Commissioned by Derek Mead, Somerset farmer, NFU council member and
Marketing Review Summary for British Agriculture
candidate for NFU President election 2004
This report was commissioned by Derek Mead to provide marketing direction for the farming industry. It concentrates on the food marketplace, which has experienced major changes in recent years and has become an increasingly competitive trading environment.
Key factors affecting the market
- Supermarket expansion (within the UK and globally )
- Supermarket consolidation (fewer key players)
- Wal-Mart entering the market trading on lowest price (away from the traditional supermarket value for money platform)
- Decline in local shops selling local produce (eg. butchers, greengrocers)
- Increase in foreign imports
- Strengthening of supermarket own label
- Increase in consumer consumption of pre-prepared foods
- Growth of eating out (eg. restaurants, service stations)
- Opening up of new routes to market (eg. farmers’ markets, farm shops)
- Development of direct selling (eg. farm brands and farmer box schemes)
- EU rules and directives
The farming industry needs to increase market share for British farm produce by value and volume to halt the decline of British Agriculture
There is a strong consumer market for quality food produce, both at home and abroad, something that the British farming industry is well placed to deliver.
British Agriculture can only compete on a world stage if the quality of the product is taken into consideration.
The industry needs to grow its market share through all routes to market; supermarkets, local shops, farm shops, farmers’ markets, direct selling and via the trade.
It also needs to stimulate consumer demand for this quality British product through communications activity in order to compete with cheap imported produce and command a higher price.
This can be achieved through marketing effort and by putting in place simple market rules which are currently absent or not enforced, such as including country of origin on food labelling.
In addition, the wider economic benefits of the industry must be communicated to key target audiences so that farming is raised up the political agenda.
Summary of findings
· The farming industry lacks an overall marketing strategy covering
o All routes to market (supermarkets to farmers’ markets)
o All sectors
o National, regional or local produce
o Commodities to brands
· Existing communications activity is under-funded, highly fragmented and ineffective
o The major supermarkets spent £193 million on communications activity to the consumer in 2002 compared to under £10 million by British Agriculture (source: Thomson Intermedia)
o Danone spent more money on communications activity than the whole of British Agriculture in 2002 (£16 million media spend)
o Many bodies are involved in this area (levy bodies, NFU, AFS, RFG’s, EFFP, FCC, FFB) but no-one is responsible for the overall industry results
o Each sector is handled by a separate levy body
o Existing communications activity is fragmented by region (Regional Food Groups) and sector (levy bodies)
o Existing bodies and RDA’s are often unclear of their remit
o There is no overall communications strategy so some areas are never addressed (eg. negative image from subsidies, pesticides)
o Image of agriculture campaign failed to achieve significant results
o The industry has failed to rebuild perceptions of farming following a series of disasters (eg. salmonella, BSE, foot and mouth disease)
· The industry has become disconnected from the consumer as recognised in the Curry Report. The reasons for this are multiple and varied:
o Fewer people work in agriculture (increased mechanization, industry decline)
o Local shops selling local produce have almost disappeared
o More food is imported and consumers have become less aware of the seasonality of British produce
o People are eating out and using pre-prepared foods more often, leading to a knowledge gap of how the food is produced
o Majority of farmers live in rural areas, a long way from the major urban areas, making it difficult for them to relate to the needs and motivations of consumers
o As the British public becomes less interested in farming, the newspapers and media invest less effort in this area (unless it is another scare story)
o The majority of farms are small businesses so receive little coverage in the business sections of national papers compared to other industries (not listed on the stock market)
o As directors of small businesses, farmers do not have the marketing resources of major companies at their disposal (Tesco employs over 90 people in marketing intelligence)
· Supermarkets have taken over the consumer relationship
o Supermarkets are trusted to sell safe food
o Supermarkets are in regular contact with customers (weekly shop)
o They listen to customers through market research and communicate with them through many different channels to influence their food buying behaviour (advertising, direct marketing, promotions, PR)
o They invest heavily in marketing activity (£193 million spend by major supermarkets in 2002)
o These messages are not always in the interest of British farmers. But the farming industry does not contribute to this conversation
o Supermarkets own the customer market intelligence (sales data)
Supermarkets shape the direction of the marketplace and influence world food supply. They are now some of the world’s largest companies. Wal-Mart is the world’s largest company with colossal buying power and the ability to bankroll loss-making units for as long as required. Wal-Mart is in USA, Canada, UK, Germany, China, Japan, South Korea, Brazil, Argentina, Mexico and Puerto Rico, and sources products from all over the world.
