Understanding the UK Food industry This information will help us to understand the industry and enable us to develop the

marketing strategy.

This synopsis examines the trends and developments affecting the food and grocery retail market in the UK. It provides information targeted specifically at new, existing or aspiring small business owners who are aiming to trade or develop their interests within this sector. The synopsis includes details of market segmentation and performance, consumer profile and factors affecting demand, current trends and influences, and Government standards, regulations and initiatives. A list of key sources of sector information is also included. The annual UK food and groceries market is worth 150 billion and is growing year-on-year. The market can broadly be divided into four segments: supermarkets; convenience stores; traditional retailers; and online retailers. Supermarkets have a 71% share of the overall market value. However in terms of number of businesses, there are more than 83,000 convenience stores and traditional retailers in the UK, compared to less than 8,000 supermarkets. Market summary at a glance

The key factors affecting the food and grocery retail market can be summarised as follows: Size of the market There are around 91,500 food and grocery stores in the UK, and the market is valued at 150 billion. The market value continues to grow year-on-year, although the rate of growth is falling. The market showed an annual increase in value of 3.1% in 2010, compared to 4.8% in 2009, and 6.5% in 2001. Spending on food and groceries accounts for 53p in every 1 of retail expenditure. Big four dominance The food and grocery market is dominated by the so-called 'big four' supermarkets - Tesco, Sainsbury's, Asda and Morrisons. Between them, the big four hold 43% of the food and grocery market, and 70% of the supermarket sector. Tesco is the UK's biggest food and grocery retailer, and it holds the single biggest share of the supermarket sector - 28.1%. At the end of 2010, Tesco had 865 stores in the UK, and was expanding at an average rate of 5% per year. Rise of the discounters Discounter supermarkets such as Lidl and Aldi hold an increasing share of the UK food and grocery market. Discounters typically sell a smaller range of goods at lower prices than their larger competitors. Discounter supermarkets hold around 4% of the UK market share, but they are growing rapidly. Figures released in June 2011 showed that Lidl and Aldi had increased their market shares by 16.1% and 15.4% respectively over the previous year. Online growth

Online food and grocery retail is growing rapidly, and its market share increased by more than 20% in 2010. Supermarkets Tesco, Asda, Sainsbury's and Waitrose already operate online, alongside online specialists Ocado and Amazon. Marks & Spencer and Morrisons are also set to launch online services. The value of online food and grocery retail, 4.8 billion in 2010, is forecast to double to reach 9.5 billion by 2015. Changing demands Changes in demographics, an ageing population, increased immigration and longer working hours among other factors, have led to changes in the food and grocery requirements of many consumers. Key demands include an increased need for convenience and pre-prepared food, Halal, Kosher and special diet foods, and overseas cuisines. Consumers are also increasingly choosing premium foods over cut-price alternatives. However, price still remains a key factor informing consumer choices. Food price inflation Food prices have increased in recent years, even when overall inflation has fallen. The inflation rate on food and non-alcoholic beverages reached 6.9% in July 2011, and rising raw food commodity prices meant further inflation was being forecast. Some experts argued that inflation was good for food and grocery retail, however in difficult trading conditions many retailers are wary of passing on price rises to consumers. Efforts to maintain profit margins without passing on costs to consumers have included reduction of pack and portion sizes in order to maintain price points. Convenience stores buoyant Despite the competition from supermarkets, the convenience store segment is increasing in value year-on-year. The convenience store segment was valued at 32.1 billion in 2010, an increase of almost 10% on the previous year. Forecasts suggest the segment will be valued at 41.3 billion by 2015. A major share of the convenience store market is held by symbol groups, such as Spar, Premier and Londis. Symbol group convenience stores were valued at 12.1 billion in 2010 which represents around 37% of the segment. A notable trend has seen an increasing number of independent stores moving under symbol group umbrellas. Traditional retailers closing A large proportion of traditional food and grocery retail stores have closed in recent years, largely due to competition from supermarkets. Convenience, tobacco and news (CTN) stores, off-licences, bakers, greengrocers and other stores have all been affected. Fishmongers and greengrocers have been among the worst affected, with the number of stores falling between 2009 and 2010 by 11.4% and 5.1% respectively. However, not all traditional retailers are struggling, and the number of butchers in the UK increased by 1.4% between 2009 and 2010.

