Trends Summer University (2/4): "It's not normal to find chicken at 2 or 3 euros per kilo" - Companies

Trends Summer University (2/4): “It’s not normal to find chicken at 2 or 3 euros per kilo” – Companies

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“Food crisis, e-reputation, new consumption habits: how to adapt to it?” This was the topic of a very lively roundtable at Trends Summer University. On the menu: prices, durability and more prices.

After months of confinement favorable to the world of distribution, the awakening in 2022 is cruel. Carrefour lost 7% of its sales in Belgium in the first half and Colruyt announces a decline in its margins for the financial year 2022 while its retail business fell by 1.7%. The war in Ukraine, the various shortages that have arisen and a substantial price increase have created an unstable context. So many themes addressed on June 11 at the Trends Summer University 2022, in Knokke, during the round table “Food crisis, e-reputation, new consumption habits: how to adapt to it?” moderated by Pierre-Alexandre Billiet, CEO of the Gondola platform.

After months of confinement favorable to the world of distribution, the awakening in 2022 is cruel. Carrefour lost 7% of its sales in Belgium in the first half and Colruyt announces a decline in its margins for the financial year 2022 while its retail business fell by 1.7%. The war in Ukraine, the various shortages that have arisen and a substantial price increase have created an unstable context. So many themes addressed on June 11 at the Trends Summer University 2022, in Knokke, during the round table “Food crisis, e-reputation, new consumption habits: how to adapt to it?” moderated by Pierre-Alexandre Billiet, CEO of the Gondola platform. One thing, however: some do better than others. “We have broken sales records in recent weeks,” said Jan Peeters, general manager of the Peeters Govers group, Albert Heijn’s main franchisee in Belgium, but also active with KFC and the Peeters Govers butcher chain. “The group has grown by 5% since January while the market has fallen by 9%”, notes Pierre-Alexandre Billiet, who recalls the success of Jan Peeters, who transformed a group with a turnover of 25 million euros. euros into a package that currently exceeds 250 million. How is it possible to grow further in recent months? Jan Peeters, who is the third generation of this family group, highlights the organization of Ahold, the Dutch group which owns Albert Heijn. “Many brands rely on promotions. But with us, all promotions are based on specialized logistics. Admittedly, my answer is not very romantic, but that is how we can bring value. ” All suppliers in the market are feeling the strains affecting consumers. “It’s very difficult for us, recognizes An Vermeulen, VP & country manager Belgium-Luxembourg of Coca-Cola. The consumer wants more sustainable products, more personalization, more health. But when we observe his behavior, he wants also fair prices, products with good taste. We must therefore navigate this paradox, between the requirement of sustainability, health, and the cheapness.” But promotions remain a driving force. “They work better the week following the payment of the salary. At the end of the month, they give less results”, continues An Vermeulen. Michel Mersch, CEO of Nestlé Belgilux, deplores the anxiety-provoking climate. “By dint of talking about the crisis all the time, even those who are not affected enter into a psychological pattern and modify their consumption, buy less or differently. We should rather talk about momentum. We must seize the current momentum to rethink the world today, agriculture, to restore value to our sector of activity.” “Since I arrived in Belgium in 2005, there have been momentums all the time,” jokes Xavier Rombouts, CEO of the eponymous coffee producer, who previously worked in France. “Financial crisis, attacks, Brexit, covid, now inflation due to the war in Ukraine. Normal situations no longer exist. You have to know how to navigate all the waters. But it’s more complicated for small family companies than for the big ones.” Consumers go to extremes. “During covid, the catering industry was closed, the consumer went to stores to treat themselves by buying quality products,” says Michel Mersch. Especially organic. “Since the war in Ukraine and the inflation, we have the feeling that people are paying more attention, are more interested in the first prices, are going to hard discounters. We have even seen a new hard discounter, the Russian Mere, arrive. I don’t understand how this could be allowed.” Will recent trends (more own brands and hard discount) continue? Food has fallen significantly in the share of expenses. According to the calculations of Pierre-Alexandre Billiet, it weighs about 12% of the household budget, whereas it once represented 40%. For