Food marketing in 2009


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Today's reality and tomorrow's trends : how to carve a niche in the market ?

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Food marketing in 2009

  1. 1. Food Marketing in 2009 Marie-Claude Michaud Business Strategy Consultant FCC – SIAL Montréal April 1, 2009
  2. 2. Retail food market INDUSTRY EVOLUTION AND TRENDS
  3. 3. Evolution of the food distribution industry In recent decades, the food distribution industry has   undergone a significant wave of consolidation. •  Increase in average sales per company from $4 to $11 billion Ten years ago, there were 45 public companies in the   North American food distribution sector. •  Now – just over 20
  4. 4. Quebec’s retail food sales market is dominated by three distributors Market Share Company Quebec Canada Supermarkets All Food Supermarkets All Food Loblaws (Provigo) 36% 30% 41% 33% 93% 78% 20% 76% 15% 60% Sobeys (IGA) 30% 26% Metro (A&P) 27% 22% 15% 12% Safeway - - 8% 7% Overwaitea - - 6% 5% Wal-Mart - 5% - 6% Costco - 9% - 7% Other 7% 8% 10% 15% Source: CIBC World Markets
  5. 5. But the food supply has become more fragmented… Supermarkets are losing market share   Estimated retail food sales by network Canada – 2007-2008 Market Sales Type of business Growth share ($ million) Supermarkets $61,390 4% 80.4% Pharmacies $1,630 7% 2.1% Warehouse clubs $5,100 5% 6.7% Discount stores $4,115 11% 5.4% Convenience stores $3,680 2% 4.8% Other $415 14% 0.5% TOTAL $76,330 5% Sources: CIBC World Markets, Statistics Canada
  6. 6. Competition is increasing In Ontario, supercentres have transformed the competitive   landscape. Increase – In-store Growth in food sales* food purchases Canada Canada Ontario Quebec 7.7% 3.3% 3.2% 4.2% Per capita food store spending 2007 2008 Canada 8.5% 8.4% Ontario 6.8% 6.7% Quebec 9.9% 10.1% * Supermarkets and convenience stores Source: Canadian Grocer, February 2009
  7. 7. But the current crisis should be good for grocers Net income for the major chains increased significantly in the   last fiscal quarter Consumers are eating out less   However, consumers who didn’t eat out before the crisis will   also try to reduce spending and, more than ever, will be looking for bargains Sales are expected to increase 3.1% in Canada in 2009*   How much will profits increase? •  *Canadian Grocer, February 2009
  8. 8. Explosion of private labels The increase in the number of products carried under private   labels, particularly in the premium segment, has clearly improved the position of the major chains. Trying to compete, Metro and Sobeys have been particularly   aggressive. •  Sobeys launched 4,800 new Compliments-brand products in its 2008 fiscal year.* •  Metro announced that it will launch over 2,000 new products in the next year. Faced with category leaders and private labels, what niche can Quebec SMEs carve? *12 months ending May 3, 2008
  9. 9. Fragmentation of consumption   •  Educated, informed and busy •  Care for their health AND want good food •  Concerned about the environment •  Worried about pesticides, GMOs, food poisoning, heart disease, cancer, etc. •  Desire for organic food products •  Price sensitive   The one-size-fits-all approach to food marketing no longer works for them.
  10. 10. The traditional supermarket is adapting slowly Major chains are not as well positioned to serve this “new   market”: •  They don’t have the flexibility to adapt their product and service line-up quickly “Micro-segments” are generally less attractive to the big   industry players •  Big companies—both retail and manufacturing—are structured to produce and distribute large volumes “The consumer is the boss.”  
  11. 11. The retail food industry is polarizing Specialty stores Big box stores CUSTOMER focus PRICE focus Bikes Bikes $6,000 $150 •  Volume and standardization •  Specialty and exclusive products •  Commodities •  Value-added products and services •  Price wars •  Attentive to the customer •  Standard courtesy •  Customer intimacy
  12. 12. Opportunity for small players Like other retail sectors, the retail food sector is   restructuring: •  Rebirth of specialty shops Market maturity and diversification of consumer tastes mean   that the “categories” of growth products are generally smaller. Small businesses are energized by the “new consumer” and   are trying to be innovative and exclusive.
  13. 13. Small businesses – stores of the future? Neighbourhood grocery stores and specialty food stores are   closer to their customers and better positioned to meet their expectations and create a close relationship with them Two main factors are fostering the growth in the number of   small specialty shops •  Information technology •  Demographic shifts
  15. 15. Develop a unique feature Develop a unique expertise or product that cannot be   reproduced on a large scale •  Complexity of implementation and impossibility of industrial production protect small from big players This strategy has two constraints:   •  Places the company in market segments that value this type of product and involves specific and selective marketing •  Mandates a high price strategy
  16. 16. Increase the barriers to entry This strategy is based on developing a protected brand that   guarantees origin or quality of the product based on rigorous specifications Means of controlling the number of potential entrants   Focus on consumer recognition and value of the label   Examples:   •  Agneau de Charlevoix: protected geographical indication (PGI) approved •  Ice cider: approval pending
