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In 2006, RIRDC invested research resources into a project which investigated the health food market for a range of gluten free grains¹. Quinoa was identified in this initial study as a grain worthy of further investigation due to its popularity overseas and some interesting production characteristics (stress tolerance to drought and saline conditions). This new project was commissioned to assess the size and value of the domestic food retail market in which quinoa may compete. This research assessed the size and value of the proprietary bread, cereal, snack food, savoury biscuit and pasta categories within five Australian food retailers namely Coles, Woolworths, Aldi, Healthy Life and Macro Wholefood Markets. The research attempts to highlight trends that are emerging between mainstream and health product positioning in the Australian food retail industry, providing evidence to suggest whether development of quinoa products will be beneficial in terms of its potential retail impact.

Who is the report targeted at?
The recommendations in this report will assist RIRDC and other interested private investors in their assessment of the initial viability of quinoa at the retail level. The report also aims to highlight areas where more targeted research towards retail category development of quinoa in Australia is required.

Background
The scientific backing of quinoa is overwhelming in its suggestion that quinoa has a nutritional makeup that provides consumers with a product high in protein, fibre, vitamins, iron and the eight amino acids. It has been discussed that quinoa has the potential to be grown in Australia as it appears to have a tolerance to dry conditions and salty soils. However, if Australia were to begin a quinoa farming program, there are a number of crucial questions that need answers. Would the retail sector sell a product with attributes such as those associated with quinoa? What is the current market value of related categories? How are products with similar attributes to quinoa currently positioned? This report aims to answer these questions and to identify the retail industry trends in relation to mainstream and health products, and use this information to make recommendations for the retail positioning target for quinoa.

Aims/Objectives
This report is a category analysis of five product categories, (proprietary bread, cereal, snack food, savoury biscuit and pasta) within five Australian food retail outlets, namely Coles, Woolworths, Aldi, Healthy Life and Macro Wholefood Markets. The project analyses each category market value, stock keeping unit (SKU) total, in-store shelf space, product in-store positioning and total product health attribute. This analysis will assist in establishing the opportunity that may exist for quinoa in the Australian retail sector and where further research is required.

Methods used
The project researched 1479 Stock Keeping Units (SKUs) across the five categories throughout the five retail outlets. At point of sale (POS) surveys were completed which provided data on the total number of products per brand in each category, a description and count of all point of sale (POS) attributes per product (many products showed more than one product attribute), total shelf space dedicated for each brand and a description of the store positioning of each product. To gain information on the dollar value of each category secondary research methods were implemented.

Results/Key findings
In Australia, the proprietary bread, cereal, snack food, savoury biscuit and pasta categories are worth a combined $2.89 billion. Proprietary bread in 2006 is worth around $792 million, the cereal category is worth $982 million, the pasta category is worth $167 million, snack food category is worth $494 million and savoury biscuit category is worth $460 million. Proprietary bread, cereal and pasta categories have seen substantial value growth from 2005. At point of sale (POS) the pasta category was the largest in terms of stock keeping unit (SKU) count, followed by cereal, savoury biscuits, snack foods and proprietary bread.

Four out of the five categories saw the majority of product positioning displayed in the mainstream grocery aisle. The exception to this was the cereal category, which saw a large number of private label products from Healthy Life and Macro Wholefood Markets competing in this category.

In all five categories there was more shelf space dedicated within the mainstream aisle, this was even true within the cereal category despite the fact that there were more health positioned products in terms of stock keeping unit SKU numbers present, the space dedicated to health positioned cereal still does not match that of the mainstream positioned aisle.

The following will summarise key findings that came out of the category analysis. Each summary will include points on health attribute percentage seen as a whole category, which are the top three attributes that drive the category at point of sale (POS), where these attribute products are positioned in-store and the shelf space dedicated to each category for both market positions (mainstream or health).

Proprietary Bread
Out of the 204 proprietary breads researched, 92% showed one or more product attributes at point of sale (POS). The top three attributes within the category included no preservatives with 49% of breads showing this attribute, low Glycemic Index (GI) with 20% and high fibre with 22% of breads claiming this attribute. The positioning of these attributes all showed a high majority (over 65%) in mainstream grocery aisles. In relation to shelf space, mainstream grocery aisles were significantly larger, with 70% more shelf space for mainstream positioned bread over that of health positioned bread.

Cereal There were 345 cereals researched at point of sale (POS), with 76% showing one or more attributes.

