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Food Forum Moscow 2011


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Presentation by Clive Woodger, Chairman of SCG London reviewing international Food Retail Trends for Russian Retail conference.

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Food Forum Moscow 2011

  1. 1. Creating Added ValuePost Crisis TrendsClive Woodger, SCG London
  2. 2. Creating Added Value Post Crisis Trends• Customer Mindsets – staying relevant• Shopping Modes – formats … multi channel• Differentiation – brand development• Social Media Challenge
  3. 3. Strategic Consulting GroupInternational Strategic branding anddesign consultancy.13 years … 60+ Russian managementsWe work in the retail, financial, real estatesectors by creating
  4. 4. Creating Added ValueCustomer MindsetsStaying relevant
  5. 5. Customer MindsetsStaying relevant – Lifestyle changesChanges in Society, needs and aspirations• Marrying later …• Rise of single households• Time poor – cash richer• Value• ‘Values’• Freshness … Health … Choice
  6. 6. Return of Consumer confidence?International • Increase • Decrease • No Change Consumer confidence – Russia = ‘average’
  7. 7. Return of Consumer confidence?International
  8. 8. Return of Consumer confidence?Russia
  9. 9. Universal Values?Shared Norms for the New Reality “we live in a world that is becoming increasingly complex and interconnected but also experiencing an erosion of common values and principles”. DAVOS 2011Opinion poll 2010 … global values for cooperation40% chose honesty … integrity … transparency24% chose others’ rights, dignity and views20% chose the impact of actions on the wellbeing of others17% chose the preservation of the environment
  10. 10. Food Trends – CustomerAttitudes Value Health Connectivity Home Dining Fresh Sustainability Energy vs. Relaxation Internationalism
  11. 11. Food TrendsValue “Constrained consumers”More for Lesspragmatic .. careful… planned shoppingPrice led but value drivenQuality …Choice …Experience … environment / service / process The best quality at the best price A good ‘deal’ … every time you shop
  12. 12. Food TrendsHealth … nutrition food / pharmacy realistic claims – growth of ‘proven’ products
  13. 13. Food TrendsConnectivity … social media marketingcampaigns
  14. 14. Food Trends ‘eating out at home’Home Dining … indulgence at home / new products for creative home cooking Tesco launches City Kitchen rangePremium ranges – gourmet andrestaurant dishesBudget – cooking from scratch‘Ingredient foods’ – less pre-made / packaged
  15. 15. Food TrendsFreshDemand for Freshness Minimal processing, chilled, minimal packaging Food safety Organic products Diet books Increased frequency of shopping trips Highlighting ‘sell by’ datesOrganic and Ethical label range opportunities
  16. 16. Food TrendsFreshBack to basics – Fruit & VegetablesLess packaged / processed foodSmoothies / packaged fruit snacks
  17. 17. Food TrendsSustainability … environmental / ethical /social … People … Planet … Profit • Consumers want to feel ‘good’ about what they buy - how was it procured, grown, reared, caught, manufactured, transported, by who, how? • Emergence of the ‘principled consumer’ • Did it harm the environment, people, communities? • Was it ‘Fair Trade’ • CSR industry - differentiated by values • ‘Look behind the label’ …. M&S
  18. 18. Food TrendsEnergy vs. Relaxation
  19. 19. InternationalisationRegional / Locally sourcedEthnic / Fusion cuisine “Now all fresh meat at Morrisons is 100% British”
  20. 20. Creating Added ValueShopping Modes - FormatsMulti Channel
  21. 21. Shopping Modes - Formats• shopping centres• hypermarket• supermarket• convenience stores• discounters• online“MULTI CHANNEL”
  22. 22. Shopping CentresTrends ….Food Experiences & ServicesCrisis exposed weak developer strategiesIn UK 60% of centres in trouble, only superregional will survive?What lessons for Russia?
