Lidl-Brighton 31-10-2015
Jamon Iberico de Cebo £99.99
Saturday 31 October 2015
Friday 30 October 2015
Amazon Fresh - losing to win vs. Tesco?
We all know that the last thing UK mults need is loss-leading online competition, the only real growth area currently available, in an medium where shelf-space is not an issue....
Given that Amazon are feeling their way forward with a fresh offering in London and Birmingham to Prime members and have traditionally been prepared to operate at a loss to build share, they represent a very real threat to the major mults.., initially in major conurbations where Amazon's dense coverage is a major strength.
Add to this the fact that home delivery can cost £20/drop vs. the maximum charge a consumer will tolerate is £5, and the scale of the threat can be appreciated.
With their 50%+ share of online grocery, Tesco have most to lose, but any Amazon Fresh success will obviously also impact the other mults.
The issue for suppliers has to be the extent to which the mults will try to recover losses via traditional brands as they try to compete in a new online reality...
Given that Amazon are feeling their way forward with a fresh offering in London and Birmingham to Prime members and have traditionally been prepared to operate at a loss to build share, they represent a very real threat to the major mults.., initially in major conurbations where Amazon's dense coverage is a major strength.
Add to this the fact that home delivery can cost £20/drop vs. the maximum charge a consumer will tolerate is £5, and the scale of the threat can be appreciated.
With their 50%+ share of online grocery, Tesco have most to lose, but any Amazon Fresh success will obviously also impact the other mults.
The issue for suppliers has to be the extent to which the mults will try to recover losses via traditional brands as they try to compete in a new online reality...
Wednesday 28 October 2015
Walgreens Boots Alliance take Rite Aid - another global step..
Yesterday’s bid for Rite Aid will obviously impact the US market, but UK and EU NAMs need to place this move in a global context in order to anticipate the impact at local level.
For those that need reminding, in a few short years, Stefano Pessina transformed a small family business into Alliance Boots, a European drug retailing and wholesaling powerhouse, through a series of takeovers. In 2007, he took the company private in an $18.5bn leveraged buyout with KKR & Co. At year-end, KKR still owned about 4.6% of Walgreens stock.. And this successful integration and revitalisation of an iconic UK brand, without missing a beat (in contrast with Kraft's acquisition of Cadbury...).
WBA-Rite Aid will result in a company with annual sales of £65bn and a Mkt Cap = £68bn.
Compare this with Tesco annual sales £69.7bn and £15bn Market Cap…
(apart from the additional scale of WBA, this Sales/Mkt Cap comparison indicates the degree of Tesco's fall from grace, and the need for H&B suppliers to re-balance their customer portfolios...)
Given that the WBA merger has been one of the private-equity firm’s best-ever deals, making it well over four times KKR’s initial investment, the private equity group will want to stay at the table...
In other words, KKR are unlikely to miss out on funding further deals proposed by Mr Pessina…
In defending the bid, Walgreens and Rite Aid would be likely to argue to regulators that they compete not just with other traditional drugstore chains, but also with companies such as groceries and club stores.
Finally, according to the WSJ, Mr. Pessina hasn’t been shy about his desire to do big deals. “We can clearly see the need or the opportunity for horizontal and vertical consolidation in our industry”
Joining some of the obvious dots, we should assume that SP is still working to a global agenda, growing by acquisition, targeting anything in healthcare and beauty, but also competing with grocers and warehouse clubs, anywhere…with appropriate funding on tap via KKR and the stockmarket…
Watch this space…
NAM Implications:
For those that need reminding, in a few short years, Stefano Pessina transformed a small family business into Alliance Boots, a European drug retailing and wholesaling powerhouse, through a series of takeovers. In 2007, he took the company private in an $18.5bn leveraged buyout with KKR & Co. At year-end, KKR still owned about 4.6% of Walgreens stock.. And this successful integration and revitalisation of an iconic UK brand, without missing a beat (in contrast with Kraft's acquisition of Cadbury...).
WBA-Rite Aid will result in a company with annual sales of £65bn and a Mkt Cap = £68bn.
Compare this with Tesco annual sales £69.7bn and £15bn Market Cap…
(apart from the additional scale of WBA, this Sales/Mkt Cap comparison indicates the degree of Tesco's fall from grace, and the need for H&B suppliers to re-balance their customer portfolios...)
