Need for more transparency? Moi?….

Competitive forces, increasing trade pressures and endless price reductions are combining to make relative power a key issue in unprecedented times…

Because running a business, supply or retail, means achieving and managing a delicate balance of the conflicting interests of shareholders, lenders, customers, workers, management, government and perhaps even the consumer-shopper, knowing the inevitability of compromise diluting profitability, and being measured via 20/20 hindsight, it is understandable that those ‘in charge’ are often tempted to respond more readily to the most powerful demands.

In a trading relationship, it is relatively easy to shift from assertion to aggression in dealing with an up-the-line partner when attempting to meet the demands of the more powerful of the internal stakeholders. Acknowledging that consumer power is the key driver, then logically this means the system only works if power diminishes as one moves back up the supply chain…

Starting with consumer-shoppers’ ability to vote with their feet, or their ability to command the help of government if their needs/rights are being ignored, the real power resides on the shop floor (or rather the floor of the shop), and cannot be ignored…

Given retailers’ ability to aggregate and apply buying muscle, they can appear to have more focused and usable power, which they then apply further up the supply chain. The finished goods supplier by definition has more power than the ingredients supplier and proceeds/needs to apply that power in driving down costs…

Governments come on board when they perceive that a shift in the power balance could result in votes being lost as they struggle with their compromises… Hence their interference when the farmers are under pressure, retailers are ‘over consolidating’, or a detrimental change in the health of the consumer-shopper is in danger of driving up healthcare costs…

Suppliers and retailers need to anticipate these inevitabilities, plan for appropriate change and prepare plausible explanations for the lead-times required.

Transparency can help.

With so many of the company’s systems/models designed for internal consumption and to meet internal needs, then accidental or forced exposure to outside eyes reveals their ‘bias’ and renders them indefensible…

The question of whether one should have to explain is not the issue (i.e. whilst refusal to explain can be interpreted an attempt at concealment, willingness to explain does not necessarily imply weakness).

It is perhaps better to accept the inevitability of total transparency, and design policies, systems and process that are fully defensible, internally and externally. Only then can we have the courage to be transparent.

In the process of attempting to fully understand partners’ views as we strive towards greater transparency from their perspective, our position can become more defensible, and result in our ability to build and use expert power, to the disadvantage of less transparent competitors…

As more transparent key influencers accumulate more power in the market, then this wish for a less opaque trading environment may even become self-fulfilling…..

'Smell-by' dates adding to the usable-life of food?

Essentially, as uncertainty continues to be the norm for many families, resulting in consumers limiting spending to essential items, it is perhaps useful to consider the impact of financially-stretched consumers attempting to extend the usable life of food in these uncertain times.

When smaller, closer, faster, more convenient shopping becomes the norm, consumers are in a better position to monitor fridge contents, will rotate stocks more effectively, and thereby waste less via 'on-time' usage.

If we couple this with major multiples attempts to limit instore food wastage, and political pressures to donate surplus produce to charities, then it becomes obvious that significant demand is being taken out of the market.

However, if consumers are also beginning to revert to Granny’s method of judging food quality by its smell, they will in effect add even more to a product’s usable life, thus taking more demand from the market.

The result will be flat-line demand for fresh produce, at best, with any growth coming at the expense of available competition, based on a savvy assessment of Product, Price, Presentation and Place….

NB. NAMs closer to the fresh food sector will immediately appreciate that increased use of ‘smell-by’ dating may result in unintended consequences based on irradiation of foodstuffs, whereby media attention will be re-directed at food processing in a search for clarity…

Winning In FMCG - How Brands Can Win in the Age of the Discounters

Guest blog by Richard Nall, The Brand Garden

Pop over to Germany and drop into a Real or V-Markt and you’ll glimpse a possible future: stores that feel more like B&Q with the typical superstore range we take for granted tacked on at the side.  On a more forensic examination, you might note a seemingly odd allocation of space for FMCG categories and brands (just how do Milka or Tempo deserve all that space?) with few promotions.  You realise that this might be more about survival than coherent FMCG retailing in the sense we have known it.  You might also note something about those brands that are flourishing...  

In short they must have done, and continue to do, the basics very well.  It’s the only explanation in a world of limited differentiation and marginal gains.  Their consumer segmentation and clarity on the leading category/brand insights will be sorted.  Brand and architecture models will be powerfully crystalised and executed ‘through-the-line’ with a long-term view of innovation requirements.  They will align this to a flexible approach to promotions and tactical SKUs within a pragmatically commercial framework.  In negotiations, they recognise the value they bring their customers’ as distinctive brands & category builders.  

This is the key.  