  17. 17. Set yourself apart In mature markets or undifferentiated product categories,   focus on innovation •  Trademark –  Bella tomatoes by Demers or Veau de Charlevoix •  Different, attractive and/or practical packaging –  La Tomate’s tubes Inject energy into a product category lacking in innovation   •  E.g.: Europe Best (frozen fruit) a few years ago… Dare to go where the big players never invest…   •  Nutra-Fruits cranberry-based product line
  18. 18. Cultivate a regional identity Avoid spreading resources thin by focusing most   development activities in region of origin Maximize benefits of proximity:   •  Reduce advertising costs through local word of mouth •  Knowledge of customer needs and habits •  Personal business relationships rather than formal or contractual ones •  Ability to respond quickly and adapt to change
  19. 19. Build partnerships With a customer   •  E.g.: La Meunerie Milanaise and Première Moisson With another processor   •  Distribution - manufacturing – sale of complementary products With a distributor or retailer   •  Exclusive or customized products With producers   •  Regional label products With regional businesses or organizations   •  Develop a label, portal-type Web site, shared booths at regional events
  20. 20. Looking ahead… Basic trends favour small producers and food processors   •  Consumers are looking for premium, different, Quebec-origin products… •  Small retailers can set themselves apart by offering unique, innovative, quality products from here… •  Growth in food sales in specialty, gourmet, organic, regional, health niches, etc. is higher than the industry average… •  Specialty neighbourhood shops are booming…
  21. 21. Medium and large businesses WHAT IS THE RIGHT WAY?
  22. 22. Forced to innovate… Between the inevitable rise of private brands…   •  In the U.S., just 9% of consumers believe that national brand products are better than private labels and 60% believe that they are manufactured in the same factories as national brands.* … and the trend pushing consumers towards food products   perceived as better quality,* all brands combined Despite the current economic context that slows but does   not change these basic trends *The Hartman Group, Contemporary Food Trends, 2008
  23. 23. New definition of quality Products with a “history” – origin, producer/manufacturer or   method of production Packaging that signals quality (transparent, matte finish,   etc.) Products manufactured using fewer, better-quality   ingredients Products for the more adventurous palate   Products that seem less industrial, less mass-produced   Source:The Hartman Group, Contemporary Food Trends, 2008
  24. 24. SIAL Paris 2008 TRENDS IN INNOVATION
  25. 25. Trends in food innovation MAJOR CATEGORIES 43% 24% 17% 14% 1% PLEASURE CONVENIENCE HEALTH FITNESS ETHICS Time-saving Natural Slimness Environment Fun Energy / Handling Vegetarian Citizenship Exoticism Well-being Sensory Portability Medical Cosmetic variety Sophistication SIAL Paris – 2008; Identified by XTC
  26. 26. Trends: product handling – time saving – sensory variety SIAL - Paris 2008 Selections Roast veal in juices Individual sauce packets Ready after 10 seconds in the microwave
  27. 27. Other examples of the 350 innovations selected at SIAL Paris 2008 Slimness - Sophistication Product handling – Sensory variety For co-branding and new format Italian french fries with 1% virgin olive oil, bake in the oven. Breaded chicken or ham sticks stuffed with La Vache Qui Rit cheese
  28. 28. Grand Prix 2008 – SIAL Paris 2008 Pastry dough… in sweet or salty flavours! Selected for the flavours that provide a base for new and original pie recipes Innovation Sensory variety – Time saving Taste of Provence – tomato and oregano Chocolate
  30. 30. Don’t minimize the importance of marketing Follow up, be proactive and innovate   •  Identify opportunities and risks •  Reassess your price strategies regularly •  Increase product development initiatives Get to know the consumer better*   •  68% change brands regularly •  5% are loyal to one brand •  73% shop in at least five types of stores •  26% are loyal to one merchant in particular *U.S. data Source: GMA - Deloitte,Shopper Marketing 2007
  31. 31. “Shopper marketing” or the importance of the store… 70% of buying decisions are made in the store.   68% of in-store purchases are unplanned.   The shopper is not necessarily the consumer…   “Shopper marketing” still a vague concept but growing in   importance: •  In recent years, U.S. manufacturers and retailers have increased marketing spending by 2%.* •  Increased spending on “shopper marketing”:  Manufacturers: +21%  Retailers: +26% * Estimated average annual growth rate 2004-2010 Source: GMA - Deloitte,Shopper Marketing 2007
  32. 32. Rethinking your marketing mix? Get started or solidify a base in “shopper marketing”   •  You don’t need to do it all, but do something •  Know your customers and their strategies and become their partner  Retailers are becoming more effective and sophisticated marketers Invest in your consumer and shopper knowledge   Align your initiatives with the retailer’s objectives and marketing   plan Develop innovative marketing plans tailored to every major   customer
  33. 33. Questions? Comments? Marie-Claude Michaud Business Strategy Consultant FCC – SIAL Montréal April 1, 2009