Market segmentation and performance

Key segments in the food and grocery retail market and recent developments within them can be summarised as follows: Supermarkets Supermarkets sell a broad range of grocery items, and some also sell non-food items such as homeware, clothing and home entertainment. Each outlet typically has a large sales area of more than 3,000 square feet. The UK supermarket segment is valued at 107.8 billion, representing more than 70% of the overall food and grocery market, according to IGD Research for the calendar year 2010 (www.igd.com/index.asp?id=1&fid=1&sid=7&tid=26&cid=94). Large supermarkets are often referred to as superstores or hypermarkets. Superstores typically have a sales area of more than 25,000 square feet, and hypermarkets usually have more than 60,000 square feet. There are 7,970 supermarkets, superstores and hypermarkets in the UK. The largest share of the supermarket segment is held by Tesco, which has 28.1% of the market. According to figures from Nielsen for February 2011, Sainsbury's has a 15.7% market share, Asda has 15.5% and Morrisons has 11%. These are often referred to as 'the big four'. The Co-operative Food has a 6.8% share. Other major players in the market include Waitrose, Marks & Spencer and Iceland. For more details go to www.nielsen.com/uk/en/insights/top10s/grocery.html. The supermarket sector can be broken down into the following sub sectors: Multiples. Also known as national chains, these are the big brands that own multiple stores around the country, such as Tesco, Sainsbury's, Asda and Morrisons. For the purposes of competition analysis, the Government classes any supermarket with more than ten stores as a multiple. According to the Grocery Retail Structure 2010 report (www.igd.com/analysis/content/Documents/Files/UK-Grocery-Retail-Structure-2010.pdf), the UK has more than 25 multiples. The multiples segment is valued at 94.5 billion, representing around 87% of the overall value of the supermarket segment. Several multiples also trade in the convenience store and forecourt segments. Tesco is the market leader in this sub segment, and indeed in the overall food and grocery market. Tesco has 865 UK stores, including 335 supermarkets, 338 superstores and 160 hypermarkets, according to IGD figures for 2010. That represents an increase of 5% on the number of stores held in 2009. Iceland Frozen Food has 767 stores, and Sainsbury's has 537. The major multiple showing the largest increase in the number of stores is Waitrose, which had 227 stores in 2010, up from 196 in 2009, an increase of more than 15%. Morrisons increased the number of stores it holds in 2010 by almost 10%. Discounters. This sub segment consists of supermarkets that sell smaller ranges of mainly imported 'own brand' goods at lower prices than the branded goods sold by their larger competitors. Discounters operating in the UK include German chains Lidl and Aldi. Discounters operate relatively small supermarkets rather than the superstores and