As British supermarkets such as Tesco expand globally to compete on the world stage they will not have the same loyalties to British Agriculture or the food manufacturing industry as they did in the past.
Therefore, for British Agriculture to survive, it urgently needs to become market-focused. This means able to:
- Understand consumers and recognise market opportunities
- Develop new products and get them to market ahead of competitors
- Stimulate consumer demand for its produce
- Protect existing markets and enter new ones
1. Review existing marketing activity
Review all industry bodies with a marketing remit (levy bodies, RFG’s, FFB, EFFP, FCC)
o Assess current roles and responsibilities
o Assess the amount spent on consumer-driven marketing and communications activity
o Determine areas of wasted funding (grant application process, layers of bureaucracy, duplication of effort, amount spent on offices/salaries versus activity and results)
2. Develop an overall marketing strategy for British Agriculture
The above process should identify areas which are under-funded, gaps in the market and areas of greatest opportunity.
An overall marketing strategy should then be developed to ensure that all routes to market, all sectors, all regions and all size of producers are supported.
DEFRA should be responsible for this.
3. Food labelling for country of origin
Currently it is very difficult for consumers to locate and buy British produce in some supermarkets as there is no clear food labelling by country of origin. This is not in the interest of British farmers producing a better quality produce than cheap foreign imports (eg. chicken from Thailand and Brazil)
Clear country of origin is needed to enable British farmers to promote their product and ensure that the consumer who wants to buy this product can then locate it. Imported produce should never be sold under the British name, and there should be severe penalties for anyone found abusing this.
This principle should be extended into pre-prepared foods and restaurants for meat, whilst the seasonality of British produce should be promoted for fruit and vegetables.
The appropriate bodies should lobby for change in this area.
4. Registration of EU-protected global brand names
Support should be given to help British farmers register geographically defined food and drink products under the European Union global brand protected scheme wherever possible.
These registered products should be marketed both at home and abroad.
4. Brand development
The majority of British produce is sold via supermarkets under own label. Own label enables the supermarket to transfer all the identity away from the producer, to themselves. The consumer is denied practically all knowledge of where the product comes from or who produces it, unless the farmer’s name appears on the packaging.
All assurances of quality are given by the retailer, who is free to source at the cheapest possible price. This is now a commodity market.
Commodities are products that are sold on price, brands are sold on brand values. Brands have greater value than commodities so they are invested in by their owners through marketing activity.
Brands enable the owner to communicate messages about the quality of the product direct to the customer via advertising activity. They can also evolve over time to adapt to new market conditions.
British farmers should develop brands to compete with own label, major brands from abroad and at the local level.
5. Promote existing brands
Very few customers are aware of existing brands in the market that support British farming (eg. Silver Spoon versus Tate & Lyle, Country Life versus Lurpak). Where these exist, they should be more strongly promoted to increase share of the market and leverage their positive links to farming. It is madness that in our home market the leading brand of butter is Danish (Lurpak has a 39% market share, Anchor 23% and Country Life 8%).
6. Communications activity
The industry needs to develop strong and sustained communications activity to promote quality British produce to the consumer. Professional agencies from each discipline should be used to develop the work and determine the key messages. Activity should not fund imported produce and different strands of activity should cover:
o National, regional and local quality home produce
o All target audiences (consumers, school children, opinion formers, media and government)
o All routes to market (supermarkets to farmers’ markets, restaurants)
o All sectors
Commercial money could be used to deliver this if state aid rules block any DEFRA funding routes.
7. Examine the state aid rules
The levy bodies (eg. MLC, MDC, HGCA) are not allowed to promote British produce in their own market under state aid rules. This means that British farmers’ money goes to fund activity that promotes generic produce (eg. buy lamb) and also supports sales of imported produce (eg. NZ lamb).
Under state aid rules, a member state (eg. Britain) is allowed to promote British produce in another member state (eg. France), but this is not the remit of the levy bodies. This is the role of Food From Britain.
As a result, much of the communications activity for the industry is ineffective. Consumers are not given a reason to buy British produce versus imported produce. The overall image of British Agriculture is never improved.
This ruling appears to cloud industry thinking and funding of activity. For example, the tobacco industry is restricted from advertising by many stringent rules and yet has produced some of the most memorable advertising (eg. Silk Cut). In other words, the communications agencies are highly skilled in developing effective communications activity to reach the consumer no matter what the rules are.