Through building distinctive, relevant brands, these brand owners help rescue these retailers.  They support the rationale for shoppers to return rather than head for Aldi and Lidl.  And herein lies the problem for many brands in this Brave New World.  If it is there in the first place, the clarity of proposition and discipline in consistent execution is quite often lost through fragmented commercial teams.  Weak P&L management means that margin/trade spend has been conceded over the years to the extent that many brands struggle to receive the investment they need.  Rather than being concentrated or, at the very least, aligned, awareness-generating monies are split between sales, category, shopper and consumer marketing teams, and used to meet their respective, turf-driven agendas.  

Yet, as always in the gloom, there are rays of light.  Challenger brands’ growth has been the success story of the last 15 years, bringing interest to homogenised categories, and offering a recipe for success for the future.  You do not need to be big today to succeed tomorrow, and being in a rush to grow might do you a dis-service as consumers take time to evolve their shopping habits.  The well-travelled phrase ‘more haste, less speed’ is very apt here.  

Be clear regarding the market in which you are competing.  Define it narrowly and you will miss growth opportunities; be too broad and it will be meaningless.  Be ruthlessly clear on your brand proposition, and leverage that through innovation and distinctive communication.  Make sure you really do understand the available consumer touch points, and be creative in your solutions.  You don’t need a big spend to have impact but you must maximise the value of each and every part of the marketing mix you can afford.  

Think Innocent and Tyrrell’s and start with packaging and SRP.  Learn from Williams Murray Hamm’s packvertising design approach.  Think ‘less is more’ and ‘concentrate for effect’.  Market size and creative power are two of the biggest drivers of exponential sales gain so use them to your advantage.  Make sure you have proper and mutual challenge and debate with your agencies.  You don’t need stand-up rows but you should encourage the creative tension of passionate conversation and short-term disagreement.  

If you’re still wedded solely to traditional communications techniques, be creative in your negotiations with the broadcasters and expand your horizon.  Take advantage of the opportunities that digital media represent, always remembering that the consumer journey is like a funnel so ‘mass awareness effect’ should remain your ultimate goal even if it might take time to get there…don’t waste your money on gimmicks, and make your digital choices wisely.  On the other hand, if you aren’t using some of your marketing spend to test the RoI of alternatives then you are missing a trick so strike a balance.  Be clear on the investment and communications decision-maker (one!).  

Next, remember that your customers need you brand owners now more than ever before, but only if your brands, large or small, are fit to fight on their behalf.  Fail this test and you will be deservedly culled.  The reality is that it does not matter how good you are today, it will not be good enough tomorrow.  A tricky race is only going to get trickier...

To see how we can help you irrigate your business, contact Richard Nall on +44 (0) 7796 930 228 © The Brand Garden 2015

BOGOF R.I.P. - A sideways swipe at waste?

With Asda re-discovering its Walmart roots by ditching multi-buys, and Sainsbury’s clearing the multi-buy shelves by Summer, Tesco and Morrisons will not risk looking odd by comparison, meaning 'Hello EDLP....'

Eliminating multi-buys, means less scope for waste, matching purchase with need, simpler pricing helping shoppers identify real value, prices moving to EDLP, with Stelios establishing new levels of Low @25p…

In fact, best to see it as part of a war on waste, coupled with a move to supermarkets donating excess produce to charity, people eating less, in a move to healthier living…

Meanwhile, consumer-shoppers have to sharpen their savviness by getting their heads around Unit Pricing - you really think they all understand it? - with supermarkets playing their part by emphasising price per unit, AND PRINTING IT BIGGER…

Finally, joining all the above dots, NAMs, having been spared the task of trying to make a multi-buy seem profitable, now have to focus on growing at the expense of competition within the resulting flatline - or even falling - demand in many categories…

Confusing promos morphing into savvy-shopper alienation

If making promos difficult to compare is the objective, then stakeholder efforts are working well, in that Watchdog deal-quizzing of consumers found that just one in 50 was able to choose the cheapest option....

If driving sales in flat-line markets is the objective, then, according to the Daily Mail, then such confusion is causing shoppers to spend an extra £1,200/annum.

                                                                                                                    Source: The Daily Mail

What no one is measuring is the negative impact on brand equity amid the creeping suspicion of being misled. Even more serious is the fact that, in the absence of effective self-regulation - last year, the Competition and Markets Authority (CMA) said it had found evidence of misleading supermarket promotions following investigations into a super-complaint submitted to the regulator by consumer watchdog Which? - the government could intervene in order to clarify the position for shoppers...

Think bureaucracy and 'government language' to explore the implications.

How much better if suppliers and retailers worked together to attempt to retrieve some of their respective brand equity by aiming at clarity and sustainable like-with-like comparison of promos, before the government is forced to assist...

Power play in supplier-retailer negotiation – how to level the playing-field in 2016

Power play in business is not exclusively about dealings between suppliers and retailers. In fact, it is more about interactions between large and smaller organisations…

Equally, we need to distinguish between being fair in our business dealings, and securing our fair share in negotiated settlements. 

