Tales of Ales and Tails

Tales of Ale and TailsOn a recent trip Stateside, I got a real flavour of one of the retailer’s major dilemmas. The store was a large Publix on the Gulf Coast of Florida – certainly as big as a large UK supermarket. As always, I was spending more time looking for stimulus for work than actually doing the food shopping … and then I turned down the beer aisle.   Now, my figures will be slightly out but close enough to be both defensible and illustrative. In the US, the market has two major brewing players – Anheuser Busch Inbev and Miller Coors who control about 80 – 85% of the market’s supply. And then there are the craft brewers, alliances of craft brewers and speciality importers.

Yes, craft beer is likely to be more profitable on a unit basis than big beer, but to command well over 50% of the space? Commercial craziness, no?

That’s the dilemma for the retailer, particularly if you are mainstream / mid-market. How do you optimise your range and space and how the hell do you decide which brands to back, to underspace, to overspace?

Going back to craft beer (or increasingly snacks, spirits, bread, cheese…) it would be easy to argue both sides. For the big boys, it would go something like this: ‘Hey, you’re crazy. I know there’s all this craft beer hype, but just look at the rate of sale and the market share… and times that by the price we command… you should be overspacing us not underspacing us!’. If you’re a craft brewer, equally, you could say, ‘Consumers are tired and dissatisfied with the same old beer choice. They’re individuals not ‘consumers’ and a craft beer range caters to them, shows that you are a specialist and ….well, look at the profitability’.

There’s no right or wrong here, but there seem to be some common denominators.

How appealing is the category: craft beer is over faced because consumers care; it is increasing in both household penetration, frequency and basket size. Authentic beers, with interesting stories are cutting through with shoppers when all big beers can offer in return are new can sizes or bottle shapes. Essentially, research is showing that when a category can drag shoppers off their habitual shopping trajectory, then it’s worth backing.

Brands count: craft beer in the US isn’t stocked out with hopeless chancers. There are strong emerging brands. Brands that are working either because they are genuinely different (say, Dogfish Head), local (say Cigar City Brewing from Tampa) or frankly growing in fame and appeal (say Sierra Nevada, Stone Brewing, Sam Adams, The Bruery). Over in the UK, with Tesco for one aiming the gun at these long tails, it’s the categories where no brands exist, where own label can do as good as, if not better job than the branded alternative where attention is needed.

Principles matter: many of the craft brands in the US have managed to grow in value off the back of their founding principles, principles which they have stayed true to. Jim Koch of Boston Beer is a divisive character because he unapologetically popularised craft beer by owning the agenda, by being in the face of big beer owners and drinkers. ‘Here is a better choice’ he would say, when not dunking himself in vats of Boston Beer. But equally, Fritz Maytag saved Anchor; Keith Grossman built up Sierra Nevada on the back of kit he beat into shape with old ball hammers and welding kit. All of them wanted to drink better beer, so they did something about it. Brands of conviction, attract.

The competitive space is changing: in Chris Anderson’s book, ‘The Long Tail’*, he talks about how retailing will change because of the impact of the internet. Look at Amazon: online bookshop becomes frankly, anything they can sell that they can store and transport; no stores, no range reviews, no square footage to overly worry about. Want a rare Dutch flower arranging book (yes, Mum, I’m referring to you), they’ll get it. As consumers we understand that that might not be the case for a Sainsbury’s or an Asda or a Tesco – but for how long. Internet retailing allows us not to worry about big brands, the Number 1s and 2s, but any brand that takes our fancy. Until food retailers abandon their mega sheds, any strategy will be a compromise – we’ve got a big range, but…..

Interestingly it seems to open up opportunities at both ends. At the ‘endless choice’ end of retail will be the likes of Amazon; at the other, quite insightfully, will be the focused retailers who recognise that as shoppers our brains can only handle so much choice. Reduce the range, reduce the choice, watch sales grow: take Lidl or Screwfix.

And so it turns out, that was my dilemma. Standing in front of this amazing beer fixture; looking at all the choices, reading labels, thinking ‘Oooh, I’ve never had that..’ but totally unable to make up my mind.

