Dubai Open Program - November’11 Dubai Open Program ...storewars.net/wp-content/uploads/After the Program Documents/Dubai... · Dubai Open Program - November’11 CHALLENGES FOR

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Dubai Open Program - November’11

CCHALLENGESHALLENGES FORFOR

MMANUFACTURERSANUFACTURERS


Brand Performance


Brand Performance

H O R I Z O N T A L

V

E

R

T

I

C

A

L

Is that Is that

possible ?possible ?

ConsumersConsumers

ExpectationsExpectations

BB

90% market share

10% market share

A A


Brand Performance

Price dimension

Awareness & Newness

Distribution & Shelf space

Out of stock

Horizontal dimension more important than

Vertical dimension

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Brand Performance

Awareness

Preference

Availability

Market Share


Strategy implementation

AvailabilityAvailability

Shelf spaceShelf space

Trade marketingTrade marketing

Brand strengthBrand strength

Out of stockOut of stock

PreferencePreference

AdvertisingAdvertising

Product modificationsProduct modifications

PricePrice

Market Share

AwarenessAwareness

AdvertisingAdvertising

Shelf Shelf spacespace

PromotionsPromotions


Brand Potential

Market ShareMarket Share ____________________________________________________________________________________________

AwarenessAwareness


Brand Potential & Resources Allocation

BrandBrand AA BB

AwarenessAwareness 90%90% 18%18%

Share of MarketShare of Market 30%30% 6%6%

Share of Market / AwarenessShare of Market / Awareness 1/31/3 1/31/3

Where investment in advertising will be more productive ?Where investment in advertising will be more productive ?

What kind of investment can improve market share of brand A ?What kind of investment can improve market share of brand A ?

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Innovation &

new product introduction


Truly New Products ...

Very Scarce ResourceVery Scarce Resource

25,000 new products25,000 new products

Real Innovation (1.4 %)Real Innovation (1.4 %)

Equity Transfer (0.8 %)Equity Transfer (0.8 %)

Line Extension (6.0 %)Line Extension (6.0 %)

MeMe--toostoos (76.9 %)(76.9 %)

Seasonal (13.0%)Seasonal (13.0%)

30 product categories30 product categories

6 countries6 countries

… what happened after 2 years… what happened after 2 years


How successful after 2 years?

Status Distribution

Truly New

Products Me-Too’s

350 SKU’s 19,225 SKU’s

Dead 0% 25% 50%

Almost Dead < 5% 17% 28%

Hanging-In 5+% - 50% 38% 18%

Successful 50+% -

90%

14% 4%

Very

Successful

> 90% 6% < 1%


New products steal the vast majority of their volume from other brands in the category

* Average Calculated From In-Market Data Using BASES’ SOURCERER Algorithm

Brand Switching

New Buyers to Category

Increased Consumption

95%

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Dubai Open Program - November’11 Source: www.unilever.com – Deutsche Bank Conference June 2010 Dubai Open Program - November’11 Source: www.unilever.com – Deutsche Bank Conference June 2010


Starry Projects

True Innovation

Educating Consumer

Increasing Market Value

Nespresso (Nestle - Krupps)

Senseo (SaraLee - Philips)

Tassimo (Kraft - Braun)

Home Café (P&G – Braun)


Starry Projects

Shell

Substantial margin uplift from their

premium fuel brands

Additional spend on media = 15% of

incremental profit

http://www.unilever.com/


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Starry Projects

Geox

Breathable soles

Membrane to keep water and dust out, while allowing sweat to exit

Sales (EUR mln) 2010 2009 2008 2007 2006 2005 2004 2003

Sales by product

Footwear 766.2 808.4 715.8 574.0 428.8 324.9 244.9

Apparel 98.8 84.1 51.8 33.9 21.7 12.2 6.6

Other 2.6 4.4 4.4 3.0 2.5

Total Net Sales 850.1 865.0 892.5 770.2 612.3 455.0 340.1 254.1

Y-o-Y growth -2% -3% 16% 26% 35% 34% 34% 41%


New ways of serving consumers

Coke’ s Freestyle fountain

Mixes up 125 different drinks, creating inventions such as Caffeine-Free

Diet Raspberry Coke.

Not only innovative products

Source: Wall Street Journal, May 2010


Helping consumers to be more

responsible

Recycling rate for non-alcoholic U.S.

beverage packaging: 34%,

25% for plastic bottles

PepsiCo's "Dream Machine“

3000 installed in 2010

Not only innovative products

Source: Wall Street Journal, April 2010, www.pepsico.com, June 2011 Dubai Open Program - November’11

… as a part of quest for ATC

The launch of P&G’s “eStore” site is part of the company’s drive to

increase its total online sales. Such sales through retailers accounted last

year for less than 1 per cent of its revenues of $79bn. The site will sell

Pantene shampoo, Pampers baby products, Gillette razors and other

brands.

