 Well, good afternoon everybody and a very warm welcome to our special food and drink webinar or mini conference Which has been organized by our team of ambassadors from the CIM food drink and agriculture group My name's Mark Dodds and I'm the chair of the group and I'm supported by a hard-working team to help stage events such as these We've got three great speakers today. First one is Andrew Walker, who's client knowledge director at Cantile World Panel We've then got Dr. Liliana Danila, the lead economist from the Food and Drink Federation And that's but not least got Simon Millard, who's food director at Fairshare UK And they're going to be talking about some of the challenges and indeed the opportunities that the food and drink sector faces today in these tricky times But before we get to the presentations, I'll quickly run through some of the more practical issues about today's session So our panel have put together some presentations and slides and each was going to present for around 30 minutes something like that After seeing all the presentations, we'll move on to questions and answers Where we'll open up the floor for the panel to answer some of your questions You'll be able to post questions for the panel session at any time during the session By clicking on the question mark you will see on the screen We've circled the mark on this slide for you depending on which device you're watching from So if you're watching on a laptop, you'll find the question mark on the right-hand side of your screen Or along the top or the bottom if you're watching a tablet or a smartphone In terms of the video for the webinar, we're hoping to have this live on the CIM YouTube channel by the end of next week And finally, of course, if you'd like to share your thoughts on today's session on the socials Then you can use the hashtag CIM events, which you'll see on the screen And we'd love to see your comments on on Twitter Instagram LinkedIn and we'll pop the hashtag up again After the presentations finished. I'm just taking continue to share thoughts So let's get things started. I mean what a difference a year makes This time last year inflation was sitting at about 4.9% And once there's some talk of unrest in Ukraine, no one could have really forecast The ongoing and global impact those troubles and indeed others would have across the world and in particular in reference to today to the food and drink sector We were already facing challenges such as labor shortages increased energy costs and retailer pressure And the last 12 months have really shown that we can never be sure of what's around the corner And also the ever-increasing importance of Social responsibility for the sector because of the pressures that are being caused by cost of living crisis, etc So we're looking enough to have three brilliant speakers Who'll give us their thoughts on the situation and hopefully provide us with some guidance for developing our future strategies for the next 12 months and beyond Our first speaker is Andrew Andrew Walker from Kantar So Andrew has kindly delivered some of the webinars and indeed the live events that the groups hosted over the past few years So it's an absolute pleasure to welcome and back going for today's session Andrew spoke two decades at Kantar helping FMCG businesses make sense of consumer behavior In his current role as client knowledge director His focus is on unpicking the big stories from Kantar's wealth of behavioral data and working with clients to design strategies that have changing custom needs at their heart So Andrew if I can invite you to turn on your webcam And I'll pass things over to you and the floor is yours when you're ready. Thank you Thanks, Park and good afternoon everyone. Let me just get through to First of the slide. So I'm going to talk for somewhere around about 25 30 minutes about kind of about inflation but more more generally about what that means for shop behavior and Following on from that what that means for trying to go grow a brand in this environment I've used the headline at the bottom to really emphasize my message Which is it changes some stuff so inflation and rising crisis change some of the things about how we grow categories how we grow Brands, but it doesn't change everything and we're going to have a balanced view of what has changed and what hasn't changed And because this is a topic that's so well covered I spent a bit of time kind of thinking about how we could talk about it make it engage and talk about it differently to what you might have heard before so I did my research on the sort of classic Narrative art for a film or a piece of drama and essentially the for those you've seen this before kind of has a beginning and Exposition so where you've set the scene and lay out what's going on It then has what they call a climax where we see the sort of rising tension and the jeopardy increasing and Then some form of resolution so we'll recognize that from films would watch the plays with watch books with red And we're going to try and do that in the next 25 minutes in your realms of shop of behavior and consumer behavior starting with the beginning which is all about setting the scene and talking about the post coded landscape and understanding where we were before Everyone started talking about inflation and the impact of price rises on the marketplace Then our middle or a climax or the bit of most tension is understanding what growing financial pressure means for shoppers And how they're responding to it and then we're going to finish with our resolution Which is my view or Cantile's view on how marketers should respond to everything that I've described So without further ado, I'll start with the post coded landscape because this might seem like a lot of looking back But I think it's so important to understand where we are on the road back from all of this eruption We've seen over the last few years before we get into the impact of inflation because the two impacts have clashed and Together they're creating a lot of the behavior, but also a lot of the opportunities that are resulting So in terms of the post coded landscape I wanted to start very broad and just give you our view of how non-alcoholic food and drink is bought in the UK So I want to paint the picture of five ways. Basically, you can spend money on food and drink and hopefully You can imagine yourself in each of these scenarios. So the sort of blue pink bluey area on the left hand side That is large grocery trips. So trips where I'm putting more than 20 items in my basket or trolley That's 36% of our spend and we've got small grocery trips Which are trips where I'm purchasing fewer than 20 items. So those are kind of that's the grocery universe That's 29% of spend and then on the right hand side. We've got what we call out of home So we've got visits to cafes and restaurants currently 18% of spend takeaways 11% of spends that's anything bought and consumed off-premise and then what we call retail on the go which is Product purchase from a retail setting that never make it out never make it back into the home So that might be a lunch you're buying when you're out of what I love a meal Do you buying on the way when you're traveling on the way to work something like that? So there's your mix. That's what it looks like today But what's interesting to us is how different is that to where we were in 2019 before we'd even heard the word Covid and here here are the percentage changes the extent of the shifts and share that we've seen versus where we are today versus where we were in 2019 and those might not look enormous so you might say okay 5% increase in takeaways 4% increase for large grocery trips But when we take into account in the 12 weekend in period that we're looking at we're talking about a market It's worth 37 billion pounds That even a 1% shift there is about 370 million so it's a huge change these these shifts they might be massive in percentage changes and also to emphasize if we Looked historically before Covid these things be very flat So there's a real disruption in shopper behavior how we're buying and where we're buying from the sets our context And we can see the scale of that disruption when we look at the long-term view of specifically to take home Grocery market so products that are purchased and taken back into the home So the left-hand side shows a long-term view of the value of that market in the last In the last 10 years or so and we see in the latest year It's 130 million and that's the level it's been at pretty consistently for the last three years But that represents a huge increase on where we were in 2018 2019 People has haven't spent a lot more money on take home food and drink than they were previously Initially because they were spending more time in their homes So they were switching spend from out of home settings into grocery But more recently as we'll come on to talk about because prices have risen very quickly But it's interesting that despite all the disruption the market value across the last three years has remained remarkably consistent albeit for a variety of different reasons and Then instead of the amount we're spending has changed and how we're spending it has changed as well So it can't are in the way we talk about Drivers of behavior of the key elements of shopper behavior We would talk about the frequency so how often you go shopping which is represented by the sort of light blue color The amount of items you're putting in the basket so tax-per-trib which represented by the green color the amount You're paying her item which is the yellow Households which is the change in population and then the little dot represents the change in value sales I'll draw your attention to a couple of things on this chart one is the relative lack of change between 2010 2019 Essentially behavior stayed more or less the same The only thing that's changing was the prices were fluctuating up and down to varying extent over that period So you can only really see the yellow over that period then in 2020 we've got this enormous shock People making far fewer ship trips So you see frequency going down and tax-per-trib going up people concentrated wanting to be in stores less So concentrating their purchasing into fewer visits to stores But the important thing here is as we look forward through 2021 and 2022 those things haven't corrected not entirely anyway So we've seen tax-per-trib drop a little bit but not to the extent that it grew in 2020 So still higher than it was and we've seen frequency rise a little bit Nowhere near to the extent it dropped in 2020. So we're behaving differently We're buying different amounts and even and this is in the grocery world Even when we go out of home mix in the way that we're purchasing spending is very different So again to characterize our purchasing out in the out-of-home arena if we very simply Make a dichotomy between trips where I'm purchasing spending less than 10 pounds and more than 10 pounds If we look at those trips on spending more than 10 pounds So what you might call those more special trips those more planned trips typically the value of those Recovered to where it was in 2019 if we look at those more incidental trips on the left hand side those one spending less than 10 pounds that might be a coffee when I'm out and about Or as I said earlier a meal deal Those are any at 60% of where they were in 2019 so 40% lower So because of our lifestyle shift because of the shock to our habits we're behaving radically differently It's how we were in 2019 be that in a grocery setting or Be that in an out-of-home setting still today more than a year on from any kind of restrictions on the way we live Our lives and I think that's really important context of what we look at next because that's we We're already in an environment where shop of habits are being disrupted They're in churn and then we're hit by the next shock which is growing financial pressure Which we're all aware of so this next section isn't going to be me talking about where inflation comes from It's all about how the shoppers responding how we see shoppers responding what that means for how brands and categories should respond to that Here's our long-term view of Inflation in the grocery market. I'm sure you'll see examples of inflation in the other presentations as well But this is the this is specifically in take-home groceries Really just to emphasize that we're in a situation with not seeing for the last 30 years you see inflation in our latest 12-week numbers at 14% Even in that 2008 2009 period it only just about touched double digits So we're in a situation that