Retailers respond to ethical demands

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You would expect the annual gathering of the clans of Britain’s grocery business to be a celebration – it is after all one of the most successful sectors of the economy – so the title of this year’s IGD convention, “Which way now?” could be interpreted as perhaps a little apprehensive.

In fact, the title reflects the fact that the environment in which the retailers operate is changing very rapidly. For most of the past century they have been able to rely on the fact that customers are looking for choice, quality and value. And, while customers still want all those things, they are also demanding environmental responsibility, social responsibility, local sourcing and fair trade policies.

The message is clear – failure in these areas could seriously damage your business. And, as a result, retailers are not simply changing the way they deal with these issues, they are putting increasing pressure on their logistics suppliers to change as well.

Research, carried out by EDS for the institute, into customer attitudes highlighted a number of areas for improvement. Perhaps surprisingly, top of the list came “supporting producers in Britain” with 43 per cent of consumers listing it as most important. Second, with 39 per cent support, was “cutting back on unnecessary packaging” while joint third on 28 per cent was “reducing environmental impact” and “encouraging recycling”.

The research also highlighted the fact that the food industry needs to reconcile the need for transparency and giving consumers clear simple messages because shoppers say the amount of information they receive from many sources can be overwhelming.

IGD chief executive Joanne Denney-Finch told delegates: “Shoppers tell us they are being bombarded by a variety of issues, day-in, day-out from a variety of sources, not just the food industry and they say that too much information bamboozles them.

“As we keep extending choice and providing ever more information, shoppers say they fear that shopping trips could become a nightmare.”

The research showed that 43 per cent of people agree that the information they get helps them to make better choices but 9 per cent feel that the amount of information provided makes choosing products more complicated.

Only 21 per cent are very confident that they understand all the information they receive about food, while 19 per cent don’t mind how much information they get – because they usually ignore it anyway. As well as information on price, use-by dates and promotions, shoppers also want information about health and nutrition including special dietary requirements, and ethical issues, such as provenance, relevant religious information, or organic or fair trade.

“There is an opportunity to put shoppers in the driving seat allowing them to choose how much information they want. We asked shoppers to rate ways of delivering this and they voted for scanners on trolleys or even better, imagine a smart card with your personal shopping list. Combine the card with the bar code and the scanner and you could have a personalised assessment.”

Denney-Finch said it would require more than labels and technology, it would also require trust. “Consumers judge us in more ways than ever. It is by values and not just value. They care about health, ethics and sustainability but they do not want to wrestle with complicated decisions and trade offs. They want the industry to make it simple for them. Some of them are even stretching the boundaries of trust and are already delegating responsibility to the industry. They are looking for leadership and this is a great opportunity to provide it.”

Marc Bolland, chief executive of Morrisons, brought an outsider’s eye to the issues. He only joined Morrisons in September last year – before that he spent 20 years with Dutch brewer Heineken most recently as chief operating officer.

UK consumers today expect good price and value, he said, but there is a growing interest in health, provenance, sustainability and so on.

He contrasted the UK market with France and Italy. France has huge hypermarkets but consumers still expect to buy bread twice a day from the local bakery while, in Italy, grocery stores were generally smaller.

Morrisons is currently in the process of establishing itself as “the food specialist for everyone” with the emphasis on freshness and quality as well as being “hard hitting on value”.

On the environment and sustainability, Bolland said: “We have not been famous for it and sometimes we have come out at the bottom of the list.” This, he said, was unfair as Morrisons did more recycling of in-store waste than anyone else.

In April, Morrisons unveiled a new logo with the “M” going from black to green.

The retailer has set itself a series of targets – for example in the short term it plans to cut its carbon footprint by 36 per cent, cut energy use by eight per cent per square metre, and get ten per cent of its energy from renewable sources.

Environmental improvement was the “licence to operate”, he said.

Ken McMeikan, retail director at Sainsbury’s, argued that ethical shopping was moving into the mainstream. “Consumers think that they can make a difference.”

Sainsbury’s was responding to this and its suppliers would increasingly be called upon to deliver what consumers required, he said.

Women, in particular, were driving the ethical revolution. Research from Mintel highlighted the fact that they were leading the way on issues such as fair trade, organic, UK produce, farmers markets and so on.

Customers are looking to us to make ethical changes, he said, arguing that supermarkets today were trusted more than the government.

On packaging waste, he pointed out that by collaboration with suppliers Sainsbury’s had been able to overcome some of the technical problems associated with the packaging of crisps, nuts etc. This is particularly difficult because of the risk of damage to the product. As a result of its work, across the category, it had managed to cut packaging waste by 20 per cent – equivalent to 85 tonnes of plastic a year.

On local sourcing, McMeikan pointed out that British farmers were facing challenging times but customers valued British products and he pointed out that Sainsbury’s was investing heavily in local dairy production as evidence of its commitment to local produce.

He also criticised the tendency to believe that airfreight was automatically bad, pointing out that a product grown in a greenhouse in the UK could have a bigger carbon footprint than a product grown in the open overseas and then flown here.

Guy Farrant, retail director of Marks & Spencer, highlighted the work the retailer has been doing under the title “Plan A – because there is no plan B”.

This is a five year plan to make 100 changes to the business in five areas: climate change, waste, raw materials, being a fair partner, and healthy eating.

For example, it wants 20 per cent of its energy to come from renewable resources. It has also championed the “teardrop” trailer from Don Bur and it is bringing in electric delivery vehicles.

Alastair Sykes, IGD president and chairman and chief executive of Nestlé UK, pointed out that there was plenty of scope to reduce lorry miles and empty running through greater collaboration.

Earlier this year, ECR UK set up a new group to look at ways to reduce transport mileage. In particular, it wants to encourage more companies to pool resources.

In the mid-90s there was some discussion among manufacturers of consumer electronics products about the possibility of collaboration in transport. The argument was that the key area of competition was the product/brand – not logistics. However, the idea never got beyond the discussion stage.

ECR UK is investigating the barriers to collaborative distribution and looking for best practice overseas. It argues that achieving operational sustainability is the biggest challenge facing the food industry today. “Through collaboration, the industry’s contribution as a whole to a sustainable future has the potential to be far greater than the sum of its parts.”

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