UK FOOD retail is arguably one of the toughest markets to enter in the world. But shopping habits are changing and new models are bypassing the big supermarkets to bring farmers and consumers much closer together.
Farmdrop works like a "click-to-harvest" farmers' market. The website allows buyers and sellers of local food to find each other and trade directly via local hubs (or “FarmDrops”) that are run by community members called “keepers”. Each week customers order and pay online and following a weekly deadline all the orders are sent to the producers, who deliver the produce three days later to a local venue.
There are five FarmDrops operating in south-east England, but the plan is to have 400 throughout the UK by 2017, says its founder, Ben Pugh. “Having just completed an equity crowdfunding round in which more than 350 people invested a total of £750,000 this feels more achievable than ever before.”
Before starting FarmDrop in 2012, Pugh spent a lot of time analysing the country’s biggest food retailers. IGD data shows that almost £4 in every £5 goes through the five main supermarkets, so they must be doing something right. However, during his research Pugh discovered that it’s a rather bizarre setup.
He explains: “Take the example of an organic grower in Kent who sold butternut squash to a supermarket for £1 each, who then sold them to customers for £3 each. In other words, he was receiving just 33% of the retail value.”
According to the National Farmers Union, the picture is even more bleak: just 11% of all the money spent on food in the UK goes to UK producers. Figures released in August for Scotland showed a fifth consecutive increase in farm debt. Almost one in four farmers (23%) can’t pay themselves the national minimum wage. “The numbers sound crazy, but they’re real,” says Pugh.
Now compare FarmDrop. “For every bag of local food sold through us, the producers take 80%, keepers take 10% and we take the final 10%. And because producers are sent precise bulk orders and have three days to fulfil them, it’s a zero-waste system. So, if no one’s bought the carrots they stay in the soil.”
Pugh is adamant this model is a “quantum leap forward” in producer profitability, and one in which “everyone involved is better off”. He adds: “The key point is this: we need to provide more efficient and profitable routes to market for the independent producers so that they can become more price competitive with the larger industrial producers whose methods are worse for the environment and whose food is worse for our health. That’s what we’re trying to do, and that’s why we will compete with the supermarkets this Christmas.”
There are some powerful tailwinds in his favour. Online grocery sales in the UK are expected to rise from 2% to 8% of the overall market between 2011 and 2017 (IGD, June 2014), with sales worth £17 billion. Click-and- collect is the fastest growing format behind this trend. Meanwhile, current industry data show Tesco and Morrisons not just trying to stem a fall in market share but declines in actual sales (Kantar, May 2014). Pugh says this is “unprecedented” and suggests a structural shift may be under way.
Besides the trend towards online and convenience, there is also provenance and nutrition – interest in which has spiked in the past 12 months in the face of the horse- meat scandal and obesity crisis. “I’ve heard more than a few people comment that if a food product is advertised on television it’s probably not wise to eat it,” says Pugh. “We allow consumers to get away from massive food brands and back to real food produced by actual people. It’s not technology for technology’s sake. It’s technology that brings us back to the environment and the people making our food.”
FarmDrop has 360 independent producers on its books, and with Pugh’s ambitious expansion plans there are opportunities for many more. As the big supermarkets struggle and the relationship between people and food continues to evolve, it will be up to the challenger retailers like FarmDrop to fulfil people’s needs.