Professor David HughesThe reality of the food and drink

industry

Dr. David Hughes

Emeritus Professor of Food Marketing

Kent Food & Drink Conference 2018

The University of Kent

Canterbury, Kent, United Kingdom

Tuesday, April 24th, 2018

Global and Local Key Messages for

Food & Drink Businesses

@profdavidhughes

www.supermarketsinyourpocket.com

A Great Idea Which Leaves You Thinking:

“Why Didn’t Somebody Do This Before?!

Fever Tree Has a Market Cap. of £3.1 bn.!

Farmers are Fashionable …

But Not Every Farmer

Should Meet a Consumer!

Epic Founded in 2013

Sales of $20 m in 2015

Sold to General Mills for

approx. $100 million 2016

Chinese Cities with the Purchasing Powers of Countries!

Global Differences

In What Shoppers

Value in Meat

White Fish Fillet

& Chicken Breast

Head-to-Head

Competitors

Worldwide

BothApprox.

US$3/kg.(£2.20)

Let’s List English Food and Drink Products Which Are Internationally Famous.

Shall We Do It Alphabetically Or As They Come To Mind?

Food is Front of Mind When “Foreigners” Think of France and Italy.

For Us, England Conjures Up Images of London, The Queen, Premier League

Soccer, Castles/Countryside/Tradition/Still Princess Di and, maybe ……

Fish & Chips!

Where Are We On the International Food Landscape?

Leveraging

French Food

Culture in

China & HK

B2C Platform

“How’d You Like Your Chicken?”

“With Adjectives, Please”:

• free-range ….;

• known provenance …

• Farmer Smith ….

• Kent Legbar….

• rare breed (Silkie)…

• slow-growing …

• vegetarian diet …

• organic …..

• Omega-3 rich …...

• happy …

• environmentally-friendly …

What’s The Story Wrapped Around Your Chicken?

College-Educated

Pigs Exclusively

Used for Waitrose!

The Margin is in the

Adjectives not the Noun

That’s £72 for a 200 grm. steak before you add the fries!

Single diners 42

2 diners 36

3 diners 11

4 or more

diners

11

2015 30 mins

1990 45 mins

1980 60 mins

1950 90 mins

5% more For healthy

22% more For better taste

Considerably more For ready made meal solution!

Source: Kantar Worldpanel UK

Albert Heijn’s “One-a-Day”

Egg Pack. Remember, 30+%

of Northern European urban

households are 1 person!*

* 30+% of Big City Aussie Households are 1 Person, Too

Not Designed for

1 or 2 Person

Households!

Ms. Veruca Salt (Courtesy of Charlie & the Chocolate Factory)

Of All the Attributes of the Millennial Consumer, Patience is NOT One!

Source: Roald Dahl, 1964

3 sec. 52% loss

How Long is Their

Web Attention Span?

Younger Consumers Eat Out Most Frequently in the UK

Pardon My Blasphemy!

Specially Blended Tea for

Use with “Non-Dairy Dairy”!

Bailey’s Irish Almond Cream!

Powerful Global Consumer Trends

OECD Obesity

League Table

2016

Australia Just Out of

The Medal Positions!

Two Cheers for Kellogg’s UK: So, Why Didn’t You Do This Before?

November 30th, 2017

Anticipating the UK Sugar Tax

Introduced April 6th, 2018

Food Retailers

Respond to

Customer Concerns

About Health

Men are Interested in Healthier Eating

and in Flexitarian Meal Options

The Number 1 Global Mega Consumer Trend is the

Increasing Concern About The Health of the Family

and The Health of the Planet. When Food Shopping,

Drives Shoppers Towards “Mindful Choices”*

And a Widespread View that Big Food, Big Business, Big Government

are Part of the Problem NOT Part of the Solution

“Mindful Choices” top food trend for 2018, Innova Market Insights, Nov. 2017

Expect Accelerated Regulation on Recycling

of Packaging in the Food & Beverage Industry

UK and Other Markets:

We’ve Reached The Tipping

Point on Recycling Issues –

Huge Implications for F&B

February 17th, 2018

Source: Bob Langert, Big Dutchman Industry Networking Forum, Malaysia, March 2017

Source: Bob Langert, Big Dutchman Industry Networking Forum, Malaysia, March 2017

Don’t Mess with The Panda. She’s Got a Big Stick and She’ll Beat You Up!

They Seek Reassurance on the Safety and Integrity of Their Food

Powerful Global Consumer Trends

Three Meal Solutions

For 2 People for £10.

That’s Tues-Thursday

sorted for £1.67 per person

per meal – VERY good value

Lunch for £3

How Low Can You Go?!:

•sandwich

•bag of fruit slices

•drink

•But where’s the fresh

produce? Often, metres

away in the Fresh

Produce Dept.

HOPELESS!

Food Products Presented

By Meal or Snack Type

NOT by Product Category

£10 Meal Deal

For 2Prawn Cocktail (Heston Blumenthal)

Chicken Breast with Prosciutto + Asparagus

Parmentier Potatoes

4 x Peroni Beers

Astonishing Value

Anthropomorphism Rules in the UK!

Fresh Pet Food Sales to Sky Rocket

The Market for Chilled Ready Meals for Pets is Set to Sky Rocket!

