Freshincite November 2014

What We’re Seeing

US market yields lessons for AustraliaTop

Wholefoods ready to go food offerThe US market can yield many valuable insights with possible applications in Australia. The US west coast in particular has many similarities with the Australian market, which made the recent PMA Fresh Summit event in Anaheim even more interesting. Freshlogic drew a number of insights from the developments and products on show at the event.

Marketing trends:

  • New product development is pushing forward with convenience and being more retail ready. This includes more combinations of ingredients, smaller portions and packaging forms that are more retail shelf space efficient. The breadth of new ranges reflected a maturing and consolidation, rather than a wider proliferation. There were more seasonings with the common promise of “adding some taste to your meal”, with these offers typically available in the efficient hang sell merchandising units.
  • There is increased demand for organics, and US regulatory bodies are reportedly adding staff to cope with increased requests for accreditation. The retail price premium for organics has levelled out at around 25% above conventional products, and that stability appears to have been welcomed by mainstream supermarkets, some of which are enjoying strong growth. Organics are taking some of the spotlight that ‘local’ has enjoyed in recent years, perhaps because it is viewed as more substantial and because consumers see the price premium as proof of additional value.
  • The provenance story has been in played out in the US longer than in Australia, and it’s significant that some marketers have drifted to a somewhat sceptical description of this as ‘little house on the prairie’ positioning.
  • Supplier brands are an integral part of the retail supply chain in the US, and due to the platform they provide, producers and marketers invest more in product support.  This same capacity fuels the confidence to innovate and begs the question as to what value could be added to the Australian market if the same branding platform was available.
  • The size of the US market and breadth of distribution channel options is reflected in the way the US industry defines them:
    • Conventional: supermarkets and hypermarkets
    • Natural: chains like the Wholefoods 300+ store network
    • Club: membership-based stores such as Costco or Sam’s Club
    • Other: including new alternative online channels
  • The understanding of what it takes to influence consumers has matured at an industry level. It is accepted wisdom in the US market that other processed foods will always have the budget to outspend fresh food, and that improving influence with consumers is only likely to come from a balance of messages and activities that connect with their emotions.

Many of the trends now playing out in the Australian market were felt earlier in the US, and the way that market is evolving can yield valuable lessons for the fresh food sector here.

Florists maintain strong positionTop

flowers.jpgSpecialist flower retailers still command a majority share of the fresh flower market in Australia, according to Freshlogic’s ThruChain™ modelling, although supermarkets have expanded their role in the category over the past decade with revamped offerings.

The strength of florists is a prime example of the attributes consumers value in all specialist retailer groups in the Australian market. A perception of better quality was involved in nearly half of consumer decisions to buy flowers at a florist rather than a supermarket, according to the Mealpulse™ consumer panel. Convenience locations and service, competitive price and a wider range were also key reasons consumers chose to buy their flowers from florists.

Specialist retailers still hold a significant share of the flower market, despite the expansion of the supermarket offer in the last 10 years. As with all other specialist retailers in the Australian market, their niche is clearly based on quality, backed up by good service and a competitive range.

China deal underlines export focus needTop

china_flag.jpgWhile the ink on the China-Australia FTA is still damp, it certainly appears to be a positive development for Australia’s food and agriculture sector. The deal has benefits for most of Australia’s primary production sectors, and looking long-term it strongly underlines the opportunities for them in the ever-growing Chinese market.

The deal has particular implications for red meat and dairy. Red meat, particularly beef, has seen big growth in exports to China in recent years, despite tariffs as high as 25%, while dairy is a newer entrant but one which has huge opportunity. With those tariffs eased out over the next nine years, Australian exporters will find themselves in an even more competitive position. Horticulture has an even earlier payoff, with all tariffs removed within 4 years.

Implications for the domestic market are clear – a larger scale and more dedicated export sector will link domestic supply to international demand more firmly, with flow-on effects for volume availability and pricing along with potential benefits in efficiencies of scale.

The FTA has significant benefits for Australian food producers, albeit with some long-term tariff phase-outs. The new deal re-emphasises the importance of taking a dedicated and well-planned approach to the Chinese market, more critical now than ever to exploit the advantages offered by this FTA.

The Food Consumer

Health focus driving beverage giantsTop

Pepsi True and Coke Life.jpgBoth Coca-Cola and Pepsi now have new stevia-sweetened variants of their colas on the international market. Coca-Cola Life will launch in Australia next year, while Pepsi has just taken the covers off Pepsi True, which follows up its Pepsi Next launch a few years ago. These variants mix sugar with the ‘natural’ sweetener Stevia, reportedly giving a similar taste to their full-sugar siblings with lower calories. They fit in between the two soft drink makers’ full sugar and artificially sweetened diet varieties.

Both companies are looking to new low-calorie “better for you” products to turn around lacklustre sales results in the soft drink sector over the past few years. Locally, Coca Cola has felt the pressure with more than 150 redundancies across partners CCA and CCL.

Consumer health concerns have clearly impacted the soft drink bottom line and are now driving NPD at the world’s largest beverage companies.

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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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