieve a better outcome.
30% say they're eating smaller amounts of meat and fish but buying the best possible quality … and a further 30% plan to do this in future.
So whatever the economy has in store for us … it won't be just about cost and price.
Quality will continue to be a driver of growth … and companies that compromise on quality will be taking a big risk.
And we have one great thing in our favour. 10% of shoppers say that food is their main leisure interest … and a further 18% would like it to be so. That's a big audience for new premium products.
Plus... we also have the chance to share in the rising prosperity of China, India, Russia, Brazil and others.
No-one here today has ever known a time when the UK exported more food than we import... for that you have to go back to a time before the Industrial Revolution.
But world demand is rising sharply, food is already the UK's biggest manufacturing industry … and our farmers... are better placed to withstand climate change than in most other countries.
So who knows … we could live to see the UK as a net food exporter again … and what a boost that would be to the economy.
So I hope I've shown there's a rich stream of opportunity … spanning ethics, health, technology and quality.
At IGD, we've identified 18 shopper trends to follow this decade … many of which I've touched on today … all of which are covered in our new report.
But now I'd like to consider how we can capitalise on the opportunities … by offering you my six ingredients for success.
We need to stay this close to shoppers … remembering that this year's emerging trend can be next year's mainstream.
Shoppers are confounding many of our preconceived ideas. The have-nots care as much about food ethics as the haves. And the better off are equally interested in special offers. So challenging some long held assumptions will show us new ways to grow.
Transparency is altering the relationship between companies and consumers. If we're slow, we'll be on the defensive....but if we lead … we'll build trust and better anticipate our customers' needs.
Targeting is my third ingredient.
There's so much opportunity around us that we could become blinded by it. But the winners in business are bold and decisive. So we'll each need to focus … focus on areas we really believe in.
That means looking in the heart and soul of our companies … not always at surveys or focus groups. We also need to promote teamwork … within our companies … between our companies … and through the supply chain.
We'll only fully solve sustainability if we share ideas and experience.
Farmers, in particular, will need plenty of support as they overhaul their methods.
And many of the best commercial opportunities will only be unlocked if we think laterally and forge new alliances.
Next … tenacity.
Climate, political events, currencies and markets will sometimes surprise us and test our resolve … but patience, determination and positive thinking will see us through.
And finally training.
Our new set of challenges requires a new range of skills … and we need to give young people a chance to show what they can really do.
By solving the problems we face together … we'll only grow stronger.
So here's my vision for our industry in the year 2020.
By then, we'll have found the path to sustainable growth. Our water, carbon and energy footprints will be very much smaller than today.
We'll have helped to transform the nutritional intake of the British public. We'll be adding new value through personalisation. We'll be using technology to make life simpler for shoppers.
We'll have helped to re-build the economy and created many new jobs. Big business, as well as small, will be recognised as a force for good.
Brands … including retail brands … will be stronger … and shoppers will be more loyal.
Our companies will be warmly welcomed as they enter new markets. And our employees will be passionate and proud of the companies they work for.
That's my highly optimistic vision but the evidence I see every day tells me that it's feasible.
And I'm not the only optimist. Two out of three British shoppers remain hopeful of a better future … and for those under the age of 24 … 80% are optimists like me.
This is surely the best time ever... to be a leader in our industry.
We have the means to inspire our people … to delight our customers … to contribute to a better world … to deliver growth for our shareholders.... and, above all … to leave a lasting legacy.