Supply chain February 2014

Supply Chain – are there new opportunities?

The retail sector is changing and so therefore will supply chains.

 

This was the message delivered by Charles Wilson, CEO of Booker at the City Food Lecture on 17th February 2014. 

World food markets have witnessed significant change over the past ten or more years with increased wealth leading to more demand for oil, proteins and carbohydrates. New technologies have driven developments in food production and have enabled on-line retailing. At the same time there are additional pressures on production which include extreme weather events and pressure on resources such as water and energy. 

Mr Wilson reported that IGD only forecast 8% growth for supermarkets and hypermarkets over the next five years. In contrast, growth forecasts for other routes to market are:

  • - Out of home (fast food, restaurants, the work place and institutional catering)
  • - Convenience (including cook food delivered to your home)
  • - Discounters (such as Aldi and Lidl – over 50% of us shopped here over Christmas)
  • - On line (including Amazon – who already offer fresh and frozen food in the US)


Demand for premium quality will grow and will benefit the aspirational retailers, such as M&S and Waitrose, where growth in the food sector is expected to be higher than for the mainstream supermarkets.

The novel retailing sector, although smaller, will remain important with significant growth expected. This includes small specialist outlets, farm shops and farmers markets where product provenance, local buying, producer engagement and smaller more frequent shops will drive demand. 

So what does this mean for farmers and primary producers? 

Mr Wilson reported that the discounters were now able to source and provide quality produce and there was a move to supply quality produce to the out of home prepared food market. In addition, there are more homes to be supplied with convenience foods. 

Suppliers should start to look at the supply chains they are involved in and what opportunities might lie in the areas which have significant growth forecasts. It isn’t all about the supermarket contracts although they still control the largest part of the market. 

The key with any of the supply chain initiatives is driving more value by a combination of:

  • - Shortening the supply chains 
  • - Driving more efficient systems 
  • - Ensuring consistency of supply and minimising waste


It is essential for long term success and value creation that both the supplier and buyer benefit. Key factors in achieving that are based on communication and trust. Many producer suppliers would argue that these two key elements are in need of significant improvement.  Savills Agribusiness team can help in developing contracts and supply chain initiatives with main stream and alternative sources.

 

Key contacts

Andrew Wraith

Andrew Wraith

Director
Food & Farming

Savills Lincoln

+44 (0) 1522 508 973

+44 (0) 1522 508 973