Bob McDonald, P&G’s chief executive:

“I don’t feel the need to have every sale go through a retailer.”

“We want to maximise our sales through retailers but we also want to be where

the consumer wants to shop,” .

Good old internet …

Source: Financial Times, May 2010

http://www.pepsico.com/

http://www.pgestore.com/



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Metro 2011 Storewars


Brewer Heineken NV confirmed it had signed a multimillion euro advertising contract

with Google Inc, becoming the first major brand to strike a global deal with the search

engine.

"The deal with Google will mainly focus on distributing our commercials on YouTube,

in order to reach our target groups of 20-somethings, but will also include promotions

such as banners on Google,”

The agreement with Google, will span 20 countries, ranging from Western Europe to

the U.S. as well as emerging markets such as Mexico. There is no end-date to the

agreement, and the brewer will distribute both global campaigns and local commercials

via Google's channels.

In return, Heineken will get access to all-important customer data from the search

company.

Good old internet …

Source: WSJ, 30 June 2011


Innovative Companies

1. APPLE

2. GOOGLE

3. MICROSOFT

4. IBM

5. TOYOTA

6. AMAZON

7. LG ELECTRONICS

8. BYD COMPANY

9. GE

10. SONY

Source :BCG 2010 innovative companies rank order


Research and Development as % of Sales

Food Companies: 1%

Non-Food : 3%

Pharmaceuticals : 15-20%

Biotechnologies : 20%+

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Fundamentals of Sustainable Growth

BrandingBranding

InsightInsight

R&D / R&D /

TechnologyTechnology


Branding

Target Market

Differential Advantage

From Functional to Emotional to Values

Less price pressure


Brand Investment


Brand Investment

Resources allocation

Total budget versus sales

Mature brands (big and small ones)

New launches

Trade versus Consumer spending

Does exclusivity make any sense ?

Portfolio management

Master branding

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Master Branding

Umbrella Umbrella

BrandBrand

Role of endorsement of several

brands in the same family that share

the same heritage

IndependentIndependent

BrandsBrands

Brands have very distinct propositions

and are not related in the mind of

consumers

Dubai Open Program - November’11 Source: www.nestle.com – 2008 Full Year Results Roadshow

Covering all price points



Source: www.unilever.com – Investors Conference Paris, June 2010 Dubai Open Program - November’11


http://www.kelloggs.com/index.html

http://www.pg.com/main.jhtml;jsessionid=J0PS2VFKR0IHXQFIAJ1SZOWAVABHMLHC

http://www.nestle.com/






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Portfolio Architecture Hair colouring (Excellence, Récital)

L’OREAL OF PARIS Skincare (Plénitude)

Mass (Technology, top of mass, Hair care (Elsève)

Consumer “L’Oréal because I am worth it”) Make-up (Perfection)

Products GARNIER (Synergie & Neutralia)

(more popular)

GEMEY, MAYBELINE NY, JADE

(entry level: “girl next door”)

LANCOME (skincare, Make-up, fragrances)

Prestige BIOTHERME (Skincare, make-up)

Guy Laroche

Ralph Lauren

H. Rubinstein

Hairdressers, Paloma Picassso

L'Oreal L'Oreal

ProfessionalProfessional Kerastase, Redken

Vichy

Pharmacy, Active Cosmetics Sanoflore

La Roche Posay

Natural Products The Body Shop

“provides affordable

luxury for people who

demand excellence”

"all different, each unique"


Insights

Consumption is a function of the

inventory at home (Coke)

Creative Destruction (Dove, iPod)

Penetrating, Perceptive Ideas (denture cleaner)

Customer, i.e. Retailer Perspective (Boots)


Positioning – customer perspective


Brand perception by retailers

Category role in the store

Brand role in the category

Brand profitability for retailer

Plan “B” in case of a creative private label

strategy by retailer

Brand strength: Brand switching cost vs. Store

switching cost

Significant number of brand decisions can be

influenced in the store

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Does the consumer plan the BRAND?

Source: EFMI-shop study, May/June 2010

0% 20% 40% 60% 80% 100%

Eggs

Chips

Detergents

Milk

Beer

Cola

Margarine

Cigarettes

Brand pre-planned


Average searching time per product group

Source: EFMI-studies 1997-2010

0 10 20 30 40 50 60

Milk

Margarine

Beer

Coffee

Fruit juice

Chips

Toiletblock

Airfreshner

Toothpaste

Toothbrush

Non - food

Food

Number of seconds in front of shelf



Where is the green square?Where is the green square?

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Dubai Open Program - November’11 Dubai Open Program - November’11

Want to see it again?Want to see it again?


But where is the dark blue triangle?But where is the dark blue triangle?

