Halloween Pepsi-can dressed up as Coke went viral

Last year a Halloween themed Pepsi ad created by Advertising Agency Buzz in a Box, Brussels posted on Ads of the World's Facebook page went viral reaching over 300,000 people on Facebook alone in just a few hours. It also generated lots of retweets on Twitter and Google+ besides Ads of the World itself

A great illustration of how a gentle poke at a competitor can optimise social media.

However, the alleged response by Coca Cola was swift, equally humourous and must have amplified the initial impact, at least via Linkedin.

But the real genius of each advert lies in the ambiguity of the message, each advert causing readers to ponder on their possible meanings, with their combination adding to the 'confusion', thus stimulating the urge to share...

The result being that the category received much more reader attention, and pass-on value than more conventional adverts for such familiar brands might otherwise have achieved.

Incidentally, even if Coca Cola did not produce the response, perhaps they should have...

A heroically scary weekend, from the NamNews team!

Tesco are not 'serious fraudsters'

Tesco is simply a train that moved too fast, causing some of the wheels to fall off.....

The real issue is the opportunity this high-profile case provides for the SFO to attempt to restore a reputation that has been tarnished by a series of high profile failures in recent years. This relatively clean case of naive manipulation by amateurs, gives the SFO the means of demonstrating its ability to investigate and penalise corporate wrongdoing, secure in the knowledge that Tesco, or its management, are unlikely to retaliate in the case of possible over-enthusiastic application of the letter-of-the-fraud investigation process, unlike a recent SFO investigation....

The disruptive impact on the day-to-day conduct of the Tesco business should not be underestimated, given that the recent Deloitte investigation, albeit a far less comprehensive project, allegedly involved more than six million documents with 18,000 invoices reviewed and 700 scruitinised in detail....

Apart from the inevitable parallel but internal reviews by other multiples, 'just-in-case', many suppliers are already conducting internal reviews to assess any possible impact on the integrity of their trade investment process. However, it has to be said that in the main, these reviews will hopefully be in private, the only issue being relationships with internal audit-control, with NAMs having to explain how sums were authorised and paid in advance, possibly 'on a nod' in terms of promises of a promotion in the following year, all with the benefit of 20/20 hindsight...

Regrettably, whilst the consumer ultimately benefits from lower shelf-prices, the SFO investigation output will also result in a media-fest pointing out the 59 ways in which brand-owners incentivise retailers to persuade the shopper to buy more...

Finally, unfortunately for Tesco, this is not just a UK issue.  Some Tesco shareholders live in the US, a country where people that feel they have been wronged, litigate, and Tesco shareholders will be no exception. Their approach will be in contrast with the UK, where in such cases it has been customary for the authorities to issue a reprimand, draw a line, and move on...

Any output from the SFO investigation will probably be used as a basis for shareholder class action in the US, in a search for compensation. In turn, any such result in the US courts will probably roll onto the UK stage, encouraging UK shareholders to seek similar compensation.

Overall there will be a change in supplier-retailer relationships, as all parties move to numbers-based assessment of cost and value, and the savvy consumer's demand for demonstrable value-for-money rolls back up the supply-chain.

Suppliers are now in a position to make or break Tesco, but it is imperative that any help given should not be unconditional...

In other words, Tesco and the SFO are presenting an unprecedented opportunity for suppliers to elevate the NAM-Customer relationship to a new level based upon fair-share dealings, where numbers count, and KPI achievement becomes the ultimate basis for retrospective performance-based reward...

All else is detail...

Aldi Ireland: joining the profit-dots in Aldi's UK latest Accounts

A recent article in The Irish Times indicates a possible approach to estimating the profitability of Aldi Stores in the Irish Republic.

Checking the latest accounts filed by Aldi Stores Ltd. at Companies House, it would appear that they include the UK & Ireland business of Aldi for the year ended 31st December 2013.

On Note 7, page 21 of the Aldi Stores Ltd. accounts, details are given of the tax charge for 2013:
  -   UK Corporation Tax at 23%         £51.7m
  -   Overseas tax                               £10.2m, (say €12.9m at current rates)

We have taken the corporation tax assumption that ‘Overseas Tax‘ refers to the Irish Republic, together with an estimate of Aldi Ireland turnover for 2013 and reached the following conclusions:

- Given Ireland's Corporation Tax rate of 12.5%, this implies a net profit before tax of €103m in 2013 for Aldi Ireland
- Taking €850m as an estimate of Aldi Ireland turnover for 2013, this results in a possible pre-tax net margin = 12.1% i.e. €103m/€850m  x 100

If we have joined the right dots correctly, the above guesstimate obviously raises issues ref general retail profit levels in Ireland, in what is deemed to be a highly competitive market.

Moreover, if the Tesco crisis fall-out spills over into Ireland, and combines with US/EU moves re Inverse Taxation, the resulting spotlights on the profitability of businesses operating in Ireland could eventually challenge supplier profitability.

You obviously know your sales and net profit margins on your business in the Irish Republic, and how they compare with the UK business....

The above analysis suggests that perhaps your forward projections re the Irish market contribution to your UK & Ireland business might benefit from a risk re-assessment?
                                  

You always miss 100% of the shots you don't try...

