Trade relationships:
it all starts with the shopper
Prof. Gino Van Ossel
24th November 2010
Gino.VanOssel@Vlerick.com
introduction
Retailer/supplier relations
Product/brand offer
Consumer marketing
Consumer health & nutrition
Competitive field
Economy & consumer demand
Corporate responsibility
Food & product safety
Technology & supply chain
Internationalisation
Human resources
“% of top managers that mentions…”
Regulations
0
10
20
Source: GfK-FNLI Top Topics 2011 - manufacturer (n=290)
30
40
50
60
agenda
1. shopper trends
2. retail trends
3. trade relationships
4. conclusion
3|
agenda
1. shopper trends
2. retail trends
3. trade relationships
4. conclusion
4|
shopper trends:
decreasing loyalty
shopper trends:
decreasing loyalty
6|
shopper trends:
decreasing loyalty
7|
shopper trends:
decreasing loyalty – 1st level
the Berlusconi syndrom
8|
shopper trends:
decreasing loyalty – 1st level
the Berlusconi syndrom
9|
shopper trends:
decreasing loyalty – 1st level
the Berlusconi syndrom
10 |
shopper trends:
decreasing loyalty – 1st level
the Berlusconi syndrom:
from brand loyalty to brand sensitivity
11 |
shopper trends:
decreasing loyalty – 2nd level
12 |
shopper trends:
decreasing loyalty – 2nd level
13 |
shopper trends:
decreasing loyalty – 2nd level
A brand lovers
A brands represent >70% in purchased units
switchers
A brands represent between 40 and 69% in purchased units
private label lovers
A brands represent <40 % in purchased units
14 |
source: GfK panel services Belgium
shopper trends:
decreasing loyalty – 2nd level
(index 107)
15 |
source: GfK panel services Belgium
(index 111)
(index 81)
shopper trends:
decreasing loyalty – 2nd level
het “neusje dicht”-paradigma
16 |
shopper trends:
decreasing loyalty – 2nd level
het “neusje dicht”-paradigma:
from brand sensitivity to indifference
17 |
shopper trends:
increasing price sensitivity
shopper trends: increasing price sensitivity
growth of discount
20
19.5
15
10.1
10
13.3
5,0
soft
5
(source: Nielsen)
2008
market share discount – Western Europe
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
6.2
1993
1992
5.1
1991
0
hard
total
shopper trends: increasing price sensitivity
growth of private label
market share private label – Western Europe
(source: Nielsen)
20 |
shopper trends: increasing price sensitivity
increasing promotion intensity
22,0
2008
19,9
2009
20,0
2010
17,5
18,0
16,8
16,1
15,8
16,0
16,6
15,7
15,8
15,1
12,8
13,3
13,1
13,5
11,9
15,2
13,1
12,8
12,0
12,0
16,2
15,4
15,4
14,3
13,8
14,0
15,6
11,5
12,7
11,9
11,7
10,0
12,9
10,5
10,4
10,5
P5
P6
P7
11,2
10,1
8,0
6,0
P1
P2
P3
P4
source: GfK panel services Netherlands
P8
P9
P10
P11
P12
P13
shopper trends:
choice stress
shopper trends:
choice stress
how much ketchup does a store need ?
