Thursday 21 March 2024

Realistic Optimism, a keynote for the New Norm…

Success in business in unprecedented times means being able to accept the realities of the ‘here & now’ and going back to basics while rivals await a return to the old normal… 

As we approached the fourth (!) anniversary of Lockdown, and my family celebrated Mother’s Day in our favourite local restaurant, crowded to capacity with an eight-person queue awaiting tables, it struck me that despite the havoc wreaked by Lockdown fallout, good businesses that consistently delivered more than it says on the tin, have never had it so good. 

In fact, those businesses that refused to fall into a rabbit hole in search of Lockdown causes, but instead focused on dealing with the effect, going back to the basics of establishing what business are we in, agreeing consumer need, defining how we could meet that need consistently, and meet it better than available alternatives, every time, are doing well…

Recognising that the greatest casualty of Lockdown was trust, in that shell-shocked consumers now believe nobody. Trust was further diminished via a succession of moves by brands trying to cope with unprecedented cost increases. These moves, including shrinkflation, skimpflation i.e. ingredient dilution and drip-pricing, saw brand owners dilute hard-won brand equity by insulting the intelligence of their most loyal and increasingly savvy consumers in their assumption that the changes would not be noticed…

Moreover, when challenged, the use of Letter-of-the-Law defences, such as ‘full indications‘ of value re weight/volume declarations on pack, simply drew attention to the fact that consumers make their decisions to purchase based on perception, Spirit-of-the-Law ‘facts’, and retaliate via ‘tell-a-friend’ complaints to their social networks.

Thus years, even decades of building trust in the brand, that guarantee of consistency in offering, was traded for a theoretical gain in product profitability, as brand loyals switched to more trustworthy rivals and even own-label. Moreover, big, powerful brands that increased prices way above inflation ‘because they could’ are now experiencing loss of demand as consumers resist the scale of the brand premium and switch to own-label, find it comparable in quality and then have to be won back to the brand at extra marketing cost…

For the latest insights re the extent of Lockdown fallout, a stroll down any High Street will reveal rows of barbershops that are empty, save for a single barber consulting his mobile as he awaits a possible ‘walk-in’. Adjoining them will be pubs with too few drinkers for time of day, interspersed with restaurants that have more staff than guests…

The pattern is repeated amongst shops and supermarkets that are trying to cope with diminished demand, attempting to serve the needs of uncertain but increasingly savvy shoppers that demand demonstrable value for money, every time.

Meanwhile, the new Big Four mults are Tesco, Sainsbury, Aldi and Lidl, as Morrisons and Asda try to compete under the extra constraints of servicing excessive debt.

The evidence of Lockdown Fallout is all around us. This is our market in the here and now.

As practical business people, we need to optimise our business model within a context of these new realities. 

Welcome to doing business in the New Norm…

The one positive aspect emerging from the Lockdown turmoil is that in times of unprecedented market disruption, business opportunities abound, in that with many rivals awaiting a return to normal, those businesses that can accept market conditions ‘as is’, re-engineer their offering to meet the real needs of savvy consumers, better than available alternatives, and deliver more than it says on the tin, every time, have to win…

In short, those businesses that can ‘park’ issues like the cause of Lockdown and instead focus on managing its effect, have more chance of success in optimising the available opportunities.

Given that trust was the greatest casualty of Lockdown, the restoration of consumer trust in brands, both supplier and retailer, has to be a priority. Consumers should not have to second-guess at every stage of the buying journey. Moreover, given that the FMCG model is based on the fact that causing the consumer to make their first purchase of a brand is such an expensive process, the sale is made at a loss. It is only when the user’s expectations are exceeded by brand performance that they make a repeat purchase with less inducement that we break even on that second sale. Then, with luck, the second purchase leads to a third, at which point some profit is made. Trust is the basis of this process and has to be preserved above all else…

