Read more at The Grocer here.
UK grocery has never been more focused on low prices. Everyday low prices have become the norm and grocers are being hauled in front of government accused of profiteering. Discounters have grown market share in excess of 5% in the past five years, and private label now forms more than 63% of the market, growing twice as fast as brands.
All along the value chain, costs are being squeezed: packs are being re-engineered to price-optimise; producers, suppliers and retailers are facing off with their teams on wages; and protectionist deglobalisation politics are re-orienting investment towards domestic markets to grasp a bigger share of the pie.
At the same time, an increasing number of consumers in the UK – the sixth largest global economy – are turning to food banks, and supply chains still have instances of modern slavery, forced labour, and dangerous working conditions. Approximately three million food parcels were given out by the Trussell Trust in the past year, feeding 750,000 people for the first time.
So, something isn’t working. Is there another way, apart from a race to the bottom?
In this tough environment, the narrative around value for money has become dominated by price. But there are a myriad of other elements consumers are willing to pay for, including taste, health, provenance, sustainability, and supply ethics – elements that can attract new profit pools.
Premium price points are not disappearing, and younger generations, who now own that lucrative family basket spend, are shopping differently than older ones. Research shows around 70% of consumers are willing to pay a premium for sustainability, whilst millennials constitute 50% of purchases of ‘purpose-led brands’, compared to only around 30% for mainstream brands.
This opportunity was highlighted by James Bailey, executive director of Waitrose and operating advisor of Verlinvest. While stressing Waitrose’s focus on more competitive pricing, he has highlighted his support for “emerging premium brands that will champion new trends, quality, ethics, and sustainability”.
A new crop of brands is already successfully championing redistributive capitalism. These brands are not claiming to be the cheapest, but are aiming to show that profit and purpose are not mutually exclusive.
Tony’s Chocolonely is fast becoming a global success, whilst paying a premium to cocoa farmers to achieve a living wage and minimise child labour in the supply chain. It has opened up its unique supply chain to others, such as ice cream maker Ben & Jerry’s and meal replacement business Huel, via its Tony’s Open Chain initiative.
Another is Who Gives a Crap, an Australian household paper brand originally selling solely DTC with sustainable materials of recycled paper and bamboo. One million trees are chopped down every day to make regular toilet paper, but Who Gives a Crap is producing a deforestation-free option and donating 50% of its profits to sanitation initiatives in the developing world.
To address the race to the bottom and open new pools of profit to build sustainable retail models, sustainable brands and sustainable consumer propositions, we need brands that cater for other factors as well as price.
We need brands that are willing to transparently educate consumers on where their money goes and the impact of their consumption on people and the planet – to offer alternative choices and let consumers decide what is worth paying more for.
Until we factor the true and transparent economic, social, and environmental costs into our businesses and pricing strategies, we are denying consumers the choice to address inequalities in our system. Good business can contribute to a more just society.
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