 From an idea by Wayne Gretzky, via Antti Ritvonen and Lars Poulsen

Tesco's cash appetite: the opportunity for suppliers

Given Tesco’s combination of £14bn debt and £3.4bn net pension deficit, vs. its latest market capitalisation of £13.6bn, it is obvious that Dave Lewis’ priority has to be a sell-off of assets.  In which case, a mixed shopping basket containing Dunnhumby, Tesco Bank and Tesco South Korea ‘should do nicely, thank you’ in helping the company in getting back to square one…

The off-limits moves
In this situation, moving the credit period from 40+ days to 90 days, a potential cashflow gain of approx. £5bn would help, but would do little for enhancement of supplier relations...  Equally, any attempts to increase supplier trade investment or escalation of deductions would not only attract the attentions of the authorities and media i.e. consumer, but would alienate suppliers, the essential collaborators in any recovery…  Given the current scrutiny by the FCA, it seems obvious that Tesco will be unlikely to rely upon increases in credit, trade investment, or deductions as cash generators.

The key options 
On balance, it could be deduced that the sell-off of assets will be a key priority, against a background of severe tightening of all expenditure and a squeeze on liquidity on an ongoing basis.

All of the above has to increase Tesco’s sensitivity to the cost and value of supplier trade investment, and their appreciation of the direct impact on Tesco’s P&L.

Opportunities for suppliers
In other words, this combination of need for financially articulate NAMs together with Tesco’s vulnerability can provide suppliers with an unprecedented opportunity to elevate their Tesco relationship to a basis for fair-share dealings, an essential requirement for those that are prepared to help their No. 1 customer out of a black hole…

Tesco aftermath: The options for other mults' NAMs?

Given yesterday’s surprises, and bearing in mind the degree of fall-out, despite the fact that precise causes still await the revelations of the FCA investigation, it is important that other mults’ NAMs anticipate the obvious and take action now.

Because of Tesco’s Commercial Income issue, compounded by structural changes in the market and how people shop, we are now embarking on an era of retailing simplicity as per the French formula: fewer complex promotions and big price cuts across the board.

For consumers this means lower prices, clearer promotions, demonstrable value for money, with the same transparency for auditors and the authorities, stripping out all non-essentials to reduce complexity and costs...

Back to the future of Commercial Income
This is a situation that 'just growed and growed', where the introduction of a 5% 'discretionary' trade fund gradually morphed into a trade investment budget in excess of 20% of a supplier's sales...yet retains many elements of a 'nodding through' process unsuited to the new post-Tesco climate of 'accountability'...

This all changed as of yesterday

This long-overdue investigation of Commercial Income practices will not stop at Tesco…

From an auditing point-of-view, from now on, think post-audit recovery, on steroids...
In other words, auditors and management of all major retailers will have to move to more focused assessment of all trade investment, examining actual transactions rather than accounting process, in order to satisfy any retrospective re-auditing and possibly legal assessment arising from the FCA examination.

For NAMs, acting now will help optimise new opportunities arising in the market

Action:

• Tighten up Commercial Income practices in anticipation of more aggressive auditing in anticipation of fall-out from the Tesco issue. In practice this means revisiting your definitions and conditions ref Commercial Income and ensure their alignment with the customer and their accounting practices
• Avail of the opportunity to establish clearer and more transparent KPIs for all trade investment
• Push for a move to payment in arrears, based upon results achieved
• Above all, insist on fair share dealings in negotiated agreements - your customer needs you now, like never before...

Seems opportunistic on the part of suppliers?
Much of Tesco's issues are due to a massive imbalance of supplier-retailer power that has been allowed to build up over the years. The trade now needs and is ready for a seismic shift back to a situation where trading partners understand their roles, relative risk-levels, challenge one another and are ready to accept a reward-split that reflects relative levels of investment in the consumer-brand relationship.

In other words, think savvy consumer buying from savvy retailer, buying from savvy supplier, all based on 'fair is fair'.....

Over-cautious?
Do you really think that any auditing firm will be able to resist this golden opportunity to increase its fee income in the current climate?
         
A lot of extra work? 
Then think about the work involved if left unchecked until your customer drifts to the top of the radar screen....

NB. Tips for Tesco NAMs: Here 

Tesco: What now?

This morning’s announcement more or less met expectations and will be a continual topic for commentators in the coming months…

Meanwhile, NAMs have to pull together a plan of action, get in the car and drive to Cheshunt...

Essentially, from a NAM’s point of view, there are now effectively three Tescos in play:

• A small business-development task force focused on growing the business, profitably
• A fire-fighting Tesco tasked with ensuring that the ‘here & now’ is optimised, keeping to the regulatory guidelines, ensuring that nothing compromises business growth
• A ‘historical-records’ Tesco whose sole aim is to satisfy all demands for details of past transactions, tidy up record-keeping systems, clarify Commercial Income elements & KPIs, and demand appropriate records from suppliers…

Suppliers might be well advised to replicate this structure in their dealings with ‘The Three Tescos’ in order to make the best of what will otherwise be an ultra-conservative and risk-averse approach to managing what is still the UK’s biggest and most profitable grocer…

The French KISS approach to beating the discounters

According to a report in Reuters, France is the only country in Europe where discounters have seen a significant drop in market share, slipping to 11.9% in the second quarter of 2014 from a 2009 peak of 14.9%, according to Kantar Worldpanel data.

In fact, the success of French retailers in stopping the advance of discounters in the last five years shows a way out of the crisis embroiling Britain's "big four" grocers.

Their simple formula: fewer complex promotions and big price cuts across the board.
(After all, rocket-science is so pre-2007...)

The French grocers expanded their budget product lines, cut a proliferation of promotions, simplified own brand ranges and worked with suppliers to slash prices of branded goods.

In practice, this approach in the UK would require high levels of collaboration between suppliers and retailers, given the inevitable margin hits’ impact on share prices…

However, for branded goods suppliers, since any growth of the discounters comes at the expense of brands, then helping the multiples, helps the brands.

Moreover, in negotiation terms, the price for such assistance has to be a demand for fair-share dealings, between equal partners…

Truly, we are all in this together…