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Russian retail sector consolidates and goes online

Russian retail sector consolidates and goes online

The turnover of the Russian food retail industry grew by 1.4% in 2019 to reach US$223.9 billion. The sector continues to consolidate, with the share of the top ten fast-moving consumer goods (FMCG) chains in the retail food market increasing to 32.9%, led by X5 Retail Group and M&A transactions. Torgservice, which owns two popular hard discounters (Svetofor and Mayak) increased revenues by 26% and moved up to 9th place. In light of the slim profit margins, most industry observers predict continued consolidation in the retail sector. Russia’s retail chains are modernising and expanding in the provinces. Convenience is becoming one of the key priorities for consumers, which has stimulated the development of e-commerce (delivery services) and negatively affected sales in large-format shopping facilities. The discounter format is also spreading. 

With the country going through a period of sustained economic hardship, Russian consumers continue to buy rationally with minimal impulse purchases, while also looking for healthy, natural, innovative and “trendy” products at affordable prices. A GfK survey last year reported that 46% of Russians said they were looking for a way to save money and use special offers for this purpose, while 54% said they were looking for stores with low prices. Meanwhile, in a Nielsen study, over 84% stated that they had recently changed their eating habits, with 53% reducing fat intake, 65% reducing sugar consumption, and 67% increasing the share of natural and healthy foods in their diet.

Most federal retail chains have a section for healthy products. A quarter of Russians surveyed by GfK stated they were interested in farm products and 20% were interested in products marked ‘bio’, ‘eco’ or ‘organic’. In 2019, this segment of the Russian market accounted for $12.5 billion, according to Euromonitor. Similarly, online purchases are on the rise, with Euromonitor reporting that food and drink internet retailing grew by 20% in 2018, to reach $736 million, and is forecast to reach $1.8 billion by 2023.

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Spinneys, the Dubai retailer that never compromises on quality 

Spinneys, the Dubai retailer that never compromises on quality 

Ethnic mixture of consumers, tough competition, high demand for organic produce, and distaste for plastic packaging are the challenges and opportunities for the retailer.

Spinneys Dubai operates 50 Spinney’s supermarkets and eight Waitrose stores. Its story started in 1961, with its first supermarket opening in 1962. Nowadays, Spinneys enjoys a well-deserved reputation for being forward-thinking and keeping pace with the changes in eating trends by offering new products from around the world. Food standards, safety and freshness have always been at the forefront of the company’s ethos. “We don’t compromise on quality; our objective is to give customers the best shopping experience,” said Stephen Rudge, commercial manager for fresh produce. “That explains why we are moving ever more toward growers and direct import. We buy around 80% of our goods directly from growers and the countries of origin.” As well as supporting local food producers within the UAE, the company has developed an enviably comprehensive network of reputable suppliers around the world. The retailer has sourcing teams located in different countries: the US, Australia, the UK and South Africa. “Our ambition is to establish closer relationships with growers, while closely following new varieties and new developments to understand what’s coming onto the markets,” said Rudge. “When we can, we want to be the first ones on the market.” 

Variety choice, a key issue

Spinneys puts great stock in selling a varied range of products. For instance, it offers very distinctive grape varieties like Cotton Candy, which has sold extremely well following in-store tastings. There are sampling stations at all of Spinneys’ large stores, with each week customers having the chance to try a new variety or product, or a product from a new country of origin. The same is true with berries. There have been numerous breeding programmes over last 15 years and more new materials have come onto the market. But the difference between good berries and bad berries is huge in terms of flavour, sweetness, texture, and shelf life. “We talk to the growers and we choose the best varieties. After each season, we discuss the results with producers, and include the successful varieties in our following season’s programme,” said Rudge. 

Competent marketing and promotion boost sales 

The UAE contains a wide spectrum of consumers among its 10 million population, and Spinneys has a particularly strong European, Emirati and Asian customer base. “We have such a mix of customers, and we take into consideration the tastes of all of them,” said Rudge. “We also offer ready-to-eat formats, such as peeled pomelo cut into individual segments. Pomelo is a fabulous product!” Spinneys has two formats of ready-to-eat products: one consists of pre-packed fruit, and the other of ready-prepared salads in the deli section, both of which have become very popular for their freshness. Spinneys widely social media extensively to promote its healthy products and participates on a morning fruit show on a Dubai radio station, which enables new products to be introduced. Indeed, following its promotion, kale has now become one of the best-sellers. 

