Archive for 'Old Blighty'

Why Profits Matter

tesco2Is a supermarket company entitled to make a profit? Of course it is. Does a supermarket company’s adoring public care about the profit the business makes? You bet. How do customers get to hear about a supermarket company’s profits? Well, if the supermarket company in question is listed on a Stock Exchange and is therefore obliged to follow forecasting and reporting rules stipulated by that exchange, then the answers to all sorts of questions, including the ones about profit, can be found in the paper and on the web.

The Tesco finance team appears to have temporarily misplaced its abacus.  Tesco has overstated  its half-year profits by £250million was. Analysts suggest this to be  ’principally due to the accelerated recognition of commercial income and delayed accrual of costs’.

Aha! Here are my 5 pence worth.

‘Commercial income’ is retail-speak for money generated through supplier deals, be that case allowances, shelf allocation fees, weekly promotional activity or catalogues. The term ‘accelerated recognition’ suggests that monies handed over by suppliers amounted to less than was contained in the forecast at the beginning of the financial year. And the only way that can occur is if the supplier agreements are incentive based; i.e., determined by the volume of stock the retailer manages to move through his promotional activities.

Why would a retailer not be able to move the amount of stock they had forecasted? How about – because he is loosing market share…

A retailer’s accounts are finely balanced between the money he pays for goods, the price he charges their customers, the fees he can demand from his suppliers for granting improved access to shelf space in numerous variations, the competitive position taken in the marketplace and market share percentage achieved. Wheels do not come off overnight. But when the first wheel is as loose as it appears to be at Tesco and if the operator is as significant as Tesco, then a fundamental shake-up of the market place is not an unrealistic expectation.

What is next – the Food Police?

keep-calm-and-look-out-for-the-food-police-1
No, it is not April Fool’s Day. I wish!

It seems that when they were not busy debating the pros and cons of Scottish independence in recent months, the UK authorities have been contemplating the introduction of a Food Police. The Netherlands and Denmark have had Food Crime Units for some years now and there seems to be support for introducing this in the UK as well.

An independent report into food supply network integrity was published in the UK in July 2014 and Food Safety News obviously has a take on the matter too.

Last year’s horse meat scandal appears to have been the last straw.  The Dutch Food Crime Unit alone is reported to have 100+ investigators, so they know how to keep themselves busy by the looks of things.  What are the odds of MPI catching up with these latest European Developments and presenting us with our own  home grown New Zealand version?

The mind boggles.

I Spy Something You Don’t See And It Starts With ‘C’

AFREA wordle from 7 cooperative principlesI have England on my mind.  I am all for the Europe concept but do we really need to have the Tour de France starting in the UK?  It’s a bit like Kent becoming a wine growing region. Well known paradigms are suddenly getting challenged. England gave us a lot of things and lots of them started with the letter ‘C’. Colonialism, Cricket and Coronation Street come to mind – and, of course, the Co-Operative model. Now there is something we can relate to in this industry of ours. Co-Operatives. Many of ours growers use MG Marketing, a Co-operative, to market their fruits and vegetables. Foodstuffs, the parent brand of Pak’n Save and New World supermarkets is also based on the Co-Operative Model.
Co-Operatives are not the norm these days and typically face stiff competition from their corporate counterparts. In this example that would be Turners & Growers and Freshmax in the produce industry,for example or Countdown in the case of the retail competition.
Well, here is a link to another one of those fascinating Guardian articles. It seems ye olde the Co-Operative model is under a fair bit of pressure in the UK and in need of saving, no less. And what are the champions of the co-operative model advocating? Back to the roots old chaps!  No point of trying to emulate those who are not you!  So, it would be worthwhile checking out this link, where one can find the Rochdale Principles of 1844, the mother, grandmother and greatgrandmother of co-operative movements around the world. And if the movement really needs saving, then lets put a bit of Kiwi flavour into it as well. No point of leaving it all to the Poms!

Supermarkets, Growers & Food Prices.

munichmerch1One of the more intelligent articles I have come across in recent years on the topic of supplier relationships in the perishable food area can be found in the Guardian.  Here is a poignant part of  the article’s last paragraph which should have some resonance in our part of the world too.

“…farmers need to be paid enough to invest in our agricultural base. We actually need to pay a little more for our food now to avoid paying much more later. A price war might be good for consumers in the short term. It might offer some sort of relief. In the long term, however, we would all be much the poorer.”

I wholeheartedly agree with this sentiment but would even be more specific. Growers and farmers need to receive sufficient enough a price for the food they produce to provide them with a reasonable income as well as a return on their investment.

The background to the article is the market share loss being experienced by the UK’s main stream supermarkets at present, with the writer analysing the predictable price cutting strategies being implemented from the perspective of their potential impact on Britain’s self-sufficiency in food production.   A very worthwhile read.

You Know The World Is Upside Down When (I)

A newspaper thinks it needs to operate an online garden centre.

Guardian garden centre

Not a belated April Fool’s day Joke but the website of the virtual garden centre operated by The Guardian newspaper in the UK. If nothing else it confirms that being a champion in an existing consumer channel offers little protection from operators emerging from entirely different channels looking  for new ways to generate income  - because they can!