Food industry’s ‘back is to the wall’ warns IGD

Food retailing is undergoing a great correction, demanding radical thinking, including fanatical attention to resource use and fresh efforts to improve supply chain efficiency.

This is what the £100bn grocery industry heard at the IGD convention in London on Tuesday.

Grocery consumption has reversed from 4% annual growth in the 1990s to a reduction of 2% a year since 2008. “This is not an ordinary downturn, it’s a time of fundamental change,” stressed IGD chief executive Joanne Denney-Finch.

“Our backs are against the wall. If we want to recapture growth we’ll have to be bold, decisive and truly exceptional. Real breakthroughs are needed.”

Ms Denney-Finch called for a redoubled effort to improve supply chains – that alone could slash average production costs by a fifth, she said.

Among the 800-plus food industry delegates including retailers, manufacturers, processors and suppliers, rising input costs were felt to be their biggest headache by far, with 48% ranking it their top problem, compared with just 28% pointing to a slow pace of consumer spending.

IGD research on 33 food chains, including red meat, milk and fresh produce, showed an average of 20% of all costs incurred added no value for consumers. “That is more than the total profit margin in some chains,” said Ms Denny-Finch.

“How food is grown, how production lines are run and how supply chains are managed needs constant attention.” She called for greater collaboration, even between competitors.

Better adherence to specifications should be a particular focus, she told Farmers Weekly. “Producers need better feedback on how well they are meeting spec, better incentives for meeting those specifications and a better understanding of the art of what is possible. But that is not to say there can be any downgrade of quality. That is not what consumers want.”

More attention to sustainability issues was needed too. “We need to focus fanatically on resource efficiency. If we don’t keep producing more with less then all our efforts to build growth will be undermined by rising costs.” The food industry needed to treat every resource as precious, with no such thing as waste, only another resource to use.

On GM technology, Ms Denny-Finch told Farmers Weekly that if consumers had to pay significantly more for non-GM, that could change the view of the technology in the longer term. “Genetic profiling is providing a wealth of new insights and higher yielding, more resilient crops are on their way.”

IGD specialises in research into and analaysis of international food and grocery retailing and supply chain issues. It also provides training, development and drives collaboration and best practice across all sectors of its industry.