FreshIncite April 2016

What We’re Seeing

Retail fresh food promotional activity surprises Top

retail_3.png The intense level of competition in the food retail channel is being reflected by increased resources aiming at attracting and retaining shoppers. The amount of retailers adverts have long been a barometer of this intensity and an analysis of these patterns reveals the retailers have some marked changes.

Adwatch reveals that when March 2016 is compared to the March 2015, the number of advertised promotions increased by 8%. There were also changes in the type of products involved in the activity and the level of change is different for each retailer. Fresh food exposure reduced by 2%, but within that meat promotions were down 22%, while vegetables increased 42%. The average price of vegetables advertised increased on the previous year from $6.60 to $9.83 per kg, reflecting the higher proportion of smaller convenient vegetable products being promoted in mutiple buy promotions. This impact is highly likely to have added value to the vegetable category.  

Retailer activity level changes in the number of adverts shows increases for Coles (31%) and IGA (26%), and reductions by Woolworths by (16%) and Aldi (35%).

FreshIncite: Despite the intense competitive conditions the vegetable promotional activity may well have encouraged more consumers to trade up to higher value products and therefore increased the category value. 

China imposes new taxes on imported e-commerceTop

tax1.jpg In a move to prod Chinese citizens to buy domestic goods, China has imposed new tariffs on cross-border e-commerce.  It includes a crack-down on imported food and consumer goods at airports and free-trade zones, and at least in the short term has impacted some Australian products on China's biggest e-commerce sites.

The changes are expected to significantly increase the cost of many items such as food, health care products and low-price cosmetics. The e-commerce operator T-Mall said they expect the changes will increase demand for smuggled goods.

These changes come at a time when the Australian dollar has firmed to a 6 month high of USD.77c.   

FreshIncites: The pace, scale and impact of this change magnifies the need to stay informed and build strong local relationships in these rapidly growing markets. 

Online Indian network Vegfru seeks to sharpen supply chainTop

vegfru_final1.png Vegfru is an Indian online network that aims to connect fruit and vegetable farmers with their distribution alternatives. They have set out to streamline the supply chain and with 29 states and 7 union territories, many intermediaries and numerous small resellers, they’ve set themselves a major challenge.

Indian farmers are currently receiving 20-30% of their final consumer price in comparison to other markets where 50-60% is received. Vegfru is attempting to enhance the capabilities of the Indian farmers and help them capture more value from a large amount of under-utilized product and trading profit.

Encouragingly the high growth conditions in the Indian food market are conducive to a level of investment. Vegfru also claims that food exports are one of the future foundations of India’s economy and for that to be realised, more efficient supply chains are needed.

FreshIncite: Considering India's rapidly rising population, it will be of strong value to Indian trade in fruit and vegetables exporters if Vegfru can deliver improvements.  

The Food Consumer

Bubbleberries and Pineberries for Australian customersTop

pineberries_bubbleberries1.png Two new varieties of fruit labelled pineberries and bubbleberries will now be available to Australian consumers. The new varieties were imported from Europe to be grown in Australian conditions.

The pineberries taste similar to a strawberry but with a hint of citrus, and the bubbleberries try for a slightly obscure flavour similar to that of hubba bubba bubblegum. Both of these fruits are trying to penetrate the novelty fruit market.

Both the pineberries and bubbleberries were sold for a second year in a row at UK retailer Waitrose for a premium price, with pineberries sold at £4.00 per 100g and bubbleberries at £4.50 per 100g, which equates to AUD $7.36 or $70.00 per kg.

FreshIncite: Another berry product appears poised to lift the berry category value.  

Can kangaroo meat feature in the modern diet?Top

kangaroo_gourmet_steak_final_4.png A research team at James Cook University have concluded that if Australians are drawn to respond more to environmental concerns we may well be eating more kangaroo in the next 30 years.

It is expected this will be led by the relative environmentally efficient nature of Kangaroo production. However, importantly it is also expected to be influenced by the lean low fat nature of the meat, which makes for a strong and somewhat unique combination.