Given that the WBA merger has been one of the private-equity firm’s best-ever deals, making it well over four times KKR’s initial investment, the private equity group will want to stay at the table...
In other words, KKR are unlikely to miss out on funding further deals proposed by Mr Pessina…
In defending the bid, Walgreens and Rite Aid would be likely to argue to regulators that they compete not just with other traditional drugstore chains, but also with companies such as groceries and club stores.
Finally, according to the WSJ, Mr. Pessina hasn’t been shy about his desire to do big deals. “We can clearly see the need or the opportunity for horizontal and vertical consolidation in our industry”
Joining some of the obvious dots, we should assume that SP is still working to a global agenda, growing by acquisition, targeting anything in healthcare and beauty, but also competing with grocers and warehouse clubs, anywhere…with appropriate funding on tap via KKR and the stockmarket…
Watch this space…
NAM Implications:
- Scale? At $100bn sales, almost as big as Tesco global...!
- Synergies? $1bn savings in year one is just the start ...
- Negotiation? First agenda item has to be prices & terms disparities.
- Preventive action? Suppliers have six months to remove anomalies, while WBA are distracted by the inevitable government scrutiny.
- Amplify? Worth sharing with global colleagues for a co-ordinated approach?
Tuesday 27 October 2015
VW and the never-ending cycle of corporate scandals - how Darwin can help
According to the BBC, after Libor, payment protection insurance, phone hacking and every other scandal, nothing appears to have been learned to stem the tide of bad behaviour from some of the world's largest companies.
And now VW has been caught cheating on emissions tests, having been caught and fined in 1973 for dodging similar tests.
Research by Cass Business School’s Professor Andre Spicer indicates predictable post-scandal behaviour:
First three to six months: high activity, scapegoating, calm restoration, removal of people, evidence, stories and reminders…
More detail in the original article re failure to learn from mistakes via a focus on getting things done rather than how results are achieved, resulting in a culture that encourages recruitment of similar individuals with the same views, rather than a policy of diversity…
Stephen Carver, a lecturer at Cranfield points out that Darwinian survival is not survival of the fittest - he never said that. It's the most able to adapt. And that means diversity…
Impact on the brand
However, we would add that a fixation on complying with the letter, rather than the spirit of the law probably causes more damage in the eyes of the consumer. Considering the years spent building brand equity – that reassurance that it is not necessary to second-guess the quality – or the quantity – in the tin, the essence of branding…
Also we all know that FMCG marketing is built on the premise that the cost of introducing the consumer to the brand and achieving initial trial is so high that it is only on second or third purchase with less spent on having to ‘educate’ the consumer, does the brand begin to make a profit. Destroy that trust – by short-changing on contents vs. expectation – and then suffer the cost of re-building that trust.
For instance, if we accept that when a consumer’s needs are exceeded, they tell a friend, when disappointed, they tell ten friends, it might be said that a brand re-build costs ten times the cost of introduction.
Exaggeration?
Why not try it for yourself, sometime…?
And now VW has been caught cheating on emissions tests, having been caught and fined in 1973 for dodging similar tests.
Research by Cass Business School’s Professor Andre Spicer indicates predictable post-scandal behaviour:
First three to six months: high activity, scapegoating, calm restoration, removal of people, evidence, stories and reminders…
More detail in the original article re failure to learn from mistakes via a focus on getting things done rather than how results are achieved, resulting in a culture that encourages recruitment of similar individuals with the same views, rather than a policy of diversity…
Stephen Carver, a lecturer at Cranfield points out that Darwinian survival is not survival of the fittest - he never said that. It's the most able to adapt. And that means diversity…
Impact on the brand
However, we would add that a fixation on complying with the letter, rather than the spirit of the law probably causes more damage in the eyes of the consumer. Considering the years spent building brand equity – that reassurance that it is not necessary to second-guess the quality – or the quantity – in the tin, the essence of branding…
Also we all know that FMCG marketing is built on the premise that the cost of introducing the consumer to the brand and achieving initial trial is so high that it is only on second or third purchase with less spent on having to ‘educate’ the consumer, does the brand begin to make a profit. Destroy that trust – by short-changing on contents vs. expectation – and then suffer the cost of re-building that trust.