many shoppers won't remember and indeed many people in the industry won't remember and that is having a Tangible impact on how shoppers feel about spending their money So one of the things we've done with our sample over the last couple of years is gone to them and said Which of these five boxes would you put yourself in you see the groups along the top? So you basically take one of the five boxes, so I don't have enough money to cover my expenses on the extreme left I don't even have to think about I don't have to restrict my spending in any way on the extreme right And what we do is use that to create a segmentation that we call struggling managing or comfortable So if you tick the bottom two boxes to say I don't have enough to cover expenses on just about making ends meet You're in the struggling group if you tick the other the two boxes at the other extreme You're called comfortable And if you're in somewhere in the middle and you say I'm just about managing you stay in the managing group in the middle Now the thing I want to draw your attention to is the extent of the change over time because when you run these general sort of Attitudinal studies you tend to see these things don't change very much people respond in very similar ways year and year out What we've seen is the struggling group double in size between May 2020 and October 2022 from 14% to 27% So shoppers have a fundamentally different mindset when they walk into stores than they did two years ago And but I think the danger with that and the danger of some of the data I've just shown you is that because inflation is the dominant narrative What we tend to do then is try and explain everything through the prism of cost of living So everything that's happening that brand is growing because of cost of living that retail is growing because of cost of living People are behaving in this way between cost because of cost of living. So here's an example So shoppers are putting that less items in their basket. Oh, that's because of inflation Everyone's flocking to the discount is that's because of inflation Different categories of topping the growth charts. Oh, that's just because of inflation putting pushing prices up and pushing keep behavior in certain directions But actually when you look under the skin of it There's lots of other things still going on that are driving the trends that we're seeing and this is so important when we think about strategy And how we respond because actually when we think about shoppers putting less in the baskets A lot of that is still about post-COVID correction as I showed you in the first section When we look at people flocking to the discounts is yes Some of it is about people seeking value, but it's also about simply there are more LEDs and littles out there in the country Which give people more more people access to the stores and give them more opportunities to visit and yes Different categories of topping the growth charts and some of them because their prices are rising very quickly But a lot of them as we'll show you towards the end of the session About still about creating volume demand and this is so important because this says to us We still on the left-hand side need to understand what the fundamental market trends are. It's not all about inflation We still need to make ourselves physically available to people because that is still a fundamental thing that make a massive difference to performance And on the right-hand side most importantly, we still need to create volume demand However good our price price pack architecture is and our promotional strategy is we still need to give people a reason to purchase our products Another reason why we can't focus entirely on inflation is because shoppers aren't Fundamentally changing all of their behavior. They're changing their behavior at their margins So really useful stat to remember from from all of this is that our long-term work says that shoppers in grocery typically absorb 75% inflation so if inflation is at 10% they increase spend by 7.5% Conflations at 20% they increase spend by 15% that isn't the behavior of people Ripping up their shopping lists and starting all over again. That's the behavior of people looking for little savings at the margins And we'll come on to the significance of that in a second And then the other theory and the other thing we've seen historically is that the choices that shoppers make Tend to be to seek the path of least resistance if I'm forced to save money I'll make the choices that are least disruptive to my life So on the right-hand side here we start with the thing if you think about your grocery shopping You kind of got four options in terms of the way you save money You can buy the same product but find it on promotion You can choose a cheaper product so you could buy a private label product instead of a brand for example You could choose a cheaper store you could shop in an LV or a little instead of a Tesco or an Astor of Sainsbury's Or you could physically buy less stuff now wait the way that we see it is from moving from the right to the left You're becoming more disruptive to your choice. So the easiest thing to do is I'll just buy the same thing But I find it on promotion. I'm getting the same I'm fulfilling the same need But I'm saving money and then steadily as I move to the left-hand side I'm being more disruptive to my life and this isn't just a theory because when we look back to 2008 2009 and the way in which people save money when inflation sort hit about eight nine ten percent We see the primary way that people save money is by buying more on promotion and by choosing cheaper products by trading down by buying Cheaper not by buying less So we've got two theories from historical data one that people will absorb about 75% inflation The other is they'll kind of take the path of least resistance and buy cheaper before buying less So the question then is is that actually true in 2022 in the same way it was in 2008 2009? and the answer is yes so To set the scene for two two headline numbers with a comparison back versus 2019 so we take out all of the impact and all of the noise around COVID that we saw in the first Section so if we take cumulative inflation versus 2019 We see we have inflation up at 19% so that's a bit higher than the number I talked about earlier because you've got three years Compounded on top of one another if we look at how much more shoppers are spending on Groceries versus that time they're spending about 12% more So it's not quite absorbing 75% But it's in that kind of region absorbing the majority of the inflation and then we can say okay There's but there's a seven point gap how people saving that seven point gaps if they were just buying exactly the same things They'd also be spending 19% more because they just be absorbing that inflation And if we look at how they're doing it that seven percent gap is made up Predominantly choosing cheaper either by buying cheaper product by trading down to cheaper products to buy more in promotion And a smaller proportion of it is about buying less stuff So our two theories about how people behave are born out But the first thing I'll try and do is find ways to buy cheaper if I'm forced to I might buy less But it's not that's not a primary response in the majority of grocery categories And at this point you might say okay, this is really generic So you're talking about categories in general, but grocery covers a massive spectrum of things and categories that are expensive categories that are cheaper categories that seem very high inflation Categories that seem very low inflation say let's just explore that a bit further and think about how this varies at a category level So slightly complex charter at this point, but these these orange dots represent all of the 286 categories that we split grocery into and what you're looking at is the relationship between inflation and The likelihood of shoppers trading up or down so inflation along the bottom So further to the right price is rising more quickly in those categories And then up the side trading up and trading down so higher up the chart people trading up year on year Lower down the chart people trading down and the reason for plotting this is to test the idea that okay If I'm in a category where inflation is very high Presumably people are much more likely to trade down and I'm at much more risk of people trading out my brand into private label Whereas if I'm in a category where inflation is less than 10% maybe four or 5% Then I'm protected from that and my shoppers are much less likely to go elsewhere And what this proves is that that theory is is not true in any sense There's very little relationship between these two things and you think that's quite odd because we've got categories where inflation is 30 35% We've got categories where inflation is less than 5% why people not responding differently And the reason is that shoppers aren't aware of which categories in the main which categories are going up in price Which are because very few items in grocery and known value items the way it works from a shopping perspective Is I can see the overall price of my basket going up that used to cost me 20 pounds now cost me 25 pounds Not quite sure where those price increases are coming from and therefore I'm gonna make my choices Based on which categories and which products are placed the most value in and those I'll hold on to and Which are the 25% or so I'm willing to sacrifice and trade down It's not driven by which what are going up most quickly in price It's about my judgment and my level of choice on Where I want to trade down and where I think I'm sacrificing the least by trading down So to build on that just three ideas on where what drives the difference if it's not about inflation It's not about inflation that drives shopper choice What what are the things that make categories more or less exposed to shoppers choosing to seek savings? The first is the nature of the shopper So we think back to our struggling manager managing comfortable groups that I talked about at the beginning Then they differ massively in importance depending on the category you're in so to look at two examples on the left We've got tonic water and bottle collars tonic water gets 17% of its sales from from struggling shoppers Bottle collars 34% said twice as high so in theory bottle collars much more exposed to people looking for savings because more people Who see their budgets under pressure in the middle? We've got the level of options so some categories There's loads of scope for me to trade up and down so skin care being an example where I could spend anything from a Couple of pounds to a couple of hundred pounds on a skin cream Whereas milk prices are much more concentrated around the single a few key items that Sold in that category as the figures you see on the chart here are the percentage of sales But within 20% of the category average that's very low for skin care and very high for milk Which is skin cares much more prone to people trading down because there's the opportunity to do it and Finally the bit that we're going to tackle in the last section is priorities And this is where the sort of marketing stardust comes in so how clearly you articulate into people The value of your product the value of your product that the shoppers should place in it and why they should look elsewhere for their Savings and not choose it in your category on your brand and that is the question We're going to answer in the final section which is amongst all this pressure amongst everything we've observed about shopper behavior How should marketers respond and we're going to recommend three things to think about the first one And I'll explain each of these we move on the first one is about mind to get over the we call mind the gap Second one is change the optics and the third one where possible is to reframe your value And I'm going to with through each of these with a couple of examples in the first two We're going to use the example of paper category So I've called it a tale of two papers on the left hand side. We've got kitchen towels So represented here by plenty where we've seen private label growing share very quickly And then the right hand side we've got toilet roll represented here by Andrex where we've got brands holding share And we're interested here in okay if we sing such different behavior in the same environment to very apparently similar categories What are the characteristics? What are the behaviors of those brands of those products that are causing people to trade down in one but not in the other and Very simply We