Given that in flat-demand markets, any growth comes at the expense of rivals – doing basic things better than the available alternatives has to be the way forward. This means being completely open-minded re assessing business and brand attributes in terms of need satisfaction compared with competitor offerings of their Product, Price, Presentation and Place combinations. Only if we can conclude that we have some competitive advantage (or can adjust the elements of our marketing mix to deliver a difference that satisfies a consumer) can we proceed…

The next reality has to be the current state of the customer base. We have to accept that the new Big Four mults are now Tesco, Sainsbury’s, Aldi and Lidl, as Morrisons and Asda slowly succumb to the market realities of servicing debt that became excessive when interest rates suddenly reverted to a more normal 5%+ after decades of artificially maintained near-zero costs of borrowing.

Although private equity-owned companies are measured in multiples of EBITDA, i.e. pre-tax Net Profit is less important, until it comes to refloating or selling the company, trying to grow market share by investing in price reduction makes servicing debt even more challenging. Excessive financial re-engineering only adds to the doubt…

The quick answer can be to sell off assets to help reduce debt; meaning reduce the size of the estate to a point where the company is more suited to the New Norm private-equity business model.

Add radical changes of company culture/management style resulting in the loss of key people and the result can mean that recovering lost share and growing the business becomes near impossible…

Post-Lockdown retailing was made for the discounters. Aldi and Lidl are each significantly larger than Tesco globally and are privately-owned with low levels of debt. They are thus capable of optimising UK market conditions in terms of growing sales and market share via good quality and low prices.

Furthermore, when necessary, they can choose to run their UK operations at a loss to achieve their ambitions. They will continue to grow share at the expense of Asda and Morrisons without fear of adequate retaliation…

Taking a longer view, the advent of retail media will radically change the financial dynamics of UK retailers. The sale of first-party data allowing access to a brand’s shoppers in the aisle will generate significant incremental and high-margin revenue for retailers that can supply good quality data via a large assortment of branded goods.

However, in the process, this will limit retailers’ ability to optimise the potential of consumer demand for own-label by causing them to have to maintain their current 50/50 split of brand and own-label in their assortments. This Retail Media revenue can be used to supplement the bottom line, allowing retailers to compete aggressively on price…

However, retail media growth will cause problems for the discounters in that with the 10/90 split of brand and surrogate label, they will not have sufficient brand data to sell. They will, therefore, have to radically change the business model to something closer to a 50/50 split by offering more brands in their assortments, or experience loss of market share as the price wars intensify…

All of these are the new realities and must be factored into business strategies. Above all, given that the uncertainties will continue, suppliers need to carefully monitor the financial health of their main customers, keeping in mind that bankruptcy happens very slowly and then too suddenly to allow any remedial action. This means continuously calculating the incremental sales required to recover losses when a customer goes bust.

There is still considerable Lockdown fallout damage lurking within supplier and retailer businesses, and it is crucial that you take remedial action before you read about another ‘unexpected’ casualty in your morning’s NamNews bulletin.

Realistic optimism means effectively managing these market realities in the New Norm, better than the next guy by applying the basics…

Tuesday 19 March 2024

Tesco Must Change Clubcard Prices Logo After Losing Lidl Trademark Appeal

Tesco has lost its appeal against a ruling that it infringed Lidl’s trademark, with it now facing a costly rebranding of its Clubcard Prices scheme.

In April 2023, the discounter won a legal case against the UK’s biggest grocery retailer over the use of a yellow circle on a square blue background to promote its ‘Clubcard Prices’ offers.

Lidl had originally sued Tesco in 2020, shortly after it adopted a colour scheme that was similar to the German firm’s company logo.

After the case was heard at London’s High Court last year, the Judge issued a ruling that said Tesco had taken “unfair advantage of the distinctive reputation” for low prices held by Lidl’s trademarks.

Weeks after Lidl won the legal battle, the High Court ruled that the discounter could have an injunction to stop Tesco from copying its logo.