If we choose to define fair-play as respect for the rules and/or equal treatment of all concerned, as in sport, fine. However, if we assert that all players are equal in business, we can seem naïve. Patently they are not. Business is not about equality, or fairness, and attempts by a government to impose standards of fair-play based on ‘equality’ are doomed to failure.

It is about two different organisations, often representing different business models, finding ways of accommodating their differing needs in an arrangement that satisfies each party, more or less…. 

Playing fair was something parents and teachers tried to enforce in the playground, and has little application in negotiation. In fact, in these unprecedented times, it can be more productive to talk about fair share – reflecting relative risk – as the basis for grown-up business negotiation.

In other words, given that both parties in a negotiation session take risks via the give-and-take process between ‘equal’ partners, exchanging information and insights that are capable of being abused in the wrong hands, it follows that a fair-share result is one where the rewards are divided in proportion to the perceived risks taken by the counterparties, and each is willing to continue the relationship.

If successful negotiation is defined as a series of matched concession exchanges between equal partners, it clearly cannot take place between two companies of unequal size, unless the NAM can redefine the size of the ball-park.

For instance, as negotiation success is often determined by relative size of business, Tesco's £62bn sales and 28% share of retail market will generally tip the power-balance in their favour for all but the largest suppliers.

All other suppliers need to find ways of leveling the playing field in order to make both parties ‘equal’.

In practice, this means moving from a business-to-business discussion of obvious inequality, where being delisted from Tesco can mean a factory closes, to a focus on a category or even a sub-category where your brand can be positioned as a ‘must-have’ for Tesco, compared with available alternatives, and for that moment you and Tesco can be regarded as business ‘equals’... The key is realism, and an ability to calculate and demonstrate the connection between a supplier’s product offering to the desired financial performance of a major customer. Little else matters in the current economic climate.

UK multiples are currently experiencing unprecedented set-backs, suffering seemingly irreversible share loss to the discounters and local convenience, all under the spotlight of the GCA, with Tesco’s GSCOP report merely a starting point, an investigation by the Financial Reporting Council under way, a SFO seemingly just steps away from imposing financial penalties and a government needing to optimise Corporation Tax returns.

In addition, shifts in consumer shopping behaviour to smaller, faster, closer, more frequent, more convenient purchasing, has resulted in large space redundancy, all diluting major retailer profitability, in the eyes of the stock market.

In other words, it could be said that UK major retailers are now in the market for unprecedented degrees of collaboration with suppliers, more tailor-making to local need, and could be more receptive to the idea of fair-share negotiation.

However, UK multiples are still very powerful players controlling major routes to consumer, and cannot afford to be ‘pushovers’…, but they are more vulnerable than ever before.

This has to represent a significant opportunity, a useful starting point, for those suppliers that are prepared to go back to the fundamentals of consumer need in a radically changed marketplace, re-establish the value to consumers of their essential offering vs. available alternatives, and eliminate any surplus from the consumer’s point of view.

It is then necessary to realistically assess the extent to which each of the multiples has been impacted by the above market changes and issues. Specifically, this means establishing their  ability to meet the needs of your core consumer, compared with other members of the Big Four.

This will help you to establish the specifics of the retailers need-set, as a basis for comparing your ability to satisfy those needs, better than available competition. All based on what we have, all we have, our most valuable asset, consumer trust…

You are then ready to prepare for fair-share negotiation…      

easyFoodstore, Another easyDisrupter? - Comments on the spot from our North London correspondent

Brian Peataque (above), a senior savvy-shopper from Hove-actually, commented: "Normally, this stretch of the North Circular would put years on anyone, but I am excited at the prospect of getting eight SKUs for £2".

                                                                                                                                       pic: bmoore

Following a degree of shopper-demand the mults need to envy, the store had to close on Wednesday to replenish stocks, and opened again this morning.

                                                                                                                                       pic: bmoore

A single check-out, folks...

The future?
With a basic range of 76 products, approx. 500 sq. ft., and one checkout, if Stelios can make the numbers work on 25p - or even 50p - his latest market-disrupter is infinitely scalable....

This has to cause branded suppliers to seek non-compromising ways into the discounter channel, ideally via branded discounters...

NB. For NAMs not accustomed to using easyTransport, easyFoodstore is part of the easyBus depot on the North Circular, a slipway a few hundred yards north of Hanger Lane junction.

If Carlsberg did shopping trolleys... (Asda Clapham Junction)

In an effort to improve the shopping experience, Carlsberg worked with custom car experts Yiannimize to create a motorized trolley complete with an electric engine, a beer cooling system and satellite navigation. No more warm crates of beer, getting lost in the supermarket and struggling with wonky shopping trolley wheels.