*Chris Anderson, ‘The Long Tail’, Hyperion, 2006

David Preston is founder of The Crow Flies, a research, strategy and innovation company that discovers the direct route to success for categories, companies and brands.; +44 (0) 1283 295100.

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

A Black Friday indeed

When you start your own business, one of the factors you underestimate is the time and organisation required to do the mundane tasks that the corporate world largely take away for you: for example, servicing the car or getting an MOT (if indeed, your company allows your car to get to three years old). So it was, that on this fine Friday morning, I found myself dropping off my car at a local garage before holing up in Costa Coffee in a Tesco for a good dose of (de)caffeine, free wifi – and the retail madness of “Black Friday”.

What does it say about our society and fundamental human behaviour that an imported, fabricated retail ‘event’ can cause (a) queues outside stores at 7am and (b) two men fighting outside a Tesco, of all places, to get the ‘bargains’ inside – as Mama Goat said, ‘I kid you not’?   This is most definitely ‘a consumer response’ and as such I find myself quite intrigued by events like ‘Black Friday’ and similar ones like Halloween a few weeks earlier. As retailers have given Black Friday more focus in recent years, it has crept furtively, unwillingly, into my consciousness. Yet, whilst I know little of its origins other than the link to the day after Thanksgiving in America, this year, the tipping point was hit: adverts and break bumpers awash with retailer adverts announcing their fabulous offers. Even John Lewis getting in on the act – indeed, like our scrapping shoppers their website was punch-drunk and floored by the amount of traffic it received. Blimey.

But how successful are these fabricated ‘events’?

Let’s consider the shopper angle first. Witness this (slightly paraphrased but genuine) conversation I overheard in the café:

Woman 1, “I hate all this Black Friday nonsense. I mean it’s just an American thing. We’re just copying their culture”.
Woman 2: ‘But there are some real bargains to be had. Are you coming?”
Woman 1. “Oh yes!”

What seems to explain this is, more than anything else, is habit – habitual shopping behaviours and responses that we have learnt since our early years. In fact, despite one of the emergent societal hypotheses being that consumers in the developed markets are moving increasingly away from a consume more model to one of consume more responsibly, Black Friday shows that the ‘old’ paradigm isn’t dead. Far from it in fact: this habit of shopping, for bargains, is powerfully ingrained, visceral. It demands a response, a response which is embedded deep within our autopilot systems. These ladies chose to shop not out of desire so much, but habit – the opportunity, the slim chance of catching a snip of a deal – only with greater odds of winning than the lottery. What’s to lose?

Cute retailers are benefiting from these habits. The disciplined ones are adopting a ‘when it’s gone it’s gone’ approach: “Here’s some stuff. We’ve hacked the price. Get it before it’s gone”. Amazon advertising 80% cuts is a good example. Louis Vuitton, 60%.   But many aren’t adopting this discipline. “Come into store for our Black Friday weekend event” (where you’ll enjoy savings of up to 15%) So that’ll be Black Long Weekend then? Doesn’t have quite the same sizzle to it, does it? And look at the January sales: they’ve moved to December – at first starting on the 27th, but now encroaching on Boxing Day – you know what’s next…

Event based marketing isn’t new but it’s gathering pace. A friend of mine, a Brit currently living in Canada, believes that Halloween could soon be a bigger shopping event than Christmas – a bold claim, but his logic is sound. It’s a unique event, it’s a relatively quiet ‘retail’ time of the year, it’s a real and traditional event that involves the whole family and indeed the community (if you count trick or treating your elderly neighbours and tipping over their plant pots if they don’t comply).  Halloween I get. Easter too. Valentine’s (at a push). But at what point do we have so many events that they become meaningless. At what point do we Brits start celebrating Cinco de Mayo or Labor Day? At what point does the whole retail landscape changes to one of constant discounting, of ‘everyday low prices’ and an erosion of the few special events that make shopping interesting, fun?   The lesson seems to be, if you’re going to benefit from events, ensure they’re real, have a connection with your audience and you have the discipline to know when to stop.