Tesco’s lawyers argued it was unnecessary to impose an injunction and that its infringement of Lidl’s trademark could be resolved by paying a small amount of damages. It was highlighted at the time how difficult it would be for Tesco to remove all the Clubcard Prices logos in its stores, with the cost estimated at nearly £8m.

Tesco sought to overturn the trademark infringement ruling at a hearing last month, but today, the Court of Appeal kept with the original decision. The court did overturn a decision on copyright in Tesco’s favour, but the group will now have to stop using its Clubcard Prices logo in the current form.

A Lidl spokesperson welcomed the decision, saying: “We expect Tesco now to respect the court’s decision and change its Clubcard logo to one that is not designed to look like ours.”

Tesco stated that it planned to update the logo shortly, with a spokesperson saying: “We are disappointed with the judgment relating to the colour and shape of the Clubcard Prices logo but would like to reassure customers that it will in no way impact our Clubcard Prices programme.”

NamNews Implications:
  • Fortunately, the Clubcard Prices idea is now so embedded…
  • …Tesco can take the £8m hit…
  •  …produce a ‘modernised’ logo sufficiently distant from Lidl…
  • …and get on with what really matters.

Sunday 17 December 2023

The Changing Retail Landscape: Reversible Trends or Permanent Shifts?

The past four years since the first Lockdown have seen fundamental changes and unprecedented trends develop that materially affect supplier and retailer businesses everywhere.

Whilst it can be left to others to (hopefully) explain the cause and purpose of the global Lockdown, pragmatic business people have to focus on how to cope with and optimise business opportunities amidst the resulting fallout. A key step has to be identifying the main trends emerging, where they are headed, how they affect us, and what to do about it…

Given that the greatest casualty of Lockdown was trust, we now have to deal with a world in which no one takes anything at face value, be it supplier, retailer or brand, and they want demonstrable value for money vs. available alternatives. Moreover, we have to deliver more than it says on the tin every time, to ensure profitable repeat purchases. If the consumer has to second-guess every element of the offering from a brand using letter-of-the-law rather than spirit-of-the-law assurances, then an alternative offering will probably appear more attractive…

Therefore, trust has to form the bedrock of all our relationships with consumers (See our August Editorial - Trust in the brand.

Shift from Brand to Own-Label:

Given the unprecedented increases in the cost of living arising from inflation-based price increases, it was inevitable that consumers would have to compromise on their need for brands and ‘settle’ for equivalent own-label products.

Brand owners were traditionally able to capitalise on a perceptible difference in quality by charging a brand premium. The problem for brand owners is that a consumer forced to settle for own-label may find the product was ‘not as bad as they were led to believe’. They may begin to query the size of the brand premium and may require extra inducement to return to the brand when things ‘revert to normal’…

Therefore, to maintain the current 55% (brand) to 45% (own-label) relationship, brands will have to moderate shelf-price increases in the face of retail brand improvements, and also advertise more effectively to brand loyals in the aisle via retail media, rather than via increasingly wasteful traditional media.

Meanwhile, it will be in retailers’ interest to try to preserve current brand/own-label relative shares in order to attract incremental retail media revenues. Thus, it is unlikely the current 55/45 split will reverse in the new norm…

Shift from Mults to the Discounters:

Again, unprecedented cost of living pressures has caused mult-loyals to move from major retailers ‘down’ to Aldi and Lidl in a search for more economic purchases via cheaper surrogate labels. As with own-label, many found the discounter experience was not ‘as bad as expected’, represented real value for money and helped them challenge the premium associated with shopping in the mults. All this on a brand / surrogate label balance of 10/90…

As long as current levels of inflation continue, it is unlikely that the appeal of the discounters will diminish, so they will continue to grow share at the expense of the mults.