DEFRA appear to block grant applications for activity without even considering the possibilities. In France and Austria, the Government departments actively encourage the promotion of their agriculture industries.
Farmers should be informed about the rules and how they can be applied. Existing restrictions should be reviewed and any problems addressed.
8. Commercial focus
Commercially funded activity is not restricted by state aid rules. This means that a commercially funded advertising campaign can promote the reasons for buying British produce whilst the levy bodies can not. If a number of producers banded together they could produce their own activity and not be restricted by the rules.
These ‘farmer producer’ marketing groups could also develop major brands in fresh produce to compete with imported produce. Brands can control their own country of origin labelling and promote this through advertising. The beer market uses country of origin to its advantage in much of its advertising.
- Australian XXXX, Castlemain
- US, Budweiser
- Japan, Sapporo
- Denmark, Carlesberg
- French, Stella Artois, Kronenbourg 1664
Farmers should look to other sectors and overseas for best practice.
9. Increase our share of EU promotions budget
The industry must be more proactive in applying for grants to fund communications activity.
Much of the EU money available to farmers goes unclaimed. In other words, British grant money goes to fund our foreign competitor activity due to lethargy in our own industry.
Country Allocation of 19 million Euros (Milk, Vegetables and Wine Promotion Budget)
Source: FarmBusiness (26/06/03)
10. Recognise the benefits of marketing projects
Lack of marketing skills in key industry positions have prevented several marketing initiatives from getting off the ground. The industry bodies need to invest in marketing skills to deliver these projects or direct farmers to people who can help them. The NFU HQ is a major problem in this area.
11. Exploit new routes to market
The consumer shops in many different locations. Banks have recognised this and placed their cash point machines in many new places to meet the needs of their customers (stations, airports, garages forecourts, shops, hospitals).
Farmers could develop ‘new retail ventures’ to compete with the supermarkets and meet the needs of customers (24hr shopping, car parking, beautiful environment, 100% local produce, easy access). These should include garden centers, super farmer markets, countryside trust food shops as well as farm shops.
12. Promote the total benefit of British farming to the UK economy
The economic benefits of farming are currently measured in terms of farm incomes and jobs. The wider benefits of farming to the UK economy tend to be ignored. For example, how much does British dairy farming contribute to the UK economy in terms of:
o Direct contribution (farm incomes, jobs)
o Related industry (haulage, vets, feed suppliers, financial services, food processing)
o Associated industry (tourism, health, recreation, education, environment)
Once the total value has been calculated, this should be promoted to help to raise the importance of farming industry up the political agenda.
13. Make the farmers’ problem a consumer and government problem
The consumer does not appear to care about the decline in the farming industry. This is because farmers always complain about how it is hurting them and their wallets. Farmers have never communicated how the decline in their industry will impact on the consumer.
Without British dairy farmers, where will fresh milk for babies come from?
Will our food supply be secure if it is produced outside the UK?
Who will set the rules about foreign food production?
The food industry does not appear to be worried about the loss of British farming. Supermarket buyers seem to think that they will simply be able to import more food from abroad.
But how will this affect the cost base and company profits for food manufacturers?
Will the food manufacturing industry simply move abroad?
There does not appear to be any analysis of the economic impact of the loss of dairy farming on UK food manufacturers. Farmers are very good at presenting their case for an increase in milk prices, but are not good at presenting why this is also in the interest of the food industry.
The economic case does not appear to be there. The industry should enlist the support of other business economic advisers.
Farmers should enlist the food industry and consumer to champion their cause.
And finally government
How will the loss of our farming industry effect government? Will we remain in control of our food policy or will we become hostage to foreign interests? How will government control:
- Food terrorism
- Rapid spread of diseases (eg. Avian flu)
- Biosecurity (eg. GM contamination)
- Relocation of the manufacturing base (eg. jobs moving abroad)
British farmers are operating in a highly competitive marketplace with many powerful, established players. They need help becoming market - focused and some degree of protection for new marketing initiatives when existing players are operating against them (eg. supermarkets vs farmers’ markets).
The industry needs to link up to the powerful marketing machine that is at its disposal but is not currently being exploited – the marketing and communication agencies.
The government, industry bodies and related industry sectors need to help the farming industry through this transition process. This is urgent and essential.
Some of the action points will need prioritising as farmers are leaving the industry. Farms are going out of business. We are in the process of losing one of our most important and valuable industry sectors.