Food Retail

Time for a new brand:retailer dialogue

Pow wowOver a coffee today, I was chatting to a friend about the scale of Tesco’s recent loss. £6.3bn in an enormously cash-generative business is some feat. Sometimes though, it’s best to take the pain with big cuts rather than little slithers, and this feels like a case in point. While it seems few and empathising with Tesco that much, for many suppliers it will create shudders of commercial fear.   A reduction of 20,000 stock keeping units has been promised: you can bet that these results, store closures and closure of new store opening programmes are hardening that resolve at Tesco HQ.

And of course, it’s not just Tesco: all ‘middle ground’ retailers are struggling, their ills manifesting themselves in different ways. The concern is that the emerging reaction is underpinned by fear. Fear for the retailers that their like-for-likes will relentlessly fall and with it the share price (and with that the value of executive long-term incentive plans). Fear for suppliers, that their brands just need to slash to survive; slash their range; slash their prices; slash their profits; slash their staff numbers.

If ever there was a time for brands to step forward and own – or create, if necessary – their category agenda, it is now. This is an easy thing to write, I know. And perhaps it is not a ‘rocket science’ statement, I admit: but it needs to be said nonetheless. My fear is that the reaction within buying teams, within marketing teams, within sales teams is for category management. To understand the dynamics in the nth degree of detail; to range accordingly; to push into the ‘big data’ under the guide of ‘insight’ and negotiate new terms, or defend accordingly. Probably, big suppliers with a strong portfolio want this – it’s an opportunity to claim their fair share of space when for years they have been under-spaced. But most, the majority, will hunker down and prepare for trench warfare.

The current crisis in UK food retail though, is not really a crisis in organisation or supply. Tesco won’t see it that way I’m sure, and I support their open heart surgery. But underneath it all, this is a crisis of identity and of market position. Of who plays around the edges with unique, but more narrow positionings, and who will stand up for the middle ground proudly, distinctively and prepare to inspire.

There’s always been an opportunity for the likes of Tesco, Sainsbury, Asda or Morrisons – and the brands who sell through them – to do this – but none has taken it. And they haven’t because everyone has been distracted by the minefield of eggshells they have been mutually created. Can the brand trust the retailer to deliver on their distribution promises and activation? Can the retailer trust the brand to deliver the progressive innovation agenda and improvement in terms? The dialogue becomes tentative, untrusting.   And then, in walks an Aldi and boom! The agenda has changed and you’re on the back foot.

This is the time for a new dialogue between brands and retailers that must be built on trust. Now is not the time for category management, now is the time for category leadership. For brands to step forward and be bold with their vision, their agenda, their picture of the future. To partner with retailers to create a shopping experience that helps the consumer; that solves those small but important problems in their life; that delivers value certainly, but not just low price. And it’s time for retailers to step forward and be bold too: to be clear what they are offering and work with brands to create this mutual vision. An agenda that builds the brand not just the retailers’ sales. It is time, in short, for all the words around ‘win:win’ to be put to one side and for the actions to follow suit.

David Preston is founder of The Crow Flies, a research, strategy and innovation company that helps brands find a direct route to long lasting success.; +44 (0) 7885 408367;; @crowflieshigh.

© The Crow Flies, 2015

Points of Difference, Points of Parity

Maybe the Tesco strategic review will spark a little sanity back into food and drink retail in general. The implications are already filtering through with many suppliers, selling products and brands close to the retailers’ specified ‘hurdle rate’, renegotiating furiously. Truth is, it feels like a cycle of normalisation and making things simpler for shopper and retailer alike will most likely turn out to be a good thing.

But brands have got to survive in the short term, and it feels like a good time to be really looking hard at how your brand is positioned. True, it may feel like a ‘Unique Selling Proposition 101’ but the reality of shopping the supermarkets is that most (shall we settle on 90%? 95%?) products sold are ‘me-toos’, forced to differentiate on price alone, copying the livery of the leader and hoping that shoppers make rational, price based decisions alone.  For those retailers where price is their positioning, that’s fine: Asda, Aldi, Lidl – let them fight it out and may the best retailer win. But for the others, price is a reassurance, an important part of the mix but not the most important. It is a point of parity not difference.

And this seems to be where the confusion lies, particularly in food retail. Morrisons, in what has been deemed to be a disastrous Christmas trading period, bin their CEO and, in the short term at least, resort to price cuts. Sainsbury’s after a better, but still soft, Christmas trading period do the same*. Tesco hit the nuclear button and do the same**, and in the parlance of an American friend of mine, ‘execute the hell out of it’, with national TV and in-your-face point of sale in store. Even Asda, who had a better time over Christmas, have decided that it will only get worse, and bin*** the senior bods in their marketing team.

But, for all but Asda, this isn’t the winning strategy. At least, not without a fundamental restructuring of what they do, how they do it and who they are – and then, what’s the end result? You become Aldi.

Asda Price GuaranteePoints of parity can be winning strategies but they require unwavering focus and unrelenting discipline to stay on track. Asda have this. They understand that price is a point of parity and they own it with every ounce of their being. All their activity underlines the point that they are cheaper, even if this is just pricing their diesel at £106.7 vs £106.9 elsewhere. (One day I shall buy one litre and see if they force me to round up or down).   They lead on price too – being the first retailer to make a Price Promise, to roll back, to launch a price guarantee (in recent times at least). They’ll be ‘Doubling Down’ on price too – you just watch this space.

Currently, it seems that price is the only promise that matters. But other points of parity can be owned and can be used to win. Take service: Tesco proved that you can win with it, to wit, Every Little Helps. The trouble was, they confused it over time with choice and suddenly their business became riddled with ferocious complexity. Sainsbury’s for many years owned quality, another point of parity, but slowly it has been denuded by time, confused focus and competition.

Now is the time to hunt for genuine, ownable points of difference in retail: ownable by the brand, not just the category. John Lewis is a case in point. If you took their signoff line, the beautiful ‘Never knowingly undersold’ you could conclude that their positioning is price: they offer a guarantee after all. But of course, John Lewis is so much more than this as the line subtly implies. Ultimately, they offer reassurance – of quality, value, service and taste. B&Q is fascinating too: their website was clever domain buying and clever attitudinally too: / do it yourself. So whilst Wickes own a grittier, trade feel, B&Q own both the point of parity and the liberating attitude of DIY.

Perhaps food and drink retailing is tougher. But Waitrose seem to do it. In the parlance of the common man, they own posh nosh. And then they reassure that you won’t get stitched up through initiatives like their Essentials range, just in case you were wavering. And northern retailer Booths, which many refer to as ‘the northern Waitrose’ are developing a much more specific positioning around regional quality. Defensible? Well they can both be copied, but they can be owned too, and that is where the effort is focused.

Ironically, Tesco, Sainsbury’s and Morrisons have an enormous opportunity. They are in the middle of the market, and whilst that is giving them some short term pain, it also offers them the opportunity to build a differentiating position for most people most of the time. Time will tell if they have the foresight to find it and the bravery to grasp it.

* Without binning their CEO
**Nor them
**Technical term: keep up 

Slide1David Preston is founder of The Crow Flies, a research, strategy and innovation company that helps brands find a direct route to long lasting success.; +44 (0) 7885 408367;; @crowflieshigh.


© The Crow Flies, 2015