As the industry in the US is focused on Fresh & Easy, we get this report from a British newspaper, The Mail, that back home in Britain, Tesco is flummoxed by deep discounters:
Tesco worried by Aldi and Lidl challenge
They have long been seen as downmarket stores for the less well-off or the plain tight-fisted. Shopping at Aldi and Lidl is not for the aspirational or for foodies.
But times are changing. As prices rocket and the middle classes begin to count the pennies, the German discount stores believe their time has come.
More affluent customers are flocking to buy their products and even Tesco, the unrivalled champion of the UK grocery market, is beginning to worry.
It is so worried, in fact, that just yards from its headquarters in Cheshunt, Hertfordshire, Tesco has built a mock-up of an Aldi store where its executives, product buyers and marketeers can study the tactics being used by the enemy.
In the past year the number of Aldi’s shoppers in social category AB has surged.
Just over one in five shoppers at Aldi is in this group and the cause is simple — food price inflation. Prices are rising faster than any other category, with bread shooting up 14% in the past year.
It seems the £4.99 Canadian lobsters at Lidl and the £7.99 bottles of Chateauneuf-du-Pape at Aldi are hard to resist.
And the surge is spreading. When fashion magazines this month found that Aldi’s own-brand anti-wrinkle cream — 1.49 a jar — was the most effective on the market, the shelves soon emptied.
Aldi’s model is simple. Stores are run with as few as four staff at any time and managers, earning a minimum of £40,000 a year, regularly roll up their sleeves to stack shelves.
Aldi wants to open 50 stores a year, taking it above 400 by the end of 2008, and has plans for 1,500. Lidl has more than 450 and rising. Tesco has more than 2,000, but its largest ones are more than ten times the size of an Aldi store.
Tony Baines, Aldi’s UK managing director for buying, said: ‘We could have a store in every town in the next 15 to 20 years.’
About 5% of all grocery shopping is at discount chains. Baines believes that could rise dramatically. ‘I think the discount grocery market in the UK could grow to 20% — us with 10% and Lidl with the same,’ he said.
He is candid about where the growth will come from and sees Tesco as the most vulnerable to its strategy. ‘If you’ve got someone with 30% of the market, you could assume most of our growth is going to come from that,’ he said.
This turn of events doesn’t surprise us at all. We remember being called by a reporter for a consumer publication when Safeway was launching its “Lifestyle” format, and we were asked if we thought Wal-Mart would to be concerned over this new concept.
We replied that we were certain Wal-Mart would lose more sleep over Aldi and other deep discounters than it would over Safeway’s concept.
With financial uncertainty the story of the day, Aldi is the concept of the moment. And not just in the UK. In the US, press releases trumpet its low prices with headlines such as Aldi Pricing Pilot Means Even Lower Prices for More Than 100 Grocery Products:
As reports of food price inflation continue to dominate the news, ALDI is taking steps to further lower its already discounted prices on more than 100 of some of the most commonly purchased items in its St. Louis-area stores. Beginning Sunday and continuing for the next nine weeks, customers will see products ranging from macaroni to chicken breasts further reduced in price.
“We’re proud to offer customers the best possible prices on the quality products they purchase the most,” said Paul Piorkowski, division vice president. “ALDI already has prices that are up to 50 percent lower than the competition. This is an emphatic statement that we will continue to take the lead in value.”
Food price inflation rose 5.3 percent in 2007 over 2006 — the largest increase since 1990, according to the Bureau of Labor Statistics. In contrast, ALDI customers can expect as much as 12 percent to 27 percent price cuts on everything from frozen foods to refrigerated items to dry goods. In the first week, more than 10 items will be reduced in price such as 32 oz. elbow macaroni going from $1.29 to $1.09 while competitors’ prices range from $1.50 to $2.59. ALDI’s instant mashed potatoes are going from $1.09 to $.99 while competitors are at $1.13 to $1.67.
This is the first time in its history that ALDI is launching this kind of pricing program, and it will look at duplicating the effort across the country following its pilot in the St. Louis area. Reduced prices are intended to stay, with ALDI re-evaluating periodically what are among the most frequently purchased items for customers. Market conditions also will factor in to long-term pricing, as ALDI continues to beat competitors on price, quality and combined value.
“We are doing this for our loyal customer base as well as giving people new to ALDI a further incentive to try us,” said Piorkowski. “We find that once people shop at ALDI, they keep coming back.”
In the meantime Aldi is moving into Florida:
Aldi Expansion Begins With Distribution Site
HAINES CITY, FL — Aldi Group, a German-rooted discount grocery chain, is launching its expansion into the “land of Publix” with a 500,000-sf distribution center in Polk County. It also plans for dozens of new stores in Central and Southwest Florida.
