Latest Podcast from Hospitality Mavericks: Retail, Hospitality & Delivering Value to Savvy Consumers with Brian Moore

Michael Tingsager and Brian share key trade insights re Amazon, the Discounters, Shrinkflation/brand equity preservation, as they affect the past, present and future states of retail and hospitality. With many crossovers to be found between the two sectors, Brian provides in-depth advice for businesses looking to succeed in a world of corporate giants and savvy consumers.

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Hospitality Mavericks is a growing community of past and present business owners, franchisees, senior managers and experienced professionals with a love and passion for the hospitality industry - find out more here

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M&S Deal Could Cost Ocado A Large Chunk Of Customers

A survey of 250 Ocado customers carried out by analysts at HSBC found that 22% would no longer shop with Ocado if it did not sell Waitrose products, while 17% stated they would not use it if the Waitrose products were replaced by M&S lines.

David McCarthy, head of consumer retail research at HSBC, described the findings as “worrying” for the new Ocado and M&S joint venture. “A meaningful proportion of customers said that their loyalty is to Waitrose and that M&S is not an adequate replacement,” he wrote in a research note. [more for NamNews readers]

• Its called brand loyalty, folks…
• …whether it be supplier or retailer.
• Hopefully Ocado will have factored this into the equation in advance…
• …and can live profitably with the difference.
• Watch this space…

Fair-Share Trade Relationships: How to optimise via equal compromise...

NAMs that manage to achieve fair share realationships with buyers can keep it so by focusing on the following 'rules':

Keeping the Deal in Place…

An ongoing Trade partnership requires that both parties respect the basic deal. In other words, over time they have reached a balance of risk and reward that satisfies the needs of each party. All further moves will take place on a reciprocal basis whereby a demand by one will be matched by a gain of equivalent value by the trade partner. Otherwise, the relationship becomes so one-sided that the partnership breaks down and each side loses. Systematic use of financial measures can help in optimising trade partnerships and provide a more reliable balance of risk and reward.

Corporate Customer Portfolio Role

Essentially, the process starts with establishing the customer’s role within the corporate customer portfolio, in terms of current and target Sales and Profit, lifecycle profile, and investment classification (invest, maintain or divest). The main focus can then be on achieving target sales and profit, only referring back to corporate performance when target sales and profit performance s deviate from that target.

‘Deal on the Table’ a constant benchmark

Here the customer and supplier are placed in market context, reflecting relative power in the relationship.

• Customer’s share of the supplier’s business (£ sales, %)
• Supplier’s share of the customer’s business (£ sales, %)
• Customer’s share of the category in total market: their appeal to the supplier’s competition and importance to the supplier
• Supplier’s share of Customer’s version of the category
• Size of deal for supplier (£, %) in this case current and annual target sales and profit (Gross and Net), reflecting scale and risk of loss of the business within supplier’s customer portfolio
• Size of deal for Customer (£, %) current annual and target sales and gross profit, reflecting Customer’s level of dependency on supplier

Current Terms and Conditions in the relationship

The supplier, operating on the premise that everything can be reduced to a financial cost and value, calculates the cost of each element of the relationship and the incremental sales it represents for each party. This includes credit period, settlement discount, stock levels, promotional support and all other parts of the supplier’s total offer package. The same terms and conditions should be translated into customer’s sales equivalents, using the customer’s published net margin as a multiplier. This will help to establish and demonstrate the value of the supplier to the customer. 

Maintaining the ‘status quo’

This total offer package represents the basic working relationship in terms of relative risk and reward between the two parties. If both parties seriously value and want to maintain the relationship, then any additional request or change in the deal by one party, will require a reciprocal move of equivalent value in order to maintain the equity of the business relationship, in other words, the ‘status quo’.

In practice this means that however the circumstances of either party may change, any such change and the resulting demands should be costed, valued and the results factored into the total offer package in order to ensure that parities have been maintained, and the supplier will continue to invest in the relationship.

