Bord Bia Brand Forum
Paul Foley
Dublin, 5. March 2015
About Paul Foley
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Founder and Managing Partner of Foley Retail Consulting
Over 40 years of experience in retail
Former Board member at Iceland Foods Ltd
Former Board member of ALDI (23 years till 2012)
Board member: OKEY Russia, GIPPO Belarus and
INVERTO Germany
Foley Retail Consulting (FRC)
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Based in Vienna, Austria
Privately owned/ owner managed
Focused purely on retail, FMCG and e-commerce
Operating in multiple geographical markets
Working with a variety of retailers and channels
Solutions derived from real practice!
Partners of FRC have combined 135 years of top level retail management experience
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The grocery scene Ireland & Britain 2015
• Irish and British grocery market is being disrupted by the
displacement of sales to the discount channel. Why?
• Discounters seek 4 certain conditions for market potential:
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High standard of living: GDP above global averages
High EBITDA average earnings: 7-10%
High wage economy
Property ownership surety and possibility
• Critical point is when discounter reaches scale point of buying
power. Let’s do the math together!
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The grocery scene Ireland 2015
Buying power comparison
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Tesco sales 2014: €3.097b / 38,000 SKU = €81,500 per SKU
Pareto principle: 80% sales from 20% of range
80% Tesco sales €2.477b / 7,600 SKU = €325,921 per SKU
Aldi sales 2014: €1.518b / 1,400 SKU = €1,084,285 per SKU
Aldi and Lidl are both 3x buying power size of Tesco per SKU
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The grocery scene Ireland & Britain 2015
• Today Aldi and Lidl have real market power. They exceed all
other players in Irish market for sales per SKU and they have
20% of the grocery market!
• Discounters have today 260 stores in the Irish Republic, they
plan 350. That’s 34% more stores and 40% more space!
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Market share of Ireland’s top 6 grocery retailers
Market share %
(2014)
Dunnes
51% private label
Lidl
76% private label
BWG
23% private label
10.74
91% private label
10.79
Aldi
Tesco
Musgrave
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7.44
10.2
Market share %
22
46% private label
31.24
36% private label
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Source: Planet Retail
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The role of private label (2014)
The % private label penetration of Irish grocery trade by major product category
• Aldi and Lidl have 29% of all private label market
Spirits
7
Beer
11
Personal care
12
Cleaning
% Private
Label
penetration
18
Pet food
21
Cooked meat
31
Paper
32
Dairy
36
Dry and tinned packaged grocery
54
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50
Source:
Planet Retail
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How should the brands fight back?
The branded part of the grocery industry is under sales and margin pressure,
there are though ways of using, enhancing or inventing “brand equity”:
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Quality unique selling points
Provenance and history
New product development
Marketing – telling the story
Join the party and sell to the discounters/bargain stores
Sell a bit of Ireland to the world!
Sell your product to the discounters!
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Brands doing a great job - three examples
Butlers Chocolates
• 80+ years old, owned by Sorensen family
• Fabulous chocolate confectionery made in
Dublin
• Tourist attraction in Dublin - Butlers
Chocolate Experience
• Sells in 60 airports, 40 different countries
and online
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Brands doing a great job - three examples
Jameson Irish whiskey
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Famous old Irish brand owned by Irish distillers
Produces a new variant every year
Focuses on “ambitious social” males aged 25-40
Sells 60m bottles per year and growing at 5% pa
Spends €80m pa on marketing and sponsorship
Brand is said to be worth €1.68b
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Brands doing a great job - three examples
Keogh’s Irish crisps
• 200 year old family run potato farm now
producing crisps in Oldtown County Dublin
• Fantastic products like Dubliner and
cheese, shamrock and sour cream
• Brand is every inch the personification of
the countryside of Ireland
• Sales since 2011 have doubled every year
• Now exports to the UK
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How a retailer thinks across different formats?
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The supermarket/superstore operator is focused on:
“consumer total needs satisfaction”
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The convenience store operator is focused on:
“distressed needs that are time or distance constrained”
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The discounter is focused on:
“low prices via low costs”
Consumer
needs based
organisations
Functional
based
organisations
All three understand popular products and popular quality levels!
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What a retailer needs from a supplier,
(especially a discounter)?
• Key is to understand or create a customer need:
– Time/cost/health/feel good/reward/event/stress relief/entertain
• Be an expert in your category
– Your retail partner should not know more than you!
• Research constantly and find the gap
– This is what keeps you ahead of the competition
• Never rest, always upgrade the product
– Constantly test the next generation of NPD
You have to sell your story to the consumer and the retailer simultaneously!
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Weetabix cereals - a case study
• Product was at first unique – but then reasonably well copied by private label
(PL) manufactures. Future was examined!
• Foreseen problems of all their New Product Development (NPD) being copied
and delivered quickly to market
• As a solution Weetabix bought as much PL manufacturing capacity as possible
• Increased the quality of PL product to rival its own brand
• Gained the major supply of PL in British market because of quality and price
• Increased NPD but only switched (NPD) into PL after 18 months
• Relied on constant NPD to drive growth
• Successful business in a sector that has high PL penetration
• Sales up 3.3% in 2014
• Pre-tax profits up 21% (2013/14)
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The key questions????
1. Who depends on whom? Partners or advisories?
– It’s an interdependency! Retailers need products, brands need a route
to market
– Think constantly about your partner’s needs. There are not enough
top management meetings, vital if your going to understand the needs
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The key questions????
4. Do retailers really care about long-term supplier relationships?
– Yes, but they care more when you have something of value! You need to
be hard to replace. Your relationship with the end consumer is critical
here.
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The key questions????
5. How retailers really think about Trade Marks and IP?
– This is not uppermost in a retailer’s mind. If it is important to you,
make the product hard to copy and do as many unique selling points
as possible.
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The key questions????
6. What’s the single most important thing a brand operator can
do that would make their product indispensable?
HAVE PERSONALITY!
(IT’S VERY HARD TO COPY)
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Thanks for your attention!
Kärntner Ring 5-7|1010 Vienna|Austria
Phone: +43 1 205 1160 1253 – Email: office@foleyretailconsulting.com
www.foleyretailconsulting.com
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