The Footballer and Food

 

By Prof. Michael Winter

I don’t often watch football. I used to enjoy playing but that was many years ago and somehow I just much prefer watching rugby these days, maybe because that’s a sport I never did play.  Be that as it may, on Sunday evening I did tune into BBC 1 and watch Manchester United take on Liverpool in the fourth round of the FA Cup.  And I was prompted to do so in part because I wanted to see Marcus Rashford MBE.  He did not disappoint, scoring one goal and making another with a superb pass. He is some player for sure. He is also perhaps the most prominent celebrity name in the Covid food story, leading fund raising efforts to support children in poverty with food; and at the same time taking on the Government over free school meals, most recently successfully challenging the quality of some food parcels.  In this respect, Rashford is following in the footsteps of other celebrities, notably Jamie Oliver who, as long ago as 2006, highlighted quality issues with regard to school canteens.  Back then, it was the Compass Group under fire and it so happens that the miscreant highlighted by Rashford over food parcels was Chartwells, a subsidiary of Compass.  Compass Group plc may not be a well-known name but they are a FTSE 100 company and a global player in catering.  As the Guardian points out:

Catering services are typically fragmented between many small providers, but Compass has profited from being one of the few catering companies with global scale and 550,000 employees. … The pandemic has also dented Compass’s profits as canteens in offices, hospitals and military bases have remained shut around the world. Compass’s earnings before tax fell by 85% in the year to 30 September 2020 to £210m.’[1]

There can be no doubt that the food parcel that caused such offence was sub-standard – the photograph went viral and does not need reproducing here – but I have just a little sympathy for companies, big or small, trying to adapt to fast changing policy demands.

I remember some academic colleagues back at the start of the pandemic writing to the Prime Minister suggesting that food rationing should be introduced, which I interpreted as headline- grabbing shorthand for more controls and a clear strategic policy within the food system. To me, and I would welcome feedback on this, the Marcus Rashford story highlights a failure of strategy within the inevitable policy intervention in the food system during this crisis.  We have a situation where Government has intervened massively in the economy to an extent unprecedented since the Second World War, but neither the institutional architecture nor the nature of the policy deliberation process comes anywhere near what was put in place around the food system in 1940.  And it was a very sophisticated, perhaps overly bureaucratic, set of interventions which certainly involved the farming and food industries directly in shaping and implementing policy.

I can’t resist just finishing on a footballing note. The football league was, of course, suspended from 1940 to 1945 but in the first season of its resumption in 1946/47 the champions were none other Liverpool and the runners up Manchester United!  Plus ça change!

 

[1] https://www.theguardian.com/business/2021/jan/12/school-dinners-row-shines-light-on-role-of-catering-firms-chartwells-compass

 

Covid Food Business Barometer – summary of results from a short survey in late 2020

 

By Tim Wilkinson and Matt Lobley

We have been casting our minds back to November 2020. It feels like a long time ago now. A lot has changed; and while analysing some data we collected at the end of last year, we have been thinking about just how much. This week we are presenting some headline results from our Covid Food Business Barometer survey. We think the results help remind us that although the business outlook is currently gloomy, some businesses last year were feeling well adapted to working within the Covid restrictions and were confident about their future.

 

Should We Run a Survey?

In the end, we ran a short survey at the end of November last year for food businesses. But we were in two minds about whether to run it at all. We were worried that it might not be an appropriate time to be doing research given the challenges that food businesses were facing. We had designed a longer survey that was due to launch just as Lockdown 2 was announced. After much deliberation and consultation we decided to redesign a shorter survey – to minimise the time it would take businesses to respond. The survey was open for two weeks from 27th November to 12 Dec 2020. This period ran across the lifting of Lockdown 2 restrictions on 2nd December 2020 and into revised tiered restrictions. We received 87 responses, to a 12-question survey, which took respondents about 6 minutes to complete. We circulated the survey online via industry mailing lists and on Twitter (we had few responses from Twitter). About two thirds of responses came on the 30th November and 1st December – just before Lockdown 2 was lifted.

We think that the pressures on businesses and changing lockdown restrictions probably affected response rates, however we are pleased to have taken a snapshot of how some businesses were doing during this crisis. Due to the small sample size, the results should not be taken as representative of all food businesses. Indeed, the sample is quite likely to be biased towards businesses who felt they were well adapted to working within Covid restrictions and who were not facing major challenges. Nevertheless, the results tell an interesting story about how businesses who responded to the survey were feeling late last year. The results also give a sense of the scale of economic impacts that Covid has had on businesses.

Businesses who responded to the survey were from a wide range of food sectors and stages of the supply chain. We had responses from Bakery (11%), Meat (11%), Beverages (11%), Ready to Eat Meals (10%), Technical Services (7%), Consultancy Services (6%), Confectionary (5%), Fruit and Vegetables (5%, Grain and Starch (5%) and several more. The Fish and Seafood (3%) sector was not well represented in the sample so the results do not tell us much about that sector. In terms of supply chain stages, we had responses from food processing (11%), food manufacture (22%), wholesale and distribution (17%), import and export (11%), retail (11%), hospitality and food service (9%), consultancy services (11%). No one sector or supply chain stage seemed to be strongly over represented.

