Inspiration 1%
Perspiration 98%
Attention to detail 2%
Perspiration 98%
Attention to detail 2%
Thursday, 13 March 2014
Morrisons success as price-warrior depends on the battle?
Whilst Dalton Philips price-cutting promise, on top of profit losses relating to writedowns, and negative like-for-like sales, was not sufficient to avoid spooking the stockmarket, the company remains in a strong position…
Thanks to Ken Morrison’s conservative attitude to money, the company is asset-rich and the sale of £1bn from an 80% owned store portfolio will eventually calm the shareholders, and leave a robust retailer in place.
The CEO’s promise to cut prices permanently to a level that would not have to match those of the discounters, but to be just low enough that its fresh food and quality offer would look worthwhile, anticipates one definition of the price war....
However, the issue for suppliers is where the upcoming price-war is headed…
Will the big 3 take a similar stance to Morrisons on going ‘low enough’ to compete – giving Morrisons a fighting chance - or is the agenda to match or even undercut discounter prices, product for product, and arrest their growth…?
In which case, the discounters cannot afford to go lower, and the depth of major retailer pockets will only be limited by stockmarket reaction…, with Morrisons at a distinct disadvantage, currently.
From a supplier perspective, it is vital to stick with current pricing and trade investment strategies - and compliance conditions - and effectively sit this one out…
Thanks to Ken Morrison’s conservative attitude to money, the company is asset-rich and the sale of £1bn from an 80% owned store portfolio will eventually calm the shareholders, and leave a robust retailer in place.
The CEO’s promise to cut prices permanently to a level that would not have to match those of the discounters, but to be just low enough that its fresh food and quality offer would look worthwhile, anticipates one definition of the price war....
However, the issue for suppliers is where the upcoming price-war is headed…
Will the big 3 take a similar stance to Morrisons on going ‘low enough’ to compete – giving Morrisons a fighting chance - or is the agenda to match or even undercut discounter prices, product for product, and arrest their growth…?
In which case, the discounters cannot afford to go lower, and the depth of major retailer pockets will only be limited by stockmarket reaction…, with Morrisons at a distinct disadvantage, currently.
From a supplier perspective, it is vital to stick with current pricing and trade investment strategies - and compliance conditions - and effectively sit this one out…
Wednesday, 12 March 2014
Co-operating with the Co-op - the challenge for suppliers
Given several years of producing results like a ‘normal’ retail multiple in terms of net margin, stockturn and ROCE, and suppliers having responded by upgrading their Co-op NAMs to pro-active business managers of the account, and factoring increasing market share into trade strategies aimed at long term collaboration, yesterday’s developments on top of a catastrophic loss of Co-op banking credibility, means that the clock has been set back twenty years…minimum.
The co-operative model works well in other countries, all based on the Rochdale pioneers approach. However, the UK Co-op is a business with deep problems, a long history of under-performance, an outdated board structure and far too much debt. This latest crisis may have convinced those in charge that Sutherland’s resignation should be "a catalyst for the real and necessary change which the group must go through"…
The problem for suppliers in these unprecedented times is that they cannot afford to wait for the evolution of a new Co-op model that reflects the competitive, consumer-savvy, ROI and fast pace of retailing today.
Also, suppliers cannot hope to change to Co-op, and instead have to revert to short-term transactional management, dumbing down the supplier-retailer relationship, minimising service level, reducing exposure, and deploying talent elsewhere.
If the Co-op survives this challenge, muddles through and begins to show signs of improvement, then suppliers will begin to cautiously re-invest, using performance-based reward, and insisting on 100% compliance…
That is the price the Co-op must pay for 2014’s mis-steps….
The co-operative model works well in other countries, all based on the Rochdale pioneers approach. However, the UK Co-op is a business with deep problems, a long history of under-performance, an outdated board structure and far too much debt. This latest crisis may have convinced those in charge that Sutherland’s resignation should be "a catalyst for the real and necessary change which the group must go through"…
The problem for suppliers in these unprecedented times is that they cannot afford to wait for the evolution of a new Co-op model that reflects the competitive, consumer-savvy, ROI and fast pace of retailing today.
