FreshIncite March 2016

What We’re Seeing

Cheaper petrol frees up household cashTop

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In Melbourne the average price for unleaded petrol in February 2014 was $1.53 per litre, compared to $0.96 per litre in February 2016, a fall of more than 37%. This sharp drop in price is large enough to make more money available for discretionary spending. If the 8.3 million occupied households in Australia purchase an average usage of 40 litres of petrol per week and can now do so for $0.50c per litre less, that equates to $20 per week per household and $166m of additional available national expenditure per week. The freshlogic Mealpulse panel confirms that the average household is spending $30 a week on fruit & vegetables, so this additional $20 is a significant amount. 

Since this insight has been compiled, the petrol prices have eased back up to $1.10 litre, but most forecasts are expecting strong global supply to maintain the pressure on prices and generate the expected household savings.    

FreshIncite: While the petrol retailing Convenience stores will get the first chance to capture this additional cash it is also likely to find its way into other retail and food service channels. 

 

Online petition showcases the digital age Top

online_petition_photo_martin1.png An online petition to enforce mandatory country of origin labels (COOL) on meat in France was launched on February the 19th, and its gathering momentum. After two weeks the petition has topped 15,000 signatures. It was created by meat industry bodies (Young farmers Coo de France, FNSEA and UFC-Que Choisir) with the aim of influencing the European union into making COOL mandatory.

The industry bodies have reached out to consumers in this instance to support their case. The 15,000 signatures speak to the idea that consumers are willing to support producers if the cause is relevant to their wants and needs.  The accessibility of the petition and the short time in which it has attracted support, showcases the strength and potential for the digital age to connect consumers and producers.

Consumers wanting to know where their food has come from isn’t a new phenomenon, however this petition has highlighted how consumers will pay close attention to this detail before they purchase.

FreshIncite: Producer advocates have reached consumers with speed and momentum using online tools and in doing so they have harnessed consumer demand to support their case.   

Organic food demand is growing Top

organic_food_supermarket_crop_2.jpg Organic food sales continue to show positive signs which are being fuelled by mainstream food consumers trying organic products. The Mealpulse panel responses confirm that the main reason consumers are buying organic food in Australia is due to what organic products do not contain. Fruit and vegetables are the most frequently purchased organic food type in Australia.

Developed markets are enjoying positive growth with the US organic food sales up 10% since 2008, and in 2015 there have been increases in Germany of 11%, Switzerland of 7.5% and in the UK by 5%.

This growth is reflected in organic products winning support from mainstream US retailers such as Costco and Walmart, and is demonstrated by Amazon featuring organic products on their US website home page.

Government level support is contributing to confidence, with Argentina eliminating taxes on organic products, Vietnam offering low cost loans to organic farmers in their VietGAP system and Ireland moving to streamline organic accreditation systems.  

FreshIncite: This type of food is now growing faster than the wider food market, making involvement in organics a stronger and more viable commercial proposition. 

The Food Consumer

China’s Retail Evolution Top

china1.jpg Rapid online shopping uptake in China is driving change that signals potential growth in other markets.   

Modern retail formats, like hypermarkets and supermarkets, have expanded rapidly in China over the last 20 years. However, these retailers are now dealing with a rapidly escalating level of competition from online providers.

E-commerce sales in China now account for 15.9% of total retail sales, compared to 7.5% in the US and UK and an estimated 4.5% in Australia. The value of  E-commerce sales in China has rapidly increased to US$472.1 billion, which is now higher than the US E-commerce market at US$304.1 Billion. Incomparison to recent years, hypermarkets sales have decreased by 1.8% while supermarket sales increased only 3.2%.

As a result, some retailer chains are closing poor performing stores, with over 7,000 supermarkets and hypermarkets closing between 2011 and 2014,  while others are rapidly refocusing their resources toward online. Walmart recently bought a controlling share of Yihaodian, China’s largest online retailer of food and beverages, and many convenience store chains have signed deals with online retailers to act as pick-up points.

Several different drivers are combining to increase the online sales in China, including: the increasing difficulty to commute across rapidly expanding metro areas; the density of housing that affords economies of scale to deliveries and the high level of patronage of wet markets, which hold approximately 60% market share of fresh food, leaving a need for consumers to purchase other shelf stable items, which are easily accessible online.

FreshIncite: The lessons and strategies employed in China, however, could provide a template for online sale impact in other developed retail markets.

