A leading research analyst at Rabobank International has said that a lack of ‘long-term’ thinking is stifling growth in the Irish retail sector, particularly when it comes to private label (own-brand) development.
Francois Sonneville, who will address the Checkout Conference, in association with Rabobank, later today, believes that perceived volatility in the retail marketplace is creating a slowdown in new product development.
In his presentation, ‘The Long And Short Of It: Why Long Term Thinking Is Crucial For Retail Grocery’, Sonneville argues that ‘retailers are reluctant to pay higher prices to manufacturers, because of changed consumer behaviour and the volatility of the market. Thus, manufacturers, particularly of ‘commodity’ products in own-brand, have low margins, and innovation is stifled’.
As a result, while there is a need for continuous new product development in the marketplace in order to drive sales growth, the innovation stream is stifled due to lack of investment.
He points to last year’s horse meat scandal - where quality was being driven out of the supply chain in order to drive short-term need for value - as an illustration of this trend.
“Although food prices today are higher than at the start of the recession, consumers have been helped by retailers through price actions and private label alternatives,” said Francois Sonneville. “As higher commodity costs have not always been fully passed on, the consumer could even be considered a winner, but the consequences for the product and the production process might turn out to make this a Pyrrhic victory.”
Sonneville notes that as a result of this short-term thinking, the industry will soon be heading for an ‘aftershock’ - a realisation that this situation has to change, or else economic recovery will also be stifled, leaving others to capitalise.
Also appearing at the Checkout Conference today are Chris Martin, Chief Executive, Musgrave Group; Caroline Keeling, Chief Executive, Keelings; Bruce Langlands, Director of Foods, Harrods; Anna Malmhake, Chairman and Chief Executive, Irish Distillers Pernod Ricard; Elizabeth Fagan, Marketing Director Health and Beauty Division, International & Brands, Boots UK & Ireland; Naomi Kaslowsky, Global Head of Loyalty, dunnhumby; Francois Sonneville, Senior Beverage Analyst, Rabobank International, and Jean Jacques Vandenheede, Senior Retail Analyst, Nielsen Europe.
© 2014 - Checkout Magazine by Stephen Wynne-Jones