23 |
shopper trends:
choice stress
decreasing
loyalty
increasing
price
sensitivity
choice
stress
agenda
1. shopper trends
2. retail trends
3. trade relationships
4. conclusion
25 |
retail trends:
managing price perception
source: investor relations meeting, Greece, 3rd December 2009
Source: Carrefour half year results, 30th August 2010
retail trends:
cost management
source: investor relations meeting, Greece, 3rd December 2009
Source: Carrefour half year results, 30th August 2010
32 |
source: Tesco Preliminary Results, 24th April 2010
retail trends:
rethinking product ranges
retail trends:
rethinking product ranges
less is more
SKU’s - 7.5%
source: investor relations meeting, Greece, 3rd December 2009
Source: Carrefour half year results, 30th August 2010
retail trends:
rethinking product ranges
less is more
private label proliferation
retail trends:
rethinking product ranges: private label proliferation
correlation between changes in # PL SKU’s and PL market share
sales
value growth
SKU
growth
Nielsen, MAT week 37 change 2009 vs. 2007, Belgium
7300 SKUs
(38% of total)
Source: Carrefour half year results, 30th August 2010
retail trends:
rethinking product ranges
less is more
private label proliferation
more space for non-food & services
42 |
retail trends:
in short…
managing
price
perception
efficiency
rethinking
product ranges
agenda
1. shopper trends
2. retail trends
3. trade relationships
4. conclusion
44 |
© Vlerick Leuven Gent Management School
trade relationships:
price cuts, promotions & delistings
De Standaard
11 Feb 09
trade relationships
Retailer/supplier relations
Product/brand resp. retail/formula offer
Consumer marketing
Consumer health & nutrition
Competitive field
Economy & consumer demand
Corporate responsibility
Food & product safety
Technology & supply chain
Internationalisation
Human resources
“% of top managers that mentions…”
Regulations
0
10
Retailers
20
30
Manufacturers
Source: GfK-FNLI Top Topics 2011 Retail (N=72) vs. manufacturer (n=290)
40
50
60
Source: Unilever Q3 results, 4th November 2010
Source: Unilever half year results, 4th August 2010
Source: Unilever half year results, 4th August 2010
Source: Unilever Q3 results, 4th November 2010
trade relationships:
retailer vs. manufacturer margin
6,8%
5,7%
5,4%
4,8%
4,7%
4,5%
3,9%
Colruyt*
Wal-Mart
Tesco
Delhaize
Group
Ahold
Casino
Carrefour
Operating Margin
2008/2007
52 | * Concerns 2008 fiscal year results (year end March 2009)
3,2%
3,2%
Kroger
Metro
3,0%
Sainsbury
agenda
1. shopper trends
2. retail trends
3. trade relationships
4. conclusion
54 |
conclusion
pressure on trade relationships:
starts with the needs of the shopper (consumer)
makes all retailers respond in similar ways
is accelerated by ‘human nature’: retailers envy margins (vs.
ROCE !!)
makes in turn all manufacturers respond in similar ways
conclusion
56 |
conclusion
if this were a weather forecast…
…rain with major risk of thunderstorms
58 |
conclusion
“The tough market conditions in the mature world are not
expected to become easier in the near future, while for the FMCG
companies the comparison base is becoming tougher. In addition,
commodity costs are rising while consumer sentiment does not
allow for price increases.
source: Petercam: Unilever (EUR 22.12, Reduce): Acquiring Alberto Culver for USD 3.7bn in cash, 27 th Sept 2010
conclusion
“The tough market conditions in the mature world are not
expected to become easier in the near future, while for the FMCG
companies the comparison base is becoming tougher. In addition,
commodity costs are rising while consumer sentiment does not
allow for price increases.
This environment forces the industry to further step up A&P
spending etc. and likely to accept some margin pressure or to
accept lower growth. Hence we expect tough times for the sector,
with Unilever performing in line with the sector. “
source: Petercam: Unilever (EUR 22.12, Reduce): Acquiring Alberto Culver for USD 3.7bn in cash, 27 th Sept 2010
conclusion
“The tough market conditions in the mature world are not
expected to become easier in the near future, while for the FMCG
companies the comparison base is becoming tougher. In addition,
commodity costs are rising while consumer sentiment does not
allow for price increases.
This environment forces the industry to further step up A&P
spending etc. and likely to accept some margin pressure or to
accept lower growth. Hence we expect tough times for the sector,
with Unilever performing in line with the sector. “
source: Petercam: Unilever (EUR 22.12, Reduce): Acquiring Alberto Culver for USD 3.7bn in cash, 27 th Sept 2010
conclusion
don’t let competition outpace you !
Retail & Trade Marketing Research
Centre:
• training
• workshops
• entertrainment
• (contract)research
Gino.VanOssel@Vlerick.be
#ginovanossel