And it raises the question too: do events like Black Friday increase sales, or just alter their shape? Perhaps the food and drink industry needs to get behind these events in a more focused way as they are (more of) an expandable commodity: but TV sets? Tablets? DVDs? My hunch is the sales are pulled forward to move the pain elsewhere.

Anyway, I’d better finish there – the police want to interview me down the station. Apparently I landed a real beauty on his face.

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.

Expectation Gap

Sainsbury’s results last week seem to be more evidence that the food retailing bigwigs are feeling the pressure to change their paradigm. Netto entering into a joint venture with Sainsbury’s themselves; the continued growth of Aldi and Lidl, both through expansion and new sites and organic growth – attracting those ‘middle ground’ shoppers who traditionally would go to solely one of the big 4. The day after their results, Sainsbury’s announce that because it’s getting tough out there, they will invest a further £150m in price discounts: £150m lost in the fight to defend their distinctiveness, their differentiation.

Of course the price we pay for our food is a major concern. But moving retail strategies towards a price orientation demonstrates the lack of confidence leaders have in their brands – and shines a light on the real problem that needs fixing.

The experience a retailer offers is part of their customer’s value equation, even if research reports say otherwise. Take dairy: this is a category full of rich and evocative pastoral images. In a recent project, we built a mental collage with consumers of what dairy meant to them. Here was the picture that was constructed: standing at the top of a verdant green hill, the leaves of an oak tree overhanging, you look down into the gentle ‘V’ of interlocking hills and there, nestled in the distance is a farmhouse, with smoke gently drifting up from its log fire. A farmer slowly chugs across a field into a vintage tractor, and cows, ready for milking, amble through the farmyard. The farmer’s wife calls to her children who are catching butterflies in a nearby field.

Utter fantasy of course, yet…not. Consumers think of dairy as full of goodness, heavenly food in fact, enjoyable eating, reminding them of good times and nutritious. Yes, they are aware of the high fat content and equally aware they shouldn’t over indulge, but these concerns are not sufficient to impact negatively on their positive dairy world-view.

Look at dairy in retail though: it couldn’t be more different. White packs, plastic and shrink wrap packaging everywhere, glaring red POS pronouncing BOGOFs and price slashes, all cheddar beiges, and goats-milk whites. This is a shopping experience that, rather than being full of warmth and happiness, is emotionally and physically cold. This is a shopping experience where the potential of premium pricing through premium experience is lost.

In fact, this is a shopping experience typical of where food retail is heading; it’s happening throughout the major supermarkets as they wrestle with the no frills approach of the discounters. In turn, the retailers pressure their suppliers for a category growth agenda because they don’t know what to do. The truth is, to not understand how the brand or category exists in the consumers minds is a major risk – commoditising the shopping experience puts you at peril. It is no surprise that at the premium end of the market the retailers are more confident in their approach. Waitrose is the oft cited example, but another, smaller retailer embodies this consumer understanding more than most. Up in the north, with stores in places like Milnthorpe and Garstang, you possibly wouldn’t expect a retailer to be thriving with this approach, but Booths is.

Booths storeI recently went to their Windermere store in the old railway station and it was a delight. This isn’t just a retailer who operates the hackneyed old stereotypes like ‘get fresh near the front’ or wafting the smells of fresh bread throughout. It does these things of course, but with thought and panache. Artisan breads were laid out on a table, with short descriptions of what they contained, how they were baked, what they’re good with. The delicatessen didn’t just feature bowls of olives but also great northern standards – a pie range to die for, more sausages you could shake a pig at, it catered for everyone not just middle class Mediterranean-diet wannabes. Beer wasn’t laid out by type, but by region, with a big focus on local. Local suppliers were the hero everywhere in fact – Goosnargh Ducks, Mrs Kirkham’s Lancashire Cheese and inevitably crafty crisps featured with point of sale showing, who made them, where, when and why.   This was a food retail experience much closer to being romanced like in a luxury car showroom, the Apple Store or a great bookstore. This was a retail experience where more clearly than any other there seemed to be a partnership between supplier and store. And oh, look, they’re doing very nicely thank you.

Commoditising price is one thing, but commoditising experience? Well, that’s a trap you’ll never get out of.

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

© The Crow Flies, 2014