Charles Wilson urges suppliers to look beyond the supermarkets for growth

Booker CEO Charles Wilson this week said the dominance of supermarket was waning amid the changing global economy and food markets.

Delivering the annual City Food Lecture at the Guildhall in the City of London, he told an invited audience, including HRH Princess Anne, that while for decades supermarkets had suited the way people lived and preferred to shop, they now faced multiple challenges from local stores, to eating out and online.

“At the same time we are seeing production pressures, with changing weather patterns, water shortages/flooding and increasing energy demands. Add in the technology changes and 2013 will be remembered as the year when the first beef burger was grown in a petri dish and Christmas 2013 will be remembered as the online Christmas when dot coms accounted for the majority of retail growth. Combined these forces are changing the global grocery market.”

He pointed out that the UK wasn’t immune to the changes. “After 60 years of strong supermarket growth, we have seen the sector slow down,” he added, pointing to the IGD’s estimates of moderate growth of 8% for supermarkets hypermarkets, yet strong increases for discounters at 65% growth – a figure he believes is an underestimate, convenience growth of 29% and out of home 18%.

“The multiple grocers are attempting to play in these higher growth sectors, but it is not easy for them.”

Wilson also pointed to the premium market doing well with M amp;S Food and Waitrose seeing good returns. “This shift to premium is seeing new formats to emerge. The size of these sectors is poorly defined, but we see customers prospering. We supply one thousand farmer market customers, two thousand farm shops and thousands of delis. These sectors appear to be flourishing. The consumer can re-connect with the producer, obtaining outstanding quality and value. We are also serving more nutri-specialists who will design a diet plan for your needs and deliver it to your home. Customised diet solutions appear to be booming. All these sectors are growing faster than supermarkets.”

He added that technology was also opening up opportunities beyond supermarkets with new operators able to carry millions of lines compared to the 30,000 or so stocked in a typical supermarket.

“The combination of changing global food markets, the growth of foodservice, convenience, discount, new formats and online is putting a huge pressure on the supermarket model. Combined Tesco, Sainsbury’s, Morrisons and Asda have spent approximately £12bn of capital expenditure in the UK the past three years. Despite this, their combined market share has fallen by one percent and profits have dropped by circa £100m. The supermarket is an increasingly challenged economic model as the growth shifts elsewhere.”

Concluding that suppliers will “need to go where the growth is”, Wilson said they should put their best people, products and channel support into the growth areas of on-line, foodservice, convenience, discount, new formats and emerging countries.

“You must avoid being ‘ground down’ by the supermarkets for no growth,” he warned suppliers. “Suppliers will have to refine their trade strategies, but the rewards will be substantial as there is plenty of growth outside the supermarkets.”

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