 

Feeling Well Adapted and Positive About 2021

Most businesses (77%) which responded to the survey were fully open and trading, but some were only partly open (20%), particularly in hospitality and food service, retail and manufacture. Just 2% of respondents were from businesses that were closed. Most respondents (82%) said that they were facing challenges but coping, while 15% said they were doing well. Only 3% of respondents were facing major difficulties. Perhaps this bias towards businesses not facing major difficulties explains why 85% of businesses said they had adapted well to working within the Covid restrictions, and why 67% said they felt confident about the future of the business. This was a very positive message, which was reiterated by businesses who, overall, scored themselves as well prepared for Lockdown 2 and for future Covid related restrictions. On a scale of 1 to 10 (where 1 was not at all prepared and 10 was extremely prepared), the mean score for being prepared for Lockdown 2 was 7.5 and for preparedness for future restrictions the average score was  7.4. This high level of preparedness is reinforced by a small majority of respondents (54%) saying that Brexit was a bigger threat to the business than Covid-19. We think that in late 2020, contingency planning may have shifted from ‘Covid’ to ‘Brexit’, with the acute uncertainties around the deal at that time. For some businesses there may have been a sense in which they were as prepared for Covid as they could be, and that the more pressing issue was how to prepare for Brexit.

 

Table 1. Results of Attitudinal Questions   

Disagree Neither Agree
I think the business has adapted well to the challenges of working within Covid restrictions 9% 6% 85%
I am feeling confident about the future of the business 9% 23% 67%
Brexit poses a bigger threat to our business than Covid-19 22% 24% 54%

 Source: CRPR Food Business Barometer Survey

 

We think that these results show how positive and well adapted some businesses were feeling late last year. As we’ve said, these results aren’t representative of all food businesses and this was a small sample, but nevertheless it shows how some food businesses have been able to adapt to meet the challenges of new ways of working in the pandemic. We do wonder whether this positive outlook was coloured by the imminent lifting of the Lockdown 2 restrictions and perhaps a wider societal hope that the pandemic would abate in early 2021. Furthermore, November 2020 saw the US presidential elections outcome, financial markets recovering and, when we ran the survey, it was far enough away from Christmas that it was still something to look forward to. We don’t want to under emphasise the pressures and challenges that food businesses face – or the work they have put into adapting to Covid, but our results indicate that some businesses do have moments of positivity and confidence. With the benefit of hindsight, we think it’s likely that the last minute announcements of tier changes over Christmas and subsequent Lockdown 3 will have changed the business mood. It certainly feels that way and elsewhere in this bulletin Michael Winter highlights some of the recent pressures facing the wholesale sector.  But what we can learn from these results is that, while there are serious business challenges, there is also adaptation and confidence. The swing from feeling prepared to feeling unprepared can be very quick, but we shouldn’t forget the times when businesses feel able to cope with the rapidly changing world. It’s not easy to get prepared or to adapt. It’s an achievement and should be acknowledged.

 

Economic Impacts

We asked several questions about how sales volume, turnover and profit have changed; how much they had changed over last six months (compared to pre-Covid) and how much they were expected to change over the next six months (compared to the last six months) on a scale from -100% to +100%. Please note that below we are only presenting the raw means, which includes outliers. On average sales volume (-20%) and turnover (-21%) were down about a fifth over the last six months, with an expected increase in both of 6% over the next six months. Profits were down, on average, by 30% with little change expected in the next six months. These averages won’t tell an accurate story for particular sectors; they are just an average across the whole sample. But we can see in our analysis, for instance, that a large proportion of those businesses whose sales volumes reduced the most (from -100% to -40%) were in hospitality and food service, and those whose sales volumes increased the most (from 0 to +80% increase) comprised of a large proportion of food manufacturing business. Covid has had an uneven impact on different sectors. But in the context of the overall figures for changes and expected changes in sales volumes, turnover and profit, the positive response to questions about adaptation, confidence and preparedness, are perhaps even more striking – given the likely consequences of these economic impacts on cash flow and savings.

 

Table 2. Results of Economic Impacts of Covid Questions  

How much have…changed in last 6 months compared to pre-Covid % (mean) How much do you expect…to change in the next 6 months compared to the last 6 months % (mean)
Sales volume -19.9 +5.8
Turnover -20.7 +5.6
Profit -29.6 -0.9

Source: CRPR Food Business Barometer Survey

 

Part of the reason for these economic impacts is business closure during lockdown and workforce issues, but it is also the costs of implementing Covid safe measures. Businesses responding to our survey experienced an average 10% increase in operating costs due to implementing Covid safe measures and a reduction in profit of 7%. We wonder what proportion of the increased operating costs are now fixed costs built into the system, and what proportion will be ongoing.

 

Where Next?

We know that the business attitudes and perceptions about the future will have been revised with the announcement of Lockdown 3 and the impact that changes to Christmas restrictions had on customer demand for some businesses, so we are planning the launch of a follow up survey in March. While the mood and outlook feel very gloomy at the moment, it remains possible that we may move quickly back to something more positive later in the year – or not, as the case may be. In this dynamic and uncertain situation it is easy to start to think that the last year has had little positive in it. But we think that the results of our short survey show the adaptability of businesses and their resilience in seeing a future for their businesses – despite the heavy economic burdens that the pandemic has placed on them.

 

A Note on Percentages Stated

In this blog we have only reported headline findings; percentages listed may exclude categories where responses were small or in ‘other’ categories. For this reasons they may not sum to 100%. Percentage has also been rounded to the nearest whole number. For more information on the results, please contact .