hypermarkets operated by the large multiples, and typically sell fewer than 2,000 different products, compared to the 20,000 to 30,000 different products sold by large multiples. There are 1,240 discounter supermarket stores in the UK, and the discounter sub segment is valued at 6.4 billion, according to IGD Research. Lidl is the most prominent discounter in the UK supermarket segment, with 530 stores in 2010, up 4.3% from 508 in 2009, according to the Grocery Retail Structure 2010 report. Aldi has 420 stores, Farmfoods has 310 stores, and Heron Frozen Foods has 150 stores. Lidl and Aldi increased their market share by 16.1% and 15.4% respectively in the year to June 2011 (www.marketresearchworld.net/index.php?option=com_content&task=view&id=4095&Ite mid=76). Other major discounters include operators that sell a limited range of food and grocery items alongside other items, such as Home Bargains, Poundland and B&M Retail. One of the largest discounter brands, Netto, was purchased by Asda in 2010 for 778 million. In 2011, Asda began a campaign to convert the 193 UK Netto stores into Asda supermarkets. This is an attempt to increase Asda's high-street presence and compete with smaller 'pocket supermarket' stores operated by rivals such as Tesco and Sainsbury's. For more details go to www.guardian.co.uk/business/2010/may/27/asda-buys-netto. Co-ops. Co-operative societies, which are run for the benefit of consumer members, operate 1,402 supermarkets in the UK, and the sub segment is valued at 6.3 billion according to IGD. The co-operative movement created what is now known as the supermarket in the 19th century, when independent retailers came together to create a bigger presence. Perhaps the most familiar co-op supermarket brand is the Co-operative Food. However more than ten other regional co-op societies operate multiple supermarkets, and several co-ops operate individual supermarkets. Co-ops also trade in the convenience store segment. Co-operative Food is by far the largest co-op supermarket operator, with 1,017 stores in the UK according to the Grocery Retail Structure 2010 report. Other co-op supermarket operators include the Midlands Co-operative, which has 62 stores, and Midcounties co-operative, which has 58 stores. The Co-operative Food figure includes 485 stores formerly owned by Somerfield, which was acquired by Co-operative Food in 2009. All former Somerfield stores were intended to be rebranded by mid-2011. However, despite the Somerfield takeover, Cooperative Food is operating a store disposal programme, which saw it reduce its number of supermarkets by 16.2% between 2009 and 2010. Despite being one of the largest food and grocery retailers in the country, Co-operative Food has stated an intention not to attempt to compete with the large multiples on price and range, and instead focus on taking an ethical stance, for example by promoting Fairtrade goods. Independents. There are 104 independent supermarkets in the UK, and the sub segment is valued at 0.6 billion. According to the Grocery Retail Structure 2010 report, the largest operator is Budgens, which has 107 supermarkets and also trades in the convenience store sector. Budgens increased its supermarket presence by 23% between 2009 and 2010. Other independent operators include Supervalu with 42 stores, and Eurospar with 25 stores. Eurospar, owned by Spar International, entered the UK market in 2009 in what was seen as a significant milestone for the independent supermarket sub segment. Eurospar supermarkets are typically three times larger than traditional Spar convenience stores.

Convenience stores This segment is comprised of relatively small (less than 3,000 square feet) stores selling a range of different food and grocery items. Sometimes referred to as c-stores, they are generally characterised by long opening hours, and some also operate as off-licences and newsagents. There are 48,289 convenience stores in the UK, and the segment was valued at 32.1 billion by IGD at the end of 2010. Despite strong competition from supermarkets, the convenience store segment value has increased in recent years, up almost 10% from 30.9 billion in 2009 to 32.1 billion in 2010. This followed a 6% rise in the previous year. The segment is forecast to reach 42.6 billion by 2015. Much of this growth is attributed to a realignment within the market, with stores focussing on promotions and tailored ranges to trade more effectively. An increased demand for convenience shopping, driven by factors including longer working hours, has also benefited convenience stores. More than a fifth of the total spend on groceries in the UK is spent in convenience stores. The convenience store sector can be further divided into the following sub sectors: Symbol groups. This sub segment consists of franchised stores owned by independent retailers. Stores take a symbol group's branding, and typically commit to sourcing a set amount of stock from the group. Key symbol group brands include Spar, Premier and Londis. Symbol groups represent the fastest-growing convenience store sub segment, with 16,072 UK stores at the end of 2010, up almost 10% on the previous year. According to IGD, the sub sector is valued at 12.1 billion, which represents around 37% of the overall sector. The largest symbol groups in the UK are Spar and Booker, which have 2,580 and 2,507 stores respectively. Booker operates the Premier and Premier Express brands. Other major groups include Bestway, which operates Best-one and Best-in, Landmark Wholesale, which operates Lifestyle Express, and Musgrave Retail Partners, which operates Londis and Budgens. In addition, there are several affiliate groups, for example Tates and Waynes Foods, which have a total of 324 stores, are affiliates of Spar. Convenience store multiples. There are 2,912 multiple or chain convenience stores in the UK, and the sub sector is valued at 5 billion, around 15% of the total convenience store market. In addition to operating in the supermarket sector, multiples such as Tesco, Sainsbury's and Marks & Spencer also operate in the convenience store sector, under brands such as Tesco Express, Sainsbury's Local, and Marks & Spencer Simply Food. There are also several dedicated convenience store multiple operators, such as Martin/RS McColl and Mills. According to the Grocery Retail Structure 2010 report, Tesco has 1,662 convenience stores, up 15% on 2009. Sainsbury's has 342 convenience stores, up 27.6% on the previous year. McColl has 523 stores, and Mills has 80. Co-op convenience stores. This sub sector represents convenience stores operated by cooperative societies. As in the supermarket sector, the Co-operative Food is the dominant brand in co-op convenience stores. The Co-operative Food has 1,749 stores. Co-ops such as Midcounties, Southern and Midlands have between 100 and 160 stores each. In total, there

