FreshIncite December 2016

What We’re Seeing

Small format food retail networks under performTop

smaller_retailer_3.png Small Australian retail food formats, including C-stores and small format supermarkets have struggled to reach the performance of similar formats in other developed retail food markets.

 

This is despite substantial investments by food retailers into this format size, including embracing petrol offers and expanding some food categories in those networks. Let’s Eat, Foodchain and Macro Foods are some of the more visible attempts in the Australian market in recent years.

In recent weeks more changes are signalled, with Caltex and BP circling to acquire the Woolworth’s fuel site network and speculation that the four remaining Thomas Dux stores will migrate to Woolworth’s Metro in early 2017.

Yet this performance is in contrast to what has been achieved in the UK and also neighbouring Asian capitals. In the UK, the advanced food and ready meals offers has driven performance and in Asian capitals the small format food stores are now the high growth retail food channel.

Why the gap? Is it driven by; population density, an expansive housing footprint, fuel centred site branding or just shortfalls in the offer. We suggest all those factors contribute but the content and quality of the food offer is at the core.

A key question is whether this latent food distribution capacity that exists in so many C-store type formats is now under increased pressure from the breadth of new food channels.

FreshIncite: If the disrupter mode is to find and align lazy assets, is there potential for the new emerging food offers to align with the distribution potential of these existing smaller stores?

Amazon to pick partnersTop

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The much-anticipated arrival of Amazon in Australia with a locally based offer is confirmed for 2017. There’s also talk of selected bricks and mortar sites to cater for the remote regions.

Warehousing real estate markets are buoyant given the 75,000-square metre facility that Amazon operates in UK.  

There is certain to be a level of impact on the Australian food market, it is significant that the entry timing confirmed is already driving some change in readiness to compete. Online food in Australia lags UK & US by 4-5% of food market share. Given Amazon has shown a willingness to invest to create scale, if they enjoy success they will lift the competitive tension in food retailing to new highs. 

While the Amazon model is clear, how they will resolve the food supply chain they need is yet to be determined. In more recent market entries they have partnered with existing operators, which invites the question of partnering options in Australia.

FreshIncite: Amazon will impact this retail market but the extent of their impact on the food market will be shaped by the competency of their food supply chain partners.    

Wild caught seafood now 2nd to AquacultureTop

seafood_combined_final1.png As Seafood takes the lead role in festive season meals, it's relevant to reflect on the source of our highest value fresh protein.

In 2016 the world moved to consuming more seafood from aquaculture farms than from the wild caught origins. This change has been forecast for years and has been driven by steadily increasing global seafood demand, combined with measures to ensure the long-term viability of natural seafood reserves.

In the Australian market, premiums are being earned for the reducing supply of wild caught seafood, while most of the volume increases are being generated with farmed seafood.   

FreshIncite: The demand for the seafood remains strong and welcomes the increasing supply of product from farmed operations.

The Food Consumer

Cauliflower on a new levelTop

cauliflower_combined_3.png A range of new uses amplified by new media has elevated cauliflower to a new status. The once savoury staple vegetable has been applauded for its multipurpose prowess as it has found its way into dishes from appetizers to desserts.

These new uses for Cauliflower are typically framed by being a carb alternative and include: rice, mash, as a flour base for baking & pizza, veggie steaks, cheese stalk sticks and creamy soups.

The broad base of interest is reflected in Google searches for cauliflower steadily increasing since 2014. The search detail reflects interest in cauliflower health benefits and how the sturdy texture enables a diversity of uses. 

While this rise has aligned some innovative uses with demand patterns, it is also a reminder of the exposure that can be generated by today’s new media options.

FreshIncite: The rise of cauliflower acts as a reminder that old favourites have growth potential. It also demonstrates the strong value of seeding and fuelling the momentum of new media.

Summerfruit dynamics ramp up in 2017Top

summerfruit_1.png The peak of the local summer fruit market is in Jan and Feb, when 60% of crop volume sells. In 2016 this period is poised to be influenced by several factors.  

Nectarines are enjoying their first season of access into China, which amongst other things is expected to flush out how many white flesh varieties have been planted in recent years. After a challenging growing season the early fruit has been well received, but it is critical how long the demand can be maintained. Chile has also gained first year nectarine access to China and with airfreight leverage has arrived earlier and is expected to impact our supply window advantage.

The 2017 Chinese New Year is a week earlier this year, on Jan 28th. As export sales ease after this key celebration, the domestic market swings into filling lunch boxes for “back to school” in the next week in larger eastern states.

FreshIncite: If the planets align, Australia can start the platform for another large export crop. At the least, this eraly new year perios will create a need to be informed on the January wholesale markets for summerfruit.  

Pizza, beer & wine now home deliveredTop

crust_combined_3.png Melbourne based Crust Pizza is now offering alcohol with their home delivered pizza products. In doing so they have raised the stakes in the very active “home delivered takeaways” space now being expanded by the tech savvy likes of; Eat Now, Deliveroo and Uber Eats.

It is understood this offer has solved licensing laws and is currently on offer in selected Melbourne stores. The alcohol available includes two different kinds of beer - James Squire and Little Creatures, James Squire Apple Cider and a selection of 4 different types of red and white wine bottles.

Alcohol home delivery isn’t something new to Australian consumers, however, Crust will be the first quick service restaurant to offer it. Liquor is an appealing add-on to a home delivered order that can provide margin and scale to spread the delivery costs.

FreshIncite: This development is another attraction for consumers spending on prepared food and it has the potential to increase competitive pressure on take home food retailing. 

Retail

FoodByUs - Sharing & selling home cooked meals Top

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In the age of the shared economy, the leaders such as Uber and Airbnb are charging a fee to provide the technology to link latent resources. FoodByUs will attempt to do this by employing local Australian home chefs to cook meals and with the help of their smartphone app sell and deliver that food to the front door of consumers. 

The app functions by allowing the vendors to set their own price on their own chosen food e.g $30 for a homemade raspberry cake. The app currently has a network of around 1,000 cooks and they are aiming to grow their network carefully. The app has recently launched in Melbourne and provides buyers with the ability to rate the food that they have purchased.

It will be interesting to assess the appeal of homemade cooking and how much momentum can be generated. Especially considering the rich social media currency this offer could create.

FreshIncite: This offer is similar to the alignment of empty rooms (Airbnb) and cars (Uber) with people who need accommodation and transport. If it works, it can grow very quickly as it requires no additional infrastructure. 

Bite sized watermelons fireTop

pepquino_4.png The new “thumb sized” Pepquino watermelon has been welcomed by Chinese consumers.

The smaller snack size watermelon can be eaten whole, requires no cumbersome preparation and doesn’t leave you with 3 kg of uneaten product to squeeze into a domestic fridge.  

On the outside the miniature watermelon looks identical to the regular sized fruit, however the inner is coloured bright green. The taste is being likened to fresh cucumber and claims to deliver a rich content of magnesium, potassium and vitamin C.

Demand has been confirmed in larger urban centres and more widespread distribution is planned.  

FreshIncite: The Pepquino transforms watermelons into catering for snacks and if it can replicate the value captured in berries, tomatoes and cucumbers it could be a welcome retail range inclusion elsewhere.  

 

  

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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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