Life in the fast lane
This is not to belittle the progress made since ECR first took off in the latter half of the 1990s: applying collaborative principles to bridging the gulf that traditionally existed, in particular, between producer and retailer. The aim was to generate a higher-quality, more responsive and not least lower-total-cost service to the consumer.
Md of ECR Europe Xavier Hua puts this in an international context: "It really came from the US in 1994, when Wal-Mart and Procter & Gamble decided they could work together rather than against each other."
As the guiding spirit behind industry organisation ECR UK for the past decade, IGD (formerly the Institute of Grocery Distribution) knows all about the theory and practice of such integrated supply chain strategy. As chief executive Joanne Denney-Finch puts it: "We have solid experience of collaborative projects, complete with results. They clearly demonstrate that the total impact can be greater than the sum of individual contributions."
But with the global financial and economic crises, the world has moved on, she argues. "The ground rules are different the ground rules for shoppers, too. In a recession, we know that certain segments of the population are affected. Now, in the UK, we may not technically be in recession, but everybody is affected, and that is something new for the food industry."
Changing behaviours
These changes have had a significant impact on the behaviour of shoppers. "In the past, we've thought of them as being 'cash rich and time poor'," she says. "Now, we're seeing shoppers who are willing to trade time for cash, and who are more promiscuous than ever before in the ways they save money and find what they want."
Purchasing patterns are shaped by two broad factors, claims Denney-Finch. "Shoppers are overridingly driven by value as well as by a set of additional issues," she explains. Those issues include organic, fairtrade, animal welfare and other ethical criteria. "And secondly, they're saying: I'm not going to downtrade, I'm going to shop around."
She adds: "Shoppers are more ethically-motivated than they've ever been. In the UK, we are likely to shop in many of these ethical sub-categories, while in the rest of Europe, shoppers may tend to choose just one of them."
Brands and retailers are increasingly expected to 'tick all the boxes' when it comes to online presence, says Denney-Finch. Meanwhile, the growing availability of smartphones means that larger numbers of shoppers can get instant access to nutritional and other information.
Hua at ECR Europe agrees: "The way people buy goods has already changed and will continue to do so at an increasingly rapid pace." He, too, cites the example of organic options. "Now, every retailer and manufacturer has to have an organic range. Retailers have to monitor these changes. They need to know what's happening."
Much of this change appears to be taking the form of fragmentation. As he says: "There's no longer such a thing as the 'average consumer'. There are categories of consumer, who exhibit different behaviour and priorities." The growth in faith-driven ethical ranges, such as halal and kosher foods is a case in point, he says.
Hua and Denney-Finch both spoke at ECR Europe's Brussels conference last month. Also contributing to one of the sessions was Dr Brian Harris, co-chair of US-based management consultancy the Partnering Group.
Harris agrees that consumer behaviour is changing radically, but he puts it in generational terms. "The typical shopper we've marketed to is not the consumer of the next generation," he says. "There are tremendous differences in how those shoppers will make their choices it's the biggest shift in behaviour between generations that we've ever seen."
He lists sharply divergent attitudes to brand and store loyalty, greater awareness of health and nutrition, and a lack of cooking skills among the characteristics of this new generation. "As an industry, we're simply not taking the time to understand all this," he warns.
On the other hand, from a US perspective, Harris does not emphasise the proliferation of consumer categories that Hua describes. He envisages more of a levelling off. "After the downturn, we're not going to return to the world as we knew it," he predicts. "Reduced consumer expectations will be reflected in a reduced need for fancy goods and variety, and a more simplified approach to how people define their needs."
Harris, known as one of the pioneers of Category Management, has recently been working with ECR Europe on the Consumer & Shopper Journey. This is a framework of insights, planning and implementation designed to bring together brandowner familiarity with the consumer and retailer knowledge about the shopper.
Rather than focusing on demographics, the Consumer & Shopper Journey is couched in terms of shopping 'missions', such as the stock-up mission, the fill-in mission and even the weekend party mission.
"Retailers are going to make decisions about the kind of shoppers that they want to win within a particular store or format," says Harris. "We'll see a more disciplined focus on what we find in store and how it's displayed."
So these are among the emerging methodologies, but where has the UK already witnessed success and demonstrated leadership in ECR?
Supply chain sustainability
Denney-Finch at IGD says: "We have been especially strong in the area of the supply chain, and particularly where that combines with sustainability. Here, the UK is a trailblazer." She adds: "The various supply chain partners tend to think that sustainability is going to cost money. But doing the right thing is good for business, too."
Harris strikes a sceptical note here. "We are not communicating sustainability as a consumer benefit," he notes, adding that these consumer benefits, and how they are expressed, need to be more of a priority.
One initiative from grocery think tank IGD and ECR UK has been a three-year sustainable distribution programme. Around 35 companies have undertaken to cut 200M road miles from the industry's total. According to Denney-Finch, they are well on their way to hitting the target.
In a separate agreement last autumn, 33 food and grocery companies committed to preventing 75,000t of waste being created by the end of 2012. They have also said they will divert a further 150,000t of waste from disposal into recovery options, such as anaerobic digestion.
Hua at ECR Europe agrees that waste management is one of the newer components in supply chain strategy where the UK is setting the pace. As he points out, it is an important issue right up to EU level: "This is one of the priorities, and from a consumer perspective, too, waste is frowned upon. It is not so much about recycling as avoiding waste in the first place, at every step in the chain."
An holistic approach is necessary, he adds: "The beauty of what the UK partners are doing is that it takes into account the product, primary and secondary packaging."
Interestingly, despite all the current and future shifts outlined by himself and other ECR experts, Hua is not on the prowl after radical new approaches. "The challenge at European level is to ensure that the supply chain remains agile and responsive, and that best practice is applied across the various countries," he argues. "That is the priority, rather than finding the next three-letter acronym that will change the world!"
He sees the UK's waste initiative as the type of lesson that could be learnt and applied more broadly. "This could be a good example of how to take best practice from one country, bring it to the European level and transfer it to others," he suggests. "Of course, in part it will need to be adapted to local conditions."
Hua is eager to see more sharing of information, of positive and negative experiences, across the European ECR community a process, as he puts it, of 'harmonisation'.
Quite how much of this sharing is likely to take place at an international level is uncertain. Brandowners and retailers such as Nestlé and Asda gave presentations at last month's Brussels conference. But Nestlé, for instance, took a decision at corporate level not to contribute to this article not, on the face of it, a sign of enthusiastic willingness to 'share'.
Perhaps this serves as a reminder that ECR in all of its evolving forms must ultimately consist of single, essentially private, bilateral relationships. As Hua points out, successful strategies will have to adapt to local or national conditions. And in fact, in the end, each supply chain relationship has to find its own level under its own 'local conditions'.