are 2,448 co-op convenience stores in the UK, and the sub sector is valued at 3.8 billion according to IGD. Independents. The biggest proportion of stores in this sector are non-affiliated independents. There are 20,351 independent convenience stores in the UK, and the sub sector is valued at 6.9 billion according to IGD. However, the number of independent stores is falling, down 5% from 2009 to 2010. This has largely been driven by moves into the symbol group sub sector, and by closures. Forecourts. Forecourt convenience stores are located at petrol stations, and operated by fuel companies, dealers, grocery multiples, and independents. There are 6,506 forecourt convenience stores in the UK, and the sub sector is valued at 4.3 billion, according to IGD. Overall, the number of standalone forecourt stores is falling, down 2.2% between 2009 and 2010. The number of independent forecourt stores fell by 5.5% over the same period. Excluding forecourt stores that are attached to supermarkets, Co-operative Food operates 208 standalone forecourt convenience stores, Tesco operates 197, and Marks & Spencer Simply Food has 125. The fuel companies have more stores in this sub sector than the multiples, with Esso operating 592 stores, Shell operating 582, and Total having 505. However, the sub sector is dominated by independents, with 4650 independent forecourt stores in the UK. Traditional retail This segment comprises a range of stores including convenience, tobacco and news (CTN), offlicences, and bakers, greengrocers, butchers and other specialists. According to IGD, there are 35,250 traditional food and grocery retail stores in the UK, and the sector is valued at 6.1 billion. The number of stores in this sector has fallen in recent years, largely due to closures of CTNs and offlicences. This sector can be sub divided as follows: CTNs. According to the Grocery Retail Structure 2010 report, there were 3,643 convenience, tobacco and news stores in the UK in 2010, 4% fewer than in 2009. The dominant operator in this sub sector is Martin/RS McColl, with 744 stores. Rippleglen, which operates brands including Supercigs and Supernews, has 151 stores. CTNs face strong competition from convenience stores, which often provide a broader range of products, and can appeal more to customers. Off-licences. The number of off-licences operating in this sector is failing. There were 3,677 offlicences in the UK in 2010 compared to 4,243 in 2009, a fall of 13.3%. This significant fall can largely be attributed to the failure in 2009 of First Quench Retailing, which operated 1,200 stores. In April 2011, Oddbins went into administration, with 52 of its 127 stores facing closure. The largest operator in this sub sector is Bargain Booze, which has 473 stores. Majestic Wine has 153 stores, and EFB Retail, which operates the Booze Buster and Simply Drinks brands, has 130 stores. Bakers. This sub sector is dominated by Greggs, which began 2011 with 1,487 stores, almost ten times more than any other specialist baker. A rapid expansion plan means it expects to open over 500 new stores over the next few years. However, other than Greggs, the rest of the retail baker sub