can see some of the story just by looking at the price and the key skews that are selling in Tesco In over the period we're analyzing. So here. We've got the top five skews in Tesco We're comparing the private label products Which is the one on the left and the two on the right with the brands which are the two plenty products These are the biggest selling five skews in the category and and at the bottom there We've got the year-on-year changing price So we see that the branded products are up about 30% in price the private label products about 10% So two observations and this is where I talked about mind the gap We're seeing the price gap widening which is making shoppers or Encouraging shoppers a little bit more to think hang on is it worth paying the premium for the Brand and the second really importantly is the direct Comparability between the brand and the private label the packaging is quite similar the colouring is quite similar We've got two pack and a four pack in each of the two ranges. So shoppers can directly sit there and go Okay, how does that price compare how much am I saving very easily how much am I saving by going from brand to private label? Then if we look at our other example, which was toilet roll We're seeing brands hold share we see quite a different story The first is we're not seeing any massive differential in changing price year-on-year So both increasing at somewhere around about 15% so that gap I'm talking about minding isn't getting any bigger but also The optics have changed so I talked about changing the optics and changing the comparability So what's happened here, and this isn't driven by the brands at all But I think it's a really interesting example that Tesco have moved their large 24-roll private label pack into exactly the same pack, but it's 12 Double-sized rolls, so they're advertising it at the same volume. It's a sustainability move But it looks different for the shopper It confuses the issue because they see a 12 pack versus a 24 pack and suddenly the value equation isn't quite as simple as It was in our toilet in our in our kitchen towel example So you see how changing the optics and removing that direct comparability can make a massive difference to shoppers Primaries to trade down because they're having to do different Calculations and they're not making like-for-like comparisons between the brand and the private label in quite the same way as they might have done otherwise And then finally what's happened here is something else which has disrupted the comparison Which is the entry of a lower tier brand that sits somewhere between the mainstream brands and the private label which again Disrupting the choice for shoppers and making it not quite as simple for them to make the judgment Which is simply brand private label say 40% or don't say 40% So that's mind the gap as you can see on the left-hand side Change the optics as you can see in the middle and then the last one is reframe I'm sorry. I'm skipping ahead and forgetting one slide. So we're talking about the importance here of Direct comparability breaking the extent to which shoppers can make the direct comparability between you and a cheaper alternative and another piece of evidence for the importance of that is if we look at Which size of brand has lost share as private label has gained share over the last year? We expected to see that it was smaller brands that would lose because they'd get squeezed out as Private label gets more space on the shelf and smaller brands would be prioritized Actually, the story is exactly the opposite and the biggest drops in share amongst the biggest brands and the hypothesis here is because Private label typically tries to compete directly and mimic the characteristics of the biggest brand in the category The biggest brand is suffering disproportionately as private label grows Whereas those smaller brands which often have a different positioning and a different reason to exist on the shelf Are actually holding out much better against the rise of private label So re-emphasizing that idea of changing the optics and removing that direct comparability as I talked and Now we'll move on to the final point which is this idea of reframing value and this might look like an odds example But I think it's a really good one But if you can't do the two things I've talked about if you can't keep the price gap between yourself and cheaper Competitors down and if you can't easily change the optics and the comparability between you and private label Can you change the value equation entirely and get shoppers to think differently about the value of your product? This is an example of a cycling helmet advert, which is saying yes I'm an expensive. We're expensive cycling helmet brand were more expensive than other things on the shelf But is that the right comparison because actually if you spend willing spend a hundred dollars on your kids trainers Why wouldn't you also pay a premium to protect their head as well? So it's changing the point of comparison saying you shouldn't be comparing me to the other Product cheaper products on our shelf should be comparing me to totally different things that you spend your money on Reframing that value entirely and this might seem a long way from food and drink that we're talking about today But is it really that far away think about ready meal product? For instance, it might be more expensive than its competitors and in the fridge and in the chiller when you walk into a retailer But if the comparison becomes getting a takeaway or going out to a restaurant Suddenly the value the value equation looks very different for that product versus a cheaper Alternative that someone might have in the shelf and suddenly I'm thinking about what I'm getting back Buying the product and not the money I'm having to invest or lose to buy it so those three ideas and then just to finish up and just to kind of bring them to life we wanted to Just look at let's use some case studies I'm not going to go into any depth on these at all But look at the top ten the fastest growing brands in grocery in the last year and just see if we can learn anything from them And see if we can see them sort of using any of those ideas that I've just talked about So these are the top ten that fastest growing brands in grocery on in terms of value percentage growth for the 52 weeks of 2022 versus The numbers of the percentage in value change and you look at them You think there's not much of a pattern There's not much and there's not much that they have in common Except for the fact they've all grown by somewhere between 18 and 13 percent The other things take take into account There is not all of them have grown because they've dropped your volume demands some have just seen prices go up Very quickly. So I just wanted to highlight those with these little arrows So the green of those that have also seen volume go up Reds of those that see volume go down have also managed to have really managed to grow through Inflation essentially or price premarization So we're really more interested in those that have created volume demand and given value on top Which are the five with the green lines for those of you who joined this similar presentation last year We've heard me talk about this before But what we can talk about the four kind of growth drivers the things that always make the difference between those brands that Hitting the top of these growth charts and those that aren't and that's what I wanted to finish on and those four growth drivers are Getting more presence. So being more visible more available to shoppers essentially Getting into more categories and that might be categories of subcategories. I'll come on to talk about Getting into different consumption moments or fulfilling new and different needs for consumers and Always always when we look at these charts and we look at the brands that are top of the charts They're fulfilling one or more of these examples. So just to just to build up to finish the presentation We've got where Fox's biscuits at number one what they've done is a lot more promotional activity They've really connected into the loyalty schemes that are very prominent in our major grosses today And they've taken advantage of that to give them more presence and more visibility to the shopper Charlie Biggames, which is a brand that you wouldn't necessarily expect to be doing well in a time when more shoppers are struggling for Financially and it's a very premium ready meals brand But one that's performed extremely well over the last few years a lot of that is about more presence and that kind of virtual Circle of initially doing very well in waitrose and now expanding its distribution a lot of the growth over the last year has come Sainsbury's expanded as it's expanded its presence there In terms of more categories now, I think people often interpret this as you have to go Fundamentally to a fundamentally different category. I've taken my drinks brand and it's confectionary. I have to take my snacks brand into ready meals That's not usually what we mean here. We mean different partitions within the category Understanding the way that shoppers navigate your category Finding the different partitions to operate in so Lucas aid is a nice example of this You typically associate Lucas aid with bottled product Which is different sector of this of the energy drinks market over the last year They've gone more directly into that growing sort of large can format Which has a different type of shopper a different part of the shelf and creates incremental sales as a result more moments Fanta's a good example here So Fanta have created more moments by creating a bit of intrigue around the product with mystery flavor Which is represented by the pink bottom at the bottom But also get into more moments with a different format so more growth through these large format 24 can packs You again might normally associate Fanta with Big two liter bottles that where the consumption moment would typically be I'll buy it and we'll consume it over the weekend Then it'll be a treat suddenly if you get people to buy in this format It becomes more than every day drink and those consumption moments grow and it fills and lunchtime occasions and so on so getting into different Moments isn't always about marketing. Sometimes it's about packaging More needs as an example We're looking at Kleenex. So Kleenex have had a very strong connection with charity minds talking about mental health and associating Product with mental health so getting products people to see the product differently differently versus Competitors and seeing it for filling a different need and associating it with a different need and they might have done otherwise So always always regardless of the situation regardless the financial situation regardless of what shoppers are telling us about the budgets If your marketing strategy doesn't fulfill at least what isn't pulling at least one of these leaders for next year You are unlikely to deliver the growth that you're looking for So just to sum up we've been through our three sections are beginning on middle and end I think it's really important that we don't forget that lockdown and Response to lockdown is still creating disruption in our lives. People are still finding ways to read Adjust so don't forget about the opportunities created by that in terms of the impact of inflation It's important to react but don't overreact because shoppers are overreacting the change in the behavior of the margins They're making choices at the margins Actually, the key strategy is convincing shoppers that yours isn't the product that they should seek to save on Finally how you do that think about value framing think about those three tools I talked about but ultimately the principles of brand growth are the same As we said right at the beginning you still need to create volume demand and you still do that by thinking about those four growth drivers I showed on the last slide And that was it for me. Thank you very much for listening and I'll hand back over to Mock Brilliant. Thanks very much Andrew. As always, you know a massive Fascinating insight from Cantor. I'm not surprising me. It's it's delivering quite a few questions Quick reminder, you know, do put your questions in the question section and we'll pick those up at the end of the presentations So we've looked through Cantor at sort of the consumer at the end user side of the as the food chain We're now going to look a little bit more at the producers and we're delighted to be joined by Liliana Danila from the Food and Drink Federation to sort of cover