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Retail Freeview - Are we paying a fair price for milk? A farm to fork perspective

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As we head into a month dominated by the Olympics, retailers are hoping the event will cheer up the nation and put us all in the mood to spend. In London temperatures are reaching 30 degrees Celsius; …

As we head into a month dominated by the Olympics, retailers are hoping the event will cheer up the nation and put us all in the mood to spend. In London temperatures are reaching 30 degrees Celsius; the torch is appearing on every high street it seems; a Brit won the Tour de France; and John Lewis is wrapping its stores in the UK flag – it certainly cheers the spirit. Let’s hope this weather and mood continue and infect the nation with the goodwill and optimism we have been lacking; retailers could certainly do with both in a very difficult year so far.

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  • 1. July 26, 2012 Verdict Retail FreeView A synopsis of retail news and opinion About us Verdict is a retail information As we head into a month dominated by the Olympics, retailers are hoping the event will cheer up specialist within the Informa Group. the nation and put us all in the mood to spend. In London temperatures are reaching 30 degrees With almost 30 years experience, Celsius; the torch is appearing on every high street it seems; a Brit won the Tour de France; and Verdict publishes unrivaled John Lewis is wrapping its stores in the UK flag – it certainly cheers the spirit. Let’s hope this weather independent analysis. We provide a complete picture of the UK and and mood continue and infect the nation with the goodwill and optimism we have been lacking; increasingly the international retail retailers could certainly do with both in a very difficult year so far. arena, helping retailers, Maureen Hinton, Verdict Practice Leader manufacturers, service suppliers, analysts, and consultants to fully exploit opportunities within the "Sportswear specialists should perform well and benefit from the industry. Olympics. The main players are JD Sports and Sports Direct – [they] will grow market share during 2012." Latest analysis Honor Westnedge, Verdict Analyst, just-style.com, July 18 Victoria’s Secret | Verdict Company Briefing Trends and Innovations in European Convenience Retailing | Verdict Strategic On Primark’s most successful store opening to date, in Berlin: Report “It’s difficult to find any European retailer that has the same clout and impact as Primark. You can say it’s in a class of its own.” Pharmacy Retailing in the UK | Verdict Maureen Hinton, Verdict Practice Leader, Bloomberg, July 18 Market Report Global Department Store Retailing | Verdict Channel Report Footwear Retailing in the UK | Verdict Market ReportWeb: www.verdict.co.uk | Tel: +44 (0)20 7551 9664 | Email: enquiries@verdict.co.uk
  • 2. July 26, 2012 Verdict View Are we paying a fair price for milk? A farm to fork perspective By Cliona Lynch, Verdict Analyst; Chris Horseman, Agra Informa Editorial Director; and David Bird, Datamonitor Consumer Analyst The dairy farmers’ summit opened up debate on why At such a sensitive time for milk pricing, Asda has All the indicators suggest that by the end of 2012, milk costs less than water on our supermarket shelves. chosen to push its low price position, with an advert in commodity prices will be back on the rise, and this will On July 20, hundreds of farmers blockaded processing the Metro newspaper on July 20 highlighting round filter back through to farmers’ milk cheques – plants in Somerset, Leicestershire, and Yorkshire in pound pricing that undercuts competitors. eventually. protest at cuts of up to 2p per liter, and the National Farmers Union (NFU) has called for strike action from all While the price drop may be absorbed by the retailer David Bird dairy farmers from August 1, unless planned price cuts and not passed on to farmers, the wider issue of Milk is a commodity market; there are very few are binned. creating an expectation of a low price point for milk differentiators to distinguish between one product and remains. Asda may have hit a top-of-mind topic, but it the next, and the consumer cannot determine why Informa’s expert analysts from Agra Informa, will also have hit a nerve with farming communities they should pay more for one product over another. Datamonitor and Verdict Research give their insight and the portion of its own shoppers that are involved in into the entire supply chain, from farmer to processor to the #sosdairy Twitter campaign. At the point of sale, all the products look similar – often retailer. the only differentiator is whether the milk is skimmed, Chris Horseman semi skimmed, or full fat, with the color of the bottle Cliona Lynch What has not been widely recognized until now is that top distinguishing this. Most milk sold is own label (there Price sensitivity is high in food retail, and despite milk as a commodity has become locked into a is very little brand value), and even then, there is not shoppers claiming that they are willing to pay more for production cycle, with prices rising and falling as even a good/better/best tiering. Indeed, the milk aisle milk, retailers are right to recognize that intention and producers adapt