After a fairly volatile 2016, a new year is upon us. But there also remains uncertainty around the macro-economic factors that will shape consumer behaviour, and consequently the commercial performance of companies in the year ahead.
The retail industry is no different. From the US to China and from France to the Philippines, consumer spending is witnessing a slowdown and price sensitivity is compelling most retail groups to focus on value-based pricing and promotional strategies.
While this in itself is not a new phenomenon in the retail sector, the interesting aspect in the regional context is that while consumers are becoming price sensitive, they are also becoming highly selective in their product preferences, comparing quality and price differentials in a holistic manner. In fact, the seemingly opposite trend of increased selectivity and shift towards healthier options in the food segment (particularly fresh foods) along with a high level of price consciousness might present the biggest opportunity for retailers in 2017.
In a recent Mintel study entitled ‘Free-from Food Trends’, 43 percent of consumers agreed that free-from foods are healthier than foods without a free-from claim. Additionally, another 59 percent agreed with the statement that the fewer ingredients a product has, the healthier it is. At Carrefour by Majid Al Futtaim Retail, we are seeing this preference play out in the sales of healthy, organic and free-from food products.
Traditional winners, such as easy-to-prepare and ready-to-eat convenience foods, are slowly but surely losing their sheen. For consumers in the past, being able to store and keep their food for longer, and prepare it faster, was the height of luxury. However, the last few years has produced a tonal shift in consumer priorities away from processed foods towards more environmentally friendly and healthy food and beverage.
While organic and healthy (low-processed, low-carb) foods have adorned the shelves of specialty stores in the region for at least four to five years, the challenge has been to get it to a scale where they can be offered in mainstream supermarket and hypermarket stores. In order for this to happen, retail groups must align their supply chains to accommodate organic food distributors and farmers.
At the same time, the consumer market for these products must be large enough to justify the change in supply chain. If Carrefour consumer data over the past year is any indication, we believe there is likely to be a gradual and decisive shift towards healthier options.
As one of the key global retailers in the region, Carrefour is already aligning its procurement within the fresh and processed foods categories to reflect this change in preference. With a large part of fresh foods supply now being sourced from local/regional producers, the display areas are also being transformed to dedicate greater space to healthy and organic food options.
The group is progressively diversifying its suppliers in the food segment, and working with organic food producers from across the world, including in the UAE. According to a Frost and Sullivan report, organic farming in the GCC is set to reach $1.5bn by 2018, driven by demand from major retailers in the region.
Locally grown organic foods are also cheaper than imported foods and can therefore be offered at much lower price points to budget-conscious buyers. This realignment of supply chain in the region is likely to continue over the coming years.
While the supply side is being realigned by retailers, demand continues to strengthen. The average estimate from industry sources is that the organic and healthy food segment will grow at about 5-10 percent over the next few years. This rate of growth will take healthy food from its current niche to a more mainstream state, with a distinct consumer base.
Access to more knowledge and reviews of foods on the internet and through media influencers will further propel these consumer trends in favour of organic and healthy foods.
While price sensitivity, accessibility and strategic promotions will continue to shape buying behaviour and overall volume of sales, there is no denying that the healthy foods segment will provide growth momentum in 2017.
Miguel Angel Povedano, Executive Regional Director for Carrefour UAE Majid Al Futtaim RetailFor all the latest retail news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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