Another feature of the Emirates is the fact that sales of organic products constitute 10% of total volume, which is much higher than in Europe where the average is 5%. The country is also committed to the war against plastic. “It is a real challenge, as suppliers cannot change their packaging in such a short time, and recycling is not well developed in the country. Spinneys will have to develop its own solution, as this is what customers are demanding,” said Rudge.

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SPAR South Africa’s rural hubs show promise

SPAR South Africa’s rural hubs show promise

 

Sustainable local supply chains for produce grown in remote areas are at the project’s heart

SPAR South Africa sees small-scale rural farmers as the key to a sustainable future for the vast nation. It believes they can help improve food security, affordability and nutrition for its rural communities. With the Dutch-founded SPAR Group and support from the Dutch government, it has created a rural hub business model based on packhouses serving as mini distribution centres in outlying areas of South Africa. The idea is to develop local supply chains of fresh produce in a cost-efficient and environmentally responsible way. And while its initial two hubs have not been without challenges and are not yet profitable, SPAR South Africa believes “we have created a sustainable model that can be rolled out nationally.”

More rural farmers starting to thrive 

SPAR’s first rural hub was established in Mopani, in Limpopo, South Africa’s northernmost province, in June 2016. It is based on the concept of a central fresh assembly point (FAP), which acts as a collection point for a range of fresh produce sourced from smallholder farmers to supply local SPAR stores within a radius of up to 200 km. SPAR says that over July 2018 / June 2019, 10 farmers/groups supplied the Mopani hub, many of whom could finance a portion of their business themselves for the first time – a sign that they can now stand on their own feet. The hub bought produce worth R1.26 million (≈€80,300) from them, with crops including green beans, baby marrows, butternuts, baby corn, cabbage, watermelon and lettuce. The hub in turn supplied 41 customers, most of which were SPAR stores, and in the past year sold more produce to informal traders, something seen as a significant development. A second rural hub business was established in Ikhwezi, in the northeastern province of Mpumalanga, in October 2017, with a group of 36 smallholder farmers. Over the same period, the Ikhwezi hub purchased produce worth R1.16 million (≈€74,000) from 24 farmers. Crops included tomatoes, cabbage, butternut, green beans, bitter melon, lettuce and sweet potatoes. The packhouse supplied 27 customers, most of which were SPAR stores.

Overcoming challenges

SPAR chairman Mike Hankinson says the rural hub project shows early signs of being financially sustainable for a group of small emerging farmers, but there was a need to find new ways for the economics around delivery and packing to make sense. One challenge was that low-margin products, such as cabbage and spinach, continued to be sourced by local SPAR stores directly from smallholder farmers in close proximity to the stores. However, many of these small businesses were at risk as they lacked food safety accreditation to sell their produce directly to stores. Routing these products through the FAPs, on the other hand, incurred unnecessary transport and handling costs. To address such issues, SPAR has developed a model to transport certain produce directly from farmer to store, while other items are distributed through the central FAP. Also, the farmers have received food safety training in order to get local.g.a.p certification, and technology solutions were introduced to help farmers grow high value crops and extend their growing seasons, thereby improving their sustainability. “We remain committed to the concept of rural farmers supplying fresh produce to SPAR stores. It has the potential to provide employment, grow rural economies, ensure food security and improve nutrition, while reducing transport costs for SPAR, shorten lead times, and increase freshness and shelf life,” Hankinson said.

SPAR South Africa acts as a supermarket supplier

Established in 1963, SPAR South Africa grants licences to independent retailers to operate stores under one of four formats, with almost all of its current store portfolio independently owned. “The SPAR Group in Southern Africa acts as a wholesaler distributing the entire range of goods stocked by a typical supermarket, including fresh produce,” SPAR South Africa fresh food manager Peter Gohl told ED. “We supply a range of about 450 fresh produce products to about 850 independently owned and managed SPAR retail stores through 6 strategically located distribution centres. Excluding our SPAR Group Ltd European and UK/Irish holdings, the Southern Africa turnover in fresh produce amounted to about €320 million over the past 12 months. Of this, the fruit category contributed €130 million and imports in the fruit category amounted to €28 million,” he said.

Source: https://investor-relations.SPAR.co.za

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Sainsbury’s commits to £1 billion to become Net Zero by 2040

Sainsbury's commits to £1 billion to become Net Zero by 2040

UK retailer Sainsbury’s has issued a pledge that its operations will become Net Zero in line with the goal to limit global warming to 1.5°C, the highest ambition of the Paris Agreement, and a decade ahead of the UK Government’s own target. The project will focus on reducing carbon emissions, food waste, plastic packaging, water usage and increasing recycling, biodiversity and healthy and sustainable eating    Sainsbury’s will work collaboratively with suppliers and will ask suppliers for their own carbon reduction commitments. 