Moreover, given that Lidl and Aldi are each bigger than Tesco globally (global sales: Aldi £123bn, Lidl £86bn, Tesco £65bn), each of the discounters can afford to sell at a loss in order to drive their UK market shares, if necessary…

However, with the advent of retail media, another dynamic enters the mult/discounter relationship. As you know, retail media networks are driven by the availability of good quality first-party data i.e. insights derived from measurable shopping behaviour arising from retailer loyalty card-based purchases of national brands. This means that for the mults, purchasing behaviour of their shoppers can be more valuable than basket contents. If necessary, the incremental revenue arising from the sale of this access to shoppers in the aisle can be used to cut shelf prices and retrieve share from the discounters.

In order to compete by securing retail media revenue, the discounters will have to adjust their brand/surrogate label balance to something like 50/50 from the current 10/90. It is probable the discounters will make this change before they surrender market share. It all depends on their global willingness to run local UK losses to maintain current momentum…

Shift from Primary Routes to Omnichannel Routes to Consumer:

Given that Lockdown has radically changed consumer value systems, we are in a consumer-centric new norm. In other words, those consumers who have survived, albeit under enormous pressure re their jobs, homes, increasing cost of living and constant uncertainty, they know their value. In return for their custom, they want to be able to buy anytime, anywhere, any place, in whatever way they require. This means suppliers will have to make their products available via every possible route to the consumer or suffer a loss of share to more flexible rivals. Suppliers will have to find ways of balancing fulfilment costs by supplying direct or via outsourcing, managing all prices & terms harmoniously in the process.

Either way, it is inevitable that the cost-to-serve will increase, making diminishing net margins a feature of the new norm. And having experienced omnichannel convenience, it is unlikely that new norm consumers will revert to limited access…

Shift from Offline to Online:

Success online means living with Amazon, operating to their standards of consumer-centricity, and still losing money… Many organisations entered online without realising the true cost of online fulfilment, with consumers unwilling to pay more than £5 delivery fees for drops that cost up to £25 to reach their front door. Meanwhile, Amazon was allowed by the market to take 30 years to gain a degree of coverage that enables it to make up to three parcel drops with each van stop, while rivals have to drive perhaps ten miles between stops.

These online rivals, along with traditional bricks & mortar retailers, also have to compete with Amazon’s 500m-strong catalogue in terms of available range. And as far as retail media revenues are concerned, Amazon are already achieving $40bn+ per annum.

When it comes to categories like healthcare, Amazon is in a position to offer diagnosis based on a combination of data from wearable tech, their knowledge of consumer lifestyle, consumption habits, food & non-food, and fulfil prescriptions to fit, deliver to patients’ homes and check progress. Compare that with a pharmacy’s current capabilities…

Moreover, with Boots currently for sale again, a £6bn acquisition could give Amazon an opportunity to provide a full national healthcare service at a stroke…

Shift from Providing More Than it Says on the Tin to Shrinkflation, Skimpflation and Slack-filling:

One of the more ominous trends arising from Lockdown fallout is the tendency of established brands to trifle with the trust of brand loyals by attempting to disguise price increases via a combination of shrinkflation, skimpflation and slack-filling. Regular readers will be aware of the ‘rationales’ put forward to justify the moves and defend against inevitable criticism.

Brand owners continue to point out that pack details give all necessary information, thus meeting letter-of-the-law requirements, ‘forgetting’ that consumers are driven by perception, the spirit-of-the-law i.e. their expectation based on years of brand loyalty, causing them to become increasingly aggrieved at their perception of being short-changed by a hitherto trusted favourite brand.

This anger may even result in them telling-a-friend: “Please me, and I will tell one friend. Disappoint me and ten friends will learn of my displeasure”. But in the new norm of social media influencers, multiply this impact by ten or even thousands to gauge the potential damage to brand franchise…

Shift from Near Zero Interest Rates to Current Normal Rates:

Following decades of artificially based near-zero interest rates that mis-footed private equity purchases of large retailers when suddenly faced with new norm borrowing costs, it was inevitable that the change to reality would cause tensions in some businesses. Recent startups, based on the assumption of continuing low rates, fell into the same trap. These positions will be difficult, if not impossible, to unwind.

