1. Developing new channels for food products from Ireland
R. O’ Farrell
27th January 2015
TRADEIT
Distribution channels and opportunities.

2. Introduction
The context of this presentation is centred on the development of new channel strategies for food enterprises
Prepared, in light of the continued growth in market share of private label brands available in the supermarkets for consumers to purchase, which has now reached 36.4% in ROI up from 28% in 2008 with a value of some €2.4bn (Bord Bia, 2014),. - a considerable threat to small indigenous brands
This presentation examines how food firms in Ireland can develop successful strategies in NPD process and distribution channels to develop their businesses in this evolving environment.
Private label supermarket food brands are growing market share across the world including Western Europe, The United States, Eastern Europe and Latin America – increased market uniformity (Kantar Worldpanel,2014).
This growth is rooted in the retailers desire for increased market share of the retail grocery sector / food service with their own branded lines.
Retailers (Grocery and food service) now have to work harder than ever to create a point of difference for the consumer and they have frequently used instruments such as price, channel and product quality as levers to achieve this.

3. Introduction
Kantar Worldpanel (2014) commented that price discounting and promotions have not worked for any of the retailers in the UK. Retail channel differentiation has not worked either and as a result the retailers have had to rethink their strategies.
The main reason for this, is that these existing strategies of price and channel can be easily copied by other retailers.
However, by comparison, investing in, and developing a quality product offering for the consumer is much more difficult to copy. Consequently, retailers have begun to refocus heavily on the private label aspect of their offering to the consumer (Kantar Worldpanel, 2014).
White (2013) reported that own label NPD activity surpassed that of manufacturer brands for the first time ever in that year.
Mintel (2013) reported similar findings in terms of the growth rate of private label NPD in the UK and their research showed that 54% of NPD in food and non-alcoholic drinks were for private label products. This is the first time that manufacturer brands have lagged behind.

4. The Retailer Advantage
Retailers have become very strategic in terms of how they use consumer knowledge to further enhance their effectiveness.
They exploit POS data, that can help determine consumer preferences and can co-ordinate NPD activity as a result (Cox and Mowatt, 2003)
Control of this information and its management in the NPD process is giving the retailers an important position in the food chain.
Retailers, know what makes manufacturer brands successful. For example, 41% of Irish consumers have been very conscious of supporting Irish brands during the recession. Branded food firms have had this position to themselves up to now.
Now, retailers such as Aldi publicise their offerings as having the same benefits as manufacturer brands in terms of provenance but at a lower price. The “Love Ireland, like Aldi” campaign has been particularly successful (Bord Bia,2013)
This is having a profound effect on manufacturer brands. A main point of difference has now been diluted and captured in a retail private label offering. This is supported in the numbers with 60% of Irish shoppers now visiting a German discount chain at least once per month (Bord Bia, 2013).

5. The Retailer Advantage
ROI and UK food firms, have reduced investment in R&D and NPD activity during the recession (Bord Bia, 2013).
Over emphasis on brand promotion has resulted in a loss of revenue reserves, NPD knowledge required for future development of the company (Moskowitz et al.,2009) .
As a result food firms are faced with a difficult dilemma in terms of building a sustainable business model. Their innovation pipelines are not as full as they should be due to lack of investment in NPD, Channel development
In contrast, the retail organisations have increased their level of consumer insight and consumer-oriented knowledge data capture, while also increasing innovation and NPD activity in supporting private label offerings in store.
This is seen as a threat to food firms. Private label brands now adapt faster in response to changing consumer demographics and have the ability to develop new products that are superior in meeting consumers’ needs.
The retailers have abandoned the price led strategy from the past. They now compete in the different product quality tiers and not always at the cheapest price (Moskowitz et al, 2009). As a result private label products market share of the grocery business has grown and retailers now see differentiation through investment in private label products as one key route to sustainable growth and development.

6. What are food enterprises to do?
Concentrate on NPD?
Concentrate on seeking out new channel opportunities? What are these new channels? Where are these new opportunities?
Consumer insights?
Market insights?
Opportunities to collaborate? In process (outsourcing) and in marketing (branding)?
Relationship and knowledge management?
Challenge the boundaries of who we think our customers are for our food products?
Look at opportunities that offer some form of exclusivity and reduced competition?

7. New Business Model Development For Food Firms
The key to success in developing an effective model is through supplier and customer integration (Lau et al., 2010).
This process is now characterised by collaborative buyer-seller relationships (Athaide and Zhang, 2011). This is in contrast to the unilateral approach that would be adopted by food firms traditionally.
This may require food firms to employ more than one business model to get product to market
While food firms and retailers operate as separate entities, it is now becoming commonplace for them to work together in some form of strategic alliance through innovation networks (Cox and Mowatt, 2003).
These networks have the ability to increase success rates and reduce costs because the retailers are prepared to share more information in these networks than they would ordinarily with a branded food firm supplier.

8. What are the opportunities?
What are the new channels?
How are they evolving?
How do we find out about them?
How do we get access to them?
What are they looking for? Point of difference? HealthTrends? Convenience? Grab and Go? Unique proposition?

9. New emerging channels On line retailing Convenience retailing
Grab and go
Food service consolidation – growth in Café culture
Direct selling and on line direct selling

10. Conclusions
Greater supply chain integration and collaboration within the food industry is going to continue.
Firms that are innovating within their network, sharing information and working collaboratively with are accessing new channels and are achieving higher growth rates and higher profitability than companies’ not engaging through their supply chain network.
The collaborative concept of plurality might best explain how food firms may exist in the food industry in the future (Benson-Rea et al., 2013). Food firms, rather than pursuing one unilateral strategy which worked in the past, might be faced with a reality where they will pursue a number of different collaborative channel relationships concurrently in the future.
Adopting a number of different strategies at the same time allows the firm to create value that might otherwise be eroded in a single strategy, it allows the firm to remain flexible to the changing needs and demands of the marketplace and its different channel opportunities.