Michel Mersch, a shift in the sector remains essential despite the crisis. “It’s not normal to find chicken at 2 or 3 euros per kilo, he believes. We must restore more substantial value to our sector. Food is not only a physiological need, it has also a social, cultural and pleasurable role. It will be necessary to agree to pay more for food in the future. This is possible since the share of the budget is only 12%, even if it is more, it is true, for low incomes.” It is necessary to improve the quality, to leave the approach commoditisation which prevailed in the sector. It is also in the interest of farmers. “Today, breeders earn absolutely nothing, something has to be done,” recalls the CEO. “More expensive, but how much more expensive?” asks Charles-Alexandre Billiet. “I am not going to give figures, but today, it is true that we do not pay the right price for food, advances An Vermeulen, of Coca-Cola. Moving towards more sustainable consumption has a price. you have to find local suppliers, invest locally.” Michel Mersch also believes that another crisis, creeping, should in any case push to anticipate a food transition. “The price of coffee has risen sharply for two years. Long before the war in Ukraine. Not least because of climate problems. We must accelerate a transition to a more sustainable approach. There are two things to do, from my point of view First, move as quickly as possible to regenerative agriculture, which is more virtuous, which makes it possible to capture CO2. It produces better yields on average, and more acceptable incomes for farmers. It also solves the question of soils, which have become so poor that the nutrient content of crops is decreasing. Secondly, we need to review our protein model. Currently, 40% of crops are used to feed livestock. Is this still acceptable? Does it make sense to allocate crops to fuels? The price of petrol is pushing people to look for alternatives. The war in Ukraine will eventually calm down, but the climate crisis will not be over.” For Jan Peeters, Ahold (Albert Heijn) is doing his part in this area. “We’ve taken a lot of sustainable food initiatives at Ahold to eat better.” There are, for example, Beyond Meat promotions (plant-based meats) in the middle of the barbecue section. And An Vermeulen reports that Coca-Cola has reduced sugar in half of its assortment, “even if in the end, it is the consumer who decides.” Xavier Rombouts believes that he has also taken initiatives towards sustainability in his field. “Crisis or no crisis, we roast coffee the old-fashioned way according to knowledge passed down from generation to generation. We have partnerships with cooperatives of independent producers and, as a pillar, our Fairtrade certification. We are known for our plastic filters launched in the 1960s. But we have also launched a 100% compostable version, which means more than 200 tons less plastic per year. Of course, it costs more.” The ECO expects governments to take action to encourage these more virtuous approaches. “In England there is a plastic tax,” he recalls. Jan Peeters is less enthusiastic about a price increase. “I am ready to reduce my margin by 10% tomorrow but on the condition that the whole chain, including the suppliers listed on the stock exchange, does it too.” “It’s true, in the short term, sustainability costs more, recognizes Michel Mersch. But I remain convinced that this will not always be the case. Let’s go back to regenerative agriculture, for example: it is not more expensive to term, because it requires fewer inputs, less labour. But the transition is complex, and there is an additional cost to make it. You have to, for example, buy new agricultural equipment, which is radically different. The first years are therefore complicated. At Nestlé, we have already invested 1.5 billion euros in this approach.” After this round table, an exchange with the audience highlighted a subject not covered by the speakers: e-commerce and its potential impact. “We always talk about Colruyt, which is fighting against Albert Heijn or Jumbo. But what about Amazon, which is also very active?” Asked Thierry Geerts, CEO of Google in Belgium. “We don’t talk about it much because many numbers are invisible,” admits Charles-Alexandre Billiet. We often talk about thousands, even tens of thousands of jobs lost because of e-commerce in Belgium. But in fact, we don’t know….” “In food, the share of e-commerce remains low, relativizes Michel Mersch. But in some segments it weighs very heavy. Sometimes a quarter of the market, as in products for dogs and cats. An online pet store like Zooplus is very important. Currently, we are experiencing a relative decrease in e-commerce but it is cyclical, it will pick up momentum. We continue to believe too much that we live on an island.”

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