Post on 06-Aug-2015
transcript
CONTENTS
1.The rise of Discounters
2.The long-term impact on the industry
3.An effective way to take leadership in price positioning
4.How to find out more
CONTENTS
1.The rise of Discounters
2.The long-term impact on the industry
3.An effective way to take leadership in price positioning
4.How to find out more
As the retail price wars evolve, suppliers will come under continuing pressure to grow value simultaneously across all channels
What are the challenges? Long term price
deflation erodes profit margins
Short term reactionary tactics have a knock on effect in the market, eroding further value
Price match guarantee & promo promiscuity intensifying trade spend pressure
Evolving price war further diluting brand loyalty and reducing ability to charge a brand premium
GROCERY
DISCOUNTERSCONVENIENCE
Profit erosion
- Price deflation as other channels expand their convenience offering
+ Price consortiums benefitting from scale to rebalance supplier negotiations
+ Rapid share gains
+ High shopper value perception
- Mounting profit concerns
- Hypermarkets losing traction in favour of smaller formats
- Shrinking ability to command a premium for branded products
Channel leakage
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CONTENTS
1.The rise of Discounters
2.The long-term impact on the industry
3.An effective way to take leadership in price positioning
4.How to find out more
PRICE DEFLATION IS HERE TO STAY
Consistent competitive pressures, wage deflation and shopper value perception will further erode prices
DISCOUNTERS ARE THE NEW PRICE BAROMETER
Morrisons will be joined by their competitors in price matching against the discounters, as a new price floor is
established
TRADING WILL ONLY GET TOUGHER
Retailers will expect suppliers to fuel the price war through
increasing trade investment
2006Introduction of loyalty schemes and targeted consumer promotions led to rapid value growth in the top 4
2008Recession severely affects average basket spend and promo promiscuity, eroding value in branded products
2009
Creation of revenue growth functions allowed companies to improve net price realisation through quick wins
TODAYBig four invest over £1bn in price warDiscounters gain significant traction across the consumer landscape
Retail sales value
Manufacturer gross margin %
Amid the rise of discounters value growth will remain tied to pricing
CONTENTS
1.The rise of Discounters
2.The long-term impact on the industry
3.An effective way to take leadership in price positioning
4.How to find out more
Leading in pricing & winning in the discounters era: What you can do to retain value?
Achieve a well considered and rational consumer price positioning and corridors; groceries VS discounters first and foremost
Establish the right enablers to implement a
defensible pricing structure
Sales director need to lead the way in changing the mind-set of the business towards channel pricing leadership
1
3
4
Ascertain your future role as a category and as a
business within the discounters’ overall strategy
2
Sales director need to lead the way in changing the mind-set of the business towards channel pricing leadership
1
TODAY TOMORROW
Adaptive approach Less reactive
approach than in the past but pricing and promotion
decisions still heavily adapting to
customer landscape
Pre-emptive approach
New mind-set across the
business in setting price positioning and clear level of accountability in the team as to
who manages it
Cultural Shift to empower NAMs to make effective and considered channel-wide decisions
A
Having the right tracking and measuring mechanism to provide relevant insights
B
Embedding price positioning as a critical step in the sales planning cycle
C
YESTERDAY
Reactive approach
Pricing and promotion
decisions taken in response to
external events
RESPONSIVE TO CUSTOMER CHANGES IN PRICING STRATEGIES
PROACTIVE STRATEGY
MANAGEMENT
Ascertain your future role as a category and as a business within the discounters’ overall strategy
2
Apply analytical rigour to fully understand and monitor the discounter’s point of view of the FMCG world via a mix of primary research and secondary data analysis. Clarity on their priorities will better inform your price positioning decisions.
How do they identify their main competitors?
What are their national plans in terms of geographical expansion?
How do they want to price position themselves in the market and how can we support the execution of their pricing strategy?
What shopper segments are they after? How are they changing their in-store customer experience?
What role does the UK market play in the group global growth strategy?What level of margins are they prepared to operate within?
What’s the role of premium brands VS private labels in their overall brand strategy?
What are their overall assortment priorities for the future (breadth and depth), outside the beverage category?
To what extend are the willing to dilute their model by trading up their merchandise assortment to higher quality products?
What are their shopper engagement programs and how can we support them via pricing and pack decisions?
Achieve a well considered and rational consumer price positioning and corridors; groceries VS discounters first and foremost
3
Ensure consistent Target Price positioning across channels and against competitors in order to achieve financial ambitions
Clear channel and customer roles in the current landscape and within future trends
Determine pricing relationships in the market and identify key product battlefields for customers
Assess the impact of channel leakages and identify the most material products
DICOUNTERS VS GROCERY STORES PRICE POSITIONING
Do Grocery and Discounters need to be in the same corridor?
Do we need to differentiate the packs so that they don’t conflict?
Establish the right enablers to implement a defensible pricing structure
4
Define the right structural pricing to help achieve and manage the consumer price corridors in the market
Structure the pricing to your customer in line with how you want them to behave in the market.
The key is to contrast customers’ strategy :– Whom they are trying to
compete with?– What do they want to price
position themselves in the market?
– What level of margins are they prepared to operate within?
Lidl Asda
List Price
Net Invoice Price
Triple Net Price
On-Invoice
Discount
Promo Investmen
t
Terms
Use Rate Card Pricing, promo and trade investment by customer to support price positioning
CONTENTS
1.The rise of Discounters
2.The long-term impact on the industry
3.An effective way to take leadership in price positioning
4.How to find out more
Interested? How to find out more…
We are Fifth P. Since 2011, we’ve worked with our clients in the FMCG & consumer product industries across Europe to create growth strategies that sustain long-term growth & leave lasting legacies
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info@fifth-p.com