their output to these changing price is a “wall of white” – all the SKUs look the same and are behavior do not always align. Where in practice indicators. This is relatively new for the European milk marketed instore in perhaps the most uninspiring way shoppers may aim to shop at a more ethical price, industry, as in years gone by milk quotas and EU imaginable, usually in warehouse-style crates for ease how many of them can and will pay more to do so in market support kept prices stable and predictable. of (re)stocking. practice when household budgets are tight? Consumers would not tolerate the sort of fluctuations in An absence of brand value or points of differentiation While the NFU praised Tesco, Sainsbury’s, Marks & retail milk prices that would be needed to match the means that justifying a product premium for milk is Spencer, and Waitrose for paying a cost of production changing price of the raw product, and nobody difficult, and producers are at the mercy of the buying (COP)-linked price for milk, it also berated the Co- accused consumers of “paying too much” when dairy power of retailers. operative, Asda, and Morrisons for differing from the commodity prices were at record highs this time last COP-linked model. year.Web: www.verdict.co.uk | Tel: +44 (0)20 7551 9664 | Email: enquiries@verdict.co.uk
  • 3. July 26, 2012 News Review Despite being a new entrant to the UK lingerie sector, the retailer is already Clothing & Accessories in a strong position due to its widespread brand awareness among UK By Kate Ormrod consumers, owing to its extensive US store network and keen marketing activities. Very launches festival ordering service Online fashion retailer Very, part of the Shop Direct Group, has announced The company has been a success in its home market because of its fast plans to operate a delivery service to V Festival in conjunction with its cycle of product launches, and Verdict expects this to resonate well with UK Collect+ click and collect service. It will allow festival-goers to order items shoppers. Regular newness of fashion and seasonal designs will drive footfall online via the company’s mobile-optimized site and have them sent directly and encourage shoppers to buy into the brand. For more information, to a collection point at the festival’s Chelmsford, Essex site the next day. It please see Verdict’s Victoria’s Secret | Company Briefing. will also offer a variety of onsite services, including a 50-item collection specifically designed for the festival, which can be delivered to the site within an hour, and a dedicated Very tent onsite with personal grooming Food & Grocery facilities and changing rooms. By Cliona Lynch Very has chosen its market wisely; the key demographic for the festival is 16– Ocado launches its latest pop-up shopping wall 24 year-old music fans, who are likely to be more fashion-oriented and will UK online grocer Ocado has opened its third pop-up shopping wall concept therefore be more willing to use such a service than those who attend other this week in Birmingham’s Bullring shopping center. While the wall generates festivals hosted across the country. First and foremost, the initiative is a publicity and shopper interest in its mobile app, its static images do not marketing exercise, with the intention of expanding the brand’s appeal excite tech-savvy shoppers. among this age group, as well as promoting its ability to deliver next day with Collect+. Ocado would do well to learn from Belgian retailer Delhaize, which has taken the shopping wall concept one step further by positioning its “cubes” Victoria’s Secret looking to seduce UK lingerie shoppers in busy train stations across the country and adding click and collect to the US lingerie retailer Victoria’s Secret opened its first store in the UK in London’s offer. By positioning its cubes in train stations, Delhaize can target Westfield Stratford on July 24, 2012, shortly followed by a second store on commuters at a key dwell time in their day. Moreover, the retailer’s concept New Bond Street (due to open on August 6, 2012). While the retailer has not allows shoppers to order products for collection at the other end of their given any details on future UK store openings after this, Verdict expects its commute. While Ocado’s lack of physical presence restricts its ability to focus to be on large destination stores in only key cities and shopping provide click and collect groceries, its concept could be adapted to work hotspots. This will keep the brand exclusive and niche, which shoppers will with a same day delivery model, or collections in conjunction with a partner find exciting. store. Both retailers would also benefit from innovating in interactive technology.Web: www.verdict.co.uk | Tel: +44 (0)20 7551 9664 | Email: enquiries@verdict.co.uk
