16 of the biggest moments in grocery in 2021
Serial shortages, Amazon’s arrival and Aldi’s efforts to #FreeCuthbert – 2021 was never dull. Morrisons was snapped up, Sainsbury’s exited wholesale and Mere arrived on UK shores. Oh, and don’t forget Brexit and Covid. Take time to reflect on the past 12 months.
HGV driver crisis
It started with a trickle in the spring. A wholesaler here, a manufacturer there, each warning that a lack of HGV drivers was becoming a detriment to their business.
By the time summer rolled around, the driver shortage was troubling all and sundry. The reopening of pubs and restaurants placed a demand on supply chains that hadn’t existed for over a year, and having lost tens of thousands of drivers during the course of the pandemic, the haulage industry was unable to cope.
By June, Tesco revealed it was losing 48 tonnes in food waste each week due to the shortage and was in “overdrive” trying to recruit. It was not alone. Lidl was struggling to persuade drivers to turn up at all. Haulage was oversubscribed and when drivers were forced to prioritise their most accommodating customers, “Lidl always falls at the bottom of the list”.
Many businesses threw cash at the problem. John Lewis offered to pay drivers up to £5,000 more a year, while M&S launched a sign-on bonus of £2,000. Some drivers reported returning from a multi-day trip to multiple incremental pay rises in the post.
Retailers’ empty shelves continued to grow regardless, though it wasn’t enough to persuade government, which remained sceptical. Transport minister Charlotte Vere suggested the industry was “crying wolf” in June, telling a meeting that “we have heard this three or four times before and the world didn’t fall apart”. The Department for Transport insisted the solutions to the driver shortage would have to come from within the industry, including “a big focus towards improving pay, working conditions and diversity”.
This particularly irked the Road Haulage Association, which had become one of the most fervent voices on the driver shortage. It believed Brexit led to a mass exodus of EU drivers and that this was the main cause of the shortage. It consequently urged the government to provide visas for a seasonal workers scheme for drivers.
But losing EU drivers was not the major cause. As The Grocer revealed in September, ONS data showed that out of the 70,000 HGV drivers who left the profession during the pandemic, just 18% were European. The rest were British and below retirement age, leaving because driving was no longer meeting their wants and requirements.
Many are now reconsidering. Huge pay rises are leading many to return, and the number of HGV drivers in the UK grew by 30,000 from June to September – a 40% recovery of those who left during the pandemic. Most companies now report it is considerably easier to find transport, though the problem is far from solved. Quite simply: too many qualified drivers are choosing not to drive.
Rapid delivery players triggering an investment frenzy
This year, billions of pounds flowed into businesses that no one had even heard of at the end of 2020.
Rapid grocery businesses triggered a frenzy among investors, who continue to place huge bets on a rapidly growing sector in the hope it gets even bigger.
Gopuff raised $1bn (£750m) in a single funding round in the summer, with rivals Gorillas and Getir raising similar amounts by the year’s end.
Their promise is simple: anything you can get from a corner shop will be delivered to your door in 15 minutes or fewer.
To the fat-walleted backers, these quick commerce players represent the future of grocery, and indeed all retail. Many are confident, like former Amazon executive Brittain Ladd. “The desire for speed on the part of consumers will continue to increase,” he says. “It’s not a fad.”
But only a handful of players can survive. It’s a market akin to a “Mexican stand-off”, says Jefferies equity analyst Giles Thorne. “The best capitalised operator is going to be the one left standing,” he says.
Those that can’t raise the huge sums of cash fast enough won’t weather the substantial losses that are part and parcel of the rapid game right now. Indeed, some have fallen already – like Weezy, acquired by Getir, or Dija and Fancy, bought out by Gopuff. Further consolidation is coming.
Whether those remaining can turn a profit still remains to be seen. The losses are currently explained away by expansion costs and customer acquisition.
Buymie CEO Devan Hughes says their success to date has been chiefly down to favourable pandemic winds, and questions the true “size of the prize”.
