Question / IssuesFresh food innovation in retail requires links to the chain to become part of the value-added process. The retailer is an active participant and key to the fresh food innovation process. It is retailers who mostly determine the role of the supplier and the rate of innovation in fresh food chains. Additionally, the retailer plays a role in the product idea, product development, and launch cycles in fresh food innovation. Write an article about the roles, issues or challenges of food retailer with regards to the above statement. Students are requires to write an article of about 750 words.
Over the past five years, there has been a significant increase in overall fresh food offerings as retailers strive to meet rising demand from consumers (Duff and Phelps, 2016). Despite able to contribute healthy sales in business, keeping fresh food is rather complicated. Thus, fresh food retailing is experiencing innovation in order to reach consumers in new ways. The roles of retailers in driving innovation success are critical by executing strategies such as offering value product, employing high-impact merchandising strategies and building a supply chain with the right economics. However, the retailers also confront with issues or challenges in the process such as implementation of alternatives in limited workforce becomes less effective, risk of losing relevance (and patronage), perishable products and strategy development.
2.0 The Roles, Issues or Challenges of Food Retailers in Fresh Food Innovation
As the own brand market was evolving, the market share of own brands was steadily increasing over the past years, though varying from country to country (Bourlakis, Hirner, Moiter and Werkhoven, 2013). Retailers may offer value products within the premium segment and premium products within the value segment. This strategy would attract customers who have become more cost-conscious due to decrease in incomes and purchasing power (Mike Stones, 2013). For example, Tesco Stores (M) Sdn Bhd have their own brand, “Tesco” with “Tesco Everyday Value” that aimed customers who want to spend their money wisely and discount competitors such as Giant Supermarket. Meanwhile, “Tesco Finest” directly aimed at competitors such as Sam’s Groceria.
Moreover, retailers must employ high-impact merchandising strategies that clearly define freshness and determine unique ways to demonstrate it. According to ATKearney (2013), the merchandising tactics include dish customization, attractive packaging and display, a “made-on-premises” look, aroma, evidence of frequent rotation or replenishment, appropriate signage, suggestive selling, see-through packaging, and labeling that indicates the production date rather than the expiry date. These tactics contribute to the desired impression of freshness and are essential to optimize the fresh prepared foods opportunity. Ikea Restaurant is the best example that apply these tactics; variety of food offerings that can be seen through the open kitchen concept, cozy ambient atmosphere, great dining experience and much more.
On top of that, numerous food manufacturers have perceived that the fresh foods supply chain is particularly delicate to the economics of sales turnover and product waste. Retailers require different supply chains focused on short shelf life, product turnover, optimized assortment, and target pricing. Also, retailers must partner with reputable suppliers that can handle all of the complexities of fresh distribution when it comes to food safety concerns. Perhaps, they may need to consider alternatives (to remain freshness such as:
1. In-store preparation whereby food is prepared on-site. For instance, Giant Supermarket has its own food court that serve fresh prepared foods to patrons.
2. In-store finish whereby frozen foods are delivered by product supply chain and reheated in the store kitchen. For instance, Ikea Restaurant.
3. Commissary model whereby a network of centralized kitchens is established to prepare and deliver ready-to-serve meals or partner with local fresh food providers. For instance, there is food & beverage section (not food court) in Mydin that serve ready-to-serve food and drinks.
4. Food processor model whereby retailers establish a partnership with a large food processor. Tesco and Giant have their own products that apply this model. The products include frozen minced beef, nuggets, French fries, mixed vegetables, and etc.
Nevertheless, these alternatives are less effective to implement when retailer has limited workforce. Retailers should focus on a core assortment. In order to achieve proper balance between merchandising fresh products and reducing shrinkage, managing assortment should be done effectively. There is also risk of losing relevance (and patronage) for retailers to cope in fresh prepared foods. It could be impossible for old-fashioned supermarkets to adapt changes in their business. Even though fresh prepared foods can be profitable, retailers should carefully evaluate a business model that is affordable and suitable for their positioning. The approach should be able to match the venue and investments should be chosen wisely.
Another challenge pertaining to fresh foods is that perishable products inventory cannot be used as the shield to manage sub-optimal information management. The use of inventory would be efficient for other types of manufacturing supply chain but not in fresh food supply chain where there are many forms of inefficiency including wastage, repackaging, out-of-stocks, discounted sales and having to purchase from non-preferred suppliers (Alberta Value Chain Initiative, n.d.). Many of these inefficiencies – such as out-of-stocks and discounted sales – are hidden costs that may not be managed and monitored. Inefficiencies can be larger than the visible costs of wastage suggest.
Lastly, there is issue in strategy development whereby it requires integrated components. The system is more than the sum of its parts. For instance, marketing skills need to be complemented with improved demand and supply forecasting capabilities. Similarly, developing a collaborative relationship between retailer and supplier is essential to generate higher rates of product innovation. Diversity of product or service is resulting from competition in new business designs. Food industry is often faced with competitive price and unable to maintain diversity in its product and quality due to the same business model practices. Both retailers and suppliers should be cooperative to support the new system so that both parties will benefit from it.
In conclusion, innovation in fresh food is essential to prolong the shelf life of the product, providing variety of products to consumers, simplify operational management, reduce cost of loss, increase more revenue and service upgrading. Innovation is always crucial in a world in which grocery and mass retailers generally offer the same product range as their competitors (Nielsen, n.d.). Thus, the cooperation between retailers and suppliers or retailers and management are indispensable to succeed. The role of retailers in innovation is vital to ensure the process is successful eventhough they have to deal with any issues or challenges ahead.
Alberta Value Chain Initiative. Fresh Food Category Management: Leveraging Strategic Options. Alberta: Agriculture and Food Council of Alberta. Accessed on 1st October 2016, http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/agp11922/$FILE/RetailPaper2FreshFood.pdf
Bourlakis, M., Hirner, S., Moiter, C. and Werkhoven, T. (2013). Six Perspectives on Retail Innovation – Expert Group on Retail Sector Innovation. Brussels: Publications Office of the European Union.
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Donnan, D., Goldin, B., Ouimet, R., Anderson, A. and Hanson, W. (2013). Fresh Prepared Foods: Cracking the Code for U.S. Retailers. San Francisco: A.T.Kearney.
Duff & Phelps (2016). Industry Insights: Food Retail Industry Insights – 2016. Accessed on 5th October 2016, http://www.duffandphelps.com/assets/pdfs/publications/mergers-and-acquisitions/industry-insights/consumer/food-retail-industry-insights-2016.pdf
Harvard University Press. Harvard Reference Guidelines. Accessed on 14th October 2016, http://www.hup.harvard.edu/resources/authors/pdf/hup-author-guidelines-notes.pdf
Miller, D. (2008). Retail Marketing: A Branding and Innovation Approach. Melbourne: Tilde University Press.
Nielsen. Continuous Innovation: The Key to Retail Success. Accessed on 12th October 2016, http://www.nielsen.com/content/dam/nielsenglobal/eu/nielseninsights/pdfs/Continuous%20Innovation%20The%20Key%20to%20Retail%20Success.pdf
Stones, M. (2013). Food Retailing to Polarise around Premium and Value. Foodmanufacture.co.uk. Accessed on 29th September 2016, http://www.foodmanufacture.co.uk/Business-News/Food-retailing-to-polarise-around-premium-and-value