Consumers unhappy about wasteful packagingTop

avo_and_orange_wf_logo1.png Canadian grocer Sobeys has been the latest supermarket to receive criticism for their packaged fresh produce. They are being accused via social media of over packaging their Avocado Halves after a customer uploaded a photo of the product on facebook. The feedback is centred on the wasteful extra plastic packaging considering that avocadoes naturally grow a protective seal.

Sobeys joins Wholefoods in receiving recent negative feedback for fresh fruit packaging. Whole foods recently removed their pre-peeled orange line after a customer uploaded a photo on twitter. Similar to the Avocado feedback consumers expressed negative comments about using protective wrapping and a container for a product produced with its own natural skin.

What’s clear is that retailers are meeting the demand for convenience with increasing proportions of fresh produce sold in packaging. However, these two incidences indicate concerns about over packaging and invites the need for product development to embrace environmentally friendly options.

FreshIncite: Convenience remains a major driver of fresh produce growth but there may well be a ceiling on how far the packaging solutions can go.   

Retail

Fresh lemon juice made easyTop

1.jpg UK supermarket chain ASDA recently offered a lemon sprayer for free with every purchase of their £1 lemon pack. The sprayer attaches itself to the fruit by piercing and then screwing into the lemon aiming to avoid some of the preparation challenges faced by consumers.

The gadget provides easy access to freshly squeezed lemon juice and means it can compete with the processed bottled lemon juice. Consumers are showing positive signs toward convenient fresh fruit and the new gadget gives consumers the option to avoid cutting up and preparing the lemon to access the juice.

The promotion was timed to coincide with Pancake Day in the UK and therefore centred on introducing consumers to a potentially new consumption occasion. 

FreshIncite: A simple and effective promotion with clear purchase related incentives that places a gadget in the household to increase on going consumption. 

Technology Frontier

Ad-blocking software has Google & publishing heavyweights concernedTop

ad_block1.png Google is working with major Australian publishers including Fairfax, News and Ninemsn to help combat the growing tide of consumers using ad-blocking. In the 12 months to August 2015, ad-blocking software increased 41% globally to 198 million users. Consumers are using adblockers because of the amount of data used by ads and the time it takes to load them – particularly on mobile devices, which face lower data caps.

This is a major problem for publishers and Google who are heavily dependent on income from advertising. In comments that reflect the gravity of the situation, Google head of news Richard Gingras said "Frankly, I think, at this point, the mobile web is in crisis".

"All of us today in using our phones, we're on these things 150 times per day, three hours a day on average, an outrageous amount of time, but if we encounter a link to something on the web, often we think twice because we think it might take 10 to 15 seconds to load, we don't know what it is, we pause." Too many annoying ads are seen as driving mobile users to ad-blockers, or quick views or reader views that challenge the standard business model entirely.

Google and others have invested in an open source project to enable improved data use and a more user centric advertising model. In the fine print it alludes to changing website architecture, which is a scary scale of change.  

FreshIncite: Perhaps due to the rapid adoption of mobile phones, we have overlooked that their use may evolve just as quickly in new directions.   

Energy storage breakthrough a game changer for electricity Top

final_battery_photo1.jpg US government agency Arpa-E has eased ahead of Bill Gates and Tesla in the multibillion dollar race to develop a new method of energy storage. The US agency has claimed a breakthrough in battery storage and the implications are major.

The new battery storage systems will allow energy captured by solar and wind sources to be stored and accessed later. This same capacity can enable consumers to access energy from their grid at low peak times and therefore avoid paying peak prices by storing energy for later use. Arpa-E projects that their discovery will impact a transformation in America’s electrical grid over the next five to ten years.

This game changing capacity has been fuelled by generous support for solar and wind technology and the underlying demand to find alternatives to fossil fuel dependency.

FreshIncite: The nature and scale of this breakthrough is an indicator that incentives and new technologies can combine to drive rapid change in the services we take for granted. 

A kick start for on-farm innovationTop

agri_picture_combined_4_3.jpg Australian farmers and researchers have received government funding to innovate with technology to enhance farm efficiency. The frontier of these developments has expanded to now include; driverless tractors, 24 hour harvesting robots, drones, crop sprayers that assess plant conditions and ride-sharing apps to organise transportation of produce.

These initiatives can improve productivity and reduce the labour inputs, which is typically the largest cost in most Australian farming operations. These technologies require more capital input to lower the overall labour cost.

New technology discovery has been given a boost with the National Farmers Federation to launch an Australian agricultural innovation hub that will receive funding from the government. Technological advancements in the agricultural sector have the potential to provide major gains for Australian farming and realising these gains will be assisted by the new hub.

FreshIncite: If these improvements all progress to completion they have potential to accumulate into substantial impacts on farm efficiency and cost of production.   

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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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