The past 12 months have been about rapid delivery making a splash. The next 12 will determine whether it’s here to stay.
Amazon Fresh launching in the UK
The e-commerce giant took its cue from Olivia Newton-John in March and got physical with the launch of its first real-life branded retail location – a checkout-free Amazon Fresh in Ealing – outside North America.
Since then, the estate has expanded at a decent lick. There are now 15 stores across London (plus two Amazon 4-Star stores). And it looks unlikely to stop there. Leaked internal documents revealed plans to establish 260 Fresh sites by 2025.
Whether that ambition is realistic is in question. On the one hand, retail vacancy rates are high thanks to the pandemic, and Amazon has armed itself with experienced property bods from Sainsbury’s, Tesco, Lidl and Aldi.
On the other, it is not the only supermarket seeking to expand, and new hybrid working practices mean the locations it has opted for so far – close to transport hubs and offices – may not be so prime any more.
But it is Amazon. Eventually, there is real potential the behemoth could overtake Tesco in grocery sales, claims former Amazon executive Brittain Ladd.
Rivals are responding. Tesco has launched its own checkout-free store, GetGo, and Sainsbury’s followed with SmartShop Pick & Go (using Amazon’s own tech).
NI protocol costing industry as much as £260m
It was the notorious ‘sausage wars’ that grabbed the headlines this year, but the problems surrounding the NI protocol go far deeper than that. In the first half of the year, businesses incurred additional costs of between £190m and £260m, according to Defra estimates – and that’s with a wide range of grace periods in place. These grace periods were extended indefinitely in September, giving the UK more time to demand changes to the agreement.
Foreign secretary Liz Truss took over from David Frost in December as the UK’s negotiator-in-chief on the protocol, a suggestion to many that Downing Street’s position is softening. It has already dropped its demands to axe the European Court of Justice from its role in enforcing the Northern Ireland protocol as it perhaps seeks to focus on easing the flow of goods.
Under the terms of the agreement, all goods travelling from Great Britain to Northern Ireland must follow EU customs rules and product regulations such as Export Health Certificates and SPS checks.
The EU has moved to resolve many of the most onerous checks, such as requiring just one certificate for mixed groupage loads. This would mean that a lorry containing potentially hundreds of product lines can travel with just a single certificate stating the items meet EU standards, rather than dozens as is currently required.
In return, however, the EU wants market surveillance information from both the UK government and British businesses to allow it to keep a better eye on goods flowing into the region. This will be a new burden for supermarkets, which will be required to provide full supply chain traceability and comprehensive product data.
Roger Burnley stepping down ahead of schedule… and Asda CEO seat remaining vacant
Roger Burnley left Asda in August – at least four months ahead of his planned departure announced in March.
Burley said in March that he planned to leave sometime during 2022, following the takeover of the business by the Issa brothers and TDR Capital. However, in a statement on 6 August 2021, Asda said Burnley had stepped down from the business following completion of a transition period under the new ownership.
Burnley said the decision to leave Asda “is personal and something I wanted to communicate to my colleagues as soon as I could”.
Nine months later, a replacement is still to be found. A number of candidates have reportedly been approached – Tesco UK CEO Jason Tarry, Booker boss Andrew Yaxley, and Morrisons CEO David Potts all turned it down. Who will get the call next? For now, new owners the Issa brothers are thought to be filling the hole.
Morrisons ending its 54-year run as public company
CD&R’s £7.1bn buyout of Morrisons was the UK’s biggest take-private deal in more than a decade, and will see former Tesco CEO Terry Leahy return to the industry as Morrisons chairman. Once the deal goes through, that is.
CD&R’s plans to fund the deal with £6.6bn in debt are now reportedly on hold until 2022 after bond market investors grew nervous about the potential impact of the Omicron variant on financial markets.
Some investors had already expressed concerns about Morrisons’ debt which, relative to profits, exceeds the amount taken on by the billionaire Issa brothers and private equity firm TDR when they acquired Asda in a £6.8bn deal earlier this year.
