Local food and big retailers

By Maureen Aylward

Walmart, Supervalu, Safeway and other retailers in the US are increasing their locally grown produce selection to save on transportation costs and appeal to consumer preferences. We asked our Zintro experts to comment on this trend.

Lane Parker, a produce manager and retail operations manager, says that the first step is to define what local means. “The term local has no formal definition. For it to be an effective advertising tool there needs to be a definition of boundaries. Some retailers are using 50 miles from the farm location to the distribution center as a definition; others are using 100 miles,” Parker explains. However, she points out that in California, most of the produce would be defined as local, and this is an issue. “Some items being touted as local are grown where they have always been grown. For example, lettuces for most of the US are grown in the Salinas Valley during the spring and summer months. While that may be local to Fresno or Sacramento, do these products qualify to earn the term local? It is important to define the term because growing practices differ between large agricultural farms and smaller farms,” she says.

Nick Richards, a senior business advisor to UK grocery management and retail, says there are advantages and risks to local providers working with big retail chains. “The advantages are increased exposure and credibility for products, a potential high volume market, and certainty of payment. Risks, which can be significant, include pressure on margins as these retailers will drive a hard bargain and almost certainly pay less than smaller customers,” says Richards. “Other risks include delayed payments, which is quite typical in these large corporations, and loss of loyalty from smaller customers as they can feel betrayed when you sell to major supermarkets. One other major risk is that smaller producers can become too dependent upon these large customers who may press for increased volume, lower prices, and then drop them when they get a better deal elsewhere.”

Gerald Sutton, an expert in UK food manufacturing and retail, says that it is important to be clear about what the outcome looks like. “It is my belief is that the aim should be fairly priced food that tastes good and supports the communities where it is produced, while still maintaining the consumer’s ability to support ongoing overall growth in the economy,” says Sutton. “Retailers have driven down prices in their continued challenge to improve profitability (with the approval of the consumer), and small suppliers have not been sufficiently organized to fight back. Farmers are finally realizing that they have an opportunity to influence if they work together within co-operatives and other producer groups. The farming lobby believes that to have some influence it needs to shorten the supply chain and cut out the middleman.”

Sutton says that consumers have gotten used to buying uniform and consistent quality food. But, to support local food growth in the UK, there needs to be a change in the way UK retailers collect and distribute fresh food within their depot networks, which are currently designed to manage large volumes sourced centrally and distributed nationally.

“There is no doubt that the consumer’s thinking is changing, but this is a slow process and could take many years to get to a point where attribution and quality matter more than availability and price,” says Sutton. “Retailers are more aware of the financial benefit of using better ingredients and regional sourcing of products, but few are actively promoting this except where they are they tend to have customer bases that are more affluent and willing to pay extra for the right products. The real challenge is to get to the point where everyone can and chooses to buy product that meets their expectations and supports the local community.”

Sutton says that to accelerate this there needs to be more focus on informing the public of what the true costs are both financially and environmentally and what the alternatives could cost, allowing consumers to form an educated view. “If consumers can see and believe in tangible benefits to local communities through more regional / local supply then they will demand change, and price will not be the key driver,” he says.

Nick Richards, a senior business advisor to UK grocery management and retail, says there are advantages and risks to local providers working with big retail chains. “The advantages are increased exposure and credibility for products, a potential high volume market, and certainty of payment. Risks, which can be significant, include pressure on margins as these retailers will drive a hard bargain and almost certainly pay less than smaller customers,” says Richards. “Other risks include delayed payments, which is quite typical in these large corporations, and loss of loyalty from smaller customers as they can feel betrayed when you sell to major supermarkets. One other major risk is that smaller producers can become too dependent upon these large customers who may press for increased volume, lower prices, and then drop them when they get a better deal elsewhere.”

Our experts would love to hear from you!  Post your question for Local food and big retail industry experts here.  Are you a subject matter expert?  Sign up as a Zintro expert to start generating free leads for your business.

Comments

  1. Thank you, I’ve been on the lookout for info about the following topic for a short time plus the ones you have works miracles I’ve observed thus far. In spite of this, exactly what in regards towards the financial well being? Are you feeling confident over the present?

  2. I just most definitely trust find out what you currently have suggested. Realistically, I actually shopped through your various blogposts but that you’ll be absolutely correctly. Congrats because of this webpage.

  3. As someone who has worked for a major retailer and has advised hundreds of companies in how to deal withe giants my first question is always to small supplier: “Why do you want to enter this market place”. Often they don’t know and worse still are doing for an ego rather than a busines reason. They are incrediably vulnerable. Changes of buyers, margin pressures, recognition by major manufacturers that their sector is worth entering can all lead to diaster. Think long and hard is my advice, know your retailer and its customer base and at alll costs do not become dependent on one or two retailers for your survival.

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