sector is in decline, having been squeezed by competition from Greggs, and from in-store bakeries in supermarkets. Butchers. Despite increased competition from in-store butchers in supermarkets, and the increasing availability of pre-packed meat products, traditional butchers have remained relatively resilient. There were 7,084 butchers in the UK in 2010, an increase of 1.4% from 6,984 in 2009, according to the Grocery Retail Structure 2010 report. Consumers value the professionalism and expertise of a butcher, and the knowledgeable advice they receive, and remain loyal to local butchers' shops despite the availability of competition. A small but significant category within the butchers sub sector provides Halal and Kosher meat, predominantly and respectively to the Muslim and Jewish communities. Yell.com lists 336 Halal butchers and 19 Kosher butchers in the UK. Halal butchers are monitored by the Halal Monitoring Committee (HMC, www.halalmc.co.uk), which also provides information on the Halal meat market. Greengrocers. The number of traditional greengrocers is falling in the face of strong competition from supermarkets and convenience stores. There were 1,802 greengrocers in the UK in 2010, down 5.1% on 2009, according to IGD. The fate of the greengrocer is linked to that of the high street as a whole, which has been badly damaged by the rise of the supermarket and out-of-town shopping. However, the fruit and vegetable market as a whole is increasing, being valued at 9.52 billion in 2010, an increase of 29.5% on 2006, according to a Keynote report (www.keynote.co.uk/marketintelligence/view/product/10436/fruit-%26-vegetables). Fishmongers. Fishmongers have been among the worst hit by the effects of competition from other categories of retailer. Most supermarkets have in-store fishmongers, and this has driven customers away from traditional specialists. According to the Grocery Retail Structure 2010 report, there were only 897 fishmongers in the UK in 2010, a fall of 11.4% on the previous year. Farm shops. There are more than 3,000 farm shops in the UK selling food and groceries grown and produced on the farm or by other local suppliers. Typical products include fruit and vegetables, eggs, milk and cheese, meat, baked goods and preserves. UK farm shops are listed at www.farmshopping.net. In addition, there are more than 500 farmers' markets in the UK. These are listed at www.farmersmarkets.net. Delicatessens. Delis stock a range of speciality food and groceries, such as meats, cheeses, breads, herbs and spices. Often delis specialise in stocking food from a particular country, such as France, Italy or Poland. Yell.com lists more than 1,800 delicatessens in the UK. Health food stores. This sub sector includes retailers that supply natural, ethical and environmentally friendly food and groceries. Health food shops include Holland & Barrett, which has around 600 UK stores, and many independents. Yell.com lists more than 2,000 businesses in its health food store category and almost 900 organic food shops. The National Association of Health Stores lists more than 1,000 UK stores in its directory at www.nahs.co.uk. Confectioners and chocolatiers. This sub sector includes multiples such as Thorntons and Hotel Chocolat, as well as numerous independents. The sector has been affected by the increased availability of premium confectionery products in supermarkets and other food and grocery stores. Thorntons directly owned and operated 364 stores in June 2011, but has announced plans to close

between 120 and 180 of them. Thorntons also operates a franchise model, and had 227 stores run by franchisees in 2011. Yell.com lists almost 2,500 confectioners in the UK. Online The online food and grocery segment is valued at 4.8 billion, and represents around 3.2% of the total market. The UK is considered to be the most advanced market in the world for online food and grocery retail, and the market is growing rapidly - increasing by 21.4% in 2010. Technological advances, logistical improvements, and increased confidence among customers mean that the sector is forecast to double in value to 9.9 billion by 2015. This will represent around 5.4% of all food and grocery spend (www.igd.com/index.asp?id=1&fid=1&sid=70&tid=188&folid=0&cid=1499). Three of the big four supermarkets, Tesco, Asda and Sainsbury's, operate 'bricks and clicks' online retail services, allowing customers to order goods online for home delivery. Other major online players are Ocado, which sells Waitrose-branded goods, and Waitrose itself, which has a separate online operation. Online retailing giant Amazon launched a UK grocery store in 2010. Marks & Spencer and Morrisons are expected to launch online operations within the next couple of years. In addition, many specialist and traditional food and grocery retailers operate online, including organic food specialists Able & Cole and Riverford. Customer profile and factors affecting demand

The food and grocery retail market caters for a wide range of demographic customer groups with different needs and preferences, including: Ageing population. The UK population is ageing, and food and grocery retail needs to ensure its offerings cater for older people. 34% of the population is aged 50 and over, and this demographic group accounts for more than half of all food and grocery expenditure. By 2031 it is estimated that 22% of the population will be aged 65 and over, and 5% will be 85 and over. Older customers tend to demand smaller pack sizes, clearer labelling, and health conscious options, and they appreciate personal customer service and a convenient shopping experience. For more details go to www.igd.com/index.asp?id=1&fid=1&sid=17&tid=0&folid=0&cid=100. Ethnic diversity. A high level of net migration into the UK has led to increased ethnic diversity. An estimated 567,000 people came from overseas to live in the UK in 2009 (www.statistics.gov.uk/cci/nugget.asp?id=260). This trend has exposed UK food and grocery retail to other cultural influences, leading to broader customer demand for a wide range of new foods. As well as catering for the demands of immigrants themselves, retailers must cater for the existing population who wish to buy new foods and groceries that they have been exposed to. Special diets. A significant number of consumers have special diets, and retailers are required to meet their needs. Common special diets include vegetarian and vegan, gluten-free, nut-free, dairyfree, wheat-free, lactose-free and low salt. For example, in 2009 a Food Standards Agency (FSA) report estimated that 3% of the UK population is vegetarian, and that 5% is partly vegetarian (www.vegsoc.org/page.aspx?pid=753). The NHS estimates that one in 100 people suffers from