According to a press release issued by the retailer, its current carbon footprint is one million tons, which is a 35% absolute reduction in the last 15 years despite its space increasing by 46% over the same time frame. For the last six years Sainsbury’s has been awarded an A rating for taking action on Climate Change by the CDP, the highest rating of any UK supermarket.

Sainsbury’s will use the £1 billion investment to implement a programme of changes, with a focus on reducing carbon emissions, food waste, plastic packaging and water usage and increasing recycling, biodiversity and healthy and sustainable eating. The investment will enable the business to fulfil Scope one and Scope two emissions, putting the business on course for Net Zero a decade ahead of the UK government’s deadlines. 

The retailer will work with the Carbon Trust to assess emissions and set science-based targets for reduction, publicly reporting on progress every six months. The targets will align the business with the goal to limit global warming to 1.5°C, the highest ambition of the Paris Agreement. Sainsbury’s will work with suppliers to set their own ambitious Net Zero commitments, in line with the Paris Agreement goals.

Mike Coupe, now former CEO of Sainsbury’s, said: “Our commitment has always been to help customers live well for less, but we must recognise that living well now also means living sustainably.  We have a duty to the communities we serve to continue to reduce the impact our business has on the environment and we are committing to reduce our own carbon emissions and become Net Zero by 2040, ten years ahead of the government’s own targets, because 2050 isn’t soon enough. We have a strong heritage of reducing our carbon emissions – we have reduced them by 35% over the past fifteen years despite the footprint of our business increasing by over 40%. We invested £260 million in over 3,000 initiatives over the last decade, including the start of our LED lighting programme and refrigeration. Over the next 20 years we will invest a further £1 billion in programmes that will transform the way we do business and put environmental impact at the forefront of every decision we make.”

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Departure of Sainsbury’s CEO “not due” to Asda deal collapse

Departure of Sainsbury’s CEO “not due” to Asda deal collapse
Credit: Peter Nicholls, Reuters, The Times

 

Sainsbury’s CEO, Mike Coupe, has announced his resignation but will remain in his post until the end of May. His replacement will be current retail and operations director, Simon Roberts. Coupe has denied that his resignation is linked with the collapse of the £12 billion merger with Asda, emphasising that it was his own decision to leave. 

Sainsbury’s proposed merger with Asda fell through last year when the CMA found that the deal could lead to higher prices for customers. Speaking to the BBC, Coupe said, “If you looked at our AGM last year, 99.5% of our shareholders voted for me to carry on what I’m doing. It’s absolutely my choice You see the amount of change that is going on in the world of retail, who knows what will happen in the next five to 10 years, but one way or another there will be a significant rationalisation of brands you have taken for granted for a generation.”

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Benlai reaches 36 million loyal members in China

Benlai reaches 36 million loyal members in China
Credit: Benlai

 

Since it became profitable in 2018, China’s third specialist food E-platform has increased direct investments in production and new hybrid business model ‘Fresh Plus Store’.

With seven years’ experience in online sales of fresh products in China, Benlai has taken a leading role in process management and implementation in the supply chain. Among its 300+ brands, Benlai has enjoyed great success with partnerships such as with Chu orange, Hongqipo 100 apple, Liyushuang organic rice, Pujiang orange, and Yu San hairy crab.

Benlai.com supplies fruits, vegetables, meat and poultry, aquatic products, cooked foods, grains, oils and other groceries. Over the past three years, annual sales have grown by more than 300% across China. It delivers fresh products to 109 cities across the country using cold-chain solutions and to 300 cities by regular delivery. At present, there are nearly 700 offline stores in China, having entered the Shanghai market in January 2019.

New hybrid business model

The ‘Fresh Plus Store’ is the new O2O (Offline-to-Online) retail model developed by Benlai.com, in order to better target the mass markets. The concept is to integrate offline shopping with online sales. Door-to-door delivery is offered for consumers located within 300 metres. Belai.com has opened stores in China’s major cities, like Wuhan, Chengdu, Changsha, Zhengzhou, Tianjin, and Shanghai. Benlai has enjoyed great success since 2018 with its two brands, Fresh Plus, for the O2O model, and Benlai.com, for the B2C model, both of which have become competitive and attractive for investors. In October 2019, Benlai received a US$200 million investment fund to accelerate its development.