Also, suppliers cannot hope to change to Co-op, and instead have to revert to short-term transactional management, dumbing down the supplier-retailer relationship, minimising service level, reducing exposure, and deploying talent elsewhere.
If the Co-op survives this challenge, muddles through and begins to show signs of improvement, then suppliers will begin to cautiously re-invest, using performance-based reward, and insisting on 100% compliance…
That is the price the Co-op must pay for 2014’s mis-steps….
Sunday, 9 March 2014
New competition of biblical proportions in the wine category, as Miracle Machine Turns Water To Wine
Discovery News reports the invention of an urn-like device can reportedly turn water, grape concentrate, yeast and a finishing powder (for barrel-aged flavour) into wine in three days. The table top appliance @ $499 is also controlled by a mobile app that guides users through the process and helps them distinguish the correct wine for their palate.
According to FAQs on the Miracle Machine site, answers to top-of-mind questions are as follows:
Q1. Sourcing Ingredients
You'll be able to buy the grape concentrate, yeast, and the final sachet of ingredients through our website, and Amazon, once we launch. Each kit will make a different type of wine. We plan on creating a low cost monthly "wine" club, where for under $10 per month you receive several kits, enough to make a bottle of wine a week.
Q2. Cost?
The costs equate to $2 dollars to make a bottle of wine that we would expect to pay $20+ for, at minimum.
Q3. Types of wine
Initially we have sourced 6 wine types that The Miracle Machine and its app will help you make. These are a full-bodied Cabernet Sauvignon and rich Chardonnay from Napa Valley, a cool climate Pinot Noir from Oregon, an aged Tuscan blend from Italy, Sauvignon Blanc from Sonoma, and a delicate red and a steely white from Burgundy. We expect to add 5-10 more over the next 3 months
Patently an advance on converted dust-bins and ant-tracks across the kitchen floor in these austere times, but the Miracle Worker is probably worth a couple of what-ifs, and at $499, a punt?
Friday, 7 March 2014
Safeway-Albertsons merger as a way back to the UK?
Last night’s NamNews of a merger resulting from demand issues in the US economy could impact UK and EU markets...
The merger continues the consolidation that has changed the US landscape for traditional supermarket operators amid greater competition from upscale chains such as Whole Foods Market, warehouse club operators like Costco and retail giant Walmart.
Apart from the classic understatement by Albertsons chief executive Bob Miller to the effect that the ($60bn) size of the new outfit would improve its bargaining position with suppliers, the real issue is how long it takes for Safeway-Albertsons to seek growth abroad, to compensate for flat-line demand at home?
In which case they would join a trend begun by Walmart-Asda, continuing with Walgreens-Boots, followed by McKesson-Celesio, and who knows, CVS-A.S. Watson in a UK-centric move to Europe…?
And given that Safeway have been here already, might it be worth considering a Safeway-Albertsons-Morrisons move for starters…?
The merger continues the consolidation that has changed the US landscape for traditional supermarket operators amid greater competition from upscale chains such as Whole Foods Market, warehouse club operators like Costco and retail giant Walmart.
Apart from the classic understatement by Albertsons chief executive Bob Miller to the effect that the ($60bn) size of the new outfit would improve its bargaining position with suppliers, the real issue is how long it takes for Safeway-Albertsons to seek growth abroad, to compensate for flat-line demand at home?
In which case they would join a trend begun by Walmart-Asda, continuing with Walgreens-Boots, followed by McKesson-Celesio, and who knows, CVS-A.S. Watson in a UK-centric move to Europe…?
And given that Safeway have been here already, might it be worth considering a Safeway-Albertsons-Morrisons move for starters…?
Wednesday, 5 March 2014
Amazon signs UK deal with Mexican food company, a Morrisons opportunty?
News that Amazon UK have a deal to supply Mexican foods to the UK market, begs the obvious question as to how soon they will want to establish a Bricks & Mortar presence?
