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Pig Industry Insider

The future of supermarkets for pork suppliers, marketers

April 6, 2014

As with other parts of the meat business, pork relies heavily on supermarkets to reach the end consumer. In many countries, the largest single purveyor of our product is likely to be a supermarket chain. So, we need to be aware if these major marketing outlets show any sign of change.

Just over a year ago, I was invited by a university to review pork’s longer-term prospects at a global level. My report flagged a number of ways in which the supermarket model was forecast to alter in the coming years.

One of those predictions has already shown signs of coming true, rather sooner than anyone might have expected. I had said that the managers of some multiple food retailers would start taking steps to extract value from their property portfolio. This is exactly what is now happening.

Internationally, one clue to the new mentality came when pan-national brands began to sell slices of their land assets to joint venture operations in which they themselves usually held a large share. The stores at those locations would then pay rent to the joint-venture company now owning the land. The shareholders in that company were likely to include a local investor, most probably someone who was not the supermarket’s partner in store operation.

This separation of property ownership from retailing function has been given a boost by the weak economic growth in many countries over recent times. Faced with a standstill in retail sales and declining profits, store groups have been urged by their larger shareholders to release capital through a sell-off of sites on which the groups’ stores are located. 

The supermarkets also have looked at new ways of working with their grocery suppliers. One vision of the future is that these separate developments could come together in a business model for supermarkets that sees them develop franchises rather than be owner-operators.

Imagine the store itself being divided into separately franchised zones, each offered to a supplier on the basis of a ground rent plus a share of sales receipts. It is how non-food department stores often operate today.

If this does happen also in the food retailing sector, the opportunity arises for meat suppliers to become also retailers, within the supermarket environment. They could have their own distinct sales area in a setting that resembles a series of outlets in a food hall instead of the lines of aisles seen today. While gaining from the footfall traffic of the total complex, they would also win by creating their own ambience and identity, and by having more control over prices, descriptions, information and promotion.

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