And of all the trends outlined above, it is highly unlikely that current interest rates will revert to near-zero levels in the next decade, if ever. Too much damage has been done by Lockdown, and we are now in repair mode for the foreseeable future.

Overall, it appears that these unprecedented changes and trends are irreversible, and suppliers taking the risk of forecasting beyond one year ahead might benefit from acting on that basis…

Saturday 9 December 2023

Trust In The Brand, A Key Casualty Of Lockdown Fallout…

Given that a key casualty of Lockdown fallout was the consumer’s loss of trust in almost everything, their loss of faith in brands should come as no surprise.

Apart from the obvious pressures of cost of living increases honing their super-savvy skills, causing them to be satisfied with nothing less than demonstrable value for money, and making them supersensitive to the most subtle of shrinkflation moves. Then, despite the ‘reassurances’ of letter-of-the-law statements on the pack, they prefer to rely on spirit-of-the-law perception in their judgement of brand trustworthiness… Therefore, the fact that the pack copy clearly states that quantity contained therein, the damage to consumer perception (spirit-of-the-law) is caused on opening the pack.

Thus, trust that has taken years to build is dismissed in a careless attempt to disguise a price increase. In other words, the consumer’s confident reliance on the character, ability, strength, expectation, faith, hope, assurance, expectation and certainty or truth of the brand has been compromised…

Consumers like to outsource their thinking and ideally their decision-making. In other words, they prefer to rely on guidance from experts i.e. they effectively delegate their money matters to the banks, their politics to the government, their health to the medics, and legal issues to the lawyers. The past three years have changed all that…

Consumers that have survived Lockdown fallout have learned the hard way that they have to think for themselves, relying on common sense and gut feeling. But critical thinking takes time and effort, and is possibly reserved for ‘more important‘ issues like coping with cost of living pressures, job uncertainty and prioritising spending. ‘Deciding’ which brand is best for them can seem to be easier delegated to a trusted influencer, instead of making a systematic evaluation of alternatives available.

In other words, deciding on a definition of real need, selecting, scoring and ranking the four criteria of Product, Price, Presentation and Place in assessing available options. Having decided on a suitable brand (delivering more than it says on the tin, every time), not having to second-guess every element of the offering, relying on spirit-of-the-law, rather than letter-of-the-law assurances, it becomes progressively easier to stick with the brand until performance drops below expectation, rather than start an entirely new process of re-assessing available options in terms of meeting one’s needs…

A key component of trust in the brand is brand loyalty, a long-term willingness to repeatedly purchase a favoured brand without the need to second-guess the contents of the offering. As you know, the main reason that brand loyalty is so important to profitability is that the relative cost of encouraging the consumer back to the brand decreases with each repeat purchase i.e. persuading a loyal user to buy again is far less expensive that encouraging a new user to try the brand.

Essentially, given the high cost of attracting a consumer to the brand and ensuring adequate trial, the consumer’s first purchase usually represents a loss to the brand owner. A repeat sale to a satisfied customer still requires some inducement, meaning that the second sale is hopefully made at a lower cost, possibly breaking even.

In fact, it is only when a doubly satisfied consumer returns to the brand a third time with minimal or no inducement that profit is made. Thus it is imperative that consumer expectations are managed, met and even exceeded in order that we can hope to optimise a consumer’s lifetime value.

It goes without saying that anything that causes the consumer to feel ‘short-changed’ places this fragile trust in jeopardy and risks delivering a ‘well-trained’ consumer into the arms of a rival… However, the loss of a regular user represents but a small part of the real risk in disappointing a loyal consumer. The real damage is caused when the ‘tell a friend’ process kicks in.