After some early resistance Kangaroo meat has earned and maintained ranging in with steak and mince product forms available at mainstream food retailing. When current retail pricing for kangaroo is assessed on a price per kg basis, the price matches beef mince and is around 15% lower than beef rump steak.  

FreshIncite: Consumers are more interested in the provenance of their food and it stands to reason that the positive story that Kangaroo meat can offer will resonate with these concerns and flow on to influence food buyer behaviour.  

Retail

Fresh food independent retailers lose share Top

freshfoodretailers1.png Sales at greengrocers, butchers and fishmongers are under pressure as the latest results from the Mealpulse panel show supermarkets capturing higher proportions of household food expenditure.

The reasons Australian consumers shop at these fresh food specialists remain anchored on better quality, range, competitive pricing and suppor for local retailers. While this is a defendable set of advantages, the crossfire from the supermarket retailers has now eaten into the sales of these specialist fresh food retailers. In the last quarter of 2015 the household expenditure reduced by 5% on the same quarter in the previous year.

Higher prevailing market prices for beef, lamb and most seafood has brought price into focus and played to the advantage of the value offers of the supermarkets.

FreshIncite: Retail competition has flowed through to slow the sales of specialist fresh food retailers. If history repeats itself the weaker operators will exit and the better operators will find more effective ways to compete.

Retail loyalty schemes challenged in this marketTop

rewards_cards1.jpg The current Australian retail food market conditions make it challenging for retail loyalty programs to maintain traction. This is best reflected in how many Australian consumers carry more than one loyalty card, which effectively defeats the purpose of retailers investing to earn loyalty.

UK retailer precedents are that consumer preferences have moved toward more immediate and uncomplicated rewards. This change is believed to be influenced by the expansion of discount supermarkets, which are now established and expanding further in Australia.

One of the domestic Australian supermarkets is facing the challenge of enticing suppliers into a loyalty program that may not generate the same increase in sales as direct product promotions.

While loyalty schemes enable a level of customer tailoring they are also a constant part of a retailers offer. Unlike shorter term promotions, loyalty schemes don’t have the option to immediately adjust or potentially abandon.  They have less flexibility and potentially come under longer term scrutiny. 

FreshIncite: Earning retail loyalty is increasingly difficult when competitive intensity is being fuelled by lower prices.

Matilda’s expand frozen fruit offer Top

matildas_berries_final2.jpg Australian frozen fruit company Matilda’s has expanded their product range soon after their initial launch in December 2015. Their locally grown product has provided an alternative to similar imported frozen fruits. Matilda’s have led strongly with the local origin of their frozen fruit products and they have secured ranging support from independent supermarkets, delicatessen and selected fruit markets. 

Their recent expansion adds mixed berries, blueberries and mangoes in 300g to 400g pack sizes to their existing strawberries product.

The ongoing success of the Matilda’s range will reflect the Australian consumer’s willingness to pay for local market product instead of lower cost imported alternatives.

FreshIncite: Frozen fruit is essentially a convenient product form and it is a clear demand signal if a premium can be maintained for locally produced frozen product. 

Technology Frontier

New Amazon devices to improve online ordering Top

amazon_final1.jpg Amazon continues their focus on global grocery markets by introducing two new devices, the Amazon Tap and Echo Dot. The devices are designed to incorporate a voice-controlled assistant Alexa into people’s homes and daily activities.

These new devices take the voice recognition capacities to new levels and as well as enabling the control of a suite of household functions, they now make online ordering simpler and faster.  

Amazon is estimated to hold a 22% share of the US online grocery market, which is a modest 4% of the $795m US grocery market. However, these online food customers are highly valued as they are spending an average of $157USD per purchase, which is 3 times the average retail basket.

FreshIncite: Amazon continues to build their capacity to capture grocery market share and their business model appears anchored on leading with home based ordering and home delivery. 

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Freshincite is a publication prepared by Freshlogic

Freshlogic is a specialised provider of food market insights and analysis, with deep expertise in the dynamics of fresh foods. We deliver a range of services to industry and corporate clients, which aim to interpret market and supply chain conditions, or address challenges faced in food supply chains associated with changes in the preferences of consumers, supply dynamics, and economic settings.

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