Author: Kevin Dorren (page 3 of 4)

Prana Protein

In early 2017 we are launching Prana Protein, this is one of our first steps away from dieting into the broader health and wellbeing category.

We have spent quite a bit of time this year looking at sports nutrition – a sector we have followed since starting Diet Chef in 2008. The sector is definitely in growth but we feel that the lifestyle consumer is badly served. Most online competitors have pushed the market into volume led discounting which does mean that it is very difficult to compete for a new entrant.

Our focus on wholefood nutrition (which has been growing strongly in the US for the last 18 months) is somewhere we are much more comfortable with. Not only is there a large megatrend towards “free from” we are also seeing demand for more natural protein sources (a lot of which taste terrible) so drawing on this we will make sure the brand appeals to the lifestyle consumer within this segment.

We have made very good progress with Diet Now this year and the business is now contributing after the initial investment. Our growth plans for this brand take us further into Europe.

Amazon Go

The future of convenience shopping is here and its called Amazon Go.

Amazon is one of our top technology holdings and we continue to be very bullish about the future of Amazon.

Amazon Go allows the vision of the future with no checkouts, no baskets, no staff, just great technology. All you need to get access is a simple barcode on the app. Everything else is done automatically.

Grocery shopping will never be the same – launching in Seattle in early 2017 this leapfrogs most other convenience retailers.

Investment in the future

Although this is quite a heavy hitting title, many businesses say this but few actually believe it. Investment in the future sometimes is quite short term.

Building great brands takes a long time and investment sometimes takes years if not decades to recoup.

By building a balanced portfolio of brands that are at different lifecycles we can use the associated cash flows to invest in the future and for the long term. We are long term shareholders and our focus is to be measured in decades not quarters.

Marketing investment is frequently curtailed if immediate payback is not available (on your first order for example) but being able to take a longer term view allows you to really benefit from the long term value that customers see in a great product.

We see marketing as an investment – not a cost – and just like buying companies that require investment for growth – we want to ensure that marketing is measured as an investment. We are very analytical but don’t only listen to the numbers, we take multiple data points to measure our marketing investment.

A typical by-product of believing marketing is an investment is that we know that not every activity that we carry out will work, but we are relaxed as long as the majority work!

Amazon Robotics

One of the businesses everyone at Move Fresh respect (and invest in!) is Amazon.  The focus on growth and the vision of the founder Jeff Bezos is truly outstanding.

The entire company constantly thinks about the future and have convinced public market investors that long term growth is the best use of Amazon’s impressive cash flow.

The BBC just covered the robotics division that are rolling out in the UK.

Kiva the company that built this technology was acquired by Amazon in 2012.

There are approximately 30,000 robots in operation in Amazon warehouses!

The slide continues…

Asda has reported the worst quarterly drop in sales a massive 7.5% in the last 3 months.

Let’s just sit back for a moment or two and think about this. All the major “multiple” retailers are in decline apart from Waitrose. That is a seismic shift in consumer behaviour, multiple retailers are being attacked by discounters, convenience and online in one of the biggest shift in consumer behaviour since supermarkets first appeared and impacted local high street stores.

Change in market share

Change in market share

So if you are an FMCG brand trying to find growth the worse place to be is within multiple retailers. Your choice is the unpredictability of discounters (smaller range)  or stick with volume in multiples and expect exceeding price and margin pressure.

Being caught in the middle

Sales at Tesco and Sainsbury’s fell by 0.2%, according to the latest Kantar Worldpanel figures for the 12 weeks to mid-July, while Asda sales fell by 5.6%.

The discounters (Lidl & Aldi), however, soared by 12.5% and 11% respectively, while on the other end of the spectrum, Waitrose grew by 1.6%.

The nation’s average shopping basket is 1.4% cheaper than a year ago, but it remains to be seen if the Brexit vote will bring about any price rises this year.

It’s not a great place to be stuck in the middle as a retailer!

Sainsbury’s offers 1 hour delivery

Sainsbury’s has become one of the first UK multiple grocers to move to compete with Amazon – as reported on Friday by Reuters

There are some fundamental issues around this strategy. One company I would not have a price war with is Amazon! 

Amazon traditionally operate on around a 15% margin from suppliers. Not all categories work within this margin structure but in comparison with UK retailer margins of between 30-40% a price war at this level would only suggest one winner.

Some interesting stats within this report though also point to a doubling of the online grocery market by 2020

Britain’s online food market is expected to nearly double to 17.2 billion pounds in the five years to 2020, according to industry research group

Supermarket Price War

Asda has started a new price war to become more competitive as it loses over 5% market share historically.

As Amazon Grocery enters this market there is some big structural issues to deal with. Amazon operate on a 15% margin model in most areas while typically major retailers in the UK run on 40%.

This structural shift isn’t going to end well for the UK’s largest retailers. 

Retailer shares fall as Asda signals supermarket price wars

Shopping Habits in the UK

Everyone is blaming BREXIT but really shopping habits have been changing quite dramatically for a long time. In my own household we have moved from weekly shops in multiple retailers (typically Sainsbury’s or Tesco) to discounter (Aldi or Lidl). In addition our convenience purchases have increased. We have moved some of our spend into local convenience retailers and some to speciality retailers such as Waitrose.

We never got into online retail from Tesco or Sainsbury’s – we wanted to choose meat, fish and veg by sight not just by price. I am sure we are not alone.

Our online purchases have skyrocketed not just in grocery but in most areas. There is a disconnect in consumer recognition that doesn’t make me count these purchases as grocery purchases. Traditional measurement platforms linked to checkout data and club card information (Kantar) won’t pick up this move either.

Over half of all retail spend in the UK is in the grocery category and only 5% of it is online. Doesn’t this strike you as something that will change?

FMCG and e-commerce

wpid-dreamstime_xs_24877815-2015-01-13-10-55.jpg

© Aprescindere | Dreamstime.comSupermarket Photo

The supermarket landscape in the UK isn’t looking great just now. All well known retailers such as Tesco, Asda and Morrisons are really struggling with a pincer movement from heavy discounters (Aldi, Lidl, Poundshops etc) and e-commerce (If you have a retail week subscription check out the winners and losers over the 2014 Christmas period)

So as a FMCG brand it continues to get harder and harder to even get listed in a large volume retailer. The fight for the consumer is driving margins down and every square foot of a retail outlet has to deliver.

I have kept on banging on about this for a few years as we have seen a move to online retail in most categories – it just seems to make sense we are going to see that in Grocery.

There is a strong manufacturing base in the UK and US, but they struggle with distribution – having depended on supermarkets for 20 years, why invest in anything else.

So I really do believe that the time has come to drive FMCG brands online, but the skill set to do this does not really exist in food manufacturers.

That is why we have formed Move Fresh. A group structure that will hold a number of brands and investments in the eFMCG space.

The group has a long term strategy and will utilise the shared IT, logistics and brand management infrastructure to grow over the long term.

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