The Plight of Wholesalers

 

By Prof. Michael Winter

I suppose it is hardly surprising that most media attention on food throughout the panic has tended to focus predominantly on the retail and hospitality sectors. After all, that is where millions of people have felt the changes in our food system most keenly. However, at our January Expert Panel meeting, attention was drawn to the plight of wholesalers, especially with regard to the speed with which the rules on lockdown restrictions changed in early January. To be specific, the Government maintained ‘a back to school come what may’ policy until, that is, they suddenly dropped it! Let James Bielby the Chief Executive of the Federation of Wholesale Distributors take up the story:

‘Before Christmas, the government were adamant schools would stay open on the basis they were low risk. Schools placed orders for food from their wholesale partners in preparation before going off on two weeks’ holiday. Stock was ordered in accordingly by wholesalers ready for shipment in January. … Then the new lockdown was announced by Boris Johnson, taking effect at midnight on 5 January. Schools closed, hospitality largely shut down. Remember, we had Brexit stockpile, Christmas stock which was impossible to sell and now orders placed for and by education. All of that stock suddenly redundant. How much? £12 million of excess stock, all of it created by misinformation and planning failure by the government. Schools sent back orders placed before Christmas. The treasury announced a support package, but of course there was nothing for wholesale.’ [1]

These are hard-hitting words. I am told that the number of pupils in school, due to a broadening of the definition of essential workers, is greater during this lockdown. I telephoned the Norse Group, the largest commercial Local Authority Trading Company in the UK, responsible for supplying many schools, and they assured me that they were still providing schools with food though, of course, at reduced levels.  It is not clear whether the £12m excess stock referred to in the Wholesale News on the 14th January factors in some continuing supply of school or not.  Perhaps someone reading this can provide us with more detail.  These comments are not in any way designed to detract from the central thrust of the wholesalers’ concerns. In any case, this is far from the end of the wholesalers’ complaints.  In addition to the surplus stock issue, there is the issue of free school meal packs ‘which were keeping wholesalers afloat in the absence of any government support’. Criticism of the quality of some of these packs led to another media feeding frenzy:

‘… the government did another U-turn today (14 January) and changed the Department for Education guidance on free school meals and reintroduced the voucher scheme. Government by headline. No strategy or consistency. Just following the news, not leading it. … There’s a lot more excess stock in wholesale now, after schools cancelled the food parcels in their droves. Supply orders have been made by wholesalers for the next few weeks to supply FSM. … And where can the vouchers be redeemed? Supermarkets! That’s the biggest irony of all. The government has today handed wholesale trade directly to the supermarkets – just to chase a headline.’ [2]

 So this is much more than just a story about losers within the food system as a result of pandemic restrictions, it is also about shifts of power and market share within supply chains.  The boundaries between different players in the food chain are being disrupted and blurred. Not all of this churn derives solely from the pandemic. For example, some supermarkets had already moved into the wholesale sector, with so-called hybrid wholesalers, the Co-op and Morrison’s, growing their market share within wholesale from 6.5% in 2018 to 9.2% in 2020:

‘The Co-op provides wholesale services to the fifteen independent regional co-operative societies, as well as to Nisa and Costcutter – in addition to its own retail estate. Meanwhile, Morrison’s supplies Amazon and McColl’s. Lumina Intelligence estimates that both operators will see wholesale turnover increase by around 15% in 2020.’ [3]

And, of course, those more traditional wholesalers supplying retail have seen increased demand whilst those focussing on hospitality and catering for institutions such as schools are really suffering.  Some wholesalers have offset losses by finding new routes to market:

‘JJ Foodservice launched JJ Home in July 2020, signalling the permanent addition of its DTC (Direct to Consumer) service – initially introduced as a stop gap – to the wholesaler’s portfolio. JJ’s has also invested in smaller delivery vans to negotiate tighter London streets and most recently has launched a “Christmas at Home Essentials range” for its consumer customers.  Similarly, Bidfood has formalised its DTC business “Bidfood at Home” and has plans for national roll out. Meanwhile, Brakes has launched its “Food Shop” venture which has been selling direct to consumer since March 2020.’ [4]

The fact that some wholesalers have come up with innovative partial solutions, to the challenges they face is not surprising. It is equally unsurprising that some have been unable to do so, given the heterogeneity of the sector.  The fact that wholesalers are not included in this year’s hospitality support measures suggests the Government does not grasp the diversity of the sector either, nor its importance in a system that, despite initial fears, has largely maintained food supplies during the pandemic. It is hard to avoid a sense that a rather crude politics is at play here. Most food wholesalers are not household names in the way that major retailers and hospitality brands are and their pleas do not easily find ready media coverage. And if this appears to be a criticism only of government let me finish by turning the spotlight on my own sector of academia.  The Web of Science is one of the leading on-line bibliographic indexes covering academic publications from across the world. I did a search for all publications with the words ‘food’ and ‘wholesale’ in the title over the last twenty years. The search came up with 27 ‘hits’. Substituting ‘retail’ for ‘wholesale’ gave 842 publications. For not the first time in this project I find myself wondering why so much public, policy and scientific attention is given to food production (farming) and to food retail (consumption), but so very little to the complex system that ties these two together.

 

[1] Bielby: ‘Government by headline’ twists the knife in wholesalers’ backs – FWD

[2] ibid

[3] Growth In Wholesale Sector Slows As Pandemic Leads To Polarisation And Change | KamCity

[4] ibid

A New Consumer World View?

 

By Steve Guilbert

About this time last year, in amongst the usual ubiquitous year-end top ten lists and articles about trends we should be looking out for in 2020, were reports of an outbreak of a mysterious illness in a Chinese city.   As we entered the New Year and decade no-one could have predicted just how truly extraordinary, challenging and transformative 2020 would turn out to be.  This year will teach us many valuable lessons but surely in the top 10 of any 2020 takeaways is the maxim that predicting the future is a fool’s errand.

