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par Emilie Schaefer4 May 20200 commentaires

[Saga 1/3] How consumers are driving retail transformations: More suppliers and products

Whether in the interest of their own health or that of the environment, more and more consumers are seeking out information about product origins and composition, with a clear objective in mind: prioritise the most “natural” products, as well as those from short distribution channels and locally-made products.

This demand, along with a decrease in the cost of production tools, has led to a direct increase in the number of small businesses offering domestically or regionally-made products.
According to data from the French National Association of Food Industries (ANIA), small and medium-sized businesses are seeing dizzying growth. In 2013, the agri-food sector had 11 852 businesses, a figure that rose to 17 647 in 2017.

Even more significantly, very small businesses (those with a turnover below 2 million Euros), as well as small businesses (with a turnover between 2 and 50 million Euros) and medium-sized businesses (with a turnover between 50 and 250 million Euros) accounted for 70% of the growth of hypermarkets and supermarkets over the past 5 years. This contribution is even more notable in that these businesses represented “only” 21.9% of market shares in 2018. In addition, decreases in logistical costs and customs restrictions are opening the French market to more and more European and international suppliers.

The result is that the 10 businesses who saw the greatest sales revenue growth in 2019 in France includes 9 businesses with a turnover below 200 million euros. Some of the actors emblematic of this trend, Ethiquable, Novamex and Swania, saw 10% to 20% sales turnover growth.

More and more products

“For years, and despite statements made by retailers that they were looking to reduce their product range, we have observed the growth of these ranges, notably to the benefit of small brands, though the phenomenon has been slowing down over the past few months”, explained Sébastien Monard, Marketing and Communications Director at Nielsen. While retailers are indeed tending to concentrate on a “common foundation” of product ranges, stores are more and more frequently choosing to highlight what makes them unique by focusing on their local presence: very small businesses have seen their listings increase by 7%, small businesses by 9% and medium-sized businesses by 6%. Meanwhile, large companies are seeing an increase of only 3%, with increases around 1% for private labels.

 

Local products are leading these fast-growing categories — along with organic products, of course, which grew by 15.7% between 2017 and 2018, earning a global sales revenue of 9.7 billion. On retail store shelves, the number of certified organic products are increasing. Private labels, SMEs and national brands are expanding their offering by developing new organic products. Very small, small and medium-sized businesses are currently very well represented when it comes to organic products, accounting for 44% of the offering, while representing 26% of fast-moving consumer goods and self-service prepared meals. “The number of products is, nonetheless, growing faster than the sales turnover”, added Nielsen’s marketing and communications director.  

Nonetheless, it has become imperative for stores to differentiate via their product range. Food policy laws in France have made it more challenging to differentiate through pricing, so the variety of products in a range is now a key draw for customers. Especially given that the size of a product range is directly linked to store performance: the top-performing hypermarkets are those with the most products in their range. 

This saga is based on our Supplier Relations 3.0 white paper which analyses retail transformation and propose some insights on organizational models to answer to the new challenges of this industry.

Download White Paper