Sir Terry was speaking at the City Food Lecture in London recently.
“In a recession, there’s a temptation to think that all the rules have changed, but they haven’t,” Sir Terry told several hundred invited guests at the event, which was organised by seven of London’s City Livery companies (trade organisations or Guilds that have operated for many hundreds of years) that are involved in the food industry. “Consumer satisfaction has to shape all we do and we need to add value at every moment as consumers can change their minds rapidly.”
He highlighted that Tesco has seen a 65% increase in its budget range of products during the past year, and that prices needed to continue to be lowered as consumers increasingly felt the impact of the current economic environment.
“The price of food fell on average 9% between 1989 and 1999, and a further 8% between 2000 and 2007,” he said. “Today, commodity prices are down 50% from their peak last year, and these lower prices need to be fed into the supply chain and passed on to consumers. It’s vital that all our suppliers understand this. We’re going to great lengths to talk to our suppliers to ensure that we give consumers what they need. If manufacturers produce what customers want, then they will be profitable.”
What consumers want includes healthy nutritious foods that are also kind to the environment as well as affordable. To this end, Tesco has invested heavily in the UK’s Sustainable Consumption Institute in Manchester, and has reduced 70% of its store waste and pledged to halve the energy used in-store by 2010.
“Too often, climate change is seen as the responsibility of governments, but if it’s to be tackled effectively, governments, business and each party must play its part,” he added.
The company has already teamed up with the Carbon Trust in the UK and is trialling carbon footprint labelling on selected products such as potatoes and orange juice, as well as washing detergent and light bulbs, and suppliers will be encouraged to play their part. “It has only been in the past four to five years that the evidence about climate change has become incontrovertible and the science is robust now.
“We urgently need to educate consumers but we also need to make options available so that they can choose different foods, and those foods need to be affordable,” he continued. “We need to gear up the supply chain to give consumers real choices.”
Among those choices, sustainability and nutrition played a key role in what was needed. The world’s population is forecast to grow by 2.5 billion between now and 2050, he pointed out: “In 2050, 2.5 billion was the size of the entire world population. So, we need to double world food supply. There will be an increased demand for meat, protein and water, and all with the backdrop of having to cut emissions.”
In the face of the changing world in terms of economy, health and sustainability, the audience and panel members questioned what the future retail scene would look like.
“The thing that will be significant in the next 10 years must exist today,” said Sir Terry. “Retailing is the most local of all industries, and you will see increasing globalisation in food retailing. It will be a slow process. The growth of internet retailing will be a lot more significant in10 years’ time. The biggest change you will see is in Asia, where there’s an irrepressible desire for a better life.”
He stressed the need for an open market free from trade barriers, and suggested a freeze on retail business tax rates to prevent job losses during the recession, calling on the whole supply chain to respond to today’s challenges.
“Consumers are global, unforgiving, and ever-changing,” he said. “Successful retailers are those that change fast.”
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