The supermarket and grocery sector in the United Kingdom has seen tremendous activity over the past several years, from the exit of Walmart from its ASDA partnership, to the growth of the deep discounters on the one hand and home delivery of groceries, including produce, on the other. At the same time, consumers have been gradually changing eating habits based on health considerations due to health considerations in many cases but also to price as market conditions have evolved.
Then, Brexit and the COVID-19 pandemic arrived to stir the pot. Joseph Shaw Roberts, Consumer Insight Director – Produce at market researcher Kantar provides insight into the evolution of the supermarket and grocery sector in the UK and how that has affected produce. He has seven years experience in grocery market research, and currently manages Kantar’s Produce Team, helping more than 70 fruit and vegetable businesses improve their sales with data-driven insights and recommendations. Shaw Roberts is passionate about encouraging people to live healthily and showcasing growth opportunities for fresh produce.
We have been fortunate to have many interactions with Joe and the Kantar team including presentation that we have highlighted here:
We asked Joe, in this revival year of The London Produce Show and Conference to give us the “big picture” take, the “30,000 feet in the air view” of where the UK industry stands now and where it will be going tomorrow.
We asked Mike Duff, Contributing Editor at Pundit sister publication, PRODUCE BUSINESS, to find out the big picture:
Joe Shaw Roberts
Consumer Insight Director
Q: How much different is the UK supermarket and grocery store business today than it was five years ago and how has that affected produce departments?
A: The channels we shop in have changed significantly. In 2016, supermarkets accounted for 61.6% of grocery spend, in 2021 that figure was 53.5%. We’re shopping much more in discounters and online nowadays, which has had implications for produce. Larger retailers price-matching Aldi is devaluing many produce categories, and there are nuances to how we shop online for produce.
Q: How did the COVID-19 pandemic change the supermarket/grocery business in the U.K.?
A: In 2021, we kept much of our behavior from 2020. More time at home drove inflated demand for groceries. This was fulfilled by bigger trips, resulting in shopping less frequently, using e-commerce in place of large format stores.
Q: Did it substantially shift consumers from one strata of the business to another, favoring deep discounters such as Aldi, for example?
A: The biggest shift was towards e-commerce as we all spent more time at home. This played well to the need for bigger, less frequent shops; 39% of the population shopped online in 2021, 11% more than 2019 and on par with 2020. They did it 22 times on average, four more times than 2020 and five more times than 2019.
Q: How did it affect the way supermarkets and grocery stores handled produce and presented it to shoppers?
A: Supermarkets implementing distancing guidelines quickly and ensuring consistent availability of product on shelf were rewarded with higher shopper satisfaction and loyalty than those who were slow to adapt to the change. With food to go largely redundant, more focus was placed on navigating shoppers safely through the main aisles of the store, of which produce is generally first.
Q: Did consumers significantly change their produce purchasing patterns in response to the pandemic?
A: Initially, loose produce saw steep declines as shoppers became concerned about hygiene and restrictions on the number of items per basket. At its peak, 20,000 tons of produce were switched from loose to pre-packed produce. Shoppers chose more organic and premium produce with greater disposable income and focus on quality. Trends that have now softened.
Q: How has Brexit affected the supermarket and grocery store industry in the UK?
A: We began to see evidence of ‘recessionary behavior’ in 2017 as consumer confidence dipped, leading to more meals being prepared at home, shoppers trading down to value-tier products and continued switching into the discounters. Now, we see shoots of becoming more self-sufficient with our produce consumption as a nation, evidenced, for example, by the proliferation of vertical farms in recent years.
Q: What has been the combined effect of Brexit and COVID been and has the combination prompted fundamental change in supermarkets/groceries and how they are presenting produce to consumers?
A: They are two very different events with different consequences from a consumer behavior standpoint. Brexit lowered consumer confidence and some of that was felt on shelf, with shoppers trading down to cheaper options and opting to scratch cook more to save money. COVID too lowered consumer confidence, but due to restrictions on our freedom, led to record growth in take-home groceries. Some themes in produce are consistent through both events, such as the polarization of many produce categories into premium and value options.
Q: Of course, some events and trends in the market, Walmart’s sale of ASDA and the expansion of deep discount grocery operators, have roots before Brexit and the pandemic, so what was the overall trend in the market before and did those events change the direction or did they act as a catalyst that sped up change that was underway?
A: Prior to Brexit, the grocery market was in a period of deflation as shoppers moved more spend to the cheaper discounters, and larger supermarkets slashed prices to try to retain customers. For different reasons, both Brexit and the pandemic have pushed grocery prices up in an otherwise intense cost battle to retain customers. Lockdowns gave online grocery operators the boost they needed to access older shoppers for some of whom the technology was previously a barrier, fast-tracking the online shopping trend which was previously succeeding in engaging existing customers more, but struggling to find new ones.
Q: Lately, we’ve seen technology becoming a bigger factor in supermarket sales, so how has digitally enabled shopping and delivery, including the advent of Ocado, changed the supermarket business and its approach to produce?