this Liliana is the lead economist for the Food and Drink Federation where she provides in-depth analysis for the federations more than 1,000 members across the UK The information and insights she provides helps food and drink businesses to develop their strategies in light of economic and other pressures And prior to joining the FDF she worked at the British Retail Consortium So she has an excellent knowledge of both retail and producer aspects of the food and drink sector So without any further ado Liliana, your web comes on and the floor is yours. Thank you very much Hello, everyone. Thank you very much for joining us today I'm going to dive right in and I'm going to set the scene by presenting this slide which shows a little known fact about our industry, which is that food and drink manufacturing is actually the largest manufacturing sector in the UK is Larger than automotive and aviation combined So what you what you can see here is what is the share of manufacturing output by manufacturing sectors and you can see that food and drink produces 16% of the manufacturing Output the highest in in UK and we are also the largest employer in in manufacturing so I'm saying this on the one hand to underline that the economic contribution of the sector is is very important for for the UK And on the other hand, the the sector is extremely important by the nature of of its product of its production So it produces food, high quality food, very diverse food, which brings a lot of joy in into our homes Though of course if if we are Thinking of what has happened with with food prices recently, maybe that joy is is slightly diminished so what you what you may see here is What has happened with annual inflation in food and drinks specifically in food and non-alcoholic drinks So this excludes alcoholic drinks and what has happened with the average UK inflation The food inflation is represented here in the in the light blue line and you may see few few things One that for several months now food inflation has outpaced UK average inflation Second in December food inflation has reached 16.9% so almost 17% which is the highest level in the last 45 years This stands in in quite a sharp contrast to whatever was happening even just in December 2020 when food prices in the UK were in deflationary territory and also While it's believed that UK inflation might might have picked That's not the same about food inflation, but that's a point that I'll get back to Towards the end of my presentation Not only that food inflation is the highest in 45 years But it's also quite well spread The ONS which is the office for national statistics report on 49 main food categories and in December 43 out of those 49 had seen inflation in double digits even more some Some considerable number numbers of categories are actually now in the 20s 30s and As you can see here low fat milk is the category that has displayed the highest The highest rising prices at an eye watering 46% year on year So what I would like to do today is to try to explain a little bit. Why do we see some such Such rises in in food prices to to see where where the industry is and to Give our opinion as to what will happen with future food prices and for how long For how long rises will continue when when will inflation come come down and when will prices come down So let me start with With how how did we how did we get here? Well in a nutshell there have been three structural shocks to to the industry One was Brexit the second was the pandemic and third was the war in Ukraine So if I if we think a little bit what has happened in broad lines during the pandemic is that Originally, there was this very big shock to to the global economic order if you wish Which meant that a lot of panic was felt both by households and by producers any kind of producers all over the world Which resulted in many production facilities being either partially or fully shut down and as we as I'm sure you're aware of different different shipping containers left in different parts of the world as The governments were trying to wrap their their heads around the situation in the high income economies strong fiscal and monetary support packages were Were were passed which have supported on the one hand the the demand side so consumer households started Feeling more comfortable about the spending and it also supported the production side. The problem was that Demand global demand aggregate demand had risen significantly at the same time all over the world, which has put a lot of pressure on On commodity markets, right? There was a much higher demand for that on raw materials and on resources in general on the other hand the the very sudden rising demand aside or against the backdrop of some some Stoppages in in production at the beginning of the pandemic have meant that Now there was very difficult for the production side to actually match the demand side force applied to match demand on top of that also lockdowns had Had changed labor migration patterns, which also Added to to the pressures on the production side So that that was one one big shock To the economy which we are still still feeling today Then we had the invasion of Ukraine which for our injury had had multiple Impact on the one hand with Russia and Ukraine being the main suppliers of wheat and different different other serials in the market That had put a lot of pressure on the on the global global cereal market Then With Russia one of the main energy suppliers to Europe Guess prices had had shot shot up The industry the food and dream manufacturers are usually high High users of energy. So quite the production of food is quite energy intensive Which meant that they would be quite impacted by the the rising in energy prices and then also Fertilizer prices were badly impacted is fertilizer is a byproduct of of the gas production So if gas prices the gas production becomes more expensive fertilizers become more expensive too So we had another major disruption in the market When when we still hadn't hadn't quite finished with the with the impact of the pandemic And all of this was happening against the backdrop of Brexit which meant that the The trade of the terms of trade with the EU had been had been severely Impacted and there was there is much more red tape. There is still not clarity in regards with certain who's so that That poses quite quite a lot of headaches So to to illustrate the the complete Unprecedented and spiraling production costs. I'm going to take you through few slides to actually illustrate what What has happened in terms of impact on production costs and the magnitude of Cost rises that's seen by by producers Here you you have a graph or of the gas price in in the UK and You you may see that gas prices started rising in Mead 2021 which is important to note And then it follows quite a lot of volatility, but they are much more elevated So it's important to note that gas prices have reason since June 2021 Because it's actually then when Russia had Had started cutting their sales of gas on the spot market So they are still fulfilling their contractual obligations, but they were not delivering as much on the spot markets Which were the markets where countries The markets countries would use to to fill their their reserves So it's then when when gas prices started rising over the last year on average energy Energy prices have risen Fivefold which is an absolutely unprecedented Event and it's also very difficult to to manage because it was to a large extent unexpected At the end of at the end of the year Prices had the have come down significantly. That's because we We and in Europe too there had been a prolonged Fall and also the the winter. It doesn't really quite feel like today, but the winter has been relatively mild Though prices have have come down, which is a positive piece of news What's less positive is that now they are about three times higher where they I mean compared to their levels in 2020 so The direction of movement is is great But we still have a long time until Until we reach levels seen before the pandemic and also there's quite a lot of uncertainty as to whether prices will continue to drop at this rate in the following month and The impact of that on the industry has been Quite difficult to to put in words what you what you may see on the left-hand side here is a response from from our members to A survey that we ran in the beginning of October Where we had asked what was the share of their operating cost What was the share of operating cost of energy in Q3 2021 and then in Q3 2022 and on average The responses were that energy represented 12% of operating costs in Q3 2021 But a year later That share had increased to 22% so a 10 percentage point increase in just Energy as a percent of operating costs, which is difficult to To really comprehend and to understand how how one manufacturer would deal with such a such a rise And then on the on the right-hand side you have the the answers broken down by by different Different shares of of rises in cost So energy prices had had skyrocketed Global food prices had also been continuously run persistently increasing these Mead 2020 until March of this year The lines here show what has happened with global food prices in each year from 2019 and you You can see clearly that in me 2020 they started rising 28 the line of 2021 prices is significantly above the level of 2019 and 2020 and then they continue to rise until March 2022 after which they they come down and they finish the year pretty much at the same level where they were in December 2021 So what has happened in the in the global food market is that again once Once the The support from government was given in many in many countries we have seen an Rise in in demand for different agricultural products Also, we have seen China that was that started building up their their reserves. So China had started buying more more food on the global market both in terms of Food and animal. I mean cereals for use for For food production and for animal feeds and also there were some Some negative weather Impact all had pushed up global global food prices. So while now they they are coming down They have come down a little bit because the Black Sea initiative had to some extent Count markets a little bit nevertheless over the entire of 2022 compared to 2019 global food prices were 51 percent higher and If you look at what has happened to oil so to vegetable oils, they were more than doubled and a hundred and twenty six percent higher Then there were quite significant disruptions in in global supply chains Here the global supply chain pressure index, which is put together by researchers at the New York pen a Value of zero shows basically no no pressure Everything works as expected and everything is smooth but what you What we can see in 2020 2021 and 2022 is that those pressures were very elevated which were manifesting themselves in Very high freight the rate at one point about Five over five times higher than than pre-pandemic levels now those pressures have come down But they are still Still there. So again a move in the right direction, but not things haven't quite quite settled yet Also, the sterling had depreciated about 10 percent over the last year that that is excluding the period of of the trust government and this is important because most Most most agricultural commodities are traded in dollars on the on the global market and about 45 percent of our food is imported so this impact our Our members the food and drink manufacturers significantly because they they have to pay more for For whatever they import just because the the sterling has weakened relative to the dollar without anything else Without anything on the on the real side of production and we say having having changed And in the same in the same survey we have asked so the one that was run in October of last year We had asked businesses How How worried and how impacted they were by by the depreciation and you may see that about 50 percent of them 57 precisely has said that they were either impacted a lot or a great deal by by the depreciation Also the tight labor market have meant that Wages were pushed up the the competition for talent and To to attract talent to keep talent in in house means that wages must have must have increased And what you see here is what has happened to wages in our industries pleaded by food and drink And then what have happened to wages in the UK? This is on as data which is Which is collected and is asking the question is collected on In the beginning in the first half of 2022, but is asking the question. What were your wages in April 