Challenge and change defined 2020 like few other years in food & grocery, and they’re set define 2021 too, though (fingers crossed) not in quite the same way. I’m confident the supply chain legends of 2020 will retain their place in industry history.
Rather, 2021 will set the groundwork for what will likely be a major shift in the sector. And while some of this has been coming for some time, the events of 2020 have helped push it along.
That includes some of the eating and buying habits picked up during the Covid-19 lockdowns, such as greater focus by consumers on health and wellness and good nutrition. If there was something good to come out of the lockdowns it was that more people moved towards healthier products. That trend was continuing through to the end of the year, and I see no reason it will stop.
The same goes for cooking and eating meals at home, and the trend to boxed and ready-meals, which are in line with our more-bunkerish mentality as we watch the pandemic run rampant overseas. Where possible, suppliers and retailers have met this change.
The trend toward keeping our pantries a little fuller than previously is likely to continue to mean fuller shopping trolleys, which will demand excellence from the supply chain, though if it can handle the lockdowns, it can handle anything.
External factors, though, are another matter, with the surge in demand for goods from China, industrial action at Australian ports forcing cancelled sailings to our small market, and a shortage of containers worldwide combining for a perfect bottleneck storm.
Despite a massive effort from government agencies and transport and sector associations, only so much can be done, and it seems likely this disruption will flow well into 2021 – some are suggesting the middle of the year.
It’s not just imports, because fewer ships coming in mean fewer to send back with our exports. So that’s a problem. It was great to see the International Airfreight Capacity scheme being extended to March to ensure critical freight and exports keep flowing. All these delays mean extra freight and logistics costs, which will eventually flow into the cost of goods. Add in the increased cost of doing business, such as the increase in the minimum wage and an extra week’s sick leave a year, and expect prices to rise higher in 2021 than they did in 2020.
Which leads to the Commerce Commission’s supermarket review, which has pricing and competition at its core.
Its terms of reference range from the structure and competition of the industry at wholesale and retail levels, retailer pricing and procurement practices, the price, quality and product range available to shoppers, private labels, and promotional activity. But it also intends to consider competitive outcomes, including the margins and profitability of retailers.
It states: “The purpose … is to look at whether competition is working well for consumers, and if not, what can be done to improve it. It doesn’t look at prices in isolation. However, if retail competition is working, this will benefit consumers through the prices they pay for groceries, the quality of groceries being sold, the range of groceries available and the service that is offered.” I’m sure that last sentence sums up what we all want to see. November, when the commission reports, should be an interesting month, as should early 2022 when the Government is expected to respond.
The Food & Grocery Council believes a natural progression of that report will be a move towards the formation of a mandatory Grocery Code of Conduct, similar to that established in Australia in 2015 after their market study. In the meantime, I hope to be talking during the year to my parliamentary petition which called for our own Code. As always we will be putting the case of suppliers accurately, truthfully, and professionally.
It’ll be a busy year.
(originally published in FMCG Business magazine Leaders Forum 2021)