What if Aldi & Lidl grow at 10% in flatline?

Apart from politicians' assurances re post election growth, just suppose that we are into flatline growth for the next five years, at least...

Also given Aldi & Lidl combined share of 9% (see yesterday's NamNews) and a conservative (!) estimate of 10% growth vs major mults at 0%, the two discounters will reach 15% share by 2020...

The resulting issue for suppliers has to be, barring radical changes in discounter ranging policy, most of this growth will be via surrogate branding, at the expense of national brands...

Branded suppliers have a choice:

• Either persuade the discounters to stock more brands...
• Or find a way to optimise private label, and seek a fair share of the discounter action

...whilst the major mults mount the deepest price cuts ever, possibly fuelled by back to front margin moves...

'Back-to-Front' thinking spreads on-shelf as Melbourne shopper encourages people to buy local

                                                                                                                   pic: Daily Mail

In a classic example of unforeseen consequences of shopper engagement, the Daily Mail reports on an Australian woman starting a ‘flip it and reverse it’ campaign and turning labels around so people can see where supermarket foods ACTUALLY come from...

The issue for retailers is whether this one-off initiative represents a single-shopper quirk, or is perhaps the tip of a consumer-need iceberg. In other words, should enterprising retailers seize a competitive edge by filling shelves to reveal label contents, and perhaps add an occasional normal facing to aid brand-identification?

Given that this 'dumbing-up' would reverse years of simplifying shelf-filling process, and could result in knock-on labour cost-increases, perhaps suppliers could play their part by modifying their shelf-ready pack configurations?

Meanwhile, marketing colleagues on regular store-visits are bound to notice the slight reduction in pulling power of current back-of-pack labelling, and may hopefully authorise enhanced branding of rear labels..

...thereby begging the question as to the function of the now-redundant front label, in these unprecedented times?   

A Post-Easter Bargain from Sainsbury's?

                                                                                         Pic: MEN/Alex Kilpatrick

A Manchester offer you can refuse, and one you cannot, Moscow-style?

                                                                                                  pic: Business Insider

With inflation in Russia running at 11.4%, maintaining the retail price represents a discount!

Meanwhile, in deflationary UK, holding the price steady indicates a price increase!

Fortunately, in each case, the consumer is savvy, and understands these subtleties!

More on Russian pricing here at Business Insider

Tesco & Walmart: going in different directions to reach the same point?

News that Walmart are telling suppliers to 'keep those trade funds and put them toward the cost of goods' will result in significant - and permanent - price cuts, has to indicate that Asda may at least consider a similar approach in the UK....

Given that trade investment can be 20% of supplier selling prices - translating to 15% of net shelf-prices for a retailer on average margins of 25%, the impact on retail prices would be significant..

Meanwhile, Tesco's move from 27  to 3 negotiation points re trade investment would achieve a similar result on shelf.

Whilst each retailer is taking responsibility for setting the selling price in a drive for market share, the difference between the two approaches are:

• Walmart/Asda are implying that trade investment transferred into lower buying-in prices and then to EDLP has more impact on consumers    
• Tesco sees merit but overlap in some trade investment buckets and will presumably negotiate the transfer of 'surplus' monies to the front margin, where they will presumably fund price reductions?

The issue for UK suppliers has to  be the extent to which the other retailers will follow the trade-investment funded pricing route...

Easter 2015: Is nothing sacred?

                                                          Brighton Easter 2015    pic Brian Moore

...or, in flat-line markets, simply high-level headhunting, at the expense of the competition..?

There will always be someone who says they can do it cheaper...

    Thanks to Guillaume Quilliot via Jonathan Hughes

Tesco's Margin Objectives: Going from Back to Front to go Back to Basics

Given that Tesco plans to reduce the negotiating elements of Back Margin from 24 to just three, it may be useful for NAMs to work this through in terms of the financial impact on their Tesco relationship.

Essentially, it is probable that the total Tesco take from your brand will remain the same i.e. they are unlikely to surrender any income currently coming from Back Margin; a proportion of this will simply move into Front Margin.

In other words, say the current 20% of trade price represented by trade investment will translate into 15% of ex VAT shelf price, assuming a 25% retail margin.

Only issues are 
-   What will happen to shelf price if Tesco want to drive sales really hard via a 15% price cut?
-   Will scale discounts be large enough to satisfy Tesco (i.e. their January price-cut test appeared to be profit-neutral)?    

However, on balance, Tesco’s move on Back to Front Margin represents a quantum leap for suppliers in that their front margin will be a direct result of sales made and will be paid in arrears

BTW, it might be wise to hold a bit back in case a change of management at some stage concludes that your category’s in-store presence needs a little ‘livening-up’ via an additional injection of trade investment…  

Passing the Tesco Cull-test: Hints from the Dave Lewis Grocer interview

See the full in-depth interview here, a treasure-trove of insight

The cull-test: Opportunities for all suppliers to get it right, irrespective of size…

Criteria for de-listing:
- SKUs with a small amount of customer appeal i.e. not meeting a real need
- SKUs needing too much Tesco effort i.e. vs consumer benefit derived

What Tesco want:
- Unique Propositions i.e. a demonstrable difference, a major hurdle for realists
- Innovations that customers value i.e. a real step forward that makes a demonstrable difference
- A good economic equation i.e. an appropriate mix of back & front margin

In other words, a mix of product, price, presentation and place that satisfies the felt-need of the savvy consumer…
…..and not forgetting the margin…