What consumer trends are you seeing in produce at the moment?
The produce market is pretty flat at the moment. This is primarily because we’ve had potatoes and other parts of our categories declining, most notably £70m coming out of the potato market, and customers are looking at value for money in other areas such as frozen food. Generally Asda’s produce business has been very strong against that backdrop. We’re seeing customers looking for value for money, as always - a combination of quality and price - and simplicity as well. Judgement of value at point of sale is really important for us, so that’s what we’re looking for. We’re seeing a rise of our dotcom business. That’s quite an interesting challenge for produce, but we’re seeing good growth in that area. Generally we’re seeing a bit of a decline on loose produce still. It’s been a very difficult season, so swapping strawberries from Spain to the UK, for instance, has been a really difficult transition.
How do you adapt to these last-minute demand changes at a time when volatility seems to be more common?
We have a very experienced trading and technical team. And it’s open dialogue. Our buying teams are constantly talking to the trading teams, the growers and the grower groups. Broccoli is a good example - we were struggling and ended up buying UK, Spanish, Polish and US product. Walmart helped us from the US point of view as well. So primarily it’s a conversation with growers, seeing what’s available and trying to knit that together with our demand.
How much are you sourcing through International Produce (IPL) at the moment, and will you look to increase this further? Are you sourcing more British produce directly now?
Currently we have about 60 per cent of our produce under the IPL banner. The latest addition to the portfolio is plants and flowers, although we haven’t fully brought that under our umbrella as we still have an external third party. That’s where we are. The flower business has been great. We’ll evaluate all the options within IPL and decide whether that’s the right one for our business. It was a model set up to enable us to import produce. I wouldn’t say we’re getting more British through IPL. I would say we’re evaluating what the opportunities are. We wouldn’t want to create a supply chain which is more complicated, so we would want to try to understand the best way of getting British produce into our stores. I wouldn’t say there’s a push either way. It does allow us to get a better relationship with growers though. Salads is a good example, where we had a long relationship with EVS. We now go directly to a lot of grower groups, which allows us to do a number of things and understand the farm costs, and we can get product development such as Tomkin and Divine tomatoes coming through. So the IPL model can allow us to go directly to growers. We have to understand the right mechanism for us.
Could IPL be used, like Tesco’s Group Food Sourcing, for UK suppliers to sell their produce to Walmart stores internationally?
Not necessarily. Though one example is Ronnie Bartlett’s Rooster brand, where we’ve been able to facilitate some conversations with Walmart in the US for Ronnie and his brand, but that’s primarily through a brokering of somebody who wants to expand his brand. We will source grapes out of Chile that will go to the US. It would make sense if we’re buying Colombian flowers to think about those going to the US as well as the UK.
How can you get the level of quality that consumers demand while still keeping prices low for consumers - all at a time when input costs are going up?
What I love about produce is it’s more of a pure buying-selling equation. The market dictates the price to a certain extent. The grower has a choice as to where he or she can sell product. A fair price is an interesting concept in produce. Growers have a lot of pressure in the same way we do. The market will dictate the price to a certain extent and our buyers need to understand what the market is doing. How the market is related to growing costs is a separate matter altogether, so it’s a really quite interesting conversation in the long term, how that’s going to balance itself out. My point about pricing would be we generally have a lower cost base so the culture in our business is everyday low costs. We wouldn’t want any of our farmers and growers to do anything that adds cost to the business and we ourselves are very clear about our own cost base. We and Walmart try to keep our cost base very tight and as a consequence we are able to pass those benefits onto consumers.
In terms of interaction with your growers, do you have any plans to develop more producer groups along the lines of your Beef Link, Pork Link and Dairy Link initiatives?
We don’t particularly have those [in produce] at the moment. It’s something we are thinking about in the future, we have looked at it in the past and we did have a relationship with our potato growers a few years ago. We have some clear relationships so people like Lincolnshire Field Products, for example, facilitate a really good programme for us and do a really good marketing role. So in the long term there’s potentially some mileage in those groups being formed. And I think there’s a need from both sides. We’ll have a bunch of marginal potato growers, for instance, who will come in and out, because it’s a nice crop rotation, and the issue for them is what land rental is.
Asda has traditionally undertraded in both produce generally and British specifically, but seems to have addressed this. Was that a conscious decision and do you have plans to sell more British?