Specifically, the implications of any new, ‘incremental’ or arbitrary demand or breach in compliance should be explored fully in terms of its impact upon the rest of the deal, and agreement reached on appropriate adjustments to the total offer package. Any reluctance to explore such options on the part of the buyer should be treated as an attempt to achieve an incremental gain at the expense of the supplier, and resisted.

Finally, it is obvious that this level of trade relationship relies heavily upon mutual trust and willing compliance. It is a deal between two organisations equal in respect for one another, if not in scale, and by definition has to operate on a multilevel and multifunctional basis, capable of surviving regular buyer-churn and fundamental changes in the market.

Otherwise, we are all in more trouble than we realise….

Feedback: ‘everything in a supplier-retailer relationship can be reduced to a financial cost and value’ We welcome any feedback quoting exceptions and will try to illustrate way and means of calculating cost and value. Please contact me with your exceptions and comments via Linkedin, or at bmoore@namnews.com

Booker And Tesco Ramping Up Benefits Of Merger

Speaking at an event this week, hosted by trade magazine The Grocer, Booker’s Chief Executive Charles Wilson revealed that significant benefits would be rolled out in three phases during 2019.

Phase one began last month with retail and catering customers being offered lower prices and better margins. The second phase is due to launch in the spring and will involve improving the quality of produce by switching to Tesco suppliers and specifications. A last phase in autumn will see the roll out of various Tesco services. [more for NamNews readers]

• All depends on how these offers and terms compare to those available from other wholesalers…
• …and if greater, inevitable switching of allegiance will follow.
• Meanwhile, NAMs need to reassess their wholesale customer classification in terms of Invest, Maintain or Divest…
• Watch this space.

Pressure Mounting On Sainsbury’s Management As Performance Weakens

Industry data released by Kantar Worldpanel yesterday showed the chain was continuing to struggle up against its revived main rivals and the discounters. Sainsbury’s sales fell by 1% year-on-year over the 12-week period to 24 February with its market share slipping 0.5 percentage points to 15.7%. This marks an acceleration from the 0.3% fall in sales that the chain suffered in the previous period. [more details for NamNews subscribers]

• Time for Sainsbury’s (and their NAMs) to forget the CMA, and get back to the day-job…
• …in readiness for the inevitable takeover bid, given the falls in share price.
• As you know, share price recovery is driven by improved ROCE, in turn driven by margin and capital rotation…
• …Simples!

Making Sense of the Savvy Consumer in Flatline….

Given ten years of market confusion, consumers are now beginning to make some sense of the financial turmoil, are developing increasing confidence in their common sense when making purchasing decisions, and those who still have jobs are working longer and harder, and possibly for less money.

As a result, they are relating every £1 of ‘discretionary’ expenditure to their current and future earnings, assessing the opportunity-cost in terms of alternative uses of the money, like never before…

They are raising their own performance standards, and using them as a measure against which to evaluate every product and service offering, refusing ever to outsource their decision-making to marketers and retailers again.

In addition, mobile-isation of market-comparison has made it easier for the savvy consumer-shopper to evaluate alternative offerings objectively and accurately, and is guiding their expectations of performance in the process.

The New Savvy Consumers

Welcome to the new savvy consumers, the professional shoppers, discerning buyers who are simply seeking to obtain satisfaction of their needs in an open market, at a price that compares well with alternatives available, based upon simple common sense, and trust in no one....

As the newly emerging primary driver of demand, the savvy consumers have to be persuaded that their needs are being met, for a fair price, and that their purchases deliver more than expected in practice. In other words, this new consumer, if willing to spend, is unwilling to accept anything short of good value for money.

The destruction of consumer-trust

Consumer-trust, having been severely undermined by the bankers and politicians, is now at an all time low, in that consumers realise that they have been betrayed by the ‘pillars of society’, and they are no longer prepared to ignore the learnings….

