The end of the UK Big 4?

big4

In the last 12 months we have seen a fundamental shift in the retail food sector in the UK. With the big 4 losing £3 billion in till receipts and the discounters seeing phenomenal growth, industry analysts are announcing a tectonic shift in the FMCG market in the UK. How is this going to affect our industry? Is this a threat or an opportunity?

Inflation hasn’t been followed by wage packets. Our economy is growing but our earnings aren’t. For years in the UK the consumer was happy to purchase from an increasingly smaller pool of suppliers. In energy and banking our options are limited, competition is nonexistent, anger and frustration rife, the only  recourse the consumer has is government backed industry enforcers. Mrs Thatcher, love her or hate her had one thing right when she identified two biggest threats to individual freedom being big government and big business. By big business she meant companies that were so powerful they totally dominated their markets killing choice and competition. The reality of the credit crunch has changed consumers, whilst their options in banking and energy markets are limited, the one sector where they can show their new muscle is in their grocery bill and flexing them they are. Is our sector becoming the whipping boy for the frustrated consumer?

In the last 12 months £3 billion has left the tills of the big 4. Consumers are far more cynical, their shopping habits have moved from the convenience of a big weekly shop at one store, a new breed of canny shopper has emerged. Worryingly, for the big 4, there is evidence that the professional classes are now leading this anti-consumerism; the basics are bought in discounters and the luxuries in Waitrose and M&S. A recent Channel 4 Despatches Documentary last week identified this trend and anger in consumers who, rightly or wrongly, feel that they have been ripped off by the big 4 for years. Those doing a one stop weekly shop are now seen as wasteful, it’s fashionable to be canny. It’s a fundamental shift; probably the biggest in the last 20 years and it shows no sign of slowing down or changing.

So, what does this mean for those of us who work in the food manufacturing sector? Is this an opportunity or a massive threat? Whatever it is, the speed of the change will have huge implications.

Are our business models fit for purpose?

The average big 4 superstore has over 30,000 products on its shelves, the average discounter, 1,500. What does this mean for the manufacturer? Our business models have been honed to service the demanding buyers of the big 4. Customer auditors have lorded it over our factories. The demands of the big 4 have been brutal and the level of control such that they have been able to effectively dictate to suppliers for years. We all have war stories of how the big 4 have enforced their demands. The problem is, that we have, through necessity, complied with these demands. This has created models that are ideal for servicing the big 4 but with the disintegration of their power, how relevant are they for the future? The consumer seems to want basics that are more basic and luxuries and fresh that are local, have provenance and high quality. Those suppliers wholly dependent on big 4 supply contracts could be in for a very nasty time.

 

The big question is, what can we do about it? Are our businesses sufficiently savvy and fleet of foot to cope with the changes in the market?

 

 

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