What do you think are the key challenges facing the multiple retail sector in the immediate future?

Undoubtedly competition between retailers is going to get even more fierce. Deeper discounts are being offered across the board, not just in fresh food, but also groceries and non-food. The challenge is who is going to fund these lower retail prices in the face of rising costs.

How has the sector changed in the recent past, and what are the drivers?

For me, I think the major change is polarisation at each end of the price scale. We have a strongly developing discount sector in the likes of Aldi, Lidl and Netto. Equally, the upmarket (food) retailers such as Waitrose, Marks & Spencer and some of the niche independents are showing strong growth. It’s the mass-market middle ground that is going to feel hardest hit.

Which retailers appear to be best equipped to succeed in the current environment?

The top and bottom of the market have a clear, unconfused offer and an increasing client base. Morrisons is building a stronger customer base. Tesco will be able to ride out the storm in the UK because of its massive strength overseas. However, no single retailer is going to be immune from the squeeze that we are in, which is expected to last 18 months to two years.

How do you expect the supermarket sector to evolve in the next three to five years?

We are definitely going to see more focus on price in the short term. All of the top four supermarkets are jostling each other even harder to establish the cheapest shopping basket. Also, deep price cuts in Aldi are really focusing everyone’s thoughts. We are going to see lots more genuine half-price offers all over the place as the big four fight to retain footfall.

I think there will be less focus on range. The ethos of ‘less is more’ will become even more predominant. Ranges will be cut, which in turn will reduce retailer costs in stockholding, distribution and the like.

I don’t think we will see any consolidation. Tesco. Asda, Sainsbury’s and Morrisons aren’t going anywhere in a hurry. Besides, the Competition Commission won’t allow it.

What impact will the discounters have on the sector, particularly in the prevailing economic climate? Do the likes of Aldi pose a serious threat to Tesco, Sainsbury’s, M&S and Waitrose, or are Asda and Morrisons more in the firing line?

We have already seen a reaction from Tesco. It introduced its new price pledge as a direct result of the Aldi ‘super six’. M&S and Waitrose are probably pretty immune from the discounters, as they have a different customer base. We know that Lidl absolutely cleaned up when it entered the Republic of Irelalnd about 10 years ago. It was quite a while before the local competition woke up to the threat, by which time it was too late for some of them.

Is having a strong international business a big advantage for UK supermarket businesses?

Yes... and no! It depends on how strong the local economies are. However, Tesco is very well placed with half of its selling space abroad. Everyone has read about the goings-on in America, but perhaps not everyone noticed the massive expenditure (almost £1 billion if my memory is correct) buying 36 hypermarkets in Korea. Tesco has a very strong, profitable business overseas, but like all the others, the UK has to deliver.

In terms of fresh produce, how can/should suppliers and growers respond to the pressure that their customers are under? What is the role of the supply chain in meeting the challenges you have outlined?

Where do I start? I guess with my opening comments about facing the challenges. Most importantly there are less people around in the offices at Cheshunt, Holborn, Leeds and Bradford. The retail buyers are going to put massive demands on their suppliers.

First, for more information. The buyers themselves are going to be busy with both day-to-day and strategic issues. The supply base is going to have to come up with more research-based plans, retail strategies and presentations. They are going to have to help each buyer shape their range in line with ever-changing customer trends. The days of just shipping it in and shipping it out are long gone.

Second, fighting the discounters. Every supplier is going to have to develop strategies to deliver a discounted range. My guess is the only way to do this is by dispensing with all the different supermarket protocols. Basic EurepGAP and British Retail Consortium (BRC) accreditation, together with much wider specifications, is the only way to achieve this. The difficulty will be for the big four to differentiate a discount product from a standard range. For example, a pineapple is a pineapple. So, perhaps a retailer will use its own standard brand on normal product and a supplier brand on the cheap discounter match, but then you have two problems: a) Does the customer recognise any difference between the two? and b) suddenly the retailer is carrying an additional range. It’s going to be a real mess until someone sorts it out.