As you know, in brand marketing a consumer’s reaction to brand experience can be fairly predictable. In other words, ‘please me and I will tell one friend, disappoint me and ten friends will hear of my dissatisfaction’. However, with access to social media by an aggrieved savvy consumer, the 1:10 numbers can be multiplied by ten, a hundred or even tens of thousands in the hands of a well-connected influencer-consumer…

As you know, brand loyalty is measured through customer retention, customer lifetime value, and customer satisfaction surveys, but it completes the profit jigsaw by optimising brand equity, the financial value of a brand.

Given that brand equity provides a means of calculating the financial value of a brand, brand equity also helps to justify a brand premium over rivals. It follows that any dilution of brand equity puts the brand at a disadvantage to rivals and reduces its competitive edge in the category. Moreover, when consumers trust a brand and find it relevant, even at a premium price, and even tell a friend, they are surely worth preserving…

Taking the market capitalisation of the firm, minus the value of its tangible assets, leaves us with the value of brand equity. So it can be seen that any dilution of brand equity lessens the value of the company in the market in providing security for borrowing and drives the cost of servicing debt.

Above are most of the reasons to never risk jeopardising the consumer’s trust in a brand. However, these are merely commonsense business reasons for ensuring the survival of the business. The real payoff from building and maintaining consumer trust in our brands comes from our potential ability to optimise one of the most radical developments in consumer persuasion, the emergence of Retail Media.

Whilst traditional media will probably hold on to its ability to build awareness of the brand, Retail Media’s ability to help us to access the brand’s consumer in the aisle, hand in pocket, ready to buy, will ultimately supplant traditional media in terms of effective persuasion of our consumer-shopper, based on a level of first-party data no traditional medium can aspire to… This Retail Media access enables us to encourage a brand-loyal to stick with the brand, discourage a switch to a rival or convert a dithering shopper into a purchaser.

Whilst the timing and accessibility of traditional TV has been driven past sell-by via emerging technology, it is Retail Media’s ability to measure the results of advertising on a Retail Media Network that delivers the knock-out punch…

For decades, advertisers have been using an old cliché to bemoan the fact they knew that 50% of their advertising was wasted, but unfortunately could not tell which half. Retail Media, by tracking a consumer’s behaviour all the way through the buying process and beyond, can now solve that problem.

Moreover, one of Retail Media’s leading advocates in the business will probably be your CFO, able at last to measure the return on investment of the money historically ‘wasted on advertising’…

However, Retail Media raises key issues and questions for the supplier:
  • Who owns Retail Media?
  • Who owns Trade Investment?
  • Advertising execution: Traditional Agency vs Retail Media Agency?
  • Who negotiates with the retailer? Sales/Marketing? eComm?
  • Who co-ordinates omni-channel messages?
These issues need to be resolved if only to help both supplier and retailer to optimise the potential benefits of Retail Media, done properly…

Patently, the incorporation of Retail Media will take some bedding in, but its momentum is already unstoppable. Given the inevitable development of Retail Media, it is clearly imperative that consumer trust in the brand be preserved at all costs.

In other words, instead of having to use some of our traditional media spend to win back a disappointed consumer and re-educate them about the merits of our brand vs. rival offers, spend that could have gone to creating awareness among non-users, we can instead use this media money to better effect in the aisle.

It is all a matter of Trust….

Tuesday 14 November 2023

Avon To Open First Physical Stores

Avon, the cosmetics and personal care brand which has traditionally been sold via a direct-selling model, is set to open its first-ever physical stores in the UK.

The 137-year-old brand has previously relied on an army of door-to-door sales reps to demonstrate and sell its products. However, the pandemic accelerated Avon’s shift to online sales.

The company is now planning to roll out a bricks & mortar format in the UK, Brazil and South Africa. It already has 63 stores in Turkey, growing rapidly over the last three years.

Avon’s Chief Executive Angela Cretu described the move as an “exciting new chapter” for the brand, with it looking to follow women “wherever they spend their time”. She added: “Women like to touch and experience the product and have that joy of seeing all the colours available.”

