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Terry Murden: Low price curse on food & drink

Fine foodDiscount food chain Lidl is the toast of Scotland after unveiling new stores, a new warehouse and new jobs. It is not such good news for Scotland’s thriving food and drink specialists.

This is the year to celebrate best of Scottish food and drink on the back of successful campaigns that have enabled producers to make big inroads into the big supermarket chains. Everything from gluten-free bread to speciality jams and craft beer is now on sale in stores around the UK.

But the supermarkets are losing their appetite for fine foods, and it is all connected with slowing growth and their loss of market share to cheaper rivals – such as Lidl and its German compatriate Aldi.

With margins under pressure and costs being revisited, there are indications smaller suppliers could find themselves losing out.

The first warning came this morning from Mr Kipling. The owner of the famous cake brand, Premier Foods, is one of the big suppliers and chief executive Gavin Darby said companies like his are likely to get more shelf space as the supermarkets trim their product ranges to focus on the best sellers.

Mr Darby suggested some of the supermarket companies may remove 20% to 40% of their product lines and this will appeal to firms such as Premier Foods which saw quarterly sales drop 4.6% year-on-year as shoppers increasingly switched to the discounters.

Big supermarkets are fighting back with price cuts, improved customer service and simpler ranges to woo shoppers, but their biggest chance of success is to sell the most popular brands at cheaper prices.

Premier Foods itself has ditched slow selling products in favour of its seven top brands: Ambrosia custard, Batchelors, Bisto, Loyd Grossman, Mr Kipling, Oxo and Sharwoods.

Commenting today, Mr Darby said: “The environment will be challenging in 2015 but after 30 odd years in this industry I have rarely seen an alignment of the stars in terms of where the big retailers are going and big branded manufacturers.”

The development of fine Scottish food, particularly among small producers of everything from bacons to buns, has been a seriously positive trend over the past 20 or so years.

Speciality produce is a treat for locals and tourists alike and apart from the growth of deli shops and farmers’ markets, it spread into the mainstream as a result of a growing recognition by the big supermarkets of customer preference for quality food and drink.

But money talks, and the customers’ intensifying demand for lower and lower prices will squeeze out quality. It looks like 2015 could prove to be a tough one for some.

Competition between the grocers has been fierce and there is now a gap of just 0.9% sales growth separating the four largest retailers.

Figures from retail analysts Kantar World Panel for the 12 weeks up to 4 January, show all the big supermarkets losing sales on the previous year. Sales at Sainsbury’s fell by 0.7%, but in a tough market this was the best performance among the big four supermarkets. Tesco’s sales declined 1.2% while both Asda and Morrisons were down by 1.6%.

The discounters moved in the opposite direction. Aldi and Lidl have grown by 22.6% and 15.1% to finish the year with market shares of 4.8% and 3.5% respectively.

 

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