Lack of long-term thinking ‘stifling growth’ in retail sector
Rabobank analyst Francois Sonneville believes that perceived volatility in the retail marketplace is creating a slowdown in new product development. The horsemeat and other food scandals have made consumers less predictable, leaving food and drinks manufacturers and retailers hesitant to invest in new products.
Mr Sonneville says retail chains are particularly missing opportunities to sell new products within their own private label ranges. A beverages specialist, he will also apply his thoughts to missed food retail opportunities at tomorrow’s Checkout Conference at the Four Seasons Hotel, Dublin, where he is a key speaker.
“Retailers are reluctant to pay higher prices to manufacturers, because of changed consumer behaviour and the volatility of the market. Thus, manufacturers, particularly of ‘commodity’ products in own-brand, have low margins, and innovation is stifled,” said Mr Sonneville.
In his presentation, ‘The Long And Short Of It: Why Long-Term Thinking Is Crucial For Retail Grocery’, Mr Sonneville argues that, while there is a continuous need for new products in the marketplace in order to drive sales growth, the innovation stream is stifled due to lack of investment.
He points to last year’s horsemeat scandal — where quality was being driven out of the supply chain to drive short-term need for value — to illustrate this trend.
“Although food prices today are higher than at the start of the recession, consumers have been helped by retailers through price actions and private label alternatives,” said Mr Sonneville. “As higher commodity costs have not always been fully passed on, the consumer could even be considered a winner, but the consequences for the product and the production process might turn out to make this a Pyrrhic victory.”
Mr Sonneville notes that as a result of this short-term thinking, the industry will soon be heading for an ‘aftershock’ — a realisation that this situation has to change, or else economic recovery will also be stifled, leaving others to capitalise.
Tomorrow’s conference is titled ‘Aftershock: The Retail Brand Challenge’. The event will examine how receptive the retail and FMCG industries are to the rapidly changing needs of the Irish consumer.
Tomorrow’s list of speakers includes Musgrave Group chief executive Chris Martin, who appears at the conference just days before the group’s plans to rebrand its Superquinn stores with the SuperValu name.
Meanwhile, Musgrave MarketPlace last week acquired the foodservice division of Allied Foods, a distributor of ambient, chilled and frozen foods to restaurants and fast food outlets nationwide. The move will boost the group’s own brand offerings in these outlets.