2022? so this is a picture of Not necessarily 22 2022 but rather April 2022 and this distinction is important in this case where we have Such a rapid change in inflation and in wages over the year. So basically in April 2022 Wages in the UK had the reason by about 4% While in the food manufacturing Those wage increases had surpassed the UK Rises and in drink manufacturing depending on whether we look at the mean or the median were either in line with Sorry, if we look at the mean they were higher than than the UK average if we look at the median they were Broadly in line slightly slightly below. So there's a lot of pressure from from the labor market and finally, there was there is a lot of pressure on on the On the farming output, this is this is data put together by Deffra and and The body looking at the Agricultural and horticultural markets and what you see is how how the agricultural Outputs have changed in terms of prices, which is the dashed line and How prices of what goes into into getting those outputs have changed and it's very clear that there's a long while until Those cost rises especially of fertilizers but also of energy and animal feed With the would trickle through into into agricultural outputs though We already see see some of those right most most of the very high increases are in in dairy and they have to do with the fact that Fertilizer prices were pushed up animal feed prices were were pushed up And then also the the drought we had over the summer meant that some of the farmers had to feed their winter feed to their had to had to feed their winter feed during the summer because there was There was such a drought and animals could not could not just graze as as normal so what what this was was a very long list of All the cost pressures that manufacturers are filling and I haven't even gone over everything transportation cosplay the role packaging costs are also adding a lot of pressure but in some absolutely every cost component is seeing major pressures and and Those kind of pressures depending on the good or the the market we're looking at they have started since mid 20 and then continued Up to up to now with some signs that those pressures are are easing On average our members have told us that their rises over the year to Q3 2022, which is between Q4 2021 and Q3 2022 On average, though their production costs have risen by 21 percent But also some of those some of those costs might not have cost Rises might not have yet been realized because some of our Members are actually purchasing Their their ingredients using fixed term contracts or forwarded Contracts so some of those impacts might might hit them later too But nevertheless, this is still Way below than where food inflation was at the end of at the end of Q3 in the UK so having seen this this barrage of Cost rises and again the the major disruptions in the market, especially during the pandemic the question is where where is the industry now and Here we have the net confidence tracker Which is also something that we get from from our survey where we asked our members How do they perceive business conditions to have been in the past quarter relative to the previous quarter so in Q3? majority of of Our respondents have said that conditions in Q3 have Substantially deteriorated compared to Q2 and what is striking here is that? The the food manufacturers are much more pessimistic now Then they were even at the height of the pandemic and it's very clear that this mood started Started turning more pessimistic in Q3 2021 so when Excuse me when guess prices and energy prices started started rising in addition to To all these cost pressures the other very big pressure on the industry is Is labor force or rather the shortages that the industry is experiencing in in their labor force? And why we know that the pandemic has meant that some people have Well, maybe all of us we have reconsidered our priorities in life, but some people have Have had the the ability or maybe the luxury to retire earlier So some people have left the labor market earlier than it would have been I Know predicted should I say? Also that the UK is dealing with many people that that are suffering from long-term illnesses Which prevents them from from joining the labor market? So there is quite a high pressure on on the labor market right now in the UK even even now as the economy shows slain signs of snowing But it seems that our industry was Disproportionately impacted by by this labor market shortages and what what you may see here is what was the vacancy rate? Which is basically the number of vacancies per each 100 employees in in the UK show by the blue line in In manufacturing overall manufacturing in the UK shown by the red line and then what was happening in our industry which are Data from the survey and we can see that the the vacancies in our industries were surpassing both you can manufacturing the vacancies and Not only that number of vacancies were much higher But labor shortages were reported across a wide range of roles and skills so Our members report that they are missing high skilled workers such as engineers or scientists or says Staff but also they are missing technical staff like food technologists or packaging technologists, and they're also missing production Or warehouse operators so Workers in in the first line of production So given given this overwhelming context we have we have asked them how how are they managing cost increases and 60% of them Okay, the the numbers here don't adapt because they could have chosen more more Options so let me say that to to be able to make sense of the slide 60% of them said that Making production more energy efficient was was one way or changing their procurement strategies so trying to Basically right to cut the cut costs by becoming more energy efficient trying to adapt to to find maybe Different different suppliers again to try to avoid some of the costs But what was very worrisome is that 49% of them have said that they would either pause or cancel Investment projects Which is worrisome because long-term investment will be or investment is a driver of growth Under other strategies adopted was reducing marketing expenses or trying to look into a restructuring or reducing workforce or reducing training and marketing budgets Slightly different questions, but Coming to in a way to the same answer we then asked our our members what factors are likely to limit their capital investment and 73% of them said cost pressures Which means as we know and again is in line with the the other the other Question I just mentioned that These these cost pressures these cost increases have been of such Such an unprecedented but also unexpected nature that it was difficult to plan for them but also that they had to shoulder some of the increases in order to be able to stay in business and In some cases it meant that they had to sacrifice Investment project which is quite worrisome and then the other The other way to Or the other big uncertainty that that our members have when it comes to to capital investment is uncertainty about demand and maybe this This has to do a little bit with whatever Andrew had presented earlier where indeed There's uncertainty about demand not knowing how much people will will continue to buy in light of High inflation that they are experiencing but also how will they change their their consumption? Are they going to shift behaviors in? Just shifting to to a cheaper supermarket or are they going to also shift their consumption basket? And probably the answer is is a combination and one one picture to show how How badly things are are felt through the industry is to look at what has happened to two insolvencies in the industry And we have here insolvencies in 2022 Only up to October including because that's the most recent data And we can see that in food manufacturing if we compare those insolvencies in 2022 So over the first time in a ten months Over the year compared to the entire year of 2019 food manufacturing had already seen more insolvencies it's a hundred forty five percent so forty five percent more Dream manufacturing had already doubled and you can see that that's much higher than whatever happened in Great Britain Or manufacturing overall in Great Britain So this points to the fact that the industry is starting to to feel quite I know the ultimate Price if you wish where we see a lot of fatalities given the tough environment and It's Given we in our industry the the profit margins are relatively low It's a bit difficult to deal with such ongoing persistent cost pressures So the question is what's going to happen next and we think that food price Inflation is going to continue till till about mid-summer 2023 that's because there is a big lag of between seven to twelve months between Rises in production costs and Rises in prices on the shelf so rises in retail prices and here we have different indicators of input costs or production costs and The yellow orange line is retail Are the retail prices and you can see that retail prices started rising only me? 2021 compared to the other cost that started rising in 2020 and again Not only there's a delay, but also the pace is is quite different so while for For households, we think prices will continue to rise the question is what What will that mean for for businesses? Well businesses are trying to become more energy Efficient and that is their top priority But also if they are undertaking investment They're also trying to maintain their competitiveness and to become more competitive by developing new product or new manufacturing processes which will attract new new customers, but also will Will enable them to deal with with different manufacturing with different. Sorry with different Regulatory requirements so developing new manufacturing processes may refer for instance to reformulating your products to have to have them more or containing less salt or less less sugar also On the on the bigger picture our our members are very keen for for tax incentives from for capital investment from from the government and improvements to to the EU trade deal they have They have listed this as their top two Initiatives that they would like to see from from the government So in in some our our industry has been faced with with three major shocks over the last over the last five years To some extent resilience has has has been eroded Cost pressures are still very high But they seem at least some of them seem to to be easing nevertheless while easing No cost are still where they used to be compared to three years ago And there are there are huge pressures from the labor market, which means that this is competing for internal resources when it comes to to investment and Some of our members have have said that they have put investment on hold or they have cancelled or all together some some of their projects In other words the big The big Direction or the big thing that we see right now in For our members is that there is a lot of uncertainty Going on into into this year And with this, thank you very much. I'm going to to pass back to to mark Brilliant. Well, thank you. Thank you once again, Lilliana for some I suppose worrying worrying statistics for the for everybody reading and Attending the webinar today. I think it just just show how Food manufacturing is impacted and also, you know, the pipe I'm going forward in terms of investment and innovation Which is so key to the sector and how the brakes have been put on that. So Yeah, so concerning times for the producers Thank you very much again our next speaker. I suppose we invited Simon Simon Millard from fair share to come and join us really to To bring a focus to to the pressures that that consumers are facing Andrew mentioned the the fact that the The group of people that were found that they were struggling Has doubled in size in recent times. And so, you know, we're seeing a real sort of social change Which you know, the sector can challenge And there are innovative ways to do this and you know, everybody everybody here, you know, can can play a part So let's say our final speaker is Simon Simon Millard from fair share Simon's the food director Where he leads the team responsible for developing relationships with the UK food industry To help secure and distribute surplus food to over 10,000 charities across the UK Prior to joining fair share Simon has worked in the UK food industry for 25 years So it's got a good background in in what goes on what happens Both in major manufacturers such as Mars and premier foods So I'm going to hand over to Simon who's going to tell you about about fair