Food businesses must embrace online sales

Food processors need to ensure their products are suited to being sold online or risk being left behind, according to the latest Rabobank report.

Manufacturers need to expand their ranges into niche areas like gluten-free, become more visible on websites using packaging or promotion and build faster and more flexible supply chains.

The Dutch bank believes the food industry is on the brink of a retail revolution similar to the rise of self-service checkouts, with online sales in the UK predicted to double to 6.3% of the grocery market between 2012 and 2016.

Rabobank senior analyst John David Roeg said food processors faced the danger of being pushed to the back of the “e-shelf”.

See also: Sainsbury’s profits rise 5.3%

“It’s not enough to change the packaging or formulations in the face of increased competition and opportunities for commercial advantage,” he said.

Rabobank also expects supermarkets to shrink their number of stores in the future, but individual food producers could benefit by selling online themselves, as the internet lifted the limits of physical shelf space.

Sainsbury’s has reported like-for-like sales excluding fuel were down 1.1% in the 12 weeks to 7 June, reflecting the continued pressure on the bigger supermarkets from cheaper rivals Aldi and Lidl.

Chief executive Justin King, delivering his last trading update before he steps down, said investments in price cuts were “welcome respite” to customers’ finances but had led to industry growth being the slowest in a decade.

In contrast to Rabobank’s report, HSBC analyst Dave McCarthy said discount stores were growing faster than online sales, suggesting consumers wanted lower prices more than home delivery.

“Sainsbury’s and others should stop subsidising internet growth and focus on offering in-store consumers better value for money, in our view,” he said.


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