  23. 23. Shopping Centres“the city centre at your doorstep” Kaleidoscope Tushino, Moscow
  24. 24. HypermarketsLifestyle pitstops /centres - ‘everything for your life’ More than functional warehouses – providing services and non food as lifestyle pit stops and community destinations big was better? • Choice • Price • Services Retail theatre … events / workshops / parties
  25. 25. Supermarkets“making shopping a pleasure”• Balancing convenience, quality and experience• Range – focused to local catchments … demographic … ethnic• More space for deli and fresh produce• Food to go / Cafes• Services – financial, mobile phones, …Sales densities vs better environments
  26. 26. Supermarkets“making shopping a pleasure”
  27. 27. Convenience Stores“my place”• Near to the customer … work or home• Baskets not trolleys• Coffee cafes - takeaways Open … “Marks & Spencer struggle 7am to 11pm to keep up with demand for wine by the cup concept”
  28. 28. Discounters“quality repositioning”
  29. 29. Online “total convenience … to your door”According to sales datacollected through the UK’sleading,Tesco enjoys the majorityshare of online groceryshoppers, with 41% ofsupermarket sales, compared to27% via
  30. 30. Online“total convenience … to your door …to your store”
  31. 31. Founded, $50m  $40m in annual  of seed capital  sales, average  Bankruptcy raised  order value $81 Deliveries began IPO valued at $600m $800m in  accumulated losses 1997 1999 2000 2001 2010 HIGHLIGHTS  Owned by 2010 HIGHLIGHTS  Owned by Only ships non‐persihable, household goods and office supplies      Sales $10m Only ships non‐persihable, household goods and office supplies      Sales $10mOCADO = New … Amazon … What is the difference? Founded, first  First automated  EBITDA positive  IPO, valued at  £1bn distribution  conveyor  for first time agreement with  warehouse Waitrose Trades above IPO  50’000 orders  100’000 orders  Deliveries began price for first time delivered in a week delivered in a week 2000 2001 2004 2006 2007 2010 20112010 HIGHLIGHTS2010 HIGHLIGHTSGross sales 2010: £551m        Average order value: £112        EBITDA: £16m         Still loss‐making after 10 years       Market cap: £1.13b Gross sales 2010: £551m        Average order value: £112        EBITDA: £16m         Still loss‐making after 10 years       Market cap: £1.13b 
  32. 32. OCADO = New ?  What is the difference?The difference is structural shifts in the society and higher acceptance of online shoppingWeb grocery sales will increase to 9.5 billion pounds ($15 billion) by 2015, from 4.8 billion pounds this year. More 18‐Web grocery sales will increase to 9.5 billion pounds ($15 billion) by 2015, from 4.8 billion pounds this year. More 18‐to‐34 year‐old shoppers are moving online and wider delivery coverage means sales have the potential to grow to‐34 year‐old shoppers are moving online and wider delivery coverage means sales have the potential to grow “significantly.” The Internet will account for 5.2 percent of total grocery spending in five years, up from 3.2 percent “significantly.” The Internet will account for 5.2 percent of total grocery spending in five years, up from 3.2 percent now. (IGD).now. (IGD). In 2010 total retail spending  was up 1%, online retail  spending up 15%. CONVENIENCE + VALUE  will fuel the online food  sales.Customers will shop through various platforms and formats –supermarkets, convenience stores, farmer’s markets or online. Tomorrow’s sector winners can’t ignore ‐ customers will demand the best possible experience.
  33. 33. Multi ChannelCity … Supermarket … Convenience … Hypermarket … Online “How to grow your business in a low / no growth industry” … now towns!
  34. 34. Multi ChannelUK grocer challenge Intense competition … near market saturation Slow growth … rising taxes … higher inflation Grow by stealing market share from rivals … enhancingproposition … adding space (better to cannibalise sales thanlose to rivals!) Race for space – but diminished site availability Need for hypermarkets lessening – growth of conveniencestores and online UK petrol price increase – more local shopping Leverage of multi-channels – click & collect kiosks … directcatalogues Non food needs more space – extensions & mezzanines More services and facilities … health, finance, travel
  35. 35. Brand Experience CUSTOMER EXPERIENCE BRAND REPUTATION Awareness Customer Journey Afterglow Promise Visit Satisfaction word of mouth, sms… customer journey… collateral …advertising, direct marketing anticipation … moments of truth bags, cards, leafletsweb site, social media, twitter, first vistas, approach, process, assurance, memories facebook layout, environment, products, reminders, triggers, promotional publicity staff, facilities, exit experience … after service … posters, street signs … Brand Touchpoints Managing the Process – Physical … Human … Technical coordination … consistency … control …
  36. 36. Touchpoint SynergyFood Retail‘Customer Journey’Identifying opportunities … solutions
  37. 37. Touchpoint SynergyPeople‘Our people make the difference’
  38. 38. Creating Added ValueDifferentiationBrand Development
  39. 39. DifferentiationWhy are you first choice?Brand Development - Image & Reputation• Convenience• Products• Service “Added Value”• Experience• Culture
  40. 40. Marketing and Communicating ‘added value’Using media, activities and events to reinforce tangible andemotional attributes … head and heart triggers.
  41. 41. Differentiation - MarketingMethods & MediaTalking ‘at’ Talking ‘to’ATL BTL ‘relationship ‘ marketing Outdoor advertising Direct mail Press Email Radio Printed media through database … T.v. Personal contact Web banners Events / road shows Web search engines‘Brand Awareness’ Defines / triggers purchaseMass Audience Targeted AudienceDifficult to measure benefit Easier to measure benefit / outcomes
  42. 42. Differentiation - Marketing Social Media Challenge ATL Social media BTL Opinions Shared experiences Price comparison sites ‘Awareness’ ‘Database Knowledge’ CustomerTarget customer groups Individual needsinformation / aspirations ‘triggers’ action
  43. 43. Differentiation - Marketing - ChallengesSavvy Customers - Product Reviews ‘To buy or not to buy?’
