www.simon-kucher.com
Pricing in Consumer Goods: Developments, challenges & the outlook for 2019
London, 20th March 2019
James Brown
London office1 Plough PlaceLondon EC4A 1DE, UKTel. +44 20 7832 6700 [email protected]
Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020
Today’s session
Pricing in 2014 – 2018: Context & experience
COLOURBOX/-
Outlook for 2019/20: What changes, what stays the same
Implications for Revenue Management in Consumer Goods
2
Before we begin, three questions
Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020
Who has found the last year tougher than previous years?Q1
How many of you managed to get through price increases to fully offset Brexit driven ForEx cost movements?
Q2
On a scale of 1 to 10… where do you rank your organization’s Revenue Management capabilities?Q3
3
Source: ONS CPI dataset, Simon-Kucher Analysis
Back to price growth?
85
90
95
100
105
110
115
2012JAN
2012JUL
2013JAN
2013JUL
2014JAN
2014JUL
2015JAN
2015JUL
2016JAN
2016JUL
2017JAN
2017JUL
2018JAN
2018JUL
2019JAN
CPI All items CPI Food
Cost of basket of goods indexed to Jan 2013
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PRICE WAR!
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Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020
BREXIT VOTE
6
GRAPHICS –equivalent slide for
Inflation (like previous slide on price war) –
ivan is providing some snapshotsINFLATION
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GRAPHICS –equivalent slide for
Inflation (like previous slide on price war) –
ivan is providing some snapshotsINFLATION
Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020
SHRINKFLATION
Revenue Management 2019 Exceedra_InProgress-V3-BIHO.pptx 8
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Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020
UK consumer goods market in context:Looking back 2014 - 2018
Price war Cost shocks Recovery (?)
Rise of discounters
Shopping channel shifts
Fight for share, fight
for relevanceBrexit vote
Broken pack price architecture
Disjointed customer pricing
Locked in promotional cycle
Fear of addressing trade terms
Revenue Management Function
Retailer power balance
Mega merger quest
Increased regulator intervention
Source: Simon-Kucher experience & analysis
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Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020
Looking forward: 2019-2020
Fundamentals unchanged
More cost shocks likely
More regulation on the cards
More consolidation of buying power
Trade terms & customer relationship back in focus
Need for professional Revenue Management function
stronger than ever
Source: Simon-Kucher experience & analysis
11
Aldi and Lidl’s combined share of UK grocery market
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
~4% in 2010
~12% in 2018
2010 2015 2020
~11% in 2017
~13% in 2019
Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020
Source: Kantar Market Share data; Simon-Kucher analysis
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Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020
“They try and fight us on price but they won’t win, because they define our margin. And we will be 15% cheaper”
Matthew BarnesCEO Aldi UK & Ireland
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2x >50%
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25% cost
shockSimon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020
Items todeclare
18
£9.3bn
Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020 19
87% @ 0%
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+ ++
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Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020
Source: Sainsbury’s statement 19/03/2019
Sainsbury's and Asda have given the detail of their estimated £1.6 billion cost savings to the CMA. This
allows them to fund the £1 billion customer price commitment while also delivering on the commitments
to shareholders of £500m of net synergies, low double digit ROIC (return on invested capital)…..
The two businesses are proposing to merge so that they can lower prices for customers in an increasingly
competitive market, while improving quality and service. They will create cost savings in three ways:
1.By securing lower purchasing prices from suppliers, predominantly by paying the lower of the two
prices that Sainsbury's and Asda currently pay large suppliers for identical products
2.By putting Argos stores into Asda
3.By jointly buying shared goods and services and reducing central costs
By securing lower purchasing prices from suppliers, predominantly by paying the
lower of the two prices that Sainsbury's and Asda currently pay large suppliers for
identical products
22
Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020
To our mutual benefit, we need to improve efficiencies, drive volume and deliver growth. We cannot do this without the full support and backing of our Supplier Partners.
We must continue to lower prices and drive volume and most importantly, we must maintain our heritage of delivering amazing, high quality food.
