Bakery is an industry full of challenges, but also of immense importance to customers, and everyone has an opinion and an emotional response to the category. I’m a customer, former manufacturer - I worked from 2004-2007 for RHM - and current retailer, a blend that I hope allows me a different perspective and a valuable opinion. I will let you judge that.
At Tesco, we are committed to this industry and the importance it has in our overall store offer. We have a history of challenging norms and taking brave decisions, such as the roll-out of the industry basket. While our strategic intent broadens to expand globally, in non-food and retailing services, we are still a grocer with a passion for giving the customer what they want, and we know that they want great quality bakery products for a fair price that are always available.
My challenge in this coming year is two-fold. Firstly, it is to continue to keep product availability at the heart of my customer focus, and our suppliers have a significant role to play in this. We must continue to challenge the norms that exist to drive cost out for the customer and improve efficiency.
Secondly, I need to reflect the need to be more flexible in the way that I range, so that the broad church of Tesco customers can always get the product they want in our bakeries. A more sophisticated view of what customers want, dependent upon their life-stage and demography, will make our ranges more efficient and effective, without reducing choice.
Customer at heart of industry
I truly believe that the customer is at the heart of maintaining a vibrant and sustainable industry in the face of the current economic climate. I won’t say that retailers and suppliers will not have robust and challenging discussions about our respective positions, but I will say that we need to work as an industry to persuade people to eat more of our products - and more often. Customer understanding is even more important when economic times are tougher and value for money becomes a greater choice denominator.
So, what are customers telling us at the moment? In a recent Nielsen report, 86% of people polled said that they felt negative about job prospects in the next 12 months and 66% thought that their finances would be ’not so good’ or ’bad’ in the coming months. This backs up Tesco research, which suggests that food pricing is now the number one priority for consumers when making choices about where to shop and what to buy when in store. It is also impossible to open a newspaper or turn on the television without some reference to the global world financial crisis. A combination of consumer sentiment, real economic tightening and significant global raw material price increases are all materially affecting behaviour in our industry.
IGD conducted some research in 2008 to look at the changes in shopper trends as a result of the economic situation. Twenty-seven per cent of customers reported that they are shopping around more, 25% said they are spending more time shopping and 21% said they were walking to the shops more (which is supported by growth levels we are seeing in the Express format). The most significant change is that 40% of respondents said that they were buying more promotions. In the 12 weeks leading to mid-April this year, some 40% of plant bread volume was sold on deal in the multiples, compared with 26% the prior year, indicating that customers are looking for increased value in our industry.
We must also be aware that customers are becoming more concerned with food waste and the government has been vocal with its campaign to reduce food waste this year. I have seen research suggesting that customers are looking to freeze more bread and throw less away. I applaud this initiative to reduce waste and preserve natural resources at a time when global demand is rising, but there is a spectre of significant volume decline for all of us if we don’t work to help customers in the wake of bread deregulation and give the right solutions to those customers who might otherwise leave the market or shop less frequently.
However, there are some potential benefits for our category from the recession. Customers are reporting that they are eating out less and having fewer takeaways. TNS has recently conducted research which states that 28m people consumed 4.2 billion lunchboxes in the last year - a 5.7% rise in a market worth £4.7bn to the UK grocery market. At £1.30, the average lunchbox costs significantly less than a bought lunch and baked goods have a significant opportunity to take a share of this growth.
Plant bread sales rise
It is also heartening to see the sales of plant bread increasing in the most recent periods to back up the customer feedback on packing more lunches and eating in. In many ways this is driven by better value through promotions and, certainly in Tesco, our continued commitment to retailer brands. However, we cannot rest on our laurels and assume this is the start of an unstoppable regeneration. It is a moment in time when the tide is in our favour and consumers are recognising the relevance of our products and an opportunity to keep this momentum by finding our voice as an industry and prove that the ’customer matters’.
I am firmly of the belief that growing the category is more sustainable for all of us than share-stealing. I believe we can all take a more active role in promoting bakery for its health, great taste and ultimate practicality.
I would hold up the cereal industry as a potent example of trying to drive consumption. Recently, an article in The Daily Mail caught my eye. The headline was ’Forget your costly sports drink, try a bowl of Corn Flakes instead’. Who cannot remember the Wholegrain Nation ads and green band on Nestlé breakfast cereals?
Are we proactive enough in this industry in talking about the positive aspects of our products? I applaud the recent editorial in British Baker, which highlighted the need to concentrate on the positives. I tire of the quarterly scare stories about salt - not because I don’t think we should act responsibly, but because I am sad that we appear on the back foot in positively promoting our fantastic products. In April, we had the ’vegetarian’ scare and, only two weeks ago, an article in the Sunday Times linked the destruction of the habitat of the Orang Utan to the growth in palm oil plantations. Guess what? Some of your members were highlighted as using this in their products and contributing to the demise of this endangered species.
Can we stop the flow of poor publicity? The answer is probably not. Can we do more to accentuate the positives of our products and our industry to consumers? Absolutely. The customer matters and they need to be enticed, reassured and delighted every time they buy and use one of our products. I also hope we will also see a return to customers craving increased quality and new and exciting NPD. Let’s do what we can to ensure that all of the customers who are re-appraising bakery now, continue to do so once we are out of the recession.
l Scott Clarke was speaking at the Federation of Bakers’ annual conference
=== Action points ===
l Product availability and more flexible ranging based on customer affluence are the top two priorities for bakery at Tesco
l Potential volume decline in bread, based on campaigns to cut food waste, must be met with more options based on deregulated bread weights
l More needs to be done to promote bakery for its health, great taste and practicality