Yet as we draw near to another New Year, in the media and blogosphere predictions again proliferate about what we’ll be wearing, driving, reading, watching as well as eating and drinking in 2021 and beyond.[1]  Most are mildly diverting clickbait but some offer real industry insight about how habits and attitudes have changed over this past year, how likely these changes are to be permanent, and the extent to which they might now be considered, to use a much repeated phrase, the new normal.

A good example of the latter, that’s been recently published and picked-up by a number of news sites, is the Waitrose and Partners Food and Drink 2021 Report.  It’s short, concise, full of fascinating insight, and brimming with consumer survey data on what and how we buy, and our changed attitudes to food: where it comes from, how we cook it, and how important it is to our health and well-being.

 

Some Stats for Starters

Let’s have a few interesting stats for starters.  You’re probably familiar with the ‘mega-trend’ that is home pickling and preserving (searches on Waitrose.com for ‘pickling’ up 222%) but perhaps less so with the return of oxtail (sales up 258%) and the home working associated trend for slow-cooked meat.  Clams, cockles, mussels and oysters are reportedly back too with sales of British seafood up 200% over the last six months, while the popularity of Asian store cupboard essentials like Japanese Rice Vinegar (up 180%) and Chinese Rice Vinegar (up 194%) represents something of a new trend.  UK social media mentions of pulses are up an incredible 600% (although presumably from a fairly low base?), while the desire for barista quality coffee at home has seen a 64% increase in sales of ‘bean to cup’ coffee machines.[2] 

What factors can explain this ostensibly random assortment of individual trends?  The Waitrose and Partners report identifies a number key structural shifts in consumer attitudes and behaviour that have occurred over the course 2020.  The first of these concerns cooking.

 

Cooking

The pandemic, the report argues, has permanently changed our relationship with food, with cooking and eating assuming a more central and meaningful place in our lives.  This was found to be particularly the case for those working from home, three-quarters of which stated that cooking dinner provided the break between ‘working time’ and ‘home time’, in effect punctuating the day in a similar but more positive way to the commute.  63% of working-from-homers also reported that mealtimes have become more of an event, a sentiment shared by three-quarters of young professionals who found that the ritual of preparing something to eat had taken on an increased importance.  Moreover, we are apparently also more organised as a nation with 53% of us now carefully planning meals and writing shopping lists and 66% of us now more watchful of waste.

 

Shopping

Not surprisingly, another one of the fundamental ‘seismic’ shifts in consumer behaviour caused by COVID and highlighted in this report concerns how, where, and when we shop for food.   The pandemic, it confirms, caused an unprecedented surge in online food shopping, with a quarter of us buying food online for the first time and three quarters of us now doing at least some of our grocery shopping online (up from 61% a year ago).  As a result of this online surge Waitrose.com has trebled its size and now accounts for nearly 20% of the total business (up from 5% last year).

But it’s not just how, but how often we food shop that’s also changed, with many people rediscovering the benefits of the less frequent food shop.  57%, for example, reported food shopping once a week or fortnight in 2020 compared with 39% in 2016.  This year may also have witnessed some of the final nails in the coffin of cash with Waitrose reporting that it accounted for only 10% of in-store transactions during COVID (down from 22% pre-COVID).  With reduced fears of transmission risk use of cash may well bounce back to pre-COVID levels but many of the other significant shifts in shopping habits look likely to be more permanent with 60% of survey respondents saying the changes they made during COVID will stick long-term.

 

Attitudes to Food and Farming

If our behaviour has changed significantly, so has our attitude to food.  The pandemic has focused minds on the things that matter and we have, the report suggests, ‘a new appreciation for the food we buy and how we buy it’.  It found, for example, that 57% of us value food more now than we did pre-COVID.  As has been mentioned in some of our previous posts, one of the key things it seems we have come to value when it comes to food is familiarity, comfort and nostalgia, manifest in things like increased sales of traditional favourites and efforts to be more self-sufficient (four in ten of us, for example, grew our own food during the long lockdown), and less wasteful (seven in ten homeworkers sometimes ate last night’s leftovers for lunch).

We also seem to have an increased appreciation for the people who produce and supply our food.  70% of us now value the role of supermarket workers more than we did at the start of 2020, while 74% of people want to see more food businesses in the UK express their support for local British producers – although shoppers themselves seem a little less enthusiastic to buy local British produce directly with only 44% saying they’d consider subscribing to a service that sent fresh produce directly from farm to door.

 

Health and Well-being 

Nevertheless, the importance of ‘localness’, community and neighbourhood have all emerged as strong themes over the pandemic.  60% of those who got involved in their local communities over lockdown, for example, said they intend to carry on, a figure that rises to 70% among the 35-44 age group.

Even more local still, maintaining our own physical and mental wellbeing has, the report suggests, been paramount over the pandemic and led to a ‘permanent readjustment in many people’s psyches’.  53% of us, it claims, feel the pandemic has acted as a reset button in our busy lives.  60% of respondents, for example, have been trying harder to keep themselves physically heathy during the pandemic.  On waitrose.com portion size searches are up 57%, high fibre recipes 230%, high protein recipes 330%, and Mediterranean meal plans up a colossal 630%.

Of course, visitors to waitrose.com are a long way from being representative of the UK population as a whole, and while the research that informs this report was not undertaken exclusively with Waitrose shoppers it clearly should be read as an interesting portrait of a certain privileged demographic.  The picture it paints of ‘our’ changed food attitudes and behaviours and our experience of the pandemic could not contrast more shockingly with the picture painted by another recently published report from the Social Market Foundation, which finds that one in four children, 3 million in total, have faced some form of food deprivation in the six months following lockdown, and  that 16% of parents said that their children made do with smaller portions, had to skip meals or went a day without eating between March and September.

