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RISE OF THE DISCOUNTERS
A winning formula to navigating the grocery market
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
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
2006
Introduction of loyalty schemes
and targeted consumer
promotions led to rapid value
growth in the top 4
2008
Recession 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
TODAY
Big four invest over £1bn in price war
Discounters gain significant traction
across the consumer landscape
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
Investment
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
+44 7521 012 923
info@fifth-p.com
STRATEGY CONSULTING
LEGACY • EXPERTISE • AGILITY • PASSION
www.fifth-p.com

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Winning with Discounters

  • 1. RISE OF THE DISCOUNTERS A winning formula to navigating the grocery market
  • 2. 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
  • 3. 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
  • 4. 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
  • 5. 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
  • 6. 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 2006 Introduction of loyalty schemes and targeted consumer promotions led to rapid value growth in the top 4 2008 Recession 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 TODAY Big four invest over £1bn in price war Discounters gain significant traction across the consumer landscape Amid the rise of discounters value growth will remain tied to pricing
  • 7. 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
  • 8. 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
  • 9. 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
  • 10. 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?
  • 11. 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?
  • 12. 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 Investment Terms Use Rate Card Pricing, promo and trade investment by customer to support price positioning
  • 13. 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
  • 14. 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 +44 7521 012 923 info@fifth-p.com
  • 15. STRATEGY CONSULTING LEGACY • EXPERTISE • AGILITY • PASSION www.fifth-p.com

Editor's Notes

  1. Not sure if this slide or slide 10 goes first. Personal opinion is this one, as don’t think you necessarily need to go down into the details on meeting one – these give sufficient detail to talk around, but should have the full case studies of these examples in appendix at least, if not as the next slide… Maybe need 2 X these slides Case study snapshot rules The pithy one-liner (orange text) A la Accenture ads, a pithy one-line summation of the project, ensuring £££ / % is detailed – one line overview of why we did it The Brief One line statement of issue Company logo Our Approach The three key things that we did, succinctly, clearly, using as little technical / etc. jargon as possible – i.e. make it accessible Lasting Impact Three key benefits to the approach – succinct, tangible, believable Will need input from you guys and Sahaj to refine the case studies in this format. Equally, will need to choose the right ones for Suntory