MDD, a distributor brand, plays a key role in sustainable development. Provided we move from words to deeds, from commitment toengagement, from CSR steeped in greenwashing to CSV.
The European House-Ambrosetti-on behalf of the Today’s Distribution Association (ADM), chaired by Giorgio Santambrogio (CEO of the VéGé Group)-presented a position paper in Bologna on 15.1.20, at the Marca trade show. Data and reflections. (1)
MDD in Italy, economic scenario
MDD (private label) achieved sales of €10.8 billion in 2019 (+4.1 percent over 2018, up from +3.3 percent in the previous two years). Its market share now accounts for 19.9 percent (+0.8 percent, 2019 over 2018,+0.4 percent in the previous two years). And it will rise to nearly 25 percent, according to Ambrosetti’s ambitious forecast.
Consumers increasingly value the private label, for reliance in their professional supply choices as well as convenience. With a variety of choice that exceeds the ‘first price’ segment and increasingly garners acceptance in quality product selections. In both directions of:
– Italian specialties linked to territories, where Unes-U2 supermarkets’ ‘Viaggiator Goloso’ and Coop Italia’s ‘Origine’ line set the standard,
– organic, which in modern distribution continues to perform extraordinarily well (+9% in 2018, with a peak +20% in the discount channel, +5.5% in 1′ half of 2019). (2)
The savings realized by Italian consumers thanks to private labels is estimated by Ambrosetti at about 2.8 billion euros per year, or about 110 euros per household. And it is in this scenario that the critical element of sustainability comes in.
Food supply chain and sustainable development
The agribusiness supply chain, as we have written, can actually contribute to the achievement of at least 9 of theSustainable Development Goals (SDGs) in UN Agenda 2030. And retail is undoubtedly in a crucial position, as it can measure shelf rotations in real time and adjust its offerings to MDD with more flexibility than IDM (Brand Industry).
‘The Distributor Brand is a primary player in addressing a sustainable vision for the country. It has an active role as an “educator” and “guarantor” of sustainability to the consumer, of leadership, guidance, direction, and stimulation to the MDD’s 1,500 partner companies with whom it has strong, long-term relationships (in 98% of cases lasting more than 2 years and in 50% more than 8) and offers a concrete response to the consumer’s growing demand for sustainability, at affordable prices‘. (Valerio De Molli, The European House – Ambrosetti, Managing Partner and CEO)
MDD and sustainability, the position paper
The position paper by Ambrosetti for of ADM reports that. ‘Distributor Brand products made increasingly according to criteria of environmental protection, circular economy, respect for working conditions and animal welfare, offer a concrete response to the growing demand for sustainability of households and an opportunity for conscious consumption.’
It refers to commitments on the environmental front, such as reducing plastic, water and electricity consumption (-30% from 2005 to 2018) and emissions in the logistics/distribution phase. Traceability of the supply chain of private label products and animal welfare protection are added.
It then rightly claims the recovery of 12,400 tons of surplus food in 2018. A huge amount of food, 6 times more than was collected in 2012, is diverted from food waste to be donated to the needy through the Food Bank Network. But the concept of ‘sustainable spending,’ as we have seen, is much broader and must be framed within appropriate strategies of which only episodic mention is offered.
Sustainability that pays off
Ambrosetti, in the position paper produced for ADM, stresses the urgency of addressing the issue of sustainability, for political and institutional (as well as regulatory, existing and emerging) reasons. (1) And highlights the retail benefits associated with sustainable development:
– is a major consumption trend , which is constantly growing (as moreover seen in the latest Coop 2019 report),
– can increase every company’s sense of duty and social responsibility (so it is hoped),
– is a competitive factor for companies, to the point that highly sustainable companies would be more productive (+10.2 percent) than non-sustainable ones,
– Promotes the attraction of investment capital.
‘The consumer is beginning to be willing to pay more for more sustainable products’. In a 2017 survey, the answer ‘Yes, I would buy this product even if it cost more than the other products’ was offered by respondents in relation to energy-efficient appliances (61%), products at zero kilometer (52%), organic products (47 percent), energy from renewable sources (26 percent), natural cosmetics (21 percent), and electric cars (18 percent). Trends up from previous year, presumably increased to date.
The sustainability you need
The sustainability most needed is the one that curiously escapes the Ambrosetti dossier and yet is invoked by the FAO, as well as the United Nations, in relation to Sustainable Development Goal SDG 12, ‘Sustainable production and Consumption. (4) Sustainability is based on Respect for people (workers, suppliers, consumers) and ecosystems.
The ‘price drug’ -influenced by, among other things, unfair trade practices, which can only be mitigated with the transposition of EU Directive 2019/633-still dominates the sourcing policies of large retailers. For it is an ingrained practice in all its buyers and their leaders.
Only when top management decides to adopt strategies based on sourcing policies from sustainable supply chains-in the system logic suggested by the ISO 20400:2017 Guidelines-can change really occur. Since responsible consumption presupposes responsible and consistent purchasing.
Pork
The distance between words and deeds when it comes to ‘MDD sustainability’ is demonstrated in the glaring example of pork products. The cost of raw material has increased dramatically, +45% in the last 4 years. (5) With a peak in 2019 when China, due to African swine fever, lost 40 percent of domestic production (130 million head). (6) Driving up demand and thus prices in the global market.
Raw material accounts for 50 to 75 percent of the production costs of processed meats (e.g., hams, cured meats). But the large-scale retail trade, in Europe as in Italy, has recognized laughable increases in purchase prices to processors. Except in France, not because of noblesse oblige but because of a law(Egalim) that specifically regulates supply chain relationships. And when even the final consumer prices have been slightly ‘tweaked’ upward, some GDO operators also speculate on this surcharge. Position papers are not enough.
#Égalité
Dario Dongo and Sabrina Bergamini
Notes
(1) The European House-Ambrosetti(2020). The Contribution of the Distributor Brand to the Challenge of Sustainable Development and the Country. Position paper, https://www.ambrosetti.eu/wp-content/uploads/Position-Paper-ADM-2020.pdf
(2) Sinab data, September 2019 https://www.greatitalianfoodtrade.it/mercati/sana-2019-il-bio-che-cresce-e-apporta-valore
(3) See footnote 1, presentation by Valerio De Molli https://www.ambrosetti.eu/wp-content/uploads/Pres-DE-MOLLI-Marca-2020.pdf
(4) SDG 12, Goals and Indicators, https://sustainabledevelopment.un.org/topics/sustainableconsumptionandproduction
(5) See European Commission, DG Agri. Meat market observatory – pig, 2015-2019, https://ec.europa.eu/info/sites/info/files/food-farming-fisheries/farming/documents/historical-pig-prices-eu_en.pdf
(6) China’s pork crisis may be easing but price rises are still in the cards, Laura He, CNN Business, 28.11.19,https://www.cnn.com/2019/11/28/business/china-african-swine-fever-pork/index.html
Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT - Food Times) and Égalité.
Journalist. Consumption, rights, nutrition, social, environment. Head of Consumers Help. She collaborated with ResetDOC, Il Riformista, La Nuova Ecologia, IMGPress.