As a result, they now believe that in the final analysis, they can no longer afford to risk outsourcing purchasing decisions to marketers and sellers of goods and services. In other words, the consumer is now using basic common sense to evaluate what they get for their money and is rejecting second-best….

A real opportunity for the good guys

If this is seems like more doom and gloom, then we are simply not expressing it properly…

In fact, we believe that the emergence of the savvy consumer is the most positive and exciting social development of the current cash crisis. We are now living through the evolution of a commonsense approach to buying goods and services by increasingly informed consumers, who are prepared to vote with their feet. This is a development that will obviously challenge traditional marketing and selling practices, but will provide significant opportunities for those suppliers and retailers that are prepared go back to basics, factor this new reality into their product offerings, and always strive to exceed consumer expectation…

In practice, this means that the consumer is providing an entirely new basis for suppliers to re-evaluate every SKU in their portfolios against available alternatives, and ruthlessly eliminate anything that does not clearly demonstrate a total match with latest consumer need, made available in a way that shoppers want to buy, better than the competition. It follows that the customer portfolio has to be re-assessed from the same point-of-view, again with the aim of identifying and cultivating trading partners that are capable of expressing the brand offering in a way that can meet consumer-shopper needs at point-of-sale, profitably.

This elimination of consumer-brand mismatch and product overlap from supplier portfolios will reduce supplier costs, allowing liberated resources to be invested in winner brands with increased emphasis upon consumer satisfaction, thereby selling more to current savvy consumers, and making it easier to sell new products to those increasingly trusting and loyal users.

In the same way, building trade partnerships with like-minded retailers has to present joint-opportunities to optimise common-sense market need, while others await a return to ‘normal’…

So What's in a Brand Name?

Today's emphasis on Big Data as a must-have in brand marketing reminds me of my early ventures in giving business advice to a Danish dairy company re the fact that their UK butter offering might prove confusing to UK shoppers because of its 'haphazard' changes in colour from yellow to white and back again during the year.

Despite my farming and Mom 'n Pop store upbringing in less politically-correct times, I persisted in recommending a purist marketing approach to this farmers' cooperative in that a consumer-test was essential in establishing whether white or yellow was the preferred colour. This insight would then determine whether the product should be bleached or coloured yellow to match consumer need...

The client politely pointed out that theirs was a natural product whose colour reflected the cow's seasonal diet, and told me they did not think much of my reservations re the brand name either...

I often wonder what ever became of Lurpak over the years...

Private Equity Giant KKR Mulling Bid For Asda

According to The Sunday Times, the US private equity giant, whose past investments include Alliance Boots, is working with former Asda boss Tony De Nunzio on a possible approach. He is now a senior adviser to KKR and the report suggested he would become Chairman of Asda in the event of an acquisition. [more for NamNews readers]

• From a NAMs-eye-view, the issue is the probability of new private equity-based majority ownership of Asda…
• …meaning sale & leaseback of outlets.
• …P&L by outlet…
• …all adding up to finance-based buying…
• …quite apart from an Amazon wanting to buy an inexpensive Sainsbury’s via the petty-cash box…

What if: a restaurant was run like a supermarket?

Suppose a major multiple decided to apply state-of-art retail principles to the HoReCa sector, using expertise in space management, offering optimisation, efficient service-level and money management to bring something extra to the food service industry… (i.e. not simply adding on a restaurant to absorb redundant space, but actually treating every aspect of the restaurant offering as if from a supermarket and coming back from that point to a practical application)

Space management:
Calculation of sales and profits per sq. ft. means converting annual sales into table footprint like a supermarket gondola, with spaces between tables treated as aisles. In other words, the total sq.ft measure of all tables divided into annual sales would give sales per sq.ft. of ‘selling area’.