coeliac disease and requires a gluten-free diet (www.nhs.uk/Conditions/Coeliacdisease/Pages/Introduction.aspx). Single person households. The number of single person households is increasing, and single people have specific food and grocery demands. In 2009 almost three in ten UK households were occupied by a single person, and is has been forecast that there will be almost 11 million single person households by 2031. Convenience is the major factor driving demand from single person households, with individual portion sizes and ready-prepared food popular. Single people are less likely to eat formal meals, and may prefer grazing on snacks. Longer working hours. The UK population is working longer average hours, increasing demand for convenience products and leaving less time for food and grocery shopping. An increasing number of people now work 10- or 11-hour days. They are more likely to shop regularly for a small number of items after work than carry out a 'big shop'. This trend benefits convenience stores and other retailers with later opening hours. In addition, almost two thirds of workers do not take lunch breaks, increasing demand for snacks and pre-prepared food that can be eaten at desks and on the move. Halal demand. There are around 2 million Muslims in the UK, representing around 3% of the population, and 90% of Muslims consume Halal meat. Although interpretations of what constitutes Halal can vary, generally Halal meat must be slaughtered by a Muslim, blessed during slaughter, be slaughtered by a cut to the throat, and be fully drained of blood. The majority of Muslims buy their Halal meat from specialist butchers, despite increased availability from supermarkets and other general food and grocery retailers. Trust, product knowledge and range of cuts are key factors in this trend. For more details go to www.eblex.org.uk/documents/content/publications/p_cp_eblex_halal_meat_final_111110.pdf. Regional differences. Customers in different regions of the UK have varying needs and preferences, highlighting the need for retailers to consider local demand when deciding on stock lines. For example, shoppers in London are more likely to prefer organic and other ethically or sustainably produced food, while shoppers in Scotland are least likely to prefer this type of item. Customers in East Anglia and the South West of England are more likely to prefer locally produced food. Shoppers in the South East of England and the West Midlands are most likely to buy own-brand food and grocery items. For more details go to www.igd.com/index.asp?id=1&fid=1&sid=7&tid=10&folid=0&cid=2087. Current trends and influences

Some of the key trends and influences currently affecting the food and grocery retail market include: Brand loyalty. UK consumers tend to shop by brand, and have retained loyalty to key brands despite the economic downturn and the availability of lower cost alternatives. Even discounters, who traditionally rely on importing cheaper own brand products, are increasingly stocking key brands in order to meet customer demand. According to figures from Nielsen, the UK's most popular food and grocery brand is Coca-Cola, with a market share valued at more than 1 billion. Other top brands

include Warburtons, Walkers, Hovis, Cadbury, Kingsmill and Nescafe. For more details go to www.nielsen.com/uk/en/insights/top10s/grocery.html. Local shopping. There are signs that the UK high street is making a comeback, benefiting local food and grocery retailers, but also prompting the large multiples to open 'local' stores. The rise of the car helped the growth of out-of-town supermarkets. However, factors such as rising petrol prices, increased working hours, and a general demand for convenience, is leading consumers to shop more locally. Initiatives such as the Government review into British high streets led by retail expert Mary Portas (www.bis.gov.uk/news/topstories/2011/May/high-street-review) are intended to develop and improve local retail. However, the large multiples such as Tesco and Sainsbury's are increasingly moving into town centres with rapid roll out of Express and Local stores.