The company, which promises markdowns up to 50% on common supermarket items, is investing $40 million in its Haines City warehouse on 73 acres south of Interstate 4. The center will service 25 stores beginning this fall, primarily in the Orlando, Tampa and St. Petersburg markets.
We will be aggressively expanding throughout Central Florida over the next several years,” David Behm, Aldi’s VP in Orlando, tells Real Estate Florida. The rate of expansion could be as high as 15 stores annually after this year’s openings, he says.
According to the company’s website, Aldi seeks locations with 16,600 sf and at least 85 dedicated parking spaces on up to three acres. Development lots or pads are preferred, with ground leases and inline end-cap spaces also considered. Co-owned and freestanding sites may also be part of the chain’s mix in Florida, Behm adds.
Aldi’s push into Florida is made more interesting given that its new distribution center will be built near the Lakeland headquarters of Publix Super Markets Inc., a regional chain that has dominated grocery sales statewide for decades. However, any comparison of Aldi to Publix would be, simply, apples and oranges.
“We consider ourselves the premier grocer on the discount side,” Behm says. Aldi, which is approaching 900 stores in 26 states among 8,000 stores worldwide, appeals to do-it-yourself types who can sack their own groceries, preferably in their own bags.
While its stores are intended to be basic, Aldi doesn’t want to be viewed as a dollar-store type operation, Behm says. The company seeks locations in trade areas with populations of at least 35,000 within three miles, on sites at signaled intersections or convenient access.
Aldi is the 25th largest grocer in the US with annual sales of nearly $6 billion, based on rankings by Supermarket News, a national trade publication. Publix, with 925 stores throughout the Southeast and $23 billion in yearly sales, ranks seventh.
While in city after city Aldi is building new stores:
Aldi headed for Wentworth and Ridge?
Aldi may come to Foodland site
Grocery chain (Aldi) to locate store next to mall
When we mentioned that Ron McCormick, Vice President of Produce of Wal-Mart, had announced a focus on heritage agriculture, many asked what that could possibly be about.
Surely, Wal-Mart executives couldn’t possibly think that reviving the Arkansas pickling cucumber industry was going to help attract customers or increase sales in any significant way.
Well what that was really about was the marketing department taking over merchandising. The marketing people at Wal-Mart came to believe that price was not enough and that Wal-Mart needed other things — things such as heritage agriculture — to earn the affiliation of the consumer.
Fortunately for Wal-Mart shareholders, Wal-Mart’s low-price leader image was well established and most of the nonsense tried by marketing (ads in Vogue, heritage agriculture, funky clothes that didn’t sell, etc.) didn’t resonate with consumers. So now, with price a priority among consumers again, Wal-Mart’s Back in Its Element.
Among Tesco’s problem in America is a confusion of focus. Many things it emphasizes — green, organic, and sustainable — are features of expensive things and upscale venues in the US. So these features clash with the discount-price image Tesco wants for Fresh & Easy.
Tesco would have done better to emulate the Albrecht family and market under distinguishing banners such as Aldi, the discount standard bearer and Trader Joe’s, its foodie, trendy cousin.
Perhaps the best hope for turning Tesco’s American enterprise into a winner is for the company to take a step back, slow the expansion and remerchandise and re-banner the Fresh & Easy stores according to what concept would most appeal to its neighborhood.
As those who have reviewed our extensive coverage of Tesco and its Fresh & Easy launch are aware, we often build our analysis on input from the Pundit Intelligence Network.
Our door is always open to positive or negative reviews, and we often run letters from industry members who have chosen to participate.
As far as these letters go, our policy is simple: We can run the letters with a signature or we can protect the anonymity of the writer. That is the choice of the industry member who wished to write in.
In all cases, however, the Pundit has to know who wrote the letter.
This is so we can judge its credibility and to ascertain any conflicts of interest which we need to identify. So, if an employee of a retail competitor for Fresh & Easy writes to us about the concept, we can maintain that person’s anonymity, but we would specify that the letter came from someone who works for a competitor.
As the Perishable Pundit is read in over 100 countries around the world and by people working in a wide range of professional capacities, and as our readership grows as we deal with new issues, it is common for us to receive e-mails from people the Pundit has never had the pleasure of meeting — sometimes from people and companies we have never heard of before.
In these circumstances, we typically return an e-mail to the correspondent, explain our anonymity policy and ask their involvement in the trade. Ninety-nine percent of the time the correspondent responds, his or her identity is quickly confirmed and we can use the letter. Fairly often, we start up a continuing dialog and make a new friend.
