Friends at restaurant using cell phones

Transformation of the distribution channels

Published on - updated on

Launched in Paris at SIAL 2018, the Alter’Native Food forum is dedicated to the food of tomorrow and the various levers used by companies in the sector to face up to the changes.

Gilles Raison, CEO of Just Eat France, and Daniel Ducrocq, Marketing and Communication Director at Nielsen, discuss the transformation of the distribution channels.

Are hypermarkets losing momentum?

 

Daniel Ducrocq is Marketing and Communication Director at Nielsen, an international company which measures and analyses data relating to the perceptions of consumers. At the Alter’Native Food forum, he asked the following question: How are companies adapting to all these trends, which are in some cases making lasting transformations to the distribution channels?

He presented some significant statistics:

  • Growth in mass retail is at 0.3%.
  • Stores specialised in fresh produce are in difficulty faced with the competition (up from 10 to 15%).
  • Growth in the food sector, excluding fresh produce, is at 1.5%
Frozen vegetables
Frozen vegetables

Today, the advent of specialised competition in the food sector (Japanese, frozen, Italian, etc.) has caused a drop in traffic in the mass-market distribution channels, such as supermarkets and hypermarkets. Sections such as pharmacy, brands, hygiene products are deserted. So as not to lose space on the sales floor, the non-food shelves are getting replaced by specialist "corners", to combat the competition. Despite these efforts, reducing prices by 0.2% has not made it possible to increase the price of the average shopping basket of consumers, despite the population continuing to grow in France.

Organic: trend or true lifestyle?

This loss of store traffic can be explained by the proliferation of specialised stores, particularly for organic, local and/or food innovation products. The SMEs offer proof of this, increasing their sales from 20 to 25% thanks to this sector.

Currently France has almost 1600 dedicated stores (excluding independents), such as Biocoop, Naturalia, etc., with 300 organic stores per year opening in France: almost one a day. Despite these statistics, consumers remain faithful to the big-box stores. This success can be explained by the search for freshness and quality in products, which has become the number one criteria for the French, with price down in fourth position.

Households on the march toward change
Yuka

As consumer food habits change so do their lifestyles, too. Daniel Ducrocq divides French households into two categories:

  • The "traditional", "quick and easy" and "convivial": these consumers are not changing their traditional cuisine/snacking habits.
  • Those "on diets", out of conscience for animal welfare, etc.: this category represents 35% of French households that have changed their habits.

This search for new and healthy eating is facilitated by mobile technology, offering the possibility of comparing nutritional compositions and prices. We therefore know that 10% of French households possess the Yuka app and use it outside of stores. This means that we are going beyond merely checking the composition of a product before dropping in our shopping basket.

Transformation of brand strategies

 

The objective of the leading brand distribution channels is to propose a food offering that allows you to "eat better", without affecting the prices. Communication campaigns focus on organic specialists and fresh produce. To stand up to the competition, there are multiple levers, such as the product offering and product mix, changing the concepts by providing larger sales areas, and so on.

Eating differently: the rise in e-commerce and unmanned spaces
organic products on a shelve

©F. FOUCHA, X. MUYARD, L. DHERINES

Although small stores are gaining ground on the large department stores, it is hard to hold the consumer's attention with an average shopping basket of only 5 items. Certain zones are therefore targeted:

  • Possible peripheral channels such as Amazon, which generates €300 million in sales on food, beauty & hygiene and cleaning products
  • Abroad, where e-commerce pure players are creating physical stores with no sales staff, such as in China, where unmanned points of sale are springing up
  • In France, where the "drive" model is enjoying 6% growth: this is the most dynamic distribution channel after home delivery

Home delivery: strong growth with the likes of Just Eat France

 

Takeaway tacos
Takeaway tacos

Gilles Raison is CEO of Just Eat France, making him an expert in home delivery in France. In the course of his business, he is constantly analysing the new distribution channels, to target both the competition and the innovations that may help him stand out from the crowd.

According to his in-house studies: "All the traditional retailers are joining forces with a pure player to propose their product mix on their marketplace. Covering all the bases in this way is a fundamental challenge for the various players: supermarkets, hypermarkets, etc."

He demonstrates this with the case of culinary specialities, keys to platform growth. Food deliveries, previously restricted to pizzas, has today been extended to over 50 culinary specialities, including pizzas, sushi, burgers, curries, tacos - the trend in 2018 - and so on. By catering to this sector, which just keeps on growing, Just Eat has delivered nearly 10 million meals in one year, with growth up 35% in 2017 and even higher forecasts in 2018 and 2019.

What are the key factors of success for home meal deliveries?
Two young women with a smartphone and a tablet PC in a kitchen drinking coffee

Three factors are driving the home deliveries sector. The first is: "the development of apps. We have gone from orders that used to be placed over the phone (...), to a major channel that the web has become (...), to another major channel, which is the mobile app. The advantage [of apps] is that the frequency of purchase is far higher than we had on the web (..), [with purchases increasing] by 30%, since you have the store on your person all day long, all year long, every moment of the day." Consequently, a real downloading war is being waged, with almost 3 million French people regularly using a delivery app.

Secondly, consumption habits are changing, particularly regarding delivery. This trend goes hand-in-hand with popularity of home entertainment streaming (Netflix and the like), helping to boost the sales of home meal deliveries. Lastly, the places of consumption have changed: beaches, parks, student residences, etc.

Who purchases meal deliveries, and how?
Takeaway service

©F. FOUCHA, X. MUYARD, L. DHERINES

Unsurprisingly, the over 55's remain for the most part resistant to this new practice. The 18-24 and, more widely, 18-34 age brackets are captive targets, who get deliveries both for eating with friends (the long-time traditional model), and for family meals.

As a means of saving time, the current trend is to go and pick up your order. Out of 29 orders per year, 4 are for online delivery via apps, and 4 more call restaurants directly.

Just Eat looks certain to prosper, since supply creates demand. Whenever a new town gets subscribers to the app, demand rockets, with growth of between 100 and 500%.