Consumers these days rely increasingly on supermarkets for their food purchases. While other channels saw their sales dwindle, only supermarkets – and especially discounters –actually posted growth. Notably, last year consumer spending on food declined only marginally (-0.2 percent) compared to total consumer spending (-2.1 percent). Consumers are very cost-conscious and will stay that way in the years to come. Therefore we do not expect total consumer spending to pick up in 2014. These are the conclusions of ABN AMRO’s 2014 sector update Visie op Food, which was published today.
Borders between distribution channels are blurring
Consumers spent a total €57 billion on food and luxury goods over 2013. That breaks down into €29.3 billion to supermarkets, €17.5 billion to out-of-home channels and €10.2 billion to at-home channels. Only supermarket spending grew in 2013. The out-of-home channels are having a rough time as an increasing number of consumers cook at home more often rather than go out for dinner. According to ABN AMRO, as suppliers capitalise on this development (e.g. by offering fresh, pre-packed, ready-to-cook products), the borders between sales channels are blurring.
Conscious consumers are on the rise
Although price is still the main focus in the food sector, the tide is turning. The abuses in the meat industry have been a wake-up call for consumers in 2013. ABN AMRO views this as favourable for entrepreneurs trying to distinguish themselves in a different way. Conscious consumers are on the rise. For example, demand for fish with a sustainability label is growing, partially due to the wider range available in supermarkets. The meat industry as well is increasingly guided by shifting consumer demands with regard to animal health and the environment. That goes not only for fresh meat, but for processed and semi-manufactured meats as well. Additionally, consumers are becoming keener on products from familiar, local suppliers. Franchisees in particular are adding locally supplied products to their product ranges.
Gaining an edge with transparency and differentiation
ABN AMRO does not expect consumer budgets to rise yet in 2014. Hotel and catering businesses are being challenged to narrow the price gap between out-of-home and at-home channels. They could do so by investing in the optimisation of logistic processes. For example, they could pool purchases to cut back on distribution costs – and limit their environmental footprint in the process. Additionally, ABN AMRO observes that wholesalers focus more and more on ready-to-cook products, lowering the expenses of their hotel and catering customers. They are also increasingly investing in specific concepts or markets, like health care. “The Dutch food sector could improve its distinctive capacity by guaranteeing transparency and quality. Currently, getting meat to meet food safety requirements is a big issue. New meat concepts allow for greater transparency and offer the consumer a broader range of products to choose from,” says Niels Dijkman, ABN AMRO’s Sector Banker Food. “Each party in the food sector needs to focus on optimising the supply chain and offering more alternatives to conscious consumers. The industry leaders will set the trend in taking responsibility for their supply chain as they broaden their sustainable offering.”