 

A New Consumer Worldview?

The Waitrose report confidently proclaims that from the disruption and uncertainty of COVID-19 comes the ‘emergence of a new consumer worldview’.  Our daily rituals, and attitudes to supermarkets and the way we shop have all been fundamentally reshaped, it suggests, and what’s more, ‘these changes are here to stay’.

I’m not sure about the emergence of a new food ‘consumer’ worldview.  With the report’s references to localness, participation, community, health and well-being it sounds a lot like people are thinking and behaving more like the engaged and proactive food ‘citizen’ espoused by April Rinne of the World Economic Forum in a recent Forbes article, than it does the ‘passive, just-buy-this’ consumer.

Given the year we’ve had, and the uncertainly that still, at the time of writing, lies ahead in 2021, I’m not sure either that I’d be as confident in my predictions for the future.  For the food system, things will never quite be the same again for sure, but the scale and permanence of these changes still remains to be seen.  Predicting the future is a fool’s errand and none of us really knows what the long-term looks like.  What perhaps we can say, however, and to quote a sage member of our own Expert Panel, is that while we don’t know what the long-term looks like, ‘we know it’s closer than it used to be’!

 

[1]  See for example:

https://www.foodmatters.co.uk/podcasts/the-future-of-food-a-look-at-consumer-trends-with-wgsn/

https://www.bidfood.co.uk/podcast/trends/food-and-drink-trends-for-2021-social-trends/

https://www.foodbusinessnews.net/articles/14778-what-well-be-eating-in-2021-according-to-robots

[2]  All sales figures are compared with the same period the previous year, unless otherwise stated.

The Impact of Covid-19 on the UK Fresh Food Supply Chain – A Summary

Assorted peppers on a supermarket shelf

 

By Prof. Michael Winter

Research results from other projects on the impact of COVID are beginning to emerge and this month I am highlighting a paper led by some Exeter colleagues based in the Business School here at the University, Rebecca Mitchell and Roger Maull, working in collaboration with researchers from the University of Lincoln. The full paper The impact of COVID-19 on the UK fresh food supply chain can be viewed and downloaded at: https://arxiv.org/abs/2006.00279

The researchers reviewed secondary data on retail demand (using Kantar data) and conducted interviews with 23 organisations associated with the UK fruit and vegetable food supply market, as well as running four video workshops with 80 organisations representing 50% of the UK fresh produce community.   The three main questions are:

  1. What was the change in retail demand for fruit and vegetables resulting from COVID-19?
  2. What was the impact on UK suppliers of fruit and vegetables?
  3. What types of innovation are emerging within supermarket coordinated supply chains of fruit and vegetables?

 

Some headline findings are as follows (but do check out the paper for the full details):

Research Question 1: Change in Demand

  • The 12 weeks from 27th January 2020, compared to 2019, saw retail in the sector increase by 11% by value and 12% by volume.
  • In the 4 weeks following shut down of the food service sector, retail sales of the same lines increased by 14% by value and 13% by volume.
  • There was considerable variability across products. For example canned tomatoes, had an uplift by value relative to the same period in 2019 of 103% at the peak of w/e 15th March, and saw week-on-week uplift in sales volume exceed 22% for 3 weeks in a row. Over the 12-week period, the total volume of fresh vegetables sold was 11% higher than the same period in 2019, with carrots showing a 12% increase but broccoli having the same demand. 

Research Question 2: Impact on Suppliers

This section in the paper is quite short and I was left wanting more!  Here is a direct quotation indicating the importance of the analysis:

‘One of our interviewees, who source fresh produce internationally, reported that for the first 18 days of the epidemic, orders were running at 120% and then suddenly “dropped to zero”. They noted that their supermarket buyers had left the algorithms that control order replenishment to operate without human intervention, which resulted in supermarkets seeing increased waste as supply exceeded demand. Buyers then began to intervene, manually adjusting the previously automated orders. This had an enormous knock-on effect for the supplier, who ultimately decided not to trust the order pattern of their customer, to make adjustments based on experience and eventually “ran our own plan”. They noted that “whilst supermarket ordering systems are brilliant in normal phase, they didn’t compensate well for large variations emerging because of COVID-19”. The interviewee concluded that their waste bill was twice its normal level, and that profitability would be reduced accordingly. This was not an isolated example. An important issue for our supply chain partners was the “chaos” caused by this algorithmic ordering. Most large retailers use these algorithmic replenishment models and supermarket processes strictly control modifications to subsequent orders, but these huge weekly spikes led to a gross perturbation….’

Research Question 3: Innovation  

This issue is the leading motivation for these particular researchers. Again let me quote directly from the paper:

‘In some instances there was evidence that suppliers were able to adapt rapidly to changing market conditions – these were predominantly situations in which suppliers were already focused on the retail sector, and were primarily dealing with uplift in demand. Suppliers usually dealing with the service sector coped better in situations in which there were not significant capital assets (such as packaging equipment) required in order to enable them to switch product line (e.g. to create smaller volume packages to deliver to retail rather than wholesale) or channel (e.g. responding to increased demand from online retailers, or delivering direct to consumers via “veg boxes”). In situations where this was not possible the role of convening groups, representative bodies and levy boards has been visibly important. For example in early May, building on their open-access analysis of potato markets, AHDB launched “The Potato Portal” as a mechanism by which to connect potato growers with wholesale buyers (AHDB, 2020c).’

But overall they conclude that the system is stuck in a rigidity trap, unable to exploit more radical innovations such as more localised supply chains and industrial robotics.