share. Thank you Simon Thank you Mark and good afternoon everyone. It's an absolute pleasure to be talking to you all this afternoon I'm going to try to touch on and summarize some of the food challenges that affect us both environmentally and also in our Society and I'll try to explain and bring to life What we are trying to do about that and you may or may not have heard of fair share We're actually the UK's largest food redistribution charity and we essentially move food from a to be a being where it's surplus And be being where it's needed I'll touch on this more shortly but to put that in context last year. We moved about 55,000 tons of food To over a million people via about nine and a half thousand charities that we sent that food to and they provided about 130 million meals which works out at about four meals per second But yes, I will attempt to bring that to life for you and I'll also talk about the partnerships that we build with UK food organizations to help us do what we do so To start it off to start this off. Why do we do what we do? It may Surprise and hopefully shock you to know that over half of the world's Habitable land is used just for producing the food that we eat for human food Now that of course impacts the environment in many ways But one of the ways it impacts us in particular is around carbon emissions over a third of all human Climate emissions that come from the production of food Now what makes that? Even more shocking is that a third of all food produced is wasted So third of of human caused total carbon emissions are caused by food production A third of that food ends up getting wasted So you can do some simple maths to realize that a ninth of all human made Climate emissions are caused by food waste. In fact if food waste was a country It would be the third largest country in the world after the US and China and You would need land the size of China to produce all of the food that gets wasted Now that's on a global scale and the stats are kind of equally stark when you look through the lens of just the UK 3.3 million tons of food are wasted in the UK annually and that's before it reaches us lot by us lot I mean us as consumers before it reaches the household a lot of food Of course is wasted at a household level in our consumption of food But before it even reaches us 3.3 million tons of food is wasted annually most of that is at the Early production stages farming level in particular But to put in context the the size of our impact at fair share we distribute about 55,000 tons Of food a year the size of the opportunity though is significant. There's 3.3 million tons out there that are potentially Acceptable as food waste that we could move to those that need it now if I move on I guess the second key Driver for why we do what we do is around UK food insecurity We have this rather crazy situation where we have full bins. I either stats that are shared on the previous slide We have full bins, but empty stomachs and it seems insane that we have it that way round There are now 13.7 million people in the UK who are classed as being food insecure or who are suffering food insecurity insecurity of food is defined by those who are making difficult decisions to To not be able to access food when hungry. So for example skipping meals entirely whilst hungry feeding children but not feeding the adults in their household Difficult decisions where they don't have the money to access food Now 13.7 million people is the stat that was updated in September recently. I've had to change that statistic Frequently when when presenting Presentation similar to this back in 2020 the stat was 4 million people Then throughout last year that went from 6 million to 9 million That's 10 million and then 13.7. So there is a growing and a fast growing level of food insecurity in the UK And given that we are such a large and rich global economy It strikes me as fairly shocking that one in five people now is food insecure Those with households with children one in four families. In fact, there's now 800,000 Children who do not qualify for free school meals. Many of whom are going hungry. I heard a Yeah a stark Message from one of the schools that we support recently the children are going to school with empty lunchboxes Because they come from families that are not eligible for free school meals So they're not able to receive food at school through that mechanism And the reason they're taking an empty lunchbox to school is because they don't want to appear poor in front of their friends Which is the shocking state of affairs for those children to not not be fed In fact, we hear feedback from teachers saying that on a typical day 10 to 15 children would knock on their office door and ask for our square food So it's not surprising then that we have so many food banks. There are two and a half thousand food banks now in the UK That's more than there are branches of McDonald's And in fair share we I guess obviously we're on the sharp end of this challenge But we're seeing a change to some of our food types that we're distributing Potatoes for example have become less popular because of that eat or heat Dynamic that you may have heard about where people are happy make having to make tough decisions between eating And heating particularly this week where it's pretty chilly out there But potatoes take a lot of energy to cook And people are now taking less or fewer potatoes from us as a result of that eat or eat dynamic So that's why we do what we do so fair share is there to turn an environmental problem of Actual and the potential for food waste and we turn it into a social solution that in a nutshell is what we do It's it's fairly simple really we take the food that may become food waste and we use it to feed people Last year we distributed like I say 53,000 tons We helped nine and a half thousand front-line charities who use the food in the work that they do and that delivered nearly 130 million meals Saving a lot of of carbon emissions at the same time as I said with the UK's largest food redistribution charity and Yeah, we're trying to get that balance between Solving an environment problem and turning it into a solution a social solution Our vision is that no good food should go to waste And our mission is to maximize the social value of that surplus food Now what do I mean by maximize social value? It means that we want to support communities and charities who tackle hunger and its causes and the and its causes is Is what I mean by tackling Food and adding social value The answer to food poverty is not more food it's more money So the answer to food poverty is economic. We need the right economic platform in place the right jobs The vision or the requirement is that people have got the money required to buy food from from normal shops But food banks exist to give out food parcels the challenge with them with the food banking model is that it solves hunger for Maybe five or six hours up to a couple of days What we're trying to do in fair share is to support those food banks But we're trying to maximize the social value of surplus food to remove people from food poverty by by helping them come out of the food poverty They're in but this journey starts with the organizations that support us You may work for one of these organizations and if you do I'm incredibly grateful for your partnership with fair share But we work with over 600 manufacturers Taking food accessing food at a factory level But also farmers growers packers producers also retailers and wholesalers Retail predominantly from retail distribution centers, but also at a store levels. We work with many of our retail partners Tesco, Sts as the Morrison's just examples Where we work with those organizations But we are also kindly able to access food at a store level and move food from a store level through to the charities that we support But those partnerships are not just kind of one one dimensional Transactional discussions about please can we have your surplus food? There's more to that we try to build depth and breadth for those to those engagements a couple of examples would be Premier foods where you can see that campaign there winner dinner to give a dinner They made it available through an on-pack activity to to win a 10 pound Tesco voucher and buy So doing Tesco gave sorry Premier foods gave 10 pounds direct to fair share So it helps us to fund the cost of our operation that Tesco in fact do something similar There was a campaign recently called buy one to help a child which was around Giving a donation of small amounts of money for each sale of fruit or vegetables through Tesco's stores last year Just two examples of how we work with organizations But to bring to life what we do we have 31 warehouses throughout the UK where we receive surplus food from the food industry We then very gratefully have the support of about 5,000 volunteers who help Cut that food down from the pallet loads or the lorry loads in which we receive it down into manageable Selections of food that we then deliver to the frontline charities So we sort it pack it Distribute it through then small vans out to the frontline charities that we support They then turn that food into nutritious meals and food parcels, which they give to the vulnerable people that they support And through doing so we're able to reach like I say about 130 million meals per year to about a million people per year In terms of the types of food we that we receive of course We receive surplus food because that's food that has the potential to become waste once it's Reached the end of its possibility of having commercial value for that organization. It is still absolutely fit for consumption. It's not Always short shelf life. There's nothing wrong with it. It's not just the kind of the wonky veg This is great quality high-value food items that we see but for a number of reasons it has become surplus So that's by far the majority of the food that we receive We also kindly receive donated food So you may yourselves have seen if you go into a store like a Tesco There might be a collection point after the tills you can buy a Bag of pasta place it in one of those collection points and we would receive that food We have similar conversations with manufacturers where we're saying you may not have surplus But we absolutely need you to donate food to us as well because of the social need that exists in UK And from time to time we would also buy food the government gave us money to buy food during the pandemic It's not part of our mission or purpose But if the government would like to give us money to buy food and we can then Distribute that food to where it's needed. We can absolutely do that on behalf of the government another example of how we Use money to access food is through a scheme that we run called surplus with purpose A good example of this would be at the farm level So a farmer who has a contract with a supermarket to supply a certain quantity of produce at a certain price If they harvest or if they produce more than that contract is worth They may not have other contracts available to sell that sell that food to to sell that over production to In those scenarios it is cheaper for the farmer to plow those vegetables back into their field than to harvest them At risk of not being able to sell them So what we do is we make available a pot of money which will offset the costs of harvesting So that we can then access that food ourselves and give it to the people that need it but that surplus with purpose scheme is something which Which we pay money for which we fundraise against which we're asking government to support us with To access food which may otherwise go to be wasted Particularly at a farm and production level and that reminds me of that earlier stat around 3.3 million tons of food waste 2.9 of that is at that primary production and farming level Now in terms of the organizations we support or that with those nine and a half thousand organizations We send food to it's one of many of these these are just many examples of that type of organization schools breakfast clubs youth clubs care homes community cafes Social supermarkets family centers food banks hostels is all of those things and we are supporting their users They may be suffering with homelessness mental health Maybe elderly may have loneliness and isolation. It may be about substance dependence death advice job support domestic abuse There's many different reasons why those individuals need help and food is part of the package that helps get them that help One example would be a drug Dependency service. I met recently based down in