Yet lately something odd has happened… As we have begun to report more negative experiences with Fresh & Easy, we suddenly started receiving several letters with more positive observations.
Yet something was odd about these letters. They were all from people the Pundit has never heard of, and all of them came from e-mail addresses that are available for free and that enable people to hide their identity, such as Gmail accounts.
Because we deal business-to-business, most of the e-mails we receive come from corporate e-mail systems and we know a lot of people and companies, so it is odd that we don’t know any of these new ones.
Yet the strangest thing is that while almost everyone we respond to typically returns our e-mails, not one of these “positive” e-mail writers answers our e-mails, despite multiple attempts.
We always want to be straight with you, our readers, so we wanted to lay this situation out. We have a bunch of positive letters about Fresh & Easy that we cannot run.
Yet we don’t think it much of a loss. While the letters we have published often involved specific information, such as the number of packages they counted at closing time and how many had to be removed from the shelf because they passed the expire date, these letters we can’t publish have odd claims, such as that they heard a woman shopper saying she loved Fresh & Easy.
We have no way of knowing who is sending these letters but, to us, it looks like someone trying to stuff the ballot box. Could it be an employee of Tesco who wants to slant things one way? Could it be a supplier to Tesco? Could be an organized effort by Tesco to influence our coverage? We have no idea. There is just no way to know.
We would say this, though: Our purpose here is not to hurt any company. Strong organizations welcome criticism as they can incorporate that critique into their own process of continuous improvement.
Many of the letters we have published come from people of such eminence; they would cost an organization such as Tesco many hundreds of thousands of dollars to retain these people. We give Tesco the benefit of their expertise for free.
A number of the letters have suggested that the Pundit has been tough on Tesco because, they believe, he is under the employment of Wal-Mart!
This is not only false, but the very thought must give some of the folks in Bentonville a chuckle — and indicates the letter-writers have not focused on our even more extensive assessment of Wal-Mart.
We want to make clear that our function is to help advance the industry. We do that through an intellectually withering assessment of important industry institutions and events. Everyone is invited to contribute to this cause, and we can all benefit by encouraging the great minds of this industry to focus more intently on opportunities and obstacles that lie ahead for the industry as a whole and for its constituent parts.
Our e-mail inbox is always open and our phone number works. If we disagree, we will do so politely and with intellectual honesty. We invite participation from all.
But we respect this process, and we respect our readership too much to waste precious time with letters sent on e-mail addresses of convenience over the signature of non-existent people who work for non-existent companies.
Ready Pac has long sponsored the Retail Produce Managers Award presented each year at the United Fresh convention and, now, showing it knows how to play both sides of the fence, United has announced a new program to be sponsored by Pro*Act:
NEW AWARD PROGRAM WILL HONOR CHEFS, COMPANIES FOR USE OF FRESH PRODUCE IN THE CULINARY ARTS
Program to Debut at United Fresh, Las Vegas Show
The competition is underway to honor companies and chefs among the foodservice industry’s top produce performers in the United Fresh Research and Education Foundation’s new Produce Excellence in Foodservice Awards, thanks to a major grant from Pro*Act LLC.
“There are thousands of chefs who work hard every day to include fresh produce in their offerings to diners. The demand from consumers for more fresh produce in restaurant meals is increasing every day, and this is a great way to highlight outstanding performance,” said Tom Stenzel, president of United Fresh.
“With Pro*Act’s generous support, we’re delighted to honor individuals and companies that are committed to incorporating fresh produce into menu offerings and who deliver the highest level of customer satisfaction in their restaurants and foodservice operations,” he said.
Both the chefs responsible for menu development and their corporate produce executives will be honored in each of five business categories:
Fine Dining Restaurants
Casual and Family Dining Restaurants
Quick Serve Restaurants
Business in Industry/Colleges
Nominations must be submitted before March 24, and a nomination form can be accessed here.
Either individual chefs or companies can be nominated. Winners will be selected based on examples of how nominees incorporate fresh produce into menu development, use protocols for correct storage and handling of produce, and build an overall positive dining experience featuring fresh produce.
Winners will be selected by a panel of United Fresh member representatives focused on excellence in the foodservice sector.
The five winning chefs and their corporate executives will receive complimentary airfare, two nights’ hotel accommodations, and registrations to the United Fresh show, May 5-7 in Las Vegas. The winners will receive their awards at the Annual Awards Banquet Tuesday evening, May 6.
The chefs will also participate in United Fresh’s convention education program to share their views on produce trends in foodservice in the “Produce Marketing Track — Foodservice Trends to Explode Produce Sales” on Tuesday morning at Bally’s.
