European food retailer Tesco has group sales of more than GBP 50 billion and saw its profitability soar by nearly 60%. The group is active in eastern Europe as well as the UK, where it operates convenience buying group and wholesaler Booker foods in addition to the ubiquitous supermarkets. Here are a few headline figures from its annual report.
[wptb id=787]
To give an idea of the scale of these results, the 2021 GDP of Rwanda was 11.7 billion USD.
When trying to save money while shopping for food, stating the blindingly obvious is not going to go down well. Food and farming minister George Eustice (pictured) take note. For those who frequent the supermarket aisles at regular intervals, there is no need for well-paid MPs to chip in with their two pennyworth, as reported in The Guardian this week. Supermarket shelves are laid out to make it easy to spot cheap products, so advising shoppers to consider cheaper fighting brands is unnecessary. Just saying that simply trading down will enable shoppers to “…contain and manage their household budget…” is rubbing salt into the wounds. Possibly more damaging to his ministerial credibility was Eustice’s assertion that the UK has a “…very competitive retail market with 10 big supermarkets…” resulting in “…a lot of competition to keep prices down.” Since all retailers face open-ended rises in energy and haulage costs, food is not about to get any cheaper. And that is before phasing in veterinary certificates and the cost of food safety checks on imported animal products.
Swiss retail giant Migros has achieved the first stage of its 2030 carbon neutrality plan. All the multiple’s retail premises have completed their transition to become carbon neutral.
As the country’s largest food business and retailer, Migros operates the lion’s share of the national retail park. It has been a dominant force on the national retail scene for decades.
Between now and 2030, Migros will cut a further 80% of its greenhouse gas emissions from its business activities, including its extensive food manufacturing arm.
Instead of buying carbon credits to offset its remaining environmental overheads, Migros will “inset” its remaining emissions. One example of this arrangement is a project working with 1,000 Thai peasant families to raise the environmental standards of their rice growing. For instance, there are gains to be made by not flooding paddy fields, which area significant source of methane emissions. The result is a contribution towards a potential reduction of 60% in the crop’s carbon footprint worldwide.
Yorkshire-based supermarket Morrisons is going to give up using best-before dates on a lot of its liquid milk lines and is telling customers to sniff the milk as they take it out of the fridge and make their own minds up as to whether or not it is fit to drink. The story appeared on the BBC, which added that milk is one of the most heavily wasted foodstuffs, with 490 million pints being dumped every year, 85 million of which is slung out because it had passed its best-before date. Properly managed refrigeration can keep milk wholesome beyond this time, which is a suggestion not a statement of fact.
The EUR15 billion Campari group has been talking to the FT about shifting the focus of its marketing to drinking at home, since the pandemic has all but shut down the hospitality sector. Campari reckons that indoor drinking will remain a growth area in the cocktail market, even after the pandemic subsides. Here is an improbably long link to the story in the FT, with no guarantee that it will will work for very long, if at all.
UK food retailers have filled their boots selling olive oil. These days they are taking a gross margin of between 30% and 40% on own label olive oil, somewhat less on branded products. Own label is more profitable because the retailer can control every last detail of the specification. But with today’s rising costs, the retailers have to curb their expectations. Besides, if Aldi and Lidl can sell extra virgin olive oil at around three to four quid a bottle, the mainstream retailers cannot afford to exaggerate their pricing.
During the 1990s the major multiples were skimming off 60p and more from every pound spent on own label extra virgin olive oil sold on a rapidly-growing market. This naked greed went unchallenged, since UK consumers trusted retailers to supply a grade of oil that merited the price being charged. No chance.
The sales director of a UK oil packer told me of his experience in those days with an own-label project with one of the big four. “I sourced an attractive bottle and filled it with a reasonable grade of extra virgin oil.” The multiple concerned stood to earn 66p in the pound on the SKU. “When I presented it to them, they turned round and said ‘fill it with shit and we’ll make 75%.’ At which point I put the samples back in my case and walked out.”
The French finance ministry announced the other week that it had raided a number of multiple food retailer head offices and some of their suppliers. In a terse staement dated November 9, the competition authority warned that it is not going to identify the retailers concerned and will not risk compromising the investigation.
In similar raids in the past, inspectors of the Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes (DGCCRF) have carried out raids without warning and gathered thousands of invoices and other documents within 12 hours. Known as the “répression des fraudes” the DGCCRF has a justified reputation for being ruthlessly efficient.
Switzerland’s biggest retail cooperative, Migros, is eliminating supermarket checkout queues. Customers using the Migros “subitoGo” application can scan their purchases on their smartphone and leave the store without further ado.
The system will be tried out at 80 outlets and rolled out if it proves successful. The software also links into any shopping list that might have been prepared before leaving home; fewer chances of leaving the store without a full complement of shopping. SubitoGo combines the Italian word for suddenly and Go.
Within living memory, a grocery business was considered successful if it earned a margin of three or four percent, but in the late 20th century supermarkets rewrote the rules.
Grocery multiples expect suppliers to have deep pockets and fund special offers at the drop of a hat.
Call it shelf money; marketing assistance; listing fees, the multiples started asking for — and getting — sums in the order of GBP 5000 a year per Stock Keeping Unit (SKU) for listing a product in an agreed number of stores (usually hundreds). Bearing in mind that a large supermarket will stock about 20,000 SKUs, some of which will be furnished by more than one supplier, the country’s major multiples are trousering millions in readies up front, without giving suppliers so much as a cat in hell’s chance of their money back if an SKU is delisted.
There are many ways the multiples can extract whatever money they feel a supplier should cough up: withholding invoice settlements; requiring suppliers to pay for Point Of Sale promotional material; special offers (these are always funded by the supplier); the list is a long one.
So the grocer that used to eke out resources to earn three or four percent has been consigned to history. France’s biggest retailer, Michel-Edouard Leclerc went on the record in October 2007 to say that a hypermarket needs to earn a margin of 25%. I saved the URL*, but Leclerc has deleted the blog post since then, leaving a rather fancy 404 page shown in the picture.