Stuart Manchin’s letter to suppliers, March 2019
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Conditionality
Fold into price
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Source: Simon-Kucher project examples illustrative
... betweencountries
Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020
Lack of price coherency leads us into difficulties…
... within akey account
... within acountry Biedronka
Lidl
Intermarche
Tesco
Kaufland
Carrefour
Lewiatan
Auchan
... betweenchannels
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Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020
Source: Simon-Kucher experience and analysis
Looking forward: 2019-2020
More cost shocks / unpredictability
Continued channel shifts & trajectory in shopper buying behaviour
Continued channel shifts & trajectory in shopper buying behaviour
29
PRESSURE
Shoppers Retailers Suppliers
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Putting a Revenue Management function at the heart of your business
Manufacturer Distributor Retailer Shopper Consumer
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Revenue Pools
Source: Simon-Kucher experience and anlysis
Identifying, defining and supporting action to target revenue pools
Manufacturer Shopper Consumer
Identification and support in creation of consumption moments and shopping missions
With right product
In right format
In right pack size
At right price point
With right promotions
Through right channel
At right time
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Our advice to consumer goods suppliers:3 focus areas for 2019
Develop strategy for ongoing price development in a fast changing environment: Revisit price, pack and promo architecture across your portfolio and develop a long term plan for value increase
1
Risk assess and revisit customer pricing structures: Prepare for continued demands as the sector gets even more consolidated; ensure TTs are justifiable and defendable2
Bolster revenue management capabilities: Enhance your Revenue Management teams and ensure they are a fully integrated function across the business3
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www.simon-kucher.com
AfricaCairo
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London office1 Plough PlaceLondon EC4A 1DE, UKTel. +44 20 7832 6700
About Simon-Kucher
Simon-Kucher & Partners at a glance
Growth and competitive strategies
Product portfolio (re-)design
Pricing excellence
Sales strategies and sales channel optimization
Customer-centric digital approaches
End-to-end transformation towards commercial excellence
…
Global presence > 3,000 projects in the last 3 years
World leader in giving advice to companies on howto price their products
Pricing strategy specialists
The world’s leading pricing consultancy
In pricing you offer something nobody else does
BusinessWeek The Economist
Professor Peter DruckerThe Wall Street Journal
World leader in pricing
38 offices worldwide, > 1,300 employees, $360m revenue in 2018Madrid Mexico CityMilanMountain View Munich New York Paris San Francisco Santiago de Chile São PauloShanghaiSingapore StockholmSydney TokyoTorontoViennaWarsawZurich
Amsterdam Atlanta Barcelona BeijingBonn BostonBrusselsCairoChicagoCologneCopenhagen Dubai FrankfurtGeneva Hamburg Hong KongIstanbul LondonLuxembourg
Best consultancy at topline improvement
Source: Forbes, survey of the best management consulting firms in the US, October 2016, 2018 (conducted every two years)
Marketing, brand,pricing, sales
Source: Capital, survey of the best consultancies in France, 2016, 2018 (conducted every two years)
Marketing, sales, pricing
Source: brand eins Thema special edition: Consulting - industry report from brand eins Wissen and Statista, online survey, 2014, 2015, 2016, 2017, 2018
Marketing, sales, pricing
Source: Financial Times, list of the UK's Leading Management Consultants, January 2018
Marketing, brand, pricing
Simon-Kucher & Partners
Simon-Kucher & Partners
on par with
Boston Consulting Group
McKinsey & Company
Capital Forbesbrand eins/Statista
Simon-Kucher & Partners
Financial Times
Simon-Kucher & Partners
on par with
McKinsey & Company
Boston Consulting Group
McKinsey & Company
Boston Consulting Group
......
Simon-Kucher & Partners
MT Magazine
Strategyconsulting
111 1
Boston Consulting Group
McKinsey & Company
...
Source: MT Magazine/Erasmus University: MT1000 2018, survey of the best strategy consultancies in the Netherlands, December 2018
Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020 35
Consumer pricing*
Transparency of achieved price
Trade terms assessment and benchmarking
Cross-channel price management
Price-pack architecture
Trade-promo effectiveness
Retailer specific RSPsand Promo calendars
* Retail price setting is at the sole discretion of the retailer
We support our Consumer Goods across all areas of Revenue Management
Brand/Pack level commercial goals
Portfolio pricing strategy
Pricing strategy
Design and management of primary price research
Market research and analytics
Development of performance tracking, data capture and gaps
Data and reporting
Design of RM organisation set-up, governance and processes
RM Org and Process
Customer pricing
Design and implementation of complete customer pricing and trade terms frameworks
Development of price and promo guidelines comprehensive review or tackling specific challenges
Ensuring pricing strategies align with overall corporate goals – at all levels
Transparency of achieved price
Trade terms assessment and benchmarking
Cross-channel price management
Customer pricing
Design and implementation of complete customer pricing and trade terms frameworks
Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020 36
Source: Simon-Kucher & Partners
With a global network of Consumer Goods & Retail experts
Manuel Osorio
Partner, Sao Paulo
LATAM
Ricky Rubi
Partner, New York
Americas
Vincent Duong
Director, New York
Americas
Toni Puigdellivol
Director, Boston
Americas
Shikha Jain
Senior Director, Boston
Americas
Guillermo Sagnier
Partner, Barcelona
Spain
Fan Chen
Managing director, Beijing
China
Kazuto Yamashiro
Senior Director,
Japan
Jason Carley
Senior Director, Sydney
AUS
Jochen Krauss
Partner, Singapore
SE Asia
Tim Brzoska
Partner, Cologne
Europe
Lauren Carter
Director, London
UK
Eduard Bonet
Managing Partner, Barcelona
Spain
Mert Terzioglu
Managing Partner, Istanbul
Europe
Onno Oldeman
Managing Partner, Amsterdam
Netherlands
James Brown
Partner, London
UK
Andreas von der Gathen
Executive VP, Bonn
Global
Florent Jacquet
Partner, Paris
France
Martin Crepy
Partner, Paris
France
Bjoern Dahmen
Partner, Bonn
Europe
Nina Scharwenka
Partner, Munich
Europe
Greg Harwood
Director, London
UK
Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020 37
Source: Simon-Kucher
Your UK contacts at Simon-Kucher & Partners for Revenue Management in Consumer Goods
1 Plough Place
EC4A 1DE London
United Kingdom
Bockenheimer
Landstrasse
33 60325 Frankfurt
Germany
Lauren Carter
Director
Tel. +44 20 7832 67 00
Fax +44 20 7832 68 00
www.simon-kucher.com
Director
Member of Global Consumer & Retail practice
Expertise in trade term strategy, value pricing and portfolio architecture
Greg Harwood
Director
Tel. +44 20 7832 67 00
Fax +44 20 7832 68 00
www.simon-kucher.com
Director
Member of Global Consumer & Retail practice
Expertise in pricing and brand research for FMCG, with relevant UK and US experience
James Brown
Partner
Tel. +44 20 7832 67 00
Fax +44 20 7832 68 00
www.simon-kucher.com
Partner
Head of Consumer & Retail practice in the UK
Leads UK engagements across all Consumer Goods sectors
Commercial strategy & organisational design
Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020 38