UK Ready Meal Market, 2017

Type £Million 2017/2016 %

English 1,364 +5.0

Italian 660 +5.6

Indian 428 +6.8

Chinese 326 +11.4

American 137 -3.5

French 130 +1.8

Spanish 80 +11.3

Thai 59 +31.7

Japan/VN/MY 52 +27.9

Greek 46 -4.2

Total £3,182 million*

* £2.25/week/household spend on ready meals

Source: Kantar Worldpanel, 52 w/e Nov 6, 2017

The Global Grocery World Has Entered a Disruptive Period

2017 2022 % Change

Hypermarkets 8.8 7.7 -1.1

Supermarkets 46.6 42.8 -3.8

Convenience 21.7 22.1 +0.4

Discount 10.9 14.1 +3.2

Online 5.6 7.6 +2.0

Other 6.4 5.7 -0.7

Changes* in Grocery Market Share by Channel UK 2017-2022

%

* IGD Forecast, 2017

Source: IGD, 2017 * forecasts

Shopping in “Big Barns” Less Often and Buying Less per visit.

Hard Discount, On-Line and Convenience Winning the Day

Food Industry Analysts Predict

Tough Times for Supermarkets

Supervalu Stock Price Dismal Performance

How Much Market Share Can Aldi (and Lidl?) Take in the Australian Grocery Market?

Hard Discounter

“Super 6” Has A

Significant Impact

On Fresh Produce

Buying Behaviour

and on Retailer

Price Competition

Both Aldi and Lidl have a Formidable Premium Range for Meats

Who’s Leading the Way in

On-Line Grocery? Why?

(and don’t go to the USA

for on-line leadership!)

Kantar Worldpanel and Mintel, 2017

Grocery Delivery Options Proliferate in the UK

August, 2017

Market Capitalization of Some Major Grocery Retailers (US$ bn)*

$664 bn.

$455 bn.

$252 bn.

$28 bn.

$16 bn.

$80 bn.

$27 bn.

* as of April 4th, 2018

**

** Woolies Australia

www.supermarketsinyourpocket.com

Market Cap Amazon $629 bn.

and Sainsbury’s $9 bn.

January 12th, 2018

Oct/Nov 2017

For Major Supermarket Companies around the World:

The Future is Omni-Channel.

One Product Does Not Fit All Channels!

Supermarket Store Configuration is Changing

Source: www.supermarketsinyourpocket.com

For Theatre in Grocery

Retail and Food-to-Go

Concepts Take a Look

in Asia:

Here’s Ben’s in KL

UK Food-to-Go Value to Soar in Next Five Years

2017 2022 Change CAGR*

£ billion £ billion +% +%

Food-to-Go Specialists 5.1 7.7 51 8.4

Quick Service

Restaurants

5.4 6.3 17 3.1

Coffee Specialists 2.9 4.2 45 7.4

Convenience &

Forecourts

2.7 3.6 33 6.1

Super/Hypermarkets 1.3 1.7 31 5.9

Total 17.4 23.5 35 6.2

* CAGR: Compound Annual Growth Rate

Source: IGD, UK.

2017

After Decades of Major Supermarkets Dominating Fresh Produce Companies

Customer Bases, “Food Service” Customers Becoming Increasingly Influential

Food-to-Go Accelerates the Convergence of Food Retail & Food Service

Increasing Competition for

“Share of Stomach” from

Non-Grocery Outlets.

Boots have a Health Halo.

This “Newsagent” Chain

is a Major Vendor of Snacks

and Mini-Meals in the UK

Amazon Opens Its 1st Check Out-Free Food Store, Seattle, USA (12/17)

Where Am I?

Huge Hot & Cold

Beverage + Snack

Offering

Healthy Food Offer

Asian and Western

Food & Beverages

Noodle Bar

Hong Kong

Meal Kit Companies: New Customers

for Fresh Food But Do They Have

Long-Term Commercial Legs?

(A$4.35)

The Guardian

Oct. 28th 2017

UberEats Delivery Partnership with McDonalds

in USA, Western Europe, Australia

• 30+% of all US sales made using Starbucks app

• Virtually US ALL same store sales growth digital

• Globally planning to double food business by 2021

• Particular expansion of premium food and drink lines

• Expanding Bistro Boxes and Reserve Cafés (20% y-o-y growth 2016/18)

• Focus on cold drinks (50% of drink sales 2017/18)

• Market leader in cold brewed coffee in USA

• China expansion: 800 cafés in 2013 to 3200 end of 2018

• 1st Reserve Roastery opened in Shanghai Dec. 2017

• Opening a new café in China every 15 hours! Currently, 600 in Shanghai

• Keeping shareholders sweet – returning $15 bn. cash over next 3 years

Evolution of Starbucks Logo

Source: Starbucks, March 20th, 2018

Danone VC Arm Buys into Farmer’s Fridge

Franchise Vending Business in USA

Here’s Some Concluding Comments to Mull Over!

• give or take, we’re 65% self-sufficient in food products which can be

produced in the UK and this % is declining

• our food and drink export-import picture is dominated by trade to and from

the other EU countries (volume/value of both increasing over time)

• our best market is right here at home – consumers know us and largely

trust us. Our EU neighbours are a terrific second best market

• on wider international markets, we’re not the lowest cost producer of any

food product. We must: target premium sectors; with products that are in

harmony with global consumer trends; have compelling stories that

translate/are relevant to our target markets; fully traceable & transparent

• it’s a great time for start-up smart, agile smaller food & drink companies

• Carpe Diem and don’t dismiss support from VC arms of “Big Food” cos.

•

CONTACT POINTS:

e-mail:

profdavidhughes@aol.com

Telephone contact:

mobile: +44(0)7798 558276

@ProfDavidHughes

Retail Blog: www.supermarketsinyourpocket.com