The first stores in the UK are expected to open over the next couple of months in “neighbourhood communities” rather than on traditional high street locations. They will be “mini beauty boutiques” run by sales representatives as franchises. The stores will feature about 150 products, with the full range available through the sales representative.

Retail analyst Natalie Berg noted that the Avon brand remained “a little dated” but suggested that the opening of physical stores could be beneficial for the company.

“You can’t overestimate the power of human touch and the community you get in a physical store environment,” she said, adding that this was particularly true for beauty products.

Berg stated that Avon would need to get its in-store technology right in order to compete with leading brands that have invested heavily in virtual and augmented reality. However, she said that local stores could have a “halo effect” by helping customers find products they later continue buying from sales reps and online.

Avon made its debut on UK high streets last month via a partnership with Superdrug. The health & beauty retailer is stocking over 150 of Avon’s make-up, skincare and fragrance products in 100 stores, with additional items available online. From 27 November, the partnership will be expanded to hundreds more stores with plans to eventually make Avon products available through Superdrug’s entire chain of almost 800 outlets.

Avon was acquired in 2019 by Natura &Co, the Brazilian beauty group that also owns The Body Shop.

NamNews Implications:

  • If Avon can continue their consumer-product ‘intimacy’ instore…
  • …they will represent something different in cosmetic selling.
  • ‘Avon local stores could have a “halo effect” by helping customers find products they later continue buying from sales reps and online’
  • Fingers crossed…
hashtagDirectToConsumer hashtagAvon hashtagCosmetics

Thursday 14 September 2023

Lidl GB Swings To Annual Loss Amid Battle To Keep Prices Down

Lidl has revealed that its business in Britain swung to a loss in its last financial year after battling to keep prices low in the face of rising costs “across the board”.Over the 52 weeks to 28 February 2023, the discounter posted a pre-tax loss of £75.9m against a profit of £41.1m the previous year. Underlying earnings (EBIT) fell from £79m to £28.5m.

Lidl noted that it had invested over £100m in keeping down during the cost of living crisis, helping it attract an additional 1.4 million shoppers. Its market share during the period increased from 6.1% to 7.1% – the fastest growth experienced by the discounter in the past five years.

The company opened 50 new stores during the year and invested heavily in staff pay and expanding its distribution network. This included building Lidl’s largest Regional Distribution Centre (RDC) in the world, which officially opened in Luton earlier this month following a £300m investment.

“We’ve always had a clear commitment to offer the best value to our customers, and that is a promise we will always keep, even in uncertain economic times,” said Ryan McDonnell, CEO of Lidl GB.

“Alongside preserving this price promise, rewarding our people and maintaining long-term relationships with our suppliers will always be a priority. As a privately-owned business, we have the ability to make decisions that we know will have immediate benefits for our people, customers and suppliers and long-term benefits for our business.”

He went on to say: “The entire retail market has seen inflation, and we are no exception. However, for us, what is important is that our price gap to the traditional supermarkets is as strong as it has ever been. We’ve invested in keeping our prices low for customers in what has been a very challenging year for most and, with many more customers flooding through our doors each day, our ambition is to ensure that every single household has access to high quality, affordable food at their local Lidl store.”

Next year will mark 30 years of Lidl in Britain, with the business now operating over 960 sites and 14 distribution centres. McDonnell stated that there was “no ceiling on our ambitions for the next 30 as we see the potential for hundreds of new stores”.

Last week, Aldi opened its 1,000th store in the UK and outlined plans to open 500 more.