The third and possibly most difficult challenge is that of ‘UK plc’.I often tell the story of the Russian buyer who turns up at a European packhouse. He offers one euro per kilo for fruit that has been packed into cheap cardboard or even wooden boxes, on a plain pallet (as opposed to a blue CHEP), with a wide specification with no major testing to go through, and he’s paying cash and taking the fruit ex-packhouse. Meanwhile, the packhouse also counts among its customers a UK supermarket which wants an expensive inter-stacking tray, CHEP pallets, pesticide residue tests, ethical trading audits, full traceability, bespoke audits for individual protocols, inspection on departure, inspection on arrival, 30- or 60-day payment terms delivered to a UK depot. And how much premium will the UK pay for all this extra work? Actually, we all know the answer is that the UK will pay less than the one euro per kilo that our Russian friend offered. It’s a bit of a no-brainer. Therefore, the UK marketing desks are going to have to use all the goodwill they have built up with growers and packers alike.

Equally, the UK supply base is really going to have to work hard at managing buyer expectations. Those buyers who simply trade on price are going to have to be shown that it’s a short-term fix that will lead to shortages on their shelves later on. It’s already starting to happen.

Which categories are best placed to thrive in the coming years? Is the fresh produce industry in a decent position to take advantage of any potential that lies out there?

Food is always strongly placed in times of recession: ‘Everyone has to eat’, as the saying goes. Equally, food inflation and especially produce inflation feeds through to consumers fairly quickly. As import or domestic produce cost prices rise, these are normally passed onto the end consumer quite quickly. However, as people tighten their belt, so they will eat out less, leading them to buy more fruit and veg in the shops to eat at home.

Also, customers don’t think about fruit and veg as a luxury, but more of a necessity, so it will always form a large part of their weekly basket unliketoiletries, clothes, toys or convenience food. Basically, a ‘treat’ in fruit and veg might be a mango or a pineapple costing £1.50, as opposed to having to shell out £50 for an item of clothing or £20 for a luxury skin cream.

What are the key messages supermarkets have to get across to consumers? Is the green card being used too much - for instance, has anyone got to grips with healthy eating, has organics taken a back seat, does any chain have the edge with its own brand offer - do consumers fully comprehend what is available to them?

With the tightening of belts, so comes the dismissal of other ‘niceties’.Air miles, green credentials, organic, Fairtrade and the rest are all nice to have, but keeping food on the table is more vital. Customers want all the nice-to-haves, but will be increasingly unwilling to pay for them.

Organics are in short supply, forcing premiums up. They therefore become the domain of the less price-conscious or the vociferous minority. Same goes for Fairtrade.

I think local produce will play a bigger part, primarily because it’s better and cheaper most of the time. There certainly shouldn’t be a premium for ‘locally grown’. Local fruit and veg is going to have to compete on price with European produce, even with the help of the stronger euro. Seasonality will also play a bigger part in customers’ minds. Genuine big offers as opposed to lots of small cuts will be important in delivering the price message to consumers.

Overall, the key messages for the next two years will be based around price and value. The big four will have to differentiate themselves from the discounters by offering service and quality in addition to the discounter’s rock-bottom prices. Above all else, the UK consumer will still demand safe food that they can trust.

What were your thoughts on our industry and the colleagues you left behind on the day you retired?

My overwhelming thoughts were those of having to get leaner, faster, slicker and with more analysis. The pressure on everyone is getting immense. The colleagues I left behind are working very long days - 12 hours with a 7am start is normal. Many of them now go into the office at weekends. One team member often has to work seven days without a break. Trips abroad are almost frowned upon, but when they do take place they are shorter and more intense - South Africa in four days, South America in a week, for example.

Tesco is no different to any of the other supermarkets in that respect. When I left the office for the last time everyone stood up and clapped… a standing ovation. It was like something out of a film. My leading role at Tesco is over, but I would like to think I can still manage a few walk-on parts or the odd cameo role elsewhere in the produce industry. For those I left behind on the third floor of Tesco House though, it is certainly not Hollywood make-believe, it’s real life, and it’s going to get tougher.

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