One bond investor told the Financial Times that the Morrisons financing was “one step too far” given the £6.6bn debt was not far off the company’s entire £7.6bn enterprise value in June, before a bidding war pushed up its share price. Many analysts expect that Morrisons will sell assets in order to reduce its leverage.
Sainsbury’s getting out of wholesale to put food first
Sainsbury’s decision to shut down its wholesale arm in July was a nasty surprise for SimplyFresh and everyone else who signed up to its fledging supplied-by-Sainsbury’s model.
In fact, anyone who had watched Sainsbury’s bid to become a serious wholesale player – prompted by Tesco snapping up Booker in 2017 – was likely taken aback.
Those ambitions now lie in embers. Its tie-up with EG Group forecourts will surely dwindle in the wake of the Issa brothers buying Asda. A series of rather unconvincing trials with WH Smith never amounted to much, and its supply into Dobbies garden centres will never be a huge income generator. SimplyFresh always seemed the most likely venture to bear serious fruit.
But Sainsbury’s strong sales through the course of the pandemic means wholesale is no longer a necessary focus for it right now.
The wholesale ambition predated CEO Simon Roberts, who is clearly intent on focusing the supermarket’s energies and resources into the core business as part of his plan to ‘put food first’.
But with all Sainsbury’s rivals boasting a decent share of the wholesale pie, there’s a danger it may want to return to the sector in the future – only to find all the best prizes are snapped up.
The Hut burning down as the City grew wary
Keep your head down and shut up’ was investors’ advice to THG boss Matt Moulding in November. Formerly known as The Hut Group, the company has had a disastrous first year on the London Stock Exchange, losing around two-thirds of its listing price.
The online beauty and nutrition retailer was once touted as one of Britain’s leading technology companies, but took a sudden downward turn in October when its share price plummeted by 35% in a single day – wiping £1.8bn off its value.
The confidence crisis in THG partly stems from the unusual corporate governance structures that gave Moulding a golden share, an £800m bonus incentive, and dual roles as CEO and chairman. Plus, there are doubts over the £4bn valuation of its Ingenuity arm.
Moulding has blamed THG’s share price slide on “aggressive” short-sellers but he’s hardly helped himself. He told GQ magazine that the listing in London had “sucked from start to finish” and spooked investors in November when he said there is an “element of me that wants to take the Mike Ashley approach”.
Its share price began to recover in December upon speculation it may leave the stock market and go private again.
Aldi fighting to #FreeCuthbert in legal battle
If M&S hoped to frighten Aldi by taking legal action over the alleged rip-off of its Colin the Caterpillar cake, it failed. Ever since M&S filed the claim at the High Court in April, Aldi’s social media team has been trolling “Marks & Snitches” relentlessly. Aldi’s own Cuthbert the Caterpillar even got a cameo in its Christmas ad being led away by police.
With the case still ongoing, M&S sued again in December – this time taking on Aldi’s alleged copycat ‘Light Up’ gin. In court papers, M&S argues the designs of Aldi’s gold flake clementine gin liqueur and gold flake blackberry gin liqueur are “strikingly similar” to its own. A list of features M&S says are protected include the shape of the bottle, an integrated light feature, gold leaf flakes and a winter forest graphic.
M&S argues true innovation is expensive. Aldi says it doesn’t copy but simply uses cues to make its cheaper alternatives easily identifiable to shoppers. Its irreverence and good humour are so far winning out.
Mere arriving from Russia with lentils
It’s rich material for headline writers: a secretive Russian discounter begins quietly making inroads in the UK with plans for hundreds of stores. More intriguing still, it’s like nothing we’ve ever seen before, unapologetically making zero customer service its point of difference, enabling it to undercut even Lidl and Aldi by a claimed 30%.
Suppliers deliver directly to stores, which in effect serve as (and look like) warehouses. Products are displayed on pallets instead of shelves, the freezer is a walk-in cold room and don’t even think about asking where the houmous is – the only available shop floor staff will be busy manning the checkouts.