The top three attributes in the cereal category included high fibre with 26% of cereals showing this attribute, low fat with 12% and added vitamins with 11%. There were also a relatively large percentage of cereals that showed no attributes (24% in total), this however is largely due to the number of private labels found in this category that do not display product attributes at point of sale (POS). Out of the top three attributes all were predominately found in mainstream grocery aisles (over 65%). Due to the large private label presence in the cereal category the shelf space dedicated to the category was more evenly split. Health aisles are close to the same shelf space found in mainstream grocery aisles (there was only a six and a half metre difference between health and mainstream aisle space in one case).

Snack Food
The project covered 240 snack food products of which 79% showed one or more attributes. The top three attributes found in the snack food category included no artificial colours with 37% of products showing this attribute, followed by low fat with 27% and high fibre with 18%. Out of the top three attributes all where predominately found in mainstream grocery aisles (over 70%). In relation to shelf space, health aisles do not compete in the snack food category with a difference in shelf space footage of around 23 metres in one case.

Savoury Biscuits
Out of the 263 savoury biscuits research 96% showed one or more product attributes at point of sale (POS). The top three attributes in the savoury biscuit category included fat free with 35% of savoury biscuits showing this attribute, followed by gluten free with 21% and high fibre with 16%. Out of these top three attributes all were dominated in the mainstream grocery aisles (over 94%). As with the snack food category, health aisles do not compete in the savoury biscuit category with a difference in shelf space footage of around 40 metres in one case.

Pasta
There were 427 pastas research in which 60% showed one or more attribute at point of sale (POS).

The top three attributes in the pasta category included no preservatives with 27% showing this attribute, followed by gluten free with 12% and wheat free with 6%. The no preservatives attribute was dominant in the mainstream grocery aisles, where both the gluten free and wheat free attributes dominate in the health aisle. As with many of the other categories, health aisles do not dominate space in the pasta category with a difference in shelf space footage of around 17 metres in one case.

Implications for relevant stakeholders
From the category analysis undertaken in this project the success of a quinoa product in Australia will depend on how it is positioned. From the results it is evident that there is a trend occurring towards mainstream healthy. Out of all five categories there were more products showing health attributes than none at all. There is a clear movement to introduce mainstream healthy products, and the surprising result is when combining the attribute result and the positioning results, it shows that four out of the five categories were also dominant in the mainstream grocery aisle. Cereal was the only exception with only a small 2% differential between product numbers found in health versus mainstream grocery aisles. The main conclusion from the research is that mainstream products are competing in the health attribute arena. In positioning quinoa, according to the data, to promote quinoa only in a small health niche market will stifle its potential. With quinoa possessing attributes such as protein, fibre, vitamins, iron and the eight essential amino acids, this presents the real opportunity for market penetration. Each category is already competing on health attributes in mainstream grocery aisles, including attributes which quinoa possesses. There is potential for quinoa as a stand alone product or a complementary ingredient to other products. This could allow quinoa to fill attribute gaps that may exist within categories or enhance existing products with attributes within the category.

The project has also found the large growth in private label products (those products branded under the retailers brand name) throughout all categories. The private label point of sale (POS) market share of Coles and Woolworths alone can attribute between 2% and 8% depending on the category. This could also provide an opportunity for quinoa, as private label is competing with traditional manufacturer brands. Retailers are looking for the next competitive edge and in some cases more so than traditional manufacturers. This growth is purely due to the fact that to grow food retail sales, retailers need to innovate their product range. With a private label product, not only is their prospect for innovative products but it also demands larger shelf space as retailers strive for higher margin products. The results have shown attribute gaps in the market which quinoa could fill and assist not only retailers, but also manufacturers, in developing innovative products to fill such gaps.

Recommendations
This project was aimed at identifying the market size and value of categories where quinoa could compete and attempt to discover the way the market is set up in relation to competition and positioning. Certain questions need to be asked of consumers, suppliers and retailers to give investors enough information to develop a robust business case. The types of questions to be asked are;

Consumer’s perspective:

• how the market is segmented
• who would buy the attributes of quinoa
• what is the consumer appeal and unique selling point of quinoa

Supplier’s perspective;

• suppliers within the category
• stand alone quinoa products versus quinoa being a complementary ingredient
• supplier buy-in (business case analysis via category management)
• Capital investment analysis
• end-to-end value chain assessment

Retailer’s perspective;

• private label analysis
• category management analysis
• market/category positioning strategies.

With the completion of such research a business case could be developed which incorporates all relevant stakeholders. The business case would be needed in order to gain buy-in from suppliers and retailers, but also required to develop a robust marketing strategy.

1 Gluten Free Grains, Vinning & McMahon, Sept 2006, RIRDC publication no. 05/011

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