NamNews Implications:
  • A key issue has to be the extent to which Lidl operations in other countries are prepared to fund UK losses at their expense…
  • That said, discounters in the UK are on a roll and global Lidl may be prepared to trade off share growth vs. local discontent.
  • i.e. Lidl has to fuel available growth…
  • …and according to their management, this investment will continue.
  • i.e. there was “no ceiling on our ambitions for the next 30 as we see the potential for hundreds of new stores”.
  • Address your Lidl strategies accordingly…
#Discounters #Aldi #Lidl #Share

Thursday 7 September 2023

Aldi Opens 1,000th UK Store With Plans For 500 More


Aldi has today opened its 1,000th store in the UK, nearly 33 years after opening its first in Stechford, Birmingham.

Announcing the opening of the milestone outlet in Woking, Surrey, the discounter committed to a new long-term target of 1,500 stores in the UK, with a pledge to invest billions of pounds in the economy.

Aldi is now the country’s fourth biggest grocery retailer, with one in every ten pounds spent in UK supermarkets going through its tills. It is also the fastest-growing supermarket, with its low-price mantra helping it attract even more customers during the cost of living crisis.

Aldi is on track to open another 20 new stores before the end of the year as part of a £1.3bn two-year investment plan.
The retailer stated that it was on the hunt for more locations across the UK to support its bid to open another 500 stores to reach its target of 1,500.

Aldi UK and Ireland CEO, Giles Hurley, commented: “Opening our 1,000th store is a huge milestone and wouldn’t have been possible without the hard work and dedication of our 40,000 incredible colleagues.

“Our popularity is growing, and there is huge demand for people to have an Aldi store near to them to increase shoppers’ access to our unbeatable prices.

“The next phase of our expansion will involve another 500 new stores over the coming years. It is a long-term target and is not a ceiling to our ambition to have an Aldi store close to everyone in the UK.”

NamNews Implications:
  • About time to include Aldi in your major customer portfolio, somehow…?
  • (Just assume a 50% increase in store numbers adds an equivalent amount to their UK market share)
  • Need any more inducement?
#AldiShare #AldiGrowth #DiscounterValue

Monday 19 June 2023

Tesco Admits To ‘Tension’ With Suppliers

After it was revealed last week that Tesco had slipped down GSCOP compliance ranking, the retailer’s Chief Executive has blamed its fall on “fighting the fight” for consumers against inflation.

After posting robust first-quarter results on Friday, Ken Murphy is quoted by trade publication The Grocer as saying there was an “inevitable tension” with suppliers trying to get through cost price increase (CPI) requests and Tesco seeking to keep prices down.

Last week’s compliance ranking published by the Groceries Code Adjudicator (GCA) showed Tesco had fallen from second place to sixth. This was despite the cut-off for the survey coming before Tesco’s call on suppliers to start paying fulfilment fees for using its online and Booker wholesale services. The report by The Grocer noted that this recent move could result in Tesco falling even further down the table next year.

Murphy highlighted that the latest GCA ranking was “very, very tight,” adding: “We are only talking about a percentage point of two in the difference, and I’m really pleased that more than 95% of suppliers recognise we are compliant with the code.

“However, there is an inevitable tension between retailers and suppliers over the passing on of costs and how we fight the fight for customers.”

Meanwhile, Murphy offered further reasoning for its upcoming range reset programme, ‘Fit for Change’. This was announced last month and is set to be the biggest range review since predecessor Dave Lewis’s ‘Project Reset’.

Murphy told The Grocer: “We have seen a giant leap in the technology to enable us to predict what customers will buy and where. This review is all about making sure we combine minimising the cost of servicing those customers with making sure we optimise the range so our customers have enough of the product they want to find.”

NamNews Implications:
  • Consumers, retailers and suppliers are coping with Lockdown fallout.
  • The most fundamental and unprecedented business challenges, ever…
  • In principle, each member of the supply chain will try to isolate costs that can be passed to other parts of that supply chain.
  • (The Tesco fulfilment charge being just one example…)
  • Suppliers need to quantify the financial impact of every part of their supplier-retailer relationship…
  • …and negotiate like-with-like re the impact on respective P&Ls.
#CPIs #Costs #SupplierRetailerRelationships