“Frankly hysterical media coverage” about heath and wellbeing had had a massive impact on the sector two years ago, he said. “From being a business with 2-3% growth, in three months there was a 10% loss in sales.”
The consumer tipping point had been a combination of the media coverage of obesity-causing diets and a mistrust of processed food, particularly after the Sudan I food dye cancer scare. “Convenience food had become the shorthand for junk food.”
McCain had to do something, he said. “People had forgotten frozen chips were made from potatoes. We had to uncover the good produce behind the process. So we launched the ‘It’s all good‘ campaign.”
That campaign was much more than just TV adverts, but extended to the whole way McCain did business. “It transformed the way we did business at McCain. We use double-decker trucks with solar panels on them to reduce energy costs we built wind turbines for our Whittlesey plant that produce 70% of its energy we reduced saturated fat by 70%, salt by 20%, and prepare all our products in sunflower oil.”
The firm was the first major food manufacturer to use the traffic light/GDA system on packaging, he said. “Our chips have three green, and one orange light – that was a surprise to some.”
The TV advertising campaign, “Singing from the rooftops about chips”, had been very successful, he said. “After 18 months of running the ads, spontaneous awareness of our 5% fat message has gone from the low 30s to over 65%.”
The firm had also pledged that all its retail chips would be 100% British, he added. “Previously it has never come high enough up the consumer hierarchy to make it worthwhile.”
The good news was that the campaign, along with efforts from bodies such as the Potato Council, was turning the processing sector around. “It is back in growth and the momentum is growing. Volumes of retail frozen potato products are up 4% over the last 52 weeks compared with 2006, and 6% over a rolling 12-week period.”
McCain’s volumes were up 5% over the rolling 52-week period, and 10% over 12 weeks, he added.
“And it is not at the expense of fresh potatoes either – they are also up 5%. People have started to eat more potatoes again.”
Global inflation and the UK’s stalling economy will provide the next challenge for the sector, Mr Vermont predicted.
“The deflationary cycle is well and truly over,” he said. “But that is not to say we can just pass on all our extra costs to our customers. As ever, you have to strike the right balance. Yes, there is an opportunity to pass on some costs, but the economy is stalling fast and people across the board, have to trim spending.
“The more you push prices up, the less people want to buy as frequently or in volume.”
A leading economist had predicted average inflation might be 7-10% over the next five to 10 years, Mr Vermont said. “It means we, and you, need to reassess the business.
“As ever, you cannot know enough about your customer. Speaking to him once a year, or even once a quarter, is no longer good enough.”
It was important to keep close to the customer as their needs were constantly changing, he said.
Backing winners was also important, even if that customer was more difficult to deal with, or paid slightly less, said Mr Vermont. “If you looked at a supermarket league table for frozen food 10 years ago, it would have been Iceland, Somerfield and Quiksave.”
Backing those companies wouldn’t, in hindsight, have been the right decision, he suggested. “If a customer is winning, maybe it is worth dealing with, even if it is more difficult and pays less return.”
He also stressed the need to move up the value chain in an inflationary period. “The best defence is to add value to a product. For us, it is done through innovation, for growers by using new varieties, or marketing themselves differently.
“There is also no excuse during an inflationary cycle for stopping being paranoid about improving cost-effectiveness. You have to drive non-added value out of the business.”