For instance, if we accept that when a consumer’s needs are exceeded, they tell a friend, when disappointed, they tell ten friends, it might be said that a brand re-build costs ten times the cost of introduction.
Exaggeration?
Why not try it for yourself, sometime…?
Thursday 22 October 2015
When the buyer wants even more – an opportunity for a partnership re-cast?
As you know, with Walmart and most probably Asda wanting extra help from suppliers to cover rising, but surely not unanticipated business costs, it is possible but unwise to simply say 'No’.
Better to treat this as an opportunity to go back to fundamentals on each side of the table. This is a bit like when a buyer makes a new demand immediately following the conclusion of a deal, such as ‘…and you will deliver to each branch’, a very old trick – so old, we used to call it the ‘quivering quill’ or sign-off demand – that destabilises the balance of a fair-share deal just negotiated.
The key here is to assume exaggerated shock or anger – if you have not anticipated the move and are really shocked/angered, your negotiation technique may need more fundamental remedials – and even go so far as to act as if you are about to terminate the interview - such as screwing up the draft plan. Apologise for having assumed a deal had been reached, and take the discussion back to the buyer’s ideal world requirements of a partnership with you and your company.
These are obviously extremely high-stakes moves, so you will obviously have placed the entire relationship in context, calculated the cost and value of each element, and will be acutely conscious of the fact that losing the Asda business means a factory closes…
The benefits of pre-interview planning means you do not have to prepare and respond to these moves ‘on the go’.
The key is to prepare right things…
Full analysis and action in October issue of NamNews
Tuesday 20 October 2015
Friday 16 October 2015
Call me naive, but... How Tesco could rebuild trust in UK retail
Latest reports in The Guardian that over-complex supermarket pricing is being targeted by UK government to ease price comparison will probably end up in the usual letter-of-the-law observance, forgetting that consumer trust is based on the spirit-of-the-law.
Providing consumers with true bases for like-with-like comparison needs the combined efforts of suppliers and retailers with a common aim of rebuilding consumer trust, the essence of branding, both retailer and supplier.
Given its presence at the point-of-purchase, and at 29% market share with most to lose, I believe that Tesco - and its major suppliers are in a position to take the following steps:
Price clarity: A major opportunity lies in wait for those retailers that strip offerings back to the basics of letting consumers know what they get for their money. Apart from an obvious emphasis on unit pricing combined with a little education ref. prices per g/ml, it means eliminating all ‘letter & spirit’ legal issues regarding promotional offers, and replacing them with genuine, transparent and defensible offerings that can be compared accurately with competitors’ alternatives, like-for-like, but also meet and even exceed consumer expectation
Product delivery: When a consumer opens a tin, its contents should match or even exceed the expectation created by the lid…a fundamental of branding based in part on the fact that the cost of making the first sale to a consumer is so high that profit is only possible on return visits without having to be re-sold. Tesco is in a unique position to add like-with-like conditions to its purchasing criteria, and delist brands that are found to have used content reduction to disguise a price rise…
Demand forecasting: As ‘experts’ in consumption, suppliers can be in a position to help refine demand calculations and the combination of this insight with a retailer’s instore on-time fully-shared expertise has to be a way of ensuring 100% zero-defect shelf availability, at minimal cost for all parties
Trade credit: Credit was always meant to cover the gap between delivery of goods to a reseller and payment by shoppers, and was never intended as a means of generating interest on 40-day deposits. As such, given average retailer stockturns of 20 times per annum, this means paying supplier invoices within 2.5 weeks of delivery, with recent moves to 14 day payment for small suppliers a good start. There is even a case for paying faster for items delivered on a daily basis
Trade investment: Post-audit recovery came about because of a combination of inadequate ‘paper trails’ of promotional agreements by suppliers, and the ability of financial programmes to search and claim for unpaid funds for six years previously. Despite the strict letter of the law supporting this process, all retailers could show more goodwill and pragmatism by limiting such searches to a maximum of two years…
Trade Deductions: Should not be regarded and treated a source of income, but should reflect genuine failure to meet reasonable standards agreed in advance as a condition of purchase, with perhaps some element of reciprocation for failures of on-shelf compliance...
