If you’re not familiar with IGD, it’s likely because you haven’t spent much time mingling in Europe’s food industry. IGD, previously known as the Institute for Grocery Distribution, is a non-profit organization with more than 500 food and grocery company members. It’s known for its stellar research and insights into the grocery industry worldwide, including Canada, where it’s now opened an office in Vancouver.
IGD’s CEO for the past 12 years has been Joanne Denney-Finch, a former executive with the British chain Marks & Spencer who has also advised Britain’s Ministry of Defence on food procurement. She spoke to Canadian Grocer about hot issues in the industry and which big trends in Europe will find their way to Canada.
A lot of people in the Canadian grocery industry look to Europe, and Great Britain in particular, for the most innovative ideas. What do you see that’s cutting edge in Europe that we could learn from here?
Let me give three examples of cutting-edge activity in Europe. Land is in shorter supply here, so store space has to work harder. The drive to fit a bigger range into a relatively small space means Europe often innovates on logistics. It’s resulted in increasingly “just in time” supply chains through such concepts as consolidation centres, cross-docking, vehicle sharing–even by competitors–backhauling and fronthauling, retail-ready packaging, real-time data sharing and traffic-management systems.
Another characteristic of Europe is the high level of ethical innovation. A good historical example is Fair Trade, which originated in the Netherlands. Current activity in this area includes a huge amount of product reformulation for better nutrition, packaging reduction, training farmers in developing countries, low-carbon farming techniques and new ways to build links with local communities.
Finally, online grocery retailing has taken off faster in the U.K. than anywhere else and now accounts for 2.6% of the market. Perhaps it’s something to do with our worldclass traffic congestion. It’s also interesting to see which categories overindex online, such as toiletries, frozen poultry and soft drinks; and which underindex, including confectionery, alcohol and fish.
Outside of things like food safety and sustainability, what are the major issues the food and grocery industry will face in 2011?
Containing inflation will be high on the list, given the rate at which many commodity prices have escalated recently. Another priority is winning the race to provide the level of transparency shoppers now expect. A number of unauthorized websites are springing up to meet this demand; some are based on dubious data.
Speaking of transparency, during your speech at the IGD convention this year, you addressed ethics. Are grocers and food manufacturers paying enough attention to that?
The grocery industry is very close to consumers and quickly picks up on any new trends. Ethical shopping has been no exception. There’s been huge investment both in new ethical products and raising the standards of mainstream products. It offers companies further ways to compete beyond price and opens up new market segments.
Water management is an area I’ve been emphasizing. We’ve seen the impact of a combination of droughts and floods around the world on food prices. It serves to remind us that water is our single most precious resource. That’s why IGD has produced a free guide to managing water in grocery supply chains that’s available from our website.
Isn’t there a danger that the food industry is making ethical or sustainability claims without backing them up?
For instance, grocers in Canada sometimes define any fruit or vegetable that comes from Canada as “local,” which I suspect isn’t how most customers would define it. Companies have to be in tune with consumers and have solid evidence in place whenever they make ethical claims, otherwise it can all rebound painfully. The issue of “local” is an ideal example and a challenging one, because it’s viewed so differently in different locations. In some parts of France or Italy, food has to come from the same village to be considered local. [But] in my experience, the majority of food companies are acting cautiously and responsibly in their ethical marketing to avoid undermining their brands by over-claiming and attracting criticism.
Grocers aren’t in the oil business, yet you suggest they pay special attention to what’s going on in that sector. Why?
At first sight, grocery retailers might look at their total energy bill, see it as a relatively small percentage of their total costs and feel there’s no reason to be overly concerned.
However, that would miss the full significance of energy prices to their business. Various studies have shown that it takes between five to 10 calories of energy to produce one calorie of food for consumption in developed countries. For this reason, energy inflation quickly feeds through to food.
There’s a second factor at play because high-energy prices incentivize farmers to switch to making biofuels. So there are very good reasons for food retailers and manufacturers to work through their whole supply chains to make them more energy efficient.
What’s the coolest grocery-related mobile application you’ve come across?
And how do you think mobile will change this industry? Mobile devices will accelerate the trend for transparency. One of my favourite apps is from The Co-operative retail group in the U.K., which allows you to see an aerial photo of the farm that produced your food.
Another key factor is the way mobile devices help companies engage with consumers and involve them more closely in making decisions. Instead of relying on the occasional focus group, retailers can now have a continuous dialogue with a large sample of their customers. Userdesigned products and services is a trend to watch. However, as with most new technologies, there’s a tendency to overestimate the short term and underestimate the long-term impact. We shouldn’t expect an immediate transformation of the shopping experience, but over the course of a decade it will add up to substantial change.
When you think of what grocery stores will be like five or 10 years down the road, how will they be different from those we shop in today?
I expect to see a diverse retail landscape with a rich variety of formats, especially in regions large enough to support stores targeted at particular groups, such as the elderly. Online shopping will continue to grow, but in ways that complement physical stores. For example, it will be common for shoppers to order certain products online to collect, while picking others by sight in-store. Online ordering in advance will also be a way for neighbourhood stores to expand their product range.
The majority of tomorrow’s stores will be zero-waste, carbon-neutral and energy self-sufficient, although I accept that will be more of a challenge for those in more remote locations. And our everyday food will be reformulated for better nutrition with the help of technologies that, for example, allow us to recreate flavours with less fat and fewer calories.