  • 4. July 26, 2012 News Review myCostcutter opens in Scotland The retailer has also planned to take on 500 new part-time employees to Symbol group retailer Costcutter has opened the first store under its new build on the current recovery trend. While this appears to be good news for premium fascia, myCostcutter, in Insch, Aberdeenshire, with a second store the electricals retailer, there remains stiff competition up against Currys, expected to open in Manchester by the end of July. The concept differs which has invested heavily in service and its KNOWHOW brand. Comet will from its standard Costcutter banner in that it will stock more local produce need to similarly build a reputation for strong customer service as it attempts and sell more premium items, while the new brand colors of black, green, to re-establish its market reputation after years of market share falls. and red, along with the improved store layout, are intended to create a more upmarket feel. Amazon is shifting strategy One of Amazon’s biggest strategic benefits of being an online pureplay The premium fascia gives Costcutter scope to tier its store portfolio. Higher retailer has been its ability to locate tax havens, which enable it to maintain performing stores and those in more affluent areas will be boosted by the low prices. This has consisted of distributing in the UK from tax havens such as new fascia. As competition in the convenience sector continues to heat up, Jersey, shipping from Ireland, or operating from particular states in the US enhancing the package offered to retailers is likely to help Costcutter to that do not collect sales tax from retailers without physical stores. However, retain more profitable members. in the US, the online retailing giant has shifted tack, and has begun opening numerous distribution centers close to large populace areas in states which insist on collecting sales tax. The big move is expected to be an attempt to Electricals & Entertainment offer same day deliveries; however, it will come at the cost of either being By Matthew Rubin less price competitive or reducing profit margins. Comet on a trajectory to profit Being able to offer products to take home on the day of purchase is where After being sold by KESA to OpCapita for £2.00 ($3.12), under the guidance the traditional high street retailers have previously maintained a distinct of a new leadership team with chairman John Clare at the helm, Comet advantage over their online competition, but this latest move could put that has embarked on a number of cost-cutting measures, reducing staff from at risk. In the UK, this may in fact not lead to higher prices due to differing 8,500 to about 7,000 and cutting many back-office costs to move the regulations; however, if the same attempt is made to offer same day retailer back towards revenue growth. delivery, it puts the already struggling high street under added pressure. For Amazon this is a smart move, as its ever broadening product range will find Clare recently announced that the retailer was moving away from cost further appeal in big ticket and large-sized items if shoppers can receive cutting and redirecting its attention to growing topline figures. While some them on the same day as well as purchasing without leaving the home. stores will be downsized, no immediate closures are to be expected, keeping the store portfolio at around 240. However, up to 60 less profitable stores have been identified for possible closure over the coming years.Web: www.verdict.co.uk | Tel: +44 (0)20 7551 9664 | Email: enquiries@verdict.co.uk
  • 5. July 26, 2012 News Review Health & Beauty By Carly Syme SuperGroup looks to leverage brand into cosmetics Stay in touch In an effort to maximize value from the Superdry brand, SuperGroup is planning to offer a range of cosmetic products in time for Christmas 2012. It has already launched a range of fragrances, and chief executive Julian Contact us to see how we can help Dunkerton has stated that the retailer intends to take up any new Tel: +44 (0)20 7551 9664 opportunities that will add value, highlighting Ralph Lauren as strategic Email: enquiries@verdict.co.uk inspiration. The expansion into cosmetics follows a collaboration with tailor Timothy Everest to develop a range of formal menswear, launching in spring Share your views with our analysts and the Verdict community through our 2013, with a formal womenswear range expected soon after. Any move to social media channels. expand the retailer’s offering will help to contribute to revenue growth; LinkedIn however, it risks losing the brand’s “cult” status. The rapid increase in Twitter product range could draw attention away from its offerings as shoppers seek a more exclusive label. Sign up to our emails for news from the UK and across the globe. Verdict FreeView Asda to stock asthma inhalers over the counter Asda is set to be the first UK supermarket to stock asthma inhalers this month, which will be available over the counter without a prescription. The inhalers would usually cost £7.65 ($11.95) if obtained through a prescription; however, customers over 16 will now be able to buy two of the blue “reliever” inhalers for £7.00 ($10.93). Deputy superintendent pharmacist at Asda, Faisal Tuddy, announced the plans, stating that the service was designed to be easy and convenient, but would be closely monitored. Executive director of research and policy at Asthma UK, Dr Samantha Walker, spoke of the organizations worry that due to the ease of availability, sufferers may overuse their inhalers, which can result in severe medical complications. By ensuring that the new program is monitored and controlled, Asda will benefit from this new initiative; however, as more supermarkets launch similar plans, the benefits will likely diminish.Web: www.verdict.co.uk | Tel: +44 (0)20 7551 9664 | Email: enquiries@verdict.co.uk