Lockdown 2.0

Hand written 'Closed Sign' in shop window

 

By Tim Wilkinson

In the second national lockdown we saw food service and hospitality businesses restricted to takeaway only. The only option to ‘eat out’ was at outdoor street food markets, who could continue trading. A poll of 242 food business operators during the week of the announcement of the lockdown found support for the measures was divided (41% supported, 43% did not support, 16% undecided). In late October, business groups warned of the potentially devastating effects on hospitality and food service sector, emphasising the need for business aid and the prospect of a loss of 750,000 jobs. With bars, cafes, pubs and restaurants only able to offer takeaway, staff have been laid off and some hospitality workers are facing homelessness as a result. Although the extension of the furlough scheme has helped to retain staff in some cases, it may not be enough to keep businesses trading, for instance, where mandated closure and negative cash flow has caused a build-up of rent arrears.

Closure of hospitality businesses in lockdown 2 has also put pressure on suppliers and wholesalers serving the food service sector. Although schools, care homes and hospitals still need supplies, without food service customers, industry leaders warned that some wholesale businesses will become unsustainable. Strains on supply chains prompted reflections on the resilience of the food system and the ongoing pressures of the pandemic were found to be impacting some food exports, such as Scottish red meat and offal (which has fallen 8% according to levy board Quality Meat Scotland).

We have now heard that that the tiered system will return and I expect that the impacts of the second national lockdown will become clearer over the next month or so. November and December are of course a crucial trading period for many food businesses, and the altered system of restrictions will shape the strategies businesses can use to resume trading and recover.

 

Two National Lockdowns Compared

Like the first lockdown, it has been suggested there may be some benefits for local and independent food shops. Delivery of local food, through start-ups like Farmdrop, also look likely to continue. Garden centres staying open might also have supported speciality food, especially in the run up to Christmas. Research from Springboard, found that, 63% of people will spend more in local shops in the run up to Christmas 2020, while 36% will spend more on food compared to last year. We know some independent food businesses who made agile responses to increased demand for takeaways and home delivery benefitted during the first lockdown. But we heard from our Expert Panel this month that with larger and global businesses now well prepared for delivery and click and collect, competition will be higher. The pressures of lockdown 2 on independents may be harsher.

Similar, although not identical, to the first lockdown, there was a dash to stock-up ahead of the November lockdown; queues and shortages of some products were reported. However, this time the rush was not just to purchase food to eat at home, but to restaurants, and pubs, and for non-food retail shopping.  High-street footfall was up, at least in post-Covid terms (although it was still 28% down compared with last year, according Springboard data cited by the Financial Times). There was some stockpiling of products like sugar, flour and pasta. For instance, sugar sales were 74% higher than the same week in 2019. Once again, purchase of familiar foods is expected to grow in the lockdown and Premier Foods (makers of Mr Kipling cakes, Bisto gravy, Ambrosia and Bird’s custard) are expecting increased sales. So it looks like lockdowns are continuing to fuel a diet of familiarity and comfort.

Compared to the first national lockdown, many food businesses had better systems in place for managing demand this time. Supermarkets were better prepared to manage customer flows, operating traffic light systems or marshals in an extension of existing customer management arrangements developed over the summer/early autumn. While there was some panic buying prior to the lockdown, I haven’t found reports of long queues for supermarkets during the lockdown. Perhaps a combination of supermarkets messaging (for customers to shop alone) and online delivery options lowered footfall in supermarket stores.[1] Jo Whitfield, Chief Executive of the Co-Op said that consumers are spending more on ‘top-up shops’, which have come to complement a shift to ‘big shops’ and online orders, developed in the first lockdown. So more frequent, but shorter shopping trips, may also be spreading footfall in lockdown 2 as customer behaviour adapts.

There has also been continued evolution of customer management, such as the launch of Marks and Spencer’s Book and Shop system, a virtual queueing system where you can book a shopping slot and avoid queuing outside. Waitrose and Sainsbury’s are also trialling similar systems, so customers may see more of this next year. Being so new, virtual queuing probably didn’t have much of an effect on lockdown supermarket use, but may become more apparent in the context of ongoing restrictions. In the first national lockdown supermarket ranges were reduced and rationalised.  Even in June ranges were down 9% compared to pre-Covid. But recent research by Assosia found that the numbers of stock keeping units and promotions in nearly all supermarkets has all but returned to pre-pandemic levels. Supermarket supply chains seem to have been better prepared and adapted to Covid restrictions in lockdown 2.

The second lockdown has seen the benefits of the development of the at home market for meal kits – which allow customers to cook or reheat restaurant food at home. Global companies such as the Mindful Chef, Gousto and Hello Fresh have seen soaring subscribers. But local alternatives have also emerged, such as Prepped (there are of course many others) which delivers meal kits from multiple restaurants (in Cambridge and Saffron Walden areas) without a subscription. In 14 interviews with restaurants, an Evening Standard article gives reports from businesses that the market for online sales is becoming saturated and a strong sense of the precarious financial position that some businesses, who are making up for sales with meal kits, are in.

The tiered system will reopen much of the economy, but the survival of many food businesses is still in question. As Covid restrictions change food businesses and consumers are trying to keep up. We will have to see how the renewed tiered system affects the way we make, sell, buy and eat food.

 

[1] If anyone could point me to any supermarket footfall data for lockdown 2, I would be very interested to know whether numbers have dropped, or whether footfall had spread more evenly across the day, lessening customer pressure.

Online Food Business Barometer survey launched

We launched our short Covid Food Business Barometer survey this month. It’s about how things are going for food businesses right now, what they think about the future and how prepared they were for autumn’s Covid-19 restrictions. The survey is just 12 quick questions (we know there are a lot of surveys out there at the moment so we’ve tried to keep it short!).