  44. 44. Differentiation - Marketing - ChallengesComparison websites
  45. 45. Differentiation - MarketingEmail marketing – customer dialogue‘immediacy – relevance’
  46. 46. Differentiation - MarketingBrand Reputation … Equity- P.R. ChallengeTESCO FISH FIGHT International Benchmark – credibility crisis … Inept corporate governance? ‘Damage limitation’ When ‘sorry’ is not enough …
  47. 47. Differentiation - Marketing - SponsorshipCorporate Imaging’Who gets the benefit?Cynical endorsement marketing or mutualreputation enhancement
  48. 48. Differentiation - MarketingDiscounter repositioningcreating quality credibility
  49. 49. Differentiation - MarketingCustomer loyalty – wishful thinking?There is no such thing as loyalty … you are as good as your lasttransaction / customer experienceChallenge - loyalty programmes not just cardsTransparent mutual deal - we really reward you - we learn about you - wecan serve you better.It has to be relevant, clearly worthwhile, proactive.Role Model - Tesco ... Increased investment ... Key factor in success … Hard to ensure loyalty of a fickle, frugal customer! Retailer or Partner card?
  50. 50. Differentiation - Marketing – StrategyDifferent investmentsTesco Tesco now has 16 million active Clubcard holders in the UK, compared to 11.7 million people who have a Barclaycard. Tesco has earmarked further investment on top of the £150m it pledged when it re-launched the Clubcard. iPhone, BlackBerry, Android, Ovi applications +Asda Invests in new TV marketing campaign Improved likelihood to shop Created better ‘my kind of supermarket’ perception … and launched own T.V. channel on YouTube ‘saving you money TV’
  51. 51. Differentiation - Marketing - Private Label- ‘More for Less’ … Something Different- A key retailer differentiation strategy …Obvious growth potential with Russian mindset changesLess status conscious - more acceptable ... for anyone … democraticLess brand loyalty - consumers more likely to switchDemand for a bargain - need value for money with economy pressuresTrading Up - psychological requirement to treat yourself - premium ownbrands e.g. Tesco FinestVariety and Choice - new products / ingredients / flavours …Organic and Ethical - retailer label ranges & opportunities
  52. 52. Differentiation - Marketing & PRCreating awareness … desire .. reputationTraditional Marketing – promises … promotions ... eventsImage ‘what you say about yourselves and offers’development … billboards, T.V., radio, themed promotions / activities … Public Relations – corporate relationships,Reputation events, messages / crisis management ...development …TodayImage and reputation ‘is what people say about you’Marketing and P.R. activities and audiences are nowsymbiotic – social media merges B2B and B2Ccommunication
  53. 53. Creating Added ValueSocial Media ChallengeStaying relevant
  54. 54. Social Media ChallengeCreating a ‘joined up’ social media strategy
  55. 55. Social Media ChallengeCustomer Connectivity“… there are 59.7m internet users in Russia,42.8% population” (June 2010)61.9m people will use the internet in Russia by2013” eMarketer“Russians are the heaviest social networkersworldwide in terms of time spent per user” eMarketernot what retailers say … customers listen to each other ... iPhones, wifi, … food forums etc
  56. 56. Social Media ChallengeInternet Transparency Software Technology who is targeting who? Software technology can track and interface with customers through loyalty cards, touch screens and phone apps … But, …. consumers can use technology to create instant damage or enhancement to your brand – cut and paste communities – Facebook, fanclubs, Tweeters, YouTube Brand demolition!
  57. 57. Social Media ChallengeCustomer dialogue – ‘the good’ Sainsbury Twitter … ‘almost’ real time response to ideas and complaints. Waitrose Forum 3500 people viewed single chat about a food recipe. 24x7 customer service. Not just advertising!
  58. 58. Social Media ChallengeManaging reputations - ‘the bad’ 556,308 fans … “4000 chavs a year die from tesco cheap booze. Every little helps” Tesco had to pull the plug on an unofficial Facebook group of 2000+ called Tesco employees could rule the world’ where staff abused their customers.
  59. 59. Social Media ChallengeAldi Live Aldi Twitter 1,614 followers in Germany 4,615 Australia USA Aldi “hate” sites …
  60. 60. Social Media ChallengeRussiaFacebook - Russian winter Twitter – 3,514 followerscampaign, 3,295 people like this enjoy the taste of our new cereal Perekrestok now have active Twitter and Facebook pages.
  61. 61. Social Media ChallengeBlack PR – Instant ‘cut and paste’
  62. 62. Creating Added Value … Achieving a first choice Brand Experience CUSTOMER EXPERIENCE BRAND REPUTATION Awareness Customer Journey Afterglow Promise Visit Satisfaction word of mouth, sms… customer journey… collateral …advertising, direct marketing anticipation … moments of truth bags, cards, leafletsweb site, social media, twitter, first vistas, approach, process, assurance, memories facebook layout, environment, products, reminders, triggers, promotional publicity staff, facilities, exit experience … after service … posters, street signs … Brand Touchpoints Managing the Process – Physical … Human … Technical coordination … consistency … control …
  63. 63. Creating Added Value …Achieving an effective management organisationBrand experience – for customers and employees Marketing Store Service Internet WorkplacesDepartmental activities / functions human resources communications marketing finance buyers real estate operations procurementlogistics management IT sales Department collaboration? Teamwork = Synergy
  64. 64. Thank You8 Plato Place72-74 St Dionis RoadLondon SW6