A strategic agreement with SGS

At the 2019 China Agricultural Forum, Benlai signed a strategic agreement with SGS (the world’s leading inspection, verification, testing and certification company) that will see the two parties cooperate closely in the areas of supplier management, fresh product testing, and own-product services to build a traceability quality control system for fresh products and improve product quality. During the 3rd China Fresh Produce Conference, organised by Eurofresh Distribution & the 23rd FHC CHINA expo in Shanghai (SNIEC), Bian Ning, general operating manager of Benlai.com said, “2019 is an unprecedented year for China’s fruit market because of the large planting area, good harvest and varieties.” As the Spring Festival will take place earlier in 2020, this will mean a short season of fruit demand in China, and risks causing a sharp reduction in fruit prices in the first half of 2020. Therefore, Benlai has launched a fast combat strategy to offset the upcoming risks.

 

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POLOmarket, unmatched in fast deliveries 

POLOmarket, unmatched in fast deliveries 

Fresh organic produce is on the rise for the number-one Polish retailer

The Polish retail market is in constant transformation to adjust to the shifting requirements of customers. Poland’s shoppers demand fresh and good quality produce on store shelves 24 hours a day, making well-organised logistics and fast transport crucial. POLOmarket is the largest retail network solely reliant on Polish financing. Established in the Kujawy region, POLOmarket has grown to comprise approximately 400 retail locations in small and medium-size towns as well as in larger conurbations throughout the country. It serves around 9 million shoppers every month. “We are the fastest in delivering fresh produce in Poland. Our chain sells goods worth €823 million per year,” said Dawid Mizera, category manager. “However, the crucial asset of our chain is our well-organised logistics, particularly for transporting fresh fruits and vegetables.” 

Fresh organic produce is a growing trend 

“For now, sales of organic products are rising slowly, but the trend is stable and its share of fresh produce has increased in the last two years,” said Mizera. The buzzword most frequently used in POLOmarket’s marketing is ‘Polish shop’ to highlight how the stores’ fresh produce comes from local Polish farmers. POLOmarket has also invested in environmental protection by withdrawing foil bags and replacing them with paper bags. As Mizera underlines, Polish customers are now more open to purchasing fresh organic bananas, tomatoes, cabbages or cucumbers in every POLOmarket store. “Now we intend to add our own brand of organic fruits, vegetables, juices and nectars ‘Zaczarowany Ogród’ (Enchanted Garden), with which we will offer more organic fresh produce in addition to our conventional products,” said Mizera.  

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Polish retailer Piotr i Paweł enters into cooperation with Spar Group 

 

Successful cooperation between retailers guarantees good profits, further development and increased brand awareness.

 

Retailer Piotr i Paweł is to join forces with the Spar Group Ltd. As in previous seasons, the retailers are developing their F&V segment so that every customer visiting their stores can find the tastes they are seeking. “In autumn 2019, in line with our new slogan ‘Inspirations’, we promoted a selection of produce, such as red grapefruit from Turkey, pineapple from Costa Rica, and Polish potatoes in various colours. We also promoted our products with the logo ‘Always Quality’ and offered many organic products,” said Tomasz Syller, managing director of Spar. Piotr i Paweł is also well-known for the high-class products that clients can find at its stores across the whole country. 

Joining forces
to reach a bigger target 

Spar has 70 shops in 65 towns in Poland but is planning to increase the number of outlets to 150 by the end of 2020. The average sales area is 1,100 m², with an assortment of 37,000 articles. The number of own-label products has increased to 1,200 items in the various categories. Once Piotr i Pawel joins forces with Spar Group Ltd., both retailers will be better placed to compete against other retailers by offering products that are often unavailable in the Polish market and at lower prices. “Fruits and vegetables account for about 8% of all our products. In 2019 up to November, our fruit and vegetables sales were worth over 120 million zlotys,” said Tomasz Syller, who states that in Poland, there is a trend to purchase organic fruits and vegetables, especially among young and middle-aged professionals. “Moreover, we are trying to offer our customers lesser known vegetables, like topinambur or pitahaya. We’ll sell these rarities in many of our outlets in various regions of our country,” said Syller.

Great potential will be generated by the partnership between Piotr i Paweł and Spar Group Ltd. “Our main target is to supply come over €11 million worth of products each year by making our shops more attractive for our customers. We now plan to build new markets in medium-sized towns. In Warsaw alone, we have five supermarkets and we plan to open new ones,” said Syller.

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Japanese supermarket giant Aeon, in online grocery push

AEON organic retail store

AEON organic retail store

Credit: Aeon

 

 

Aeon is partnering with British online grocery pioneer Ocado to launch a new company by March 2020 that will use AI and robotics to deliver a cutting-edge digital experience. Also, as a sustainability initiative, Aeon has set up a platform to help boost organic farming in Japan, where demand is outstripping supply of organic food.