Extraordinary though it is, Mere has a formidable track record. In the 12 years since its founding in Russia – where it trades as Svetofor – it has grown to over 3,000 stores globally, including in Romania, Lithuania and Latvia. In the UK, Mere’s take-off has hardly been meteoric. In May it was gearing up to open four stores within months. Seven months later there is still only one and it’s not exactly bustling. Finding enough suppliers is also proving an uphill struggle, presumably in part because they’re only paid for products sold.
Walkers suffering a supply crisis
The UK’s biggest crisp brand came up against a ‘computer says no’ issue at the end of October. An SAP upgrade at owner PepsiCo caused chaos, resulting in widespread supply issues and prompting it to publicly apologise through an ad for a ‘humble pie’ flavour. Blaming the IT guys is often an easy cop-out, but this time it seemed legit. After all, fellow PepsiCo brand Quaker Oats also ran short.
The shortage is now expected to last until at least the end of January as PepsiCo struggles to make the fix. Their problems have boosted competitors, with Seabrook now struggling to meet “unprecedented demand” since Walkers cut out.
CO2 getting turned off due to gas prices
CO2 proved its power over the nation’s food supply once again in September when CF Industries paused its fertiliser factories due to a rise in gas prices. Its factories produce around 60% of the UK’s food-grade carbon dioxide, meaning abattoirs, fizzy drinks and packaging suppliers were suddenly left without.
The government stepped in to ensure supply until early 2022 and agreed to meet the full operating costs – said to be tens of millions of pounds – of CF Industries’ plant on Teesside, “whilst the CO2 market adapts to global prices”. As part of the deal, the food industry has to pay five times more for carbon dioxide – with prices rising from £200 per tonne to £1,000.
Oatly losing trademark infringement court case against Glebe Farm
Oatly’s bid to sue drinks minnow Glebe Farm in June was textbook schoolyard bully tactics. Their relative sizes, however, made it more like an insecure dad attacking year five’s star pupil rather than normal rough and tumble. Oatly claimed the ‘y’ on the end of Glebe’s PureOaty created too much similarity with its own ‘Oatly’ and ‘Oat-ly!’ trademarks. Shockingly, the courts dismissed the case.
The judge found there was no likelihood of confusion between the PureOaty sign and carton and any of Oatly’s trademarks. While there was some similarity in Glebe’s product due to the presence of the word ‘oat’, the levels of similarity were “very modest”.
Glebe Farm owner and MD Philip Rayner called the case a “David versus Goliath battle”.
Ronaldo spurning Coca-Cola in favour of agua
Whether or not Cristiano Ronaldo is a moral man is up for debate. But the footballer’s conscience seemed to kick in at a Euros news conference this summer, when he moved two bottles of Coca-Cola out of the camera shot, raised a bottle of water and declared “agua!”, encouraging a global audience to drink the sugar-free stuff instead.
The Portugal captain’s desire to promote public health messaging is a recent development. After all, he has worked with Coca-Cola and KFC in the past. But fickle or not, the response to Ronaldo’s stunt demonstrated the scale of his influence – it made headlines around the world and caused Coca-Cola’s share price to temporarily dip by 1.6% (the equivalent of about £2.87bn).
Despite the blow, Coca-Cola played it cool, stating that “everyone is entitled to their drink preferences based on their tastes and needs”. But the fallout laid bare the fragility of the product placement game.
Just days later, Paul Pogba hid a Heineken bottle from view during a post-game conference in Munich. While Pogba’s actions were religiously motivated – the midfielder is a devout Muslim – the proximity of the two stunts demonstrated that football stars are no longer always willing to play ball when it comes to big brand endorsements.
Panic at the petrol pumps
When BP told a government meeting in September it was temporarily closing a few petrol stations due to driver shortages, it couldn’t have predicted the panic that would ensue. The news quickly leaked to the press and triggered a mad rush to top up tanks.