If you are a food business we invite you to fill in the survey. If you’re not, please do circulate the survey to anyone you think might be interested. The hyperlink above will take you straight to the survey, as will this link: https://exeterssis.eu.qualtrics.com/jfe/form/SV_b29jd2mL3xjhNyJ

After the announcement of Lockdown 2.0 we decided to redesign a longer survey we were planning last month. That survey was about Covid-impacts in different time periods (the first national lockdown and the summer period/tiered lockdown system). We felt that the additional pressures the national lockdown placed on food businesses made a long survey inappropriate, and including an additional lockdown period in the survey would have made it substantially longer. So, with the help of our Expert Panel we have adapted and developed a shorter survey that takes a snapshot of Covid impacts now.

Mapping the UK Food System – A Review

 

By Prof. Michael Winter

Hasnain, S., Ingram, J. and Zurek, M. 2020. Mapping the UK Food System – a report for the UKRI Transforming UK Food Systems Programme. Environmental Change Institute, University of Oxford, Oxford. ISBN 978-1-874370-81-9.

The full report is available on the Global Food Security programme website, where it is supported by an interactive online resource.

This is an impressive piece of work which pulls together a wide range of data on the economic value of the UK food system, the number of enterprises, and levels of employment, providing an assessment of the overall shape of the UK food system and a foundation for further research. It also gathers together in an appendix a goodly number of diagrammatic conceptual representations of the food system. Not easy to copy these from a pdf file (and we might be in breach of copyright if we did!), so take a look at the original and the various attempts made by academics to conceptualise how this complex system works.

Some of the report highlights are as follows:

  • The UK agri-food sector is a major driver of economic growth. Overall, in 2018 it contributed £121 billion or 9.4% to national Gross Value Added (GVA) and the wider system employed 4.3 million people.
  • Food and drink accounts for 20% of the total manufacturing sector by turnover and employs over 430,000 people in the UK.
  • Concentration in the UK economy has increased with time. There are ten large food retailers. Together, the top five food manufacturers have a £30 billion turnover. There are two main UK big players in contract catering while US multinationals dominate fast food alongside SMEs.
  • While the food sector is the biggest employer in the UK, 30% of food manufacturing employees are from the EU (63% of which are in meat processing plants). Other sectors in food employment have low wages, and there is an increasing issue of a lack of appropriate workplace skills.
  •  The UK has the third highest volume sales of ultra-processed foods per capita out of 80 high and middle-income countries, and the most processed diet of countries in Europe. This contributes to the 63% of UK adults being obese or overweight.
  •  Land use is dominated by animal and cereal production (e.g. 52% of croppable area in the UK is covered with cereals).
  • The UK heavily relies on external food sources, particularly the EU. 53% of food consumed in the UK in 2018 was produced domestically, followed by 23% sourced from the EU. There are financial deficits in all food categories, except for drink (due to whisky exports). The UK is importing food that can be grown here, albeit often dictated by seasonality.
  •  Although there are enormous economic benefits from the UK food system, it faces multiple challenges. Diets too rich in fat, sugar, and meat and too low in fruit and vegetables are contributing to obesity and related health problems, especially in deprived households. Unsustainable production methods are driving biodiversity loss, soil degradation, pollution, water scarcity and climate change in both the UK and overseas. Poor working conditions persist, especially for low-skilled labour in the food sector. Meanwhile, stresses and shocks including climate change, COVID-19, and EU-exit highlight the need for greater resilience. It is clear that transformational change is needed, but this must balance with complex trade-offs and competing needs and interests across the food system.

 

Let me also highlight a few key findings from the main body of the report itself:

 

 

Number of people employed Number of enterprises Economic summary £billion
AGRICULTURAL INPUTS SUPPLIERS

56,000

4,800

3.3

FARMING

447,000

217,000

10.3

FISHING & AQUACULTURE

16,000

4,000

0.9

PROCESSING & MANUFACTURING

430,000

11,000

31.1

WHOLESALING

60,000

16,000

3.0

RETAILING

1,171,000

54,000

30.3

CATERING

1,831,000 135,000

36.4

The UK Food System (Figures 2, 3 & 7 of the report)

 

In addition, there are those employed in the production of packaging (a total of 85,000) and logistics (a total of 2,540,000), for which it is impossible from official data to disaggregate food-related elements. 

Economic impacts, business confidence and local lockdowns

 

By Tim Wilkinson

In a month where Tesco’s posted rising profits, some of the economic impacts of the initial national lockdown are becoming clear. With local lockdowns now implemented, the ‘firebreak’ lockdown across Wales from 23rd October and the possibility of a ‘no deal’ Brexit rearing its head; it’s an interesting time to look at some of the economic impacts of Covid-19 on food businesses.

Tesco’s profits in the first half of the year (26 weeks to 28th Aug 2020) were widely reported as surging (see Essential RetailEvening Standard and The Telegraph) with pre-tax profits up 29% to £551 million. The tidal wave of shoppers opting to do a ‘big shop’, a huge uptick in online orders (up 69%) and the panic buying in March/April all contributed to an operating profit of 1.2bn in the UK retail arm. However, the bottom line was affected by lower sales and an operating loss for Tesco’s Bank, as well as poorer performance in Tesco’s European retail operations. Even so, this increase in profits is clearly significant, and illustrates the extent to which the pandemic has affected consumers buying habits and food choices. Of course, tides may already be changing, as shoppers return to the likes of Aldi and competition in the home delivery market rises.

