Don’t get pushed to the back of the e-shelf, Rabobank

The future for food retail?The growth of online food retail is a “game changer” for meat and other food processors, similar to the introduction of self-service supermarkets in the 20th century and later on the arrival of hard discount and private label, says a new Rabobank report.

The bank believes the global food industry is on the eve of an online retailing revolution that will lead to fundamental changes for players along the supply chain from processors through to retailers. For brands and private-label food processors of every size it means exploiting opportunities and tackling the challenges of securing on-screen visibility.

In its latest report ‘Food processors challenged by online growth dynamics”, Rabobank looks at the growth of online food retail as a game changer for processors. the report looks at how food producers and processors are having to assess brand strategies, adjust and diversify their product range, refine their marketing tactics and modify their supply chains to meet the demands of online retailers and ensure they don’t risk becoming invisible online.

“In theory, the online grocery market should be a place for everyone to sell everything,” says John David Roeg, senior analyst at Rabobank. “But food processors face the danger of being pushed to the back of the e-shelf. It’s not enough to change the packaging or formulations, in the face of increased competition and opportunities for commercial advantage, products need to be ‘online-proof’. Even the most popular products can lose share of screen so it is equally important for consumers to understand how to navigate the new online retail world.”

Rabobank has identified three areas where processors can adopt strategic changes to flourish in the online age:

  • Assortments – adjust products to make them online-proof: A risk for large FMCGs is to see their leading brands filtered out by consumers using filters such as gluten-free or low-sodium. An option for producers of B-brands is to specialise in niche products such as healthy options. Beyond niches, there are other variables than can lead to filter-beating products such as smart pricing and packaging variety.
  • New marketing techniques: Marketers and sales teams will need to develop more advanced systems and procedures to actively manage share of screen 24/7. While the emphasis will be on building strong and recognisable brands, tactics to improve visibility can include negotiating individual terms with a retailer for promotions, substitution deals (to promote it or prevent it from happening) or on-screen advertising.
  • Supply chains – new efficiencies for retailers and processor: Online retail will lead to more complexity for retailers with some costs going up, like more flexible production runs; and some coming down, like working capital due to fewer stocks in the supply chain. New product development can also become less expensive since online provides an ideal platform for product testing in a small catchment area. Additionally, improved flow-control can result in fresher products for consumers and lower stock losses, while shorter lead times and smaller batches are possible thanks to better data and forecasting.

For those food processors that get it right, online retail channels provide opportunities not previously afforded in the grocery industry, says Rabobank. With no limitations on shelf space, the barriers to listing and de-listing products are reduced. This goes for assortments from existing producers but also benefits small and new market entrants such as those in the slow-moving (super) premium segment or small ethnic food category. Furthermore, Rabobank expects some producers will be able to sell products through new online platforms or market places.

“Ultimately, Rabobank expects retailers to downsize their property and store portfolio significantly,” concludes Roeg, “with only fast-moving and profitable products getting shelf space, the rest will be ordered online.”

Pick up the challenge to stay at front of the retail e-shelf

Some New Zealand meat exporters, such as Silver Fern Farms, are adjusting their product offerings and marketing for the brave new online world around the globe. One of its major customers, the British-based Tesco, was the first in the UK to launch online shopping in that market 16 years ago and recently won Online Supermarket of the Year in that market in the Grocer Gold Awards in London.

“In all that time, our focus has been the same – we always aim to give our customers what they want, when they want it and how they want it,” a thrilled Simon Belsham, the retailer’s manager of grocery home shopping, said.

New Zealand meat was part of the package in a Chinese online promotion in April, when New Zealand Trade & Enterprise (NZTE) teamed up with Chinese online retailer on a six-day Kiwi product and brand awareness campaign. That resulted in 9,600 deliveries of seafood and meat to consumers.

As the New Zealand meat industry’s focus turns towards Asia – where consumers are said by Imperial College’s Professor David Hughes to be “particularly online savvy” – meat exporters and marketers need to pick up the challenge to make sure our products are at the front of the premium meat retail e-shelf.

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