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Manufacturers’ reality

Consumer as a shopperConsumer as a shopper

A significant number of brand decisions can A significant number of brand decisions can

be influenced in the storebe influenced in the store

stores as a media channelstores as a media channel

In In –– store activitiesstore activities

Brand health checkBrand health check

shelf space = market share ?!?shelf space = market share ?!?

Customer profitabilityCustomer profitability


Retailers influence on consumersRetailers influence on consumers

• Retailers in control of:

– Communication with a customer in shop

– Promotion, price, merchandising, sampling etc.

• What do manufacturers do about it?

– Customer not consumer

– Shop / point of purchase not home

– Purchase behaviors research – looking for insights

– Market research


Strategic Triangle

IndependenceIndependence

Customer ValueCustomer Value

Customer Customer

ProfitabilityProfitability

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Customer Segmentation

DEVELOPING LONGER TERM

PROFITABILITY - movable to star? - understand cost drivers - pay for performance - strict guidelines - small team

LEADING LONGER TERM GROWTH

AND PROFITABILITY - dedicated team - tailor made services - proactive behaviour - most advanced tools

UNDER PERFORMERS HARVEST - minimal standardized

effort - reduce service

investments

MATURE SHORT TERM

PROFITABILITY - standardize the effort - be prepared to scale

down services

Retailer attractiveness

Reta

iler

import

ance i

n r

eta

il m

ark

et


Negotiations ahead


Company Management

Foodles = 2 Woodles

Woodles need more investment early on

R & D

building of new brands

It is always cheaper to build early on

Synergies

Profits

Negotiations

Private Label approach

Competitive analysis Dubai Open Program - November’11

Negotiations: Preparations & Agenda

Structure:

our objectives

their objectives

Best Alternative To Negotiated Agreement

(BATNA)

reservation price

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Understanding the Retailer

Typically, Manufacturer’s (especially the Typically, Manufacturer’s (especially the

leaders) are not very good at this. Getting leaders) are not very good at this. Getting

better requires humbleness as the starting better requires humbleness as the starting

point ! In other words, point ! In other words,

Moving From,

What role they play in my strategy ?

Moving To,

What role do I play in their strategy ?


Negotiations: Preparations & Agenda

Be creative – sky is the limit

Relational, not transactional

Conditional Money ≠ Free Money

it is easier to build trust when implementation can be

checked

Perceived risk

transfer & sharing

Things that are measured tend to improve


Technical hints

Reasonable discounts ?

from market price back to production cost

How much for listing fee, how much for shelf

space ?

retailer view

manufacturer view

Retailers’ sales forecasts realistic

volumes


Quantity Discount

Gross Profit = (Price - Cost) Volume

Volume = ...

Volume Required … 300

… for proposed discount of 10%

Unit Production Cost €40.00

List Price €70.00

Net price after discount €63.00

Gross Contribution per unit €23.00

Gross Profit €6,900.00

Retailer asks for discount of 15%

New net price €59.50


Volume required to generate the same gross profit 354

Change in Discount 50%

Change in Volume 18%

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Shelf space

Unit Production Cost €40.00

Net Price €70.00


Previous shelf space 10%

Previous Sales Volume 150

Additional shelf space requested 5%

Expected additional sales volume 50

Incremental Gross profit €1,500


Realistic volumes

• How much can you sell?

• How much can market absorb ?

• Inventory levels: efficiencies

- Manufacturer

- Retailer

• Other competitive factors

- Private label


Market /Segment Volume Potential ?

Attainable initial share of segment

Competitive Market Price ?

Decent retailer margin

Competitive Advantage to get Customer Acceptance

New products


What is the actual cost?

Cost of capital: 6% for 180 days

30 days = 1%

Terms of Payment

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Vendor Managed Inventories (VMI)

Manufacturer carries Inventory Holding Costs (IHC) and can

therefore sell a higher quantity to the retailer, both avoid out-of-

stock (OOS).

Retailer minimises OOS and IHC by transferring costs to

manufacturer which perceives less risk and higher benefits.

Especially important in Foodles due to the obsolescence

problem.

Manufacturer takes back the unsold goods at full cost.


Slotting Fees

Manufacturers & retailers perceive different risk when

introducing new products and giving them shelf space.

Slotting Fees (SF) capitalises on this asymmetric risk

evaluation.

SF should be significantly higher for Foodles than

Woodles due to:

prices differential: Foodles >> Woodles

obsolescence

profit generator category role


Exclusive, Selective and Differential Products

Retailer likes it (differentiation)

Very expensive for manufacturer (advertising for

entire market and only part of distribution)

Small brands made exclusive for one country or one

segment

New Brands: One period exclusivity as a test market.

Not very interesting in the context of only four periods


Agree on Exact Formula

Project ID

Composition Changes

Maximal Guaranteed Volume

Transfer Price

Subcontracted Private Label