 

Fresh food delivery has yet to truly take off among the Japanese, who largely still pick up fresh produce on a daily basis. But with better logistic networks and different demographics – such as more dual-income households and senior citizens – that’s forecast to change. And with AmazonFresh already in Tokyo, and Walmart (owner of Aeon rival Seiyu) beefing up its online grocery delivery together with Japanese e-commerce giant Rakuten, it’s no surprise that supermarket Aeon is also making the leap. In a statement in November, Aeon said it will leverage Ocado’s world leading know-how to launch and operate “the next generation online supermarket.” It plans to open its first customer fulfilment centre harnessing the Ocado Smart Platform by 2023 to serve Japan’s Kanto region, followed by others over the following two years in order to eventually serve the whole country. And it anticipates achieving online grocery sales of about 600 billion yen (about €4.92b) by 2030. “Aeon will realise a highly efficient operations and distribution system to deliver ‘anytime, anywhere, anything’ through a superb application interface to meet our customer needs. It is expected that these technologies can be utilised for the existing Aeon online supermarket business, store pick up, click & collect,” the company said in a press release. Aeon also plans to seek more partners both in Japan and around the world in order to be at the forefront of the digital era. Ocado, it should be mentioned, has also been chosen as a partner by other major supermarket groups around the world, including Kroger in the US, Casino in France, Marks & Spencer in the UK, ICA in Sweden and Coles in Australia.

Produce from farms run by Aeon Agri Create // Credit: Aeon

 

A platform to boost organic production 

Two other key initiatives from Aeon are in the area of organic food. Back in 2017, among the sustainable procurement goals the group set itself was that of boosting the sales ratio of organic products to 5% of all its agricultural products by 2020, also when Tokyo will host the summer Olympics. Aeon says it wants to contribute to “human, social and environmental health” through organic products, furthermore ones that are “cultivated, distributed and consumed naturally.” It also says it is “responding to our customer demands for safer, better tasting, and environmentally friendly food products.” However, while interest in organic produce is on the rise in Japan, “supply of organic products has not caught up with growing consumer demand,” it says, and “organic JAS certified producers in Japan account for only 0.2% of all farmers.” Given this context, in September 2019 the retailer announced another initiative, the new Aeon Organic Alliance (AOA). In a statement, it said this platform will boost the supply of organic products and help farmers overcome the burden of high organic cultivation costs and those incurred due to inefficient distribution, as well as giving them opportunities to gain new skills, exchange information and share and solve issues together. The AOA platform will be used to “centrally manage production, procurement, processing, distribution, and sale of organic agriculture products.”

Organic produce in Bio c’ Bon store in Japan // Credit: Aeon

 

14 new organic stores in Japan

AOA members will also have access to technological know-how for the acquisition of Global G.A.P. and organic JAS certification. Aeon has acquired such expertise via the 20 farms it directly manages across Japan. The farms are operated by the company Aeon Agri Create and three hold organic JAS (Japanese Agricultural Standard) certification, one of which is the fully organic 16 ha Saitama Hidaka Farm. Aeon’s organic farms will serve as distribution bases that collect products from growers who are members of its organic alliance, thus reducing distribution and delivery costs while also facilitating joint purchasing of materials necessary for cultivation, which in turn lowers costs. Furthermore, an AOA website will share what is happening in stores, including customer feedback, product line-ups, and sales performance, as well as overseas trends and other relevant information. It will also serve as a communication platform for connecting producers. Another group subsidiary, Aeon Topvalu, develops Aeon’s private brand for organics, Topvalu Gurinai, which is sold in group stores across Japan. Also providing a sales outlet for organic produce in Japan are the Bio c’Bon stores operated by Aeon in partnership with French firm Bio c’ Bon. There are now 14 such stores in Japan.

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Major merger of Vietnamese retailers

Major merger of Vietnamese retailers

Vingroup has announced that its retail and agriculture divisions (VinCommerce and VinEco) are to merge with Masan Consumer Holdings to establish Vietnam’s largest retail group. The new company will have a network of 2,600 VinMart and VinMart+ stores in 50 provinces, as well as VinEco’s 14 high-tech farms. Masan’s chairperson, Truong Cong Thang, said, “Vingroup has completed its mission to create the pioneer and most effective clean agriculture and retail system in Vietnam. And now we will carry this flag to continue our mission to serve consumers while ensuring a fair retail market for Vietnamese manufacturers.” The new firm also harbours plans to extend its business worldwide.