Tesco may have profited, but the hospitality sector has suffered. Increased home cooking and Covid safe procedures limiting customer numbers, appear to be partly responsible for impacts in the casual dining sector. For instance, owners of Wagamama’s, Frankie & Benny’s and Garfunkel’s chain, The Restaurant Group, posted a pre-tax loss of £235 million (for 26 weeks to 28th June) – almost £150 million more than a loss made in June 2019.  There has, however, been higher sales between July and September 2020 , as restrictions relaxed and some people returned to eating out. Pub chain Wetherspoons reported a loss of £34 million for the year ending in July 2020 (down from a £103 million profit in 2019) – the first annual loss in 36 years . With sales of alcohol in grocery stores up 8% in September and 10pm closing times, there are clearly challenging times for pubs ahead. This month also saw a report of the closure of street food businesses, such as Street Feast, which traded at four sites in London, but struggled to operate under Covid restrictions. While the summer has offered possibilities for al fresco dining and drinking, as winter draws in, one wonders how consumers will respond. I noticed translucent pods outside a café in Exeter, which offered customers some respite from the weather, but clearly, capacity is limited. How far does new(ish) spaces like these, take food businesses?

Away from the financial performance of individual businesses, the Office of National Statistics Business Impact of Covid-19 Survey makes very interesting reading.  In the two weeks from 7th to 20th Sept, 2375 accommodation and food service businesses responded to the survey. Of these respondents, around 2% said business turnover and profit had increased by more than 20%, compared to what they would normally expect for this time of year.[1]  Meanwhile, over 40% of accommodation and food businesses reported that both turnover and profit had decreased by over 20% compared to normal expectations for this time of year.[2]  Such financial figures appear to translate into business confidence, with 30% of accommodation and food businesses reporting that they had low (25.4%), or no (4.6%), confidence that they would survive the next 3 months. While the picture for businesses overall (including all industries, not just accommodation and food) has improved since March, these figures highlight the continued extent of the economic impacts of Covid-19.

With local lockdowns and tiered restrictions in the UK, there is an increasingly pronounced geographical dimension to how these impacts will transform, going forwards. As restrictions alter the possibilities for the food service industry and probably customer preferences for food purchase, along administrative boundaries, existing regional differences in the food system, may well become more marked.

 

[1] Question: In the last two weeks, how has the coronavirus (COVID-19) pandemic affected turnover/profits, compared with normal expectations for this time of year? Statistics calculated through sum of turnover/profit categories ‘increased by 20-50%’ and ‘increased by over 50%’. Turnover total (2.5% plus unspecified amount less than 1%), profit total (1.9%)

[2] Question: In the last two weeks, how has the coronavirus (COVID-19) pandemic affected turnover/profits, compared with normal expectations for this time of year? Statistics calculated through sum of turnover/profit categories ‘decreased by 20-50%’ and ‘decreased by over 50%’. Turnover total (45.9%), profit total (40.3%)

Survey design as lockdown rules change

By Tim Wilkinson

This month we have been working on designing a questionnaire survey for food businesses. Our survey is exploring the impacts of Covid-19 restrictions and the strategies businesses have implemented in response. It has been challenging designing a survey that will capture the multiple and varied impacts of Covid on business operations, and which addresses the different phases of the lockdown restrictions, which have shaped the type and degree of those impacts. As with nearly all aspects of life at the moment, the process of survey design has been one of adjusting to new Covid restrictions – to make sure the survey works in a variety of lockdown contexts. We discussed a draft of the questionnaire with our Expert Panel last week, and we are currently working with their feedback to develop the survey. We will launch the survey, online, in November.

We are going to be seeking respondents from a range of businesses from different food sectors (e.g. fruit and vegetables, meat, dairy etc.) and from different stages of the supply chain. Having created a sampling frame, after much discussion, we decided to focus on several stages of the food supply chain – but not all. We are focussing on transporters of primary products, food processors, manufacturers, importers, exporters, wholesalers and distributors. We have chosen not to cover primary producers, hospitality or retailers in the survey – although they are important parts of the food system. This was partly because it was so challenging to write robust questions that individual businesses from across the whole food system could answer in a standard way. But also because there are excellent secondary data sources from market research, particularly for retail and hospitality. We will be exploring the impacts of Covid-19 on primary producers in our Centre for Rural Policy Research South West Farm Survey 2020, which we launched this month. We are also investigating the possibility of running a survey of tourism and hospitality businesses in the South West early next year to gather data on this sector.

As part of our background work in this part of the project, we reviewed existing surveys that look at the impacts of Covid-19 on businesses. There are, of course, a number of surveys doing this. We found 16, but not all were exclusively about food businesses (they covered a range of industries). Some surveys focussed on only one stage in the food supply chain (for example, only covering manufacturers or food processors). Other surveys only looked at businesses in one particular UK region or had geographical foci abroad. It is worth checking out the Office of National Statistics (ONS) Business Impact of Coronavirus Survey, which has tracked changes to business turnover, workforce, prices, trade and resilience every two weeks since 9th March. The ONS data set includes all industries, although some separate data are available for food and beverage importers and exporters.

Despite identifying a wide range of Covid-19 impact surveys, we found that a cross-sectoral look at the impacts of Covid-19 on food business specifically, both during and after the national lockdown in the UK, has not been made. In such a rapidly changing situation, we are discussing the possibility of repeating the survey at some point next year. However, we will use the data we collect in November to understand the food chain responses to shocks in 2020. We will be exploring our key findings in interviews with businesses in order to understand more of the story behind the incredible shifts in business practice. The outcomes of the research will be available to inform policy on food business resilience and preparedness for future shocks to the supply chain and food system.