Canny shopping. There is a growing trend for consumers to 'top up' their food and grocery shopping at discounters such as Lidl and Aldi. Although shoppers are generally still making a 'main shop' at their favourite supermarket, they are increasingly visiting the discounters to buy selected goods at lower prices. This practise has been dubbed 'canny shopping'. This growing share of the main household shop has seen both Aldi and Lidl grow at a year-on-year rate of almost 18%, reaching alltime high record market shares of 3.4% and 2.6% respectively in June 2011 (www.kantarworldpanel.com/#/Insights/Read/Consumers-topping-up-help-discounters-makeinroads%20). Mobile groceries. The use of smartphones is changing the way consumers shop for food and groceries. 2% of grocery shoppers already use their smartphones for on-the-spot price comparisons, while 16% say they would do like to this in the future. Online retailer Ocado receives 12% of its orders via smartphones, and Marks & Spencer said that 1.2 million shoppers used its mobile website within four months of its launch in 2010. Mobile apps are also important. Tesco launched a barcode scanner app in 2010, allowing customers to scan items - in Tesco stores and elsewhere - in order to add them to their Tesco online basket. Sainsbury's mobile app allows shoppers to find out about instore offers and gain additional Nectar points. In the future, smartphones will become payment methods for food and grocery shopping, with Orange rolling out a mobile payment system in 2011. For more details go to www.igd.com/index.asp?id=1&fid=1&sid=7&tid=10&folid=0&cid=1978. Green food. Consumers are increasingly demanding 'green' food and groceries, produced in environmentally friendly and sustainable ways, and are choosing brands that share their concerns about the environment. This applies to retailer and product brands, with shoppers demanding more than just good value. For example, in July 2011 Waitrose announced plans for an eco-friendly supermarket powered by bio-mass energy, and Heinz launched a range of soups in environmentallyfriendly tubes. However, this desire to 'shop green' only applies to a certain point, and price remains the main factor for consumers when shopping for food and groceries. For more details go to www.euractiv.com/en/consumers/green-image-seen-key-future-business-success-news-506569. Organic sales. Demand for organic products is falling, but remains significant. Sales of organic goods fell by 5.9% to 1.73 billion in 2010, according to the Soil Association (www.soilassociation.org/Businesses/Marketinformation/tabid/116/Default.aspx). Certain categories, such as organic beef and baby foods, showed significant increases in demand. Consumers spend 33 million per week on organic goods, with dairy products and fresh fruit and vegetables

accounting for more than half of all sales. Although organic sales through the large multiples fell in 2010, Waitrose and Marks & Spencer forecast modest growth for 2011. Overall, the outlook for organic retailers is described by the Soil Association as cautiously optimistic. Premium products. Although the economic downturn has prompted some shoppers to cut their food and grocery bills, consumers still place a strong value on quality. The growing trend for shoppers to choose premium products over lower cost alternatives has been labelled 'premiumisation'. The trend has seen the market share of retailers that are more associated with quality, such as Waitrose, grow more than that of retailers more associated with low prices, such as Asda. Waitrose enjoyed a 9.3% increase in market share in September 2010, compared to Asda's growth of 2.6%. Asda responded by recognising a greater need to emphasise quality in its promotional campaigns. For more details go to www.kantarworldpanel.com/#/Insights/Read/premiumisation-puts-pressure-on-Asda. Rising food costs. Rising food and grocery costs are putting pressure on retailers' margins, with supermarkets in particular reluctant to pass on rises to customers. Figures released by the ONS in July 2011 showed an inflation rate on food and non-alcoholic beverages of 6.9%. The price of fish had risen by 12.2% over the preceding year, the price of soft drinks and juices rose by 10.6%, coffee and tea by 9.3%, bread and cereals by 8.5%, sugar and confectionery by 8.2%, meat by 7.2% and vegetables by 5.4%. Further rises were forecast, with raw food commodity prices increasing. For more details go to www.telegraph.co.uk/finance/economics/8632831/Food-prices-soar-despitesurprise-drop-in-inflation.html. Reduced pack sizes. In an effort to prevent retail price rises in the face of rising raw food costs, manufacturers are reducing pack and portion sizes in order to maintain price points. Kellogg's have reduced the size of their cereal boxes by 15%, Tropicana have reduced the size of their juice cartons by 8%, and Heinz have reduced the size of their range of ketchup bottles. For more on this trend go to www.independent.co.uk/life-style/food-and-drink/consumers-more-sensitive-to-rising-pricesand-shrinking-portion-sizes-2281689.html.