As Tesco unveils plans to launch a vegetable box delivery scheme next month just a week after the acquisition of Abel & Cole, Retail Week takes a look at the vegetable box market.

Why are we talking about this now?

Tesco is poised to launch a play for the organic veg box market delivering vegetables, fruit and salad to shoppers in London next month. The move comes just a week after organic vegetable box specialist Abel & Cole was acquired by supplier William Jackson Food Group.

What form will Tesco’s offer take?

Shoppers will be able to purchase five different sized boxes from Soilandseed.co.uk, owned by Scottish supplier Tio, and also from Tesco.com. The veg box boxes will be distributed from Tesco’s London dotcom fulfilment centres. Tesco has attempted to enter the market once before, offering boxes in store as part of a trial in 2006, but it is now better placed with its well-developed London distribution network. The grocer has also made a play for the London foodie market by creating a party food service, which will launch later this year.

Who else is in the market?

The market is dominated by Abel & Cole and its rival Riverford Organic Farms which have carved a niche by targeting ABC1 shoppers keen to connect with the origins of their food.

Both companies have used marketing and direct mail to engage with customers, highlight their ethical credentials and offer a tailored service. However, Abel & Cole was recently criticised by shoppers over the volume of calls received from its call centre and does not deliver at the weekends. Tesco’s customer base and seven day service puts it at a distinct advantage.  Elsewhere, smaller operators include Farmaround, Growing Communities, Coleshill Organics and Daylesford Organics, which also supplies Ocado.

Why is Tesco doing this now?

The lucrative market made Abel & Cole £46m in sales last year and will allow Tesco to bring its brand easily to upmarket consumers. It is also a market in which it does not face competition from its traditional foes including Asda and Sainsbury’s and will be keen to cement its customer base in the capital ahead of Morrisons targetted growth in London through its convenience offer next year.

What does Tesco’s move mean?

Observers may be surprised that Tesco has made the move before its more upmarket rivals Waitrose, Marks&Spencer and Sainsbury’s, who are arguably better placed to tap into a premium market.

However, Tesco’s existing infrastructure and low risk investment in the project mean a trial makes business sense. Seb Powell, founder of online farmers market Flavrbox, welcomed the move.  “No-one has found a way to get boxes into the mass market, they tend to appeal to certain segments, be that green and ethical or the wealthy.  Tesco launching their scheme can only be a good thing for creating more demand for quality, organic food,” he says.

Perhaps more significantly, Tesco’s commitment to selling organic produce, which has been struggling to gain sales and extra supermarket listings since the recession began in 2008, is interesting. As the grocery giant looks to ‘warm up’ its brand in the UK, connecting with a savvy, sustainable and ethically sound start-up may prove a smart decision.