The new United Fresh Produce Excellence in Foodservice Awards are sponsored by Pro*Act, LLC. “Pro*Act is delighted to support this great new program honoring chefs who make it a point to incorporate fresh produce into their menu items,” said Steve Grinstead, president and CEO of Pro*Act.
“More and more people are eating out, and it’s clear that they want to eat great-tasting, healthy fruits and vegetables. So it’s important that our industry recognizes those who are working to deliver a great consumer experience with fresh fruits and vegetables when they eat away from home,” he said.
“The Produce Excellence in Foodservice Award is our way of telling chefs around the country that the produce industry appreciates what they do to help to increase consumption of fresh fruits and vegetables,” said Amy Philpott, United Fresh vice president of marketing and industry relations. “Honoring these chefs in Las Vegas at the United Fresh May 2008 show is an important way to emphasize produce among senior foodservice management,” she said.
Although PMA offers the Nucci Scholarship for Culinary Innovation, that is, as the name implies, a scholarship program, not an award program.
The real significance of this program may be to begin an industry effort to really focus in on fresh. We’ve run pieces such as Will Fresh Industry Foot Bill If Frozen/Canned Uses More Matters Logo? and Facts Obscured About Frozen Produce On General Mills/Green Giant Web Site, which have pointed out that, increasingly, there is a conflict between promoting frozen and canned — which is really a separate industry — and promoting fresh.
Just take one look at http://www.GoFrozen.com and you realize what a battle the fresh industry has ahead of it.
We would actually like to see the nomination form revised to specifically ask these applicants: “What steps do you take to maximize your use of fresh produce as opposed to frozen or canned product?”
United Fresh is intelligently looking for things that play well with the new Las Vegas venue for United’s show. Las Vegas has become a venue for may trendy food service concepts; every celebrity chef seems to have a new place there, and dining ranks up there with shows and gambling as a top entertainment activity.
Steve Grinstead and his team at Pro*Act deserve industry approbation for generously funding such a project. Done properly, it will help United and help the fresh industry at large.
Congratulations to Pro*Act and United Fresh.
Our piece, Robert Whitaker Becomes PMA’s First Scientific Officer, led many people to extend congratulations. This letter from a reputable producer seemed to represent the general sentiment:
As a grower working with Bob Whitaker on the industry’s food safety metrics, I can say with confidence that he will bring all of the important perspectives to discussions of food safety from farm to fork.
It is so important to have someone leading the charge that understands the issues that growers face, as well as other facets of processing, handling, distribution and the cold chain. Congrats to Bob (and the PMA for selecting him).
— Bob Martin
King City, California
Bob Martin puts it in a nutshell. There is a real danger when food safety efforts are designed by “experts” who may know little or nothing about the practicalities of production agriculture.
For PMA, with its strong buyer orientation, it was absolutely crucial to have someone who would be seen as knowledgeable regarding the dilemmas faced by the production end of the business.
It seems like PMA scored a win with this hire.
Yet producers should be wary. Our sense is that, as we discussed in our piece Wal-Mart Uses New Food Safety Initiative As A Marketing Tool, food safety may increasingly become a dictate from Quality Assurance (QA) departments that previously neglected produce. Initiatives increasingly seem to be tied as much to marketing as to food safety.
In the short term, Bob Whitaker will have a lot of work to do coordinating with the Center for Produce Safety and its new Chairman and Executive Director. We wonder, though, if in the long term, the job won’t involve much more outreach to FMI, NRA and the QA Community.
We’ve heard from Bob Martin several times before, including here, here and here and we appreciate him taking the time to pass these thoughts along today.
When we ran a piece announcing Bonnie Fernandez Takes Helm Of Center For Produce Safety, we heard a lot of hopeful feedback but also were asked some hard questions. How could it be otherwise? Coming from outside the industry, Bonnie is an unknown to most industry leaders. But not to all, and among those who do know her, we have heard little but praise. This response is indicative:
I read with great interest your article in regard to Bonnie Fernandez being named the new Executive Director for the Center for Food Safety. I have had the opportunity to work with Bonnie for the last four-plus years as part of the Agribusiness Presidents Council in Sacramento.
Your comments about her are right on point. She is a very thoughtful person with a great demeanor that I believe will fit her new position well. I am truly pleased to see her in this very important role.
— Barry J. Bedwell
California Grape & Tree Fruit League
Thanks to Barry for passing on his “up close and personal” experience with Bonnie and her leadership skills.
The Center for Produce Safety is a new institution established to plough new ground in service to the trade and the people of the world by enhancing the safety of fruits and vegetables.
It is a blessing to have an Executive Director with some different experiences and some new ideas to help us launch this most important of ventures.
Thanks again to Barry for sharing his insight.