case study – expansion strategy
TRANSCRIPT
Bord Bia Brand Forum
Paul Foley
Dublin, 5. March 2015
About Paul Foley
• 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) • 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 09.03.2015 Bord Bia Brand Forum 2
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: • 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
• 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 (2014)
31.24
22
10.79
10.74
10.2
7.44
0 5 10 15 20 25 30 35
Musgrave
Tesco
Aldi
BWG
Lidl
Dunnes
Market share %
Market share %
76% private label
91% private label
46% private label
36% private label
51% private label
23% private label
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
54
36
32
31
21
18
12
11
7
0 10 20 30 40 50 60
Dry and tinned packaged grocery
Dairy
Paper
Cooked meat
Pet food
Cleaning
Personal care
Beer
Spirits
% PrivateLabelpenetration
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”:
1. Quality unique selling points 2. Provenance and history 3. New product development 4. Marketing – telling the story 5. Join the party and sell to the discounters/bargain stores 6. Sell a bit of Ireland to the world! 7. 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
• 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? • The supermarket/superstore operator is focused on: “consumer total needs satisfaction”
• The convenience store operator is focused on: “distressed needs that are time or distance constrained”
• The discounter is focused on: “low prices via low costs”
Consumer needs based organisations
Functional based
organisations
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All three understand popular products and popular quality levels!
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! 09.03.2015 Bord Bia Brand Forum 13
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: [email protected]
www.foleyretailconsulting.com
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