The grocery recovery stores phenomenon

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Nonetheless, these items retain their properties for reasonably long periods after the published best-before dates. Additionally, there are ranges that have been discontinued or new product launches that have failed to catch on, and sometimes even outer packaging that has been damaged in transit and is therefore unsuitable for the general retail trade from a brand image point of view.

Up until now the options of what to do with the obsolete stock were limited. In many instances the products end up being dumped, which carries additional costs for the manufacturer. Estimates vary, but there is an indication that between 30% and 50% of food produced globally never makes it onto a plate. The reasons vary too, but in many instances it is caused by unnecessarily strict sell-by dates coupled with consumer demand for cosmetically perfect food.

An alternative channel that manufacturers have tried is to donate these products to the needy. However, the distribution logistics of pursuing this option often falls beyond the core business of the manufacturer. Secondly, there has been very little guarantee that these products won't make their way onto formal retail shelves via unscrupulous operators who gain access to the stock under the guise of distributing it to charitable organisations.

Managing excess inventory

Against this background, manufacturers are increasingly considering the grocery recovery option to assist in managing excess inventory. In the US, giants such as Kraft and Kellogg have come to embrace this phenomenon. "We consider these retail outlets to be growth channels," according to a Kraft spokeman.

According to Dave Bester of Groceries Unlimited, the Western Cape's largest chain of grocery recovery retail outlets with affiliates throughout South Africa, clients have indicated that apart from solving an obsolete stock problem, grocery recovery outlets can form part of their production planning. "We are an ideal outlet for their new product development initiatives. Both product quality and production efficiencies can often only be tested with longer runs, meaning that manufacturers end up with high levels of finished stock during the NPD process, stock that for various reasons is not ready to be put into the general trade yet. Groceries Unlimited offers a cost-effective solution."

According to Bester, a key issue manufacturers are concerned about is brand protection and brand integrity. "Where necessary or requested by the manufacturer, we de-brand products and sell the goods in their generic form. Quite honestly, our consumers don't really care whether the pasta they are buying is a specific brand or not. The trade-off is access to affordable food for their families." Customers also don't have an issue with buying expired stock. Again, it's a price/quality trade-off. "There is, however, the reassurance that we test items from every batch we buy to ensure they are acceptable from a quality point of view. The Department of Health also visits us regularly. We collaborate with it to ensure a responsible approach."

A second and very key concern for brand owners is that short-dated or damaged stock does not make its way into the formal retail trade. "We limit the number of items a consumer can buy, usually no more than six, to make it unviable for any reseller to consider buying from us. In very special circumstances we will sell more than our maximum quantity upon documented proof that the purchaser represents a welfare organisation or a feeding scheme. In this instance we will also discount our retail price, off our already low prices which are usually at a 50% discount to the general retail trade."

Who shops at grocery recovery stores?

So who shops at grocery recovery stores? The demographics are varied, but by and large it is consumers who are cash-strapped and battling to make ends meet. In many instances these are pensioners who cannot survive on their monthly incomes, or families whose income has not kept up with rocketing food inflation.

The Groceries Unlimited stores are a destination rather than relying on passing traffic. Located in mainly industrial areas that border on lower income housing suburbs, the stores are not a substitute for general grocery shopping, since there isn't consistency of line items. Availability is all dependent on what surplus stock has become available from manufacturers.

In summary, grocery recovery stores are becoming big business around the world. And with triple-digit growth in South Africa, it's fair to say that they're here to stay. Any manufacturer wishing to discuss potential synergies is welcome to contact Dave Bester at Groceries Unlimited in Cape Town on +27 (0) 21 705 6857 or +27 (0) 83 303 9504.