Organisational compliance: The above changes need to be understood and communicated at all levels within both supplier and retailer organisations, thereby reducing the possibility of 'rogue-employee' defences at higher levels of management…
Tesco, with 29% market share and a need to regain custom, is in a unique position to be in the vanguard of this change..
And if it results in a temporary loss of margin, so what…
In time, as shoppers - and suppliers - begin to relax into the feeling that in a Tesco store, ‘what you see is what you get’ and even more, then the result have to drop into the bottom line as repeat sales come in at less cost, like with all good brands…
HT to Wayne Robinson for Guardian link
Providing consumers with true bases for like-with-like comparison needs the combined efforts of suppliers and retailers with a common aim of rebuilding consumer trust, the essence of branding, both retailer and supplier.
Given its presence at the point-of-purchase, and at 29% market share with most to lose, I believe that Tesco - and its major suppliers are in a position to take the following steps:
Price clarity: A major opportunity lies in wait for those retailers that strip offerings back to the basics of letting consumers know what they get for their money. Apart from an obvious emphasis on unit pricing combined with a little education ref. prices per g/ml, it means eliminating all ‘letter & spirit’ legal issues regarding promotional offers, and replacing them with genuine, transparent and defensible offerings that can be compared accurately with competitors’ alternatives, like-for-like, but also meet and even exceed consumer expectation
Product delivery: When a consumer opens a tin, its contents should match or even exceed the expectation created by the lid…a fundamental of branding based in part on the fact that the cost of making the first sale to a consumer is so high that profit is only possible on return visits without having to be re-sold. Tesco is in a unique position to add like-with-like conditions to its purchasing criteria, and delist brands that are found to have used content reduction to disguise a price rise…
Demand forecasting: As ‘experts’ in consumption, suppliers can be in a position to help refine demand calculations and the combination of this insight with a retailer’s instore on-time fully-shared expertise has to be a way of ensuring 100% zero-defect shelf availability, at minimal cost for all parties
Trade credit: Credit was always meant to cover the gap between delivery of goods to a reseller and payment by shoppers, and was never intended as a means of generating interest on 40-day deposits. As such, given average retailer stockturns of 20 times per annum, this means paying supplier invoices within 2.5 weeks of delivery, with recent moves to 14 day payment for small suppliers a good start. There is even a case for paying faster for items delivered on a daily basis
Trade investment: Post-audit recovery came about because of a combination of inadequate ‘paper trails’ of promotional agreements by suppliers, and the ability of financial programmes to search and claim for unpaid funds for six years previously. Despite the strict letter of the law supporting this process, all retailers could show more goodwill and pragmatism by limiting such searches to a maximum of two years…
Trade Deductions: Should not be regarded and treated a source of income, but should reflect genuine failure to meet reasonable standards agreed in advance as a condition of purchase, with perhaps some element of reciprocation for failures of on-shelf compliance...
Organisational compliance: The above changes need to be understood and communicated at all levels within both supplier and retailer organisations, thereby reducing the possibility of 'rogue-employee' defences at higher levels of management…
Tesco, with 29% market share and a need to regain custom, is in a unique position to be in the vanguard of this change..
And if it results in a temporary loss of margin, so what…
In time, as shoppers - and suppliers - begin to relax into the feeling that in a Tesco store, ‘what you see is what you get’ and even more, then the result have to drop into the bottom line as repeat sales come in at less cost, like with all good brands…
HT to Wayne Robinson for Guardian link
Thursday 15 October 2015
Gambling on loyalty Cards - insights by Steve Gray
In response to our post on Loyalty Cards, Steve Gray has added the following insights:
- There is inherent value in the loyalty programme itself - millions of consumers like collecting points (Clubcard, Boots, Nectar etc) and go out of their way to do so. The programmes more than wash their face for the retailers who deploy them
- They also create a valuable asset for their owners : Nectar was sold for around £450m, if ever Tesco sold Clubcard (as opposed to dunnhumby) it would be worth something similar or more
- There is, as you say, additional value from the data - it can be used to deliver a more personalised shopping experience (via range, promotions and personalised offers)
- Currently, supplier-partners aren't really able to help retailers to "build a comprehensive picture" as they tend not to have any useful data on individuals (supplier data tends to be anonymised research from small sample groups). This might change as brands start to invest more in direct to shopper programmes, more retailers enable digital coupon redemption and sales tracking other than via their closed loop programmes
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