I’ve been back in produce now for two and a half years. It’s not a conscious decision. Britishness is on people’s minds but first and foremost is the quality evaluation - price and quality. We maximise British wherever possible, so if we have the choice of buying carrots from the UK or France we’ll always buy British. We wouldn’t push the British season just because it was the right thing to do though. There are certain seasons where carrots, for example, you would go into France for. I think Britishness has become a little bit of an old agenda. I think it’s becoming much more regionally based now and I think there’s much more association with apples grown in Kent, asparagus grown in Evesham, those sort of things. By implication if you think your apples are grown in Kent they’re British anyway, so I think there’s much more interest in regionality and sourcing of product. On potatoes, for instance, what Cornwall would like us to do is put Jersey back into its natural season. Jersey stretched its season too long in my opinion. We got a really good response from customers on that.
What more can be done on educating consumers about produce?
One thing we are finding is the need to have more education. An amazing amount of customers put tomatoes in the fridge and that’s the worst thing that can happen to them. There’s a lack of treating produce how your mum used to. There’s still a generational issue here for me about understanding how to keep produce at home. There’s a general re-education all the way through the supply chain. I think there’s an interesting role for the produce industry generally to help us think about waste at home and the convenience of it. If we’re not careful the frozen industry could take over a bit of our patch.
Is branding an area you see growing?
I would say if a brand helps us to sell more fruit and veg and has the right attributes then I would welcome it. With Ronnie Bartlett advertising Rooster on TV and in the press, that helps consumers buy and eat more fresh potatoes. So it has to be well thought through and you have to really understand what the brand attributes are and what are you trying to achieve in terms of having a brand in produce. I think there is a place for it. Florette do a really good job for us in terms of bagged salad. They set a benchmark, create an awareness of healthy eating, so there are some opportunities. It would be ignorant to say just because we’re Asda we’re only going to do our own lines.
Are you worried about food security?
If you ran a business and thought about the next five years you would have to think about emerging markets. And you have to think about the attractions you have - established market, guaranteed cash flow etc. Marginally will that affect our business? Yes, I think it will. And it’s about the buyers knowing what’s happening in each of those markets, what our influences are in those markets in the long term. We will always be able to get produce. It’s what you pay for it - that’s the challenge.
Given that, is it inevitable that food prices will have to rise?
Not necessarily. More growers could come into the market. The markets have a way of balancing themselves at some point. That’s a seasonal thing. The most extreme of those is potatoes. Our challenge is to have good enough relationships with our growers so that where the market’s paying, we will be able to pay them a good return. We have to balance the needs of growers and consumers. There must be sustainable long-term growth for farmers and customers need a fair price.
Are you aware of the NFU’s Fruit & Veg Pledge and will you be signing up?
I think we are doing most of the things the NFU is calling for already. Dialogue is great and the industry needs to talk. We are discussing [the Fruit & Veg Pledge] at the moment and contemplating it. -
FEELING SOCIAL
Asda has put a big emphasis on boosting its social media presence recently. According to a spokeswoman, the company’s Facebook site has given the retailer an invaluable opportunity to interact directly with consumers. Discussion topics have included advice on the size of strawberries and which are shoppers’ favourite pre-packs. -
QUALITY CONTROL
Damon Johnson, head of quality for fresh food at Asda, has been starring in TV ads for the supermarket. Here, he explains the challenges of getting the quality right:
“With all the challenges around value and when consumers have less disposable income, quality becomes an important part of that value. The challenge for us is to make sure the product delivers on a number of levels.
“We have a toolbox of things at our disposal, dependent on the challenge. That’s where IPL and having teams close to source comes in - prevention of problems is always better than cure. Information is absolutely key, and having accurate information is probably more important than having some of those direct relationships. That facilitates a better planning phase, which allows the execution in store to be more effective. It’s about giving the customer the product they want so they come back and buy it again. That’s in everybody’s interests throughout the supply chain.
“We’ve been on a real journey. We have worked very hard at all parts of the supply chain to get a more consistent offer. Some of the things we’ve been doing we could have done better. In terms of initiatives everything is focused on making sure the offer on shelf is a more consistent one and the more we look at that it is in everyone’s interests. Some of the models we have adopted have enabled us to be better at that than we have been in the past.” -
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