Reducing the space between tables would increase selling intensity, with customer comfort and relative privacy a trade-off against increased productivity…

The offering:
Diners would need the equivalent of ‘shopping the aisle’ via a more interactive menu. In other words, it would be apparent that flowery descriptions of menu-ingredients, albeit in franglais, would then seem inadequate, as currently conveyed. However, the temporary provision of an ipad for each guest, listing available dishes, complete with provenance, attractive illustrations pitched at levels that would manage expectations, updated ‘live’ to match kitchen availability, would help in meeting diner need. Unforeseen demand-spikes would obviously trigger emergency deliveries from just-in-time suppliers. The addition of ‘ideal world ‘ needs and other personal details would aid the addition of award points and service improvements, thus providing a basis for follow-up marketing to satisfied guests.

Service level:
The iPad would also help in minimising waiter numbers (virtual self-service?) by allowing guests to place orders directly with the kitchen, with ‘are we there yet?’ queries answered regularly via text updates…(with a suitable app designed to delete/replace expletives, as necessary...).

Meanwhile, live video coverage of the kitchen would facilitate on-going observation/monitoring of the cooking process where so required by anxious guests…Discretionary on/off soundtrack would protect sensitive guests in the event of sudden outbursts of ‘over-excitement’ by the chef/s…

The money:
In terms of pricing, the ipad would provide full details on pricing, by ingredient/unit, per chair, and full table, with a running total monitoring impulse bottles of wine and other add-ons. This ongoing build-up of the 'shopping basket’ would provide invaluable insight to restaurant management, enabling lighting and heating levels to be related to rate-of-sale and adjusted accordingly.

Tables could be priced according to popularity, size, position, degree of privacy and of course discounted via advance-booking… At the end of the meal, payment could be made in a check-out area, thereby freeing up the table so much faster for the next party.

Finally, a discrete scanner would then ensure that the number of guests attempting to take home the 'menu' as a souvenir, would be minimised...

Impossible, or food for thought?

Optimising the NAM's business lunch?

In the bygone era of the free 3-hour ‘business lunch’, in effect a high-powered 'non-business' meeting that appeared to have no fixed agenda, a new NAM tended to be thrown in unprepared, with no training on the basics…

Some precautionary pointers may help

In one of my first business lunches, my Dutch MD rescued me from the confusion of the French menu by suggesting I might like Tournedos Rossini, which until that moment I had taken to be part of the restaurant’s musical accompaniment… The resulting combination of rare filet mignon with warm foie gras on a bed of wet toast proved very satisfactory and apart from raising the bar on expenses, from that moment I have found an assured request for ‘Tornado Rossini’ was always a safe bet when confronted with a ‘foreign language’ menu.

Unfortunately, I have been less successful with my choice of a standard starter in Pate Maison, finding it tasted different in every restaurant…

For these reasons, I found it useful to conduct a dry run on a new venue in preparation for really important lunches. It obviously raises the cost, but pays off in terms of ability to focus on the hidden agenda in real time…

Following the menu-choice lead of the main guest can aid the bonding, but can also have its pitfalls…

I still blush in recollection of an introductory meal with a newly promoted buyer where I pre-warned the team to follow his lead regardless..

This appeared to work well with his choice of starters, a generous portion of fresh Dublin Bay prawns, dutifully followed by the rest of us. However, when he proceeded to eat them complete with shells, I sensed some loss of my personal franchise as the team crunched their way through their portions… Looking back, I now realise that he was one of the best leg-pullers I have ever met… beware the hidden agenda

When it comes to wine, it pays to keep it simple and stick with what you know. To this day, nothing beats the embarrassment I experienced having sent back a bottle of ‘corked’ Hirondelle, without realising it was one of the first plastic-capped wines in the UK…

Excessive alcohol consumption can also have its downside in terms stage-management of the occasion. A long-standing MD pal with a hard-earned reputation for being able to hold his drink tended to give himself away by leaning forward towards the end of a lunch and whispering ‘ I would like to give you some infidential confirmation..’ This was always a signal for his NAM to announce some emergency ‘at the office’ that only his MD could handle…

In other words, high quality and moderation, with a silent-mobile primed to divert when all else fails…

All other egg-sucking precautions can probably be handled very adequately by well-intentioned grandchildren….