M&S to be hit hardest as consumers change food buying patterns

A fall in the number of people biting into a Marks & Spencer sandwich shows how cash-conscious consumers are rethinking not only where they shop, but also what they are putting into their baskets.

A profit warning issued last week by Uniq, one of the largest food suppliers to M&S, has brought home how the economic snowball effect has hit suppliers, as well as retailers and consumers.

Analysts say M&S will be more vulnerable than any other food retailer, including the likes of Waitrose, as consumers trade down from premium brands to lower margin products such as own-label varieties, while also taking advantage of price promotions.

Uniq, which supplies own-brand sandwiches to a number of retailers including M&S, says it is expecting to report a trading loss in the second half of the year. M&S earlier this month reported a 5.9% fall in food sales on a like-for-like basis in the three months to the end of September.

The big winners appear to be the cut-price supermarket chains such as Lidl and Aldi. But as Pragma Consulting director Mike Godliman points out, such players only occupy a small niche in the market. He says the real victors are more likely to be Sainsbury’s and Tesco which offer a wide range of products, while also targeting consumers looking to find ways to save money.

This year Sainsbury’s launched a number of money saving initiatives, from its “Feed a Family For A Fiver” campaign fronted by Jaime Oliver and the launch last month of its “Ways to Save” website, which was created to help customers plan their shopping with a reduced budget. Tesco, meanwhile, has introduced a range of 350 “branded” budget products and has pledged to become “Britain’s biggest discounter”.

Jonathan Gabay, director of Brand Forensics, says M&S and Waitrose must instead concentrate on their “quality” offering. “While everyone is rushing to slash and cut as if they were auditioning for a role in the next instalment of Halloween, stalwarts of the branding world should snip prices but reassure consumers of quality,” Gabay says.

Waitrose campaign
Waitrose has already begun to do so, with the launch last week of a new TV campaign. The ad says: “We’re so confident in the quality of our food, if you don’t enjoy it, we’ll replace it and give you your money back”.

While quality is the big differentiator for M&S and Waitrose, Godliman says M&S especially will need to undertake a “major rethink” about its current product offering.

Part of the answer could lie in how successful M&S’s trial selling branded goods in its stores is. It has put brands such as Marmite, Heinz Baked Beans and Weetabix on its shelves for the first time across a number of its stores in the North-east, but has yet to confirm if the strategy will be rolled out.

Brian Roberts, global research director at Planet Retail, says it is still too early to tell if the move will have a major impact on its bottom line.

Godliman says: “Ready meals are likely to remain popular, but M&S will also need to start offering more value-end products.” He adds the average family is likely to cut back in certain areas, but keep spending in others. Although parents don’t tend to change their spending habits when it comes to their children, he says they may cut back on buying sweets and lunch box “treats”.

And while the cut-price players may only occupy a relatively small slice of the market, Roberts warns that Aldi has been taking on the big boys and pushing its own “quality message” through its marketing.

“They’ve so far been successful at telling people to change their supermarket, not their lifestyle. And that’s when it starts to get interesting,” Roberts says.