A: Online shopping is now a significant and habitual part of our grocery shopping repertoires, having moved from 7% of our grocery spend in 2016 to 13% in 2021. This acceleration would not have happened without lockdowns. There are some interesting nuances to how we buy produce online: more organic, more premium, slightly more veg, slightly less fruit, all pointing to a need for reassurance of quality and concern about condition of items when they turn up.
Q: Just walk out technology is becoming part of the market, with Amazon and Sainsbury partnering and, I believe, Aldi beginning to use the technology. How do you expect that to change the marketplace, particularly in urban areas where people often do their shopping at convenience groceries on the way home from work?
A: It may give convenience grocery stores the shot in the arm they need having struggled prior to the pandemic, and after the initial surge in March/April 2020. It’s still very early to make predictions about behavioral change, but I suspect the effect on sales will be small in comparison to the events of the last two years.
Q: How have consumer trends, such as the demand for organics, vegetarian/vegan lifestyles, changing demographics, environmental concerns and considerations of wellness in general, affected supermarkets/grocery stores and their produce operations recently?
A: You might think that recent dietary changes hyped up in the media would have driven fresh produce sales through the roof, but the reality is that the changes are still relatively small, and much of the associated consumer spend has gone into added-value chilled convenience foods. Organics are at a pivotal point. Having gained many shoppers during the pandemic, the market is struggling to retain them as concerns about rising prices affect consumer spending. They do, however, appeal to the most sustainably-minded consumers, who represent 29% of the GB population and are worth £37bn to the U.K. grocery market. If produce is locally sourced or partnered with an ethical accreditation, this should be clear to shoppers to build their trust.
Q: How have more upmarket supermarkets and groceries such as Waitrose fared in all this?
A: Waitrose are performing roughly on par with the market, Marks & Spencer of course saw a big pandemic boost from taking over Ocado supply from Waitrose. Consumers have emerged from the pandemic in varying degrees of financial comfort. The fact that 41% of the population say they are ‘comfortable’ is good news for upmarket stores. Less good news is the incessant news of rising prices, which has led even this group of ‘comfortable’ consumers to begin to trade down to cheaper stores.
Q: How have other major supermarket chains, Sainsbury among them but also Tesco, Morrisons and Asda, fared through the past few years and the effects of Brexit, the pandemic and other influences that changed the marketplace?
A: All ‘Big 4’ retailers saw huge growth in their online arms over the pandemic and are now facing challenging annualizations. Tesco are the standout performer here. Clubcard prices and the Aldi price match have helped retain customer loyalty at a potentially difficult time to do so, growing their grocery share by over half a percent over the last year.
Q: What effect has inflation recently had on supermarket/groceries and their produce operations?
A: I’m best placed to answer this in terms of the effect it’s having on consumer choices. The consumer reaction is polarizing: The two best performing ‘tiers’ in the grocery market in the latest 12 weeks to 20th Feb are premium and economy, exemplifying the divided finances of consumers emerging from the pandemic. In produce, the picture is somewhat different, largely because it’s the battleground upon which retailers fight for the best value perception. The produce market saw inflation of 1% in the latest 12 weeks to 20th Feb, compared to 5% in the wider grocery market, and therefore hasn’t seen the same pronounced consumer reaction.
Q: Of course, present world turmoil is evident on the news daily. What do you expect the future to hold for the retail food business in the U.K. and produce retailing?
A. I would expect to see more reactions to price rises, which haven’t fully hit the grocery market in the way they have other sectors of the economy. We will see a notable drop in sales of high fat, sugar and salt items as legislation hits shelves and prompts a race for space, much of which has the potential to be repurposed for good with healthier items. Sustainability will continue to be a key area of focus, with eco-active consumers set to account for two in three shoppers by 2030.
Joseph Shaw Roberts and the work at Kantar is always fascinating and in times such as these, when so much is changing, so much is at stake, the insights he offers are invaluable.
At core it not fully recognized in the produce industry how the imporatnt role produce palys during inflationary time:
“In produce, the picture is somewhat different, largely because it’s the battleground upon which retailers fight for the best value perception. The produce market saw inflation of 1% in the latest 12 weeks to 20th Feb, compared to 5% in the wider grocery market, and therefore hasn’t seen the same pronounced consumer reaction.”
What an incredible mixed bag! On the one hand sales will not suffer as they do in other departments and may even increase as the relative value of produce rises when other departments are raising prices.
On the flip side retailers are going to beat up shippers to try, desperately, to retain their margins. This is not going to be a pretty picture.
As shopping venues evolve, how well is the industry really primed to adapt to the needs of different types of retailing? How many shippers just sell a commodity and haven’t prepared for the fracturing of demand into different shopping venues? How amny have a strategy for how to introduce new products to a shipper online?
Please join us for the enlightening review at the London produce Show and Conference, held March 21, 22 and 23 at the ExCeL center in London. There is no charge for admission for industry professionals and you can register right here.
Still a few opportunities for last minute sponsors and exhibitors, if you are interested just let us know here.
The world is changing and the well informed will win, come and join the winners by engaging with Kantar and the broader London Produce Show and Conference. We look forward to building a better industry, together. See you at ExCeL.