Brighton now. They give out three lunches People who have substance dependency are often feeding their habit rather than feeding themselves to their hungry Now if we can bring them in and give them a meal It allows that charity While they're there being fed to talk to them to give them support put them in touch with local support agencies that can help them kick Kick their substance dependency So whilst they're being fed They're receiving that support as well as kindness and help and companionship at the same time and that's one example of What we talk about when we talk about unlocking foods superpowers We want to provide a hand up not a handout So it's far we try to work with organizations that are doing far more than just simply giving out food We're trying to help people Break that cycle of food poverty in certain the first place And the logic of this comes when you think about what food actually is for us what it does for us It's not just about dealing with our hunger and feeding us Food connects us it creates connections and when you think back through your own lives If you think about the pivotal pivotal moments in your lives when you're celebrating something a first date You might have gone on a wedding a birthday party When you're seeing friends when you're socializing Food is what creates that social setting. It's what binds us It creates those connections It allows people to talk to celebrate to support that to show love and kindness to each other And it's that basis then that helps all of those other support mechanisms be provided Now the charities that we send food to if they can get food either free or Significantly cheaper by accessing it through us It means they can invest money in their core services to deal with all of those challenges that I shared Couple of examples I've been to some homelessness services recently one in Central Cardiff and one in Manchester placing Cardiff Had a kitchen where you can go in you can sit Receive support receive advice receive assistance whilst having a nutritious meal whilst talking to other people in a safe environment So it's good for those users of that service It's also good for the people cooking the meals because the people cooking the meals are gaining skills And this is an example of how we invest in employability We're giving people opportunities to learn skills such as catering Cooking those kitchen skills which once learned will enable somebody to then go on and get a job working in Restaurant or a bar somewhere to hopefully then break them out to that cycle of poverty and homelessness that they're suffering So it gives them that opportunity to get to a hand up And in in Manchester, there's a homeless service I went to which which has a cafe now another cafe for the homeless people themselves I mean a cafe for for you and I we walk down the street Want to nip in buy a coffee? It's essentially just like a Starbucks or a Costa coffee by Kate get a coffee And the people working in that cafe are the users of that homelessness service They're gaining those kind of barista skills that would help them to gain employment somewhere else. So they're they're gaining those qualifications You said a good example of how we try to add value how we use foods superpowers By investing in these employability schemes So whether it's gaining skills working in kitchens in cafes or whether it's gaining skills working in one of our 31 warehouses where people can get forklift truck licenses Warehouse admin skills it gives them a chance to then move back into employment and break their own cycle of Dependency on things like food banks and food parcels The food hygiene courses cooking working cafes is just one of those examples But why else do we like to build these good relationships with our food partners? Well, it's partly so that we can help them do the right thing if they have surplus food We can help them connect that food to the people that need to eat it but there is also a cost of Dealing with food waste that we can reduce that cost for those organizations But really it's about staff engagement We know that the staff of the organizations we work with they feel good that they are helping us We feel that we know that they feel good by doing things like Volunteering days when they come and work in one of our warehouses They're packaging food parcels or they're going out in vans delivering it talking to the very people that are working for those frontline Organizations or or receiving the food themselves. It's having done this several times myself It feels fantastic to know that what you're doing is giving back to society Other benefits of course things like those unpack promotions that I mentioned earlier on with organizations like Premier Foods But what we're looking at here those six to seven hundred organizations those food businesses in the UK is Giving them a package which is not just about food, but it's also about fundraising staff engagement employability PR and Helping them look good because we can shout loudly and proudly about the support they've given us So I'll I'll close there just with this final comment from my boss I've CEO Lindsay Boswell when he says we don't believe that the surplus food is the solution to food insecurity of policy It's up to the politicians find their solutions, but as long as surplus food exists We want to get the maximum social benefit from it So with that, I'll thank you for your time and I'm for listening to this talk today, and I'll pass you back to Mark Brilliant. Thank you Simon. Thank you for a very But it started off a very sort of Stark presentation. I think with some quite harrowing figures, you know truthful, but but harrowing position that certainly And I say lifting towards the end because there is so much benefit and I think today when brands are You know, they're being judged on on what they do as well as what they sell and the need to Engage employees with short late tight labour markets, you know, what a great opportunity for for the people listening in to get involved in in a great in some great projects and So thanks very much to all of our speakers. We're now going to sort of head into the into the questions and answers section and the next In the next few minutes, so do keep if you're listening do keep asking questions using the questions box We've still got time to time to complete them So just a little reminder or so that you want to tag us in on social media, please do using the hashtag CIM events And so speakers if I can ask you sort of to pop your your webcam down and we'll we'll dive into some of the questions I mean, I'll start with a quick question for each of you to get the ball rolling if that's all right We'll start with Andrew. I mean Andrew a great presentation on sort of consumer insight and and and what marketing teams can Can do about about the current situation and you highlighted the four Brand growth leave us towards the end of the tour, which is you know, do one of these or do as many of these as you can Which one do you think? Marketers should focus on if they if they can only focus on or which is the most important Rick one. I think I think The one that correlates most with performance is present So being available in as many places possible, but I'm conscious as I say that You can only achieve that if there's demand there and retailers don't just list products because they They they think they should they do it because they think they know they're going to sell So I think the creating presence drive driving some of the others And I'd say the one that makes the most differences needs so challenging the idea that if we're doing something new We're creating something new we're adjusting the product Are we demonstrating to shoppers that they can fulfill more needs by using the product? I think that's the one that makes the biggest fundamental difference Thank you, I think it obviously also depends on, you know The resources of the business as to which they can tackle doesn't it and in terms of that You know their development activity Eliana I mean great picture from About the immense pressures that producers are facing at the moment that were facing over the last 12 months and and and things to come As if that wasn't enough You know, it it's on the headlines all the time now We're getting you know, a lot of demands for salary increases to match the increase in inflation and I suppose there is a danger that's going to trigger a spiral of the wage and price inflation which will I think the Bank of England have got a 2% target So the chances are that We're not going to be there for some time I mean what implications do you think that's going to have for the sector? All right. Yes, indeed the Bank of England has a target for inflation of 2% and Yes, the most recent data showed that the nominal wages So before we adjust for inflation in the UK have gone up by over 6% Which is the highest on record Which is on the one hand has has the potential to to keep feeding in Prices since with low productivity firms will have to to pass it on as an increasing cost But putting together also the the tightness in in labor market In labor market what we have seen is that firms are trying to to automate more so We might be at some point not necessarily in that far that far future where we'll see that A lot of the production processes would have been automated. So basically replacing labor with capital Yes, so essentially essentially trying to solve two problems by you know investing in in automation and that's reducing the The labor labor crisis Simon Again in a great presentation about a simple question, you know If anyone in the audience want wants to wants to support fair share or get involved, you know, what should they do about it? Yeah, thank you Martin. Yeah, I would love to receive support from from anybody in this session today be What it what it is we need is food so you may work for food organization And if you aren't partnered with an organization such as ours at the moment and would like to work with us to Help benefit from the surface food that you may have we'd love to talk to you If you're not a food organization, then you still have resources that we would value money Obviously, we are a charity and we fundraise to to cover the costs of our operation, which is essentially the The movement of all of that food around the country and the delivery of all of that food But it's not just money It may also be time. So if you're able to give up some time and volunteer We have 5,000 volunteers working in those 31 regional centers and and warehouses where the rents receiving food Packing it into our vans or driving and delivering it to the organizations that receive it We would love to have some volunteering support Or you may be involved With your organizations taking decisions such as charity of the year and if you are looking for ideas for who could be your next Charity of the year. I'd love for us to be on that short Excellent lots of ways to get involved. That's what I like. I like to see and okay moving on to some of some of the questions that have been Contributed by people watching today Question here saying that you know, there is some publicity and about The fact that food retailers might be using the cusp of living Crisis as a smoke screen to sort of hike prices higher than reasonably economically justified You know, is there any truth in these rumors? Is there anything and if so You know, what could the industry do to combat that? Anyone want to chip in on that? No Okay, um, I mean, I suppose they are they are just they are just rumored and One particular for Andrew. I mean Obviously we buy a lot of our shopping online. Do your figures take account online shopping as well? They do. Yeah, so we've within those numbers and we didn't talk about channels and retailers today But we would have a read of of online grocery purchasing as well What we've seen with that is that share not surprisingly peaked in early 2020 one in them in the last of the big lockdowns as people were sort of Trying to spend as much time at home as possible But it that share has dropped away a little bit, but it's still much much higher than it was in 2019 So as per some of those comments I made we've sort of readjusted a bit and where we were in lockdown But we've certainly taken some of those habits with us Okay. Thank you. Um That's a question. I think probably Andrew again You mentioned that consumers would be mindful of making conscious decisions as Choices into which categories they trade down in Interesting question. Have you seen any particular behaving categories where the purchase is not the end consumer so