Mexgrocer.co.uk will sell 100 products, such as margarita mix and chilli sauce, on Amazon.co.uk, adding to thousands of dried foods on the Amazon site.
The online retailer has been expanding its Amazon Fresh service, which delivers fresh groceries to customers’ doors, across the US in the past year, and is believed to be considering bringing it across the Atlantic.
And, given the issues Morrisons are dealing with, coupled with the Ocado link and a market capitalisation of £5.48bn, would an acquisition be totally out of the question?
Mexgrocer.co.uk will sell 100 products, such as margarita mix and chilli sauce, on Amazon.co.uk, adding to thousands of dried foods on the Amazon site.
The online retailer has been expanding its Amazon Fresh service, which delivers fresh groceries to customers’ doors, across the US in the past year, and is believed to be considering bringing it across the Atlantic.
And, given the issues Morrisons are dealing with, coupled with the Ocado link and a market capitalisation of £5.48bn, would an acquisition be totally out of the question?
Amazon tests physical retail with ‘Kindle Kiosk’ vending machines
Geekwire recently reported* that Amazon is experimenting with standalone, automated 'Kindle Kiosk' vending machines in selected airports and shopping malls in the US.
Whilst the machines sell everything from the $379 Kindle Fire HDX to a $20 Kindle PowerFast adapter, in addition to Kindle e-readers and covers.
The experiment signals the company’s desire to expand beyond online sales and third-party retail stores, directly selling its hardware and accessories in physical locations. It’s also notable in the context of past predictions that Amazon might want to buy Coinstar and Redbox parent Outerwall, the automated vending machine company based in Bellevue. That was pure speculation, but such a move would significantly increase Amazon’s physical footprint.
Amazon - with its low margins and love for automation - would prefer a vending machine to a brick & mortar outlet, at this stage, but as far as the UK is concerned, the current issues at Morrisons might make the grocer a useful acquisition to power Amazon's next move towards the consumer....
As far as vending assortment is concerned, whilst it’s not clear how many people will feel comfortable purchasing something as expensive as a $379 tablet from a vending machine, at $69, the standard Kindle e-reader could be an impulse buy for someone preparing for a long flight.
However, the real pay-off for Amazon has to be the subsequent sale of ebooks for new users, and obviously other impulse/distress possibilities from the rest of their portfolio...
* See 21 additional pics here
Tuesday, 4 March 2014
Late payment: Why three weeks free credit is too much...
The whole issue is about big vs. small, i.e. Power and it's abuse..., rather than simply supermarkets using supplier credit to supplement their cash flow. However, as current supplier payment periods are 'justified' by the fact that 'other retailers do it', and suppliers in turn try to pass the cost of credit back up the supply chain via demands for equivalent credit periods from their suppliers, it is perhaps an idea to try to correct the problem by compelling retailers to pay within an appropriate period, related to rate of sale.
Given that most food retailers turn their goods over 20 times per annum on average, and credit is meant to bridge the cash gap between delivery of goods & services to a reseller, and payment by a shopper, then it could be said that payment should be made in 2.5 weeks.... i.e. a lot shorter than current levels of 40+ days in the UK.
In practical terms, products should by grouped in bands related to rate of sale: say twice weekly, weekly, 2.5 weeks, and monthly (a product moving at less than 12 times per year, perhaps should be in another channel...).
This would then allow revised terms to cascade back up the supply chain, and thus allow at least one 'concession' to be removed from the negotiation table.....
Given that most food retailers turn their goods over 20 times per annum on average, and credit is meant to bridge the cash gap between delivery of goods & services to a reseller, and payment by a shopper, then it could be said that payment should be made in 2.5 weeks.... i.e. a lot shorter than current levels of 40+ days in the UK.
In practical terms, products should by grouped in bands related to rate of sale: say twice weekly, weekly, 2.5 weeks, and monthly (a product moving at less than 12 times per year, perhaps should be in another channel...).
This would then allow revised terms to cascade back up the supply chain, and thus allow at least one 'concession' to be removed from the negotiation table.....
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