sort of baby care pet food So where they're buying for somebody else to consume Yes, it's difficult to unpick that because I think what we'd say I think we all look at certain categories in the grocery store and think That's one that I wouldn't compromise on or that's a brand I wouldn't compromise on that's something that's really important to me Difficult of seeing that in the data is my the categories that most important to me might be entirely different to The three of you or anyone in the audience as well So it isn't a isn't a case of some categories suffer more than others It's about how many people can you convince that your product is is the thing that shouldn't sacrifice versus the thing that? Actually, I can make a bit of a saving here because it doesn't really matter where I buy the the premium product or the cheaper product So it it's difficult to generalize But yeah, the the job of the marketer I guess is to is to make sure that you're you're on the list of won't sacrifice versus will sacrifice Yeah Thanks for that question for Lilliana Big question at how big effect do you think that you know Brexit actually had on the UK food and drink market and With the answers or not, you know, would we be better or worse that if we were still part of the EU? You don't have to answer that just an idea of the impact of Brexit opposed to everything else Yeah, well, I don't think we can We can know what's the impact of practice yet because we don't have yet all those all those trade deals finalized So it's those impacts are still unfolding as as we speak also the fact that that The pandemic happened when it happened makes it more difficult to really You know come up with a very robust economic model to unpack those but there's no question that brexit has imposed a lot of red tape which Which implies higher cost of doing business with the with the EU and We see a negative impact on that when we look at our exports So for our members that has been quite quite difficult also the industry as I mentioned is 97% of the industry or 97% of the businesses in the industry are small and mid-sized businesses, which means that they have been Impacted disproportionately by brexit because they don't have the power to to employ several people in the company to fill out the paperwork that's required to to deal with with the new new trading terms, so There's no no no question that from an economic impact on on our sector It has not been a positive one now that being said I think there's only so much we can dwell on the past and we have to To think of what can happen in in the future and I think current current trade negotiate negotiations are some providing some some some hopes Yes. Yes, so fingers crossed for that thought for those talks Okay, thank you for that The question might be for Andrew somebody asking about shrinkflation, which is obviously manufacturers Reducing the size of their products with charging the same Do you have any any data on that now? It's and whether that's happening apart from anecdotal obviously Yeah, we're not we're not sit. I think it's one of those things that gets talked about more than we seeing it in reality I think one of the reasons is it's happened a lot in the past to stick to to try and hit specific price points like The need to be able to sell a product at a pound and people have had to reduce pack sizes to hit those price points The the reason it's not easy to carry on doing that is that there comes a point when you can't reduce any further the other thing that's happening is the prominence of those Headline price points like one pound two pound three pounds one pound fifty is reducing So the proportion of products sold that those kind of price points has dropped Dramatically again forced by inflation so people can't hold that a pound anymore So the the volume of that going on is less than it might be perceived to be and certainly less than it has in the past Actually, if you look at the market in totality the average pack size is going up Rather than down because of the mix of things that people are buying Hmm. Yeah, it's interesting. I also noticed well, I'm not as you know when I go around lots more Retailers are also doing bulk buys. So they're doing they seem to be doing larger You know larger containers and larger packs. So people seem to be sort of bulk buying more. I suppose question for Simon So I mean when when you know when you go and see a company, what are the what are the sort of the top questions that? They ask Before they sort of engage with you Yeah, there's some there's some kind of nuts and bolts questions along the lines of food safety standards and compliance Unsurprisingly I mean particularly what for branded businesses and for own label Organisations they They need to make sure that we will do right by their product and that's that will range from Us promising not to sell it because they're not going to give it to us if we're just going to sell it somewhere obviously Through to making sure that we store it We transport it and we deliver it correctly so that that it's um, I don't know if it's like an asda Ready meal. It's not acceptable if that ready meal turns up having not been appropriately chilled Or stored in the right condition so it's the it's the basics of Of Yes standards and compliance and food safety and handling And then it's around speed of delivery So how fast can we turn it around often will get a like a you know day one for day two if it's short shelf life But that's okay. That's the works and Then I guess once they're satisfied that we are reputable trust worthy And that we have a national scale which we do is we cover the whole of the UK It's around understanding the impact we have so Because from their point of view they want to work with us because they want to see that their surplus food is doing good And so we will then Then demonstrate to that to them We will feed back to them on a regular basis for every quarter every six months We're able to report back to them to say you gave us X tons of products and these are the organizations It was sent to these are the number of people it's benefited and we're able to demonstrate and feed back on the impact that their food has had Yes. Yeah, yeah, interestingly One one one for each of you can come for each of you in turn. I suppose a bit of future gazing and and It's always always tricky putting people on the spot, but you know, where do you think we'll be in 12 months time? You know in terms of the market and and the pressures on producers and the producers on consumers and and and globally so it's as big or small as you like but Andrew's first on my screen say Andrew. We're over being 12 months down. I Think as as Lilliana talks about in her presentation, I think we'll see inflation as we measure it being lower, but it's easy to forget when we look at inflation that it What we've already experienced is locked in so it's not like pricing me dropping back to where they were 12 months ago They're they're still higher. They're just not rising as quickly and therefore I think we'll see consumers still Exhibiting many of the behaviors that I described and As per the comment with regards to people sticking with habits that they absorb during lockdown If people are adjusting their behaviors a little bit and I'll emphasize the word a little bit because price arising I think they'll hold on to some of those behaviors because they find actually I can save a bit of money here And it's not really making that much difference to my life So I'll stick with it in the same way they changed that behavior by staying at home a bit more During lockdown and people have decided in some case. They're quite like that and stuck with it So I think and we'll see less Year-on-year pressure, but a lot of the same behavior still Thank you, Lilliana Well Not to be the the gloom and doom here, but as I was mentioning it takes 7 to 12 months for for cost rises to filter through so in terms of in terms of the consumer side The retail inflation again as I was mentioning we think in food that will continue to mediate and then inflation will start coming down But to get a bit geeky will start coming down just because we are comparing high prices with higher prices So we have a higher comparable base is not necessarily because prices in themselves would have gone down Also, if we look at former Crisis when prices had for food had increased significantly in 28 to 2008 2011 or 2014 When the the crisis would have fast Crisis start coming down, but they never reach the previous level and I think the most intuitive Explanation for that is that if wages aren't going up Once prices come down wages will not really go down So at least the impact of wages will be will be locked in into prices So it's it's difficult to really expect same same level of crisis that we had this before the pandemic So that's for that on the That on the household side on the production side Again some pressures have started easing which are very positive news But they are not easing fast enough and not really across the board as as cost rises have been across the board So for you know the next year if I only I had a crystal ball. I think it will be quite quite challenging for for our members to To continue to deal with a very tough Very tough environment and again It's really at the point where they have to make really difficult decision to Where they have to cut? Other other expenses within the company to be able to to absorb some of the cost rises and the danger is that We'll have too much investment cut for you know when it comes to to the future So that may not be over the the next 24 months, but there is a danger that The pressures right now are so overwhelming that in my last have a lasting impact on the long-term growth of the industry But that being said I still think that our our members are quite Quite innovative and resilient whereas again as we have seen how it even even during the pandemic We had those those few weeks of panics where shelves are not really Filled because people were panicking so much, but once they have seen that actually Would still still comes to to the shops everybody come down So so I have faith in in the resilience of our members, I guess Brilliant so so not out of the woods yet light at the end of the tunnel keep going Simon get getting your crystal ball out You know 12 months time what what what do you think in a picture is going to be for fair share and and and People that you're helping and the retailers that you're that you're working with Yeah, I echo the comments that we've heard from the other two speakers that I Don't expect anything to change soon The level of demand for the food that we distribute far outstrips the supply that we can access I'm not seeing that that's going to be changing anytime soon So I think in 12 months time we're going to be doing you know the same and having as big an impact as we possibly can Working with you know the organizations that support us with their food or their money To maximize the impact we can have but now I don't see but it's the food level of food Insecurity hopefully it'll level off if it can decline that would be amazing at the moment it continues to increase Yeah, Brian Okay, well, I see it's five to three So I think we're gonna have to wrap it up So first of all, I'd like to thank again our panel Andrew Lilliana and Simon For giving us their insight today, and it's been incredible Two hours, you know, I think I would recommend that one step when this video is up that everybody goes and watches it again So so much so much great insight insight there I'd also like to thank the CIM FDA committee for helping organizing this event Do please go and join our LinkedIn group. We've got over a thousand members And there's some discussion goes on there or you can post something that you find interesting If you go on to LinkedIn and just see I am FDA you'll find us there Finally, of course, we'll be sending out a short survey. We're all marketers. So we all know how important feedback is So the survey will go out later today. So do let us know What you thought of today and just as importantly, you know anything you'd like us to cover in the future You know, we would we like to do these events and we like to provide you with with value and insight from great industry speakers And says there's anything in particular do let us know and we'll have a look at it So it just leaves me to say, you know, thank you once again to the speakers. Thank you all for joining us again today We hope you've enjoyed the webinar and take care of your body and we look forward to seeing you again soon. Thank you