International Retailing

International

Retailing

Fruit and vegetables

-Prof. Göran Roos

Oslo, 26 November 2003

Content

International Grocery Retailing Overview

Today’s Issues in Grocery Retailing

The Changing Consumer

Fruit and Vegetables Retailing Issues

Overview

Food safety

Category Management

Today’s Issues in Grocery Retail

ƒ

Global Marketplace

ƒ

Consolidation

ƒ

Private Label

ƒ

Dynamic Consumers

ƒ

Convenience

ƒ

Food Safety Concerns

Why Consolidation?

ƒ

Take advantage of economies of scale

ƒ

Survive global competition

ƒ

Take advantage of all available food dollars

Retail Industry around the World

Retail store formats

ƒ

Department stores on a downward slope

ƒ

Supermarkets doing well

ƒ

Hypermarkets doing well in immature markets (e.g.

Scandinavia), but struggling in more mature markets (e.g.

France and Spain)

ƒ

Convenience stores on the rise, boosted by consumers’

lack of time.

ƒ

Discount stores doubtful, depending on whether

consumers will go to remote locations for bargain hunting

Distinct positioning of different stores:

ƒ

Up-market (e.g. Kowalski’s, Byerly’s, Waitrose)

ƒ

Mid-market (e.g. Carrefour, Tesco)

International grocery retailing - overview

Opportunities

Threats

Supplier

•

Become an expert

of shopper

behaviour

•

Product

innovation

•

Private label:

develop and

co-brand products to

grow category

•

Technology – cost

savings, e.g. RFID

•

Decreasing

margins

•

Private label

Consumer

•

Increasing

spending power

•

For the

time-poor: more

convenience

•

For non-time

poor: more fun

shopping

•

Food safety

threats

Retailer

•

Innovation:

•

“Retail-tainment”

•

Meal solutions

•

Technology –

cost savings, e.g.

RFID, in-store

interactive media,

internet/digital TV

shopping

•

Globalisation –

emerging markets

•

Exploring private

label more

•

Changing

shopper behaviour

- more critical and

demanding

•

Increasing

concentration and

competition

•

Decreasing

margins

Wholesaler

•

Sell directly to

consumers

•

Internet sales

•

Decreasing

margins

•

Suppliers selling

directly to retailers

and/or consumers

•

Consolidation

re-ducing the number

of prospective

customers

The Changing Consumer

ƒ

Wealthier households

ƒ

Working women

ƒ

Family redefined

ƒ

Growth of ethnic

ƒ

Aging population

The global consumer is cash rich…

Increasing disposable income –

especially among 24-35 year-olds

Luxury consumption boom –

demand for luxury "status symbols"

Higher demand for indulgent

products

Opportunity to charge a premium

for products that cater to the

specific needs of individual

consumers.

Taste, variety and freshness are the

top reasons for specialty food and

drink purchases.

… but time poor

People increasingly work longer

hours and weekends

Time is the scarce resource –

convenience is crucial

Consumers are looking for the

combination of convenience, speed

and choice

Growing demand for food and

drinks that can be consumed on the

move or at the workplace

The global consumer is ageing

But the ageing consumers are

not what they used to be…

‘Modern old’ consumers:

–

are flexible and enjoy change;

–

put personal development high

on the agenda;

–

are responsive to new products

and services;

–

turn to ‘nutraceuticals’ and

functional foods to preserve

their health as long as possible;

–

make up a diverse group which

can no longer be bundled into

“the ageing consumer”

The global consumer is health conscious

Growth of overweight and obesity

problems make more people think

about their diet.

Low-fat and low-calorie lines

continue to be important, but there

is a greater emphasis today on

naturalness, with consumers

showing increasing interest in

organic and other natural products

Nutraceuticals” & dietary/

nutritional supplements are

booming

Consumers are increasingly willing

to adapt their diets and do so

according to a set of beliefs.

Sources: Food and Drinks Beliefs, Market Report, Datamonitor, May 2003; The UK Food and Drinks Report 2003,

The global consumer is single

Single-person-households still

increase in numbers, particularly in

urban areas, raising the demand for

convenience and portion-packed

food and drinks.

Single person households spend

50% more per person on consumer

packaged goods than two adult

households.

The most valuable market segment

is Late Mid-lifers - especially those

who have never married.

The global consumer is multicultural

Particularly true for the U.S.

market, with ethnic minorities

reaching nearly a third of the entire

U.S. population…

But multicultural consumers are

becoming increasingly important in

most industrialised countries.

Ethnic foods and drinks are growing

fast, thanks to consumer

adventurism, tourism, and celebrity

chefs

Content

International Grocery Retailing Overview

Today’s Issues in Grocery Retailing

The Changing Consumer

Fruit and Vegetables Retailing Issues

Overview

Food safety

Category Management

The Global Marketplace for Fruit and Vegetables

Trends affecting the industry

ƒ

New varieties

ƒ

Year-round availability

ƒ

Fewer limitations on shipments

ƒ

NAFTA/WTO/GATT

ƒ

Increased travel

Reasons for Produce Growth

ƒ

Increasing ethnic populations

ƒ

Health conscious consumers

ƒ

Rising interest in ethnic specialties

ƒ

Exposure to new varieties and exotic produce

ƒ

Growing proliferation of fresh cut and convenience

products

ƒ

Use of produce in foodservice

ƒ

Today more consumers pick their supermarket

Top Growth Categories

(Fresh Trends-% growth store sales-99-2000, based on US market)

0

2

4

6

8

10

12

Top Sales Contribution to Chain

(Fresh Trends 99-2000, based on US market)

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

Health Trend Relevance to Fruit and Vegetables Retailing

ƒ

Boosting consumption of fresh produce, fruit drinks

and fruit yogurts (with or without functional benefits)

ƒ

Processed fruit such as jams and canned fruit are

suffering due to high sugar content

ƒ

Emerging fruit and vegetables snacks – replacing

energy bars?

ƒ

Consumers want miracle cures for anti-aging, cancer

prevention, etc.

ƒ

Lycopene: watermelon, tomatoes, grapefruit

ƒ

Anti-Oxidants - blueberries

ƒ

Diets are still popular and 68% of consumers choose

Convenience Trends

ƒ

Aging, dual-income, busy families want and will

pay for convenience

ƒ

Common Convenience Items – Pre-packed

products and exotic produce mean premium

prices

ƒ

Bagged Salads, Peeled Carrots, Cut Melons

ƒ

Growing Convenience Categories

Making it easier for the consumer (1)

Making it easier for the consumer (2)

Making it easier for the consumer (3)

Dynamic Consumer Implications*

ƒ

Population Segmentation

ƒ

Hispanics are the major produce consumer by race

and this population segment is growing nine times

faster than other races.

ƒ

Ethnic Foods – will account for about 15% of

growth in food sales in the next 10 years

ƒ

75% of ethnic food sales are to mainstream

consumers.

ƒ

The largest ethnic categories are Mexican, Chinese

and Italian.

Dynamic Consumer Implications

ƒ

Generation X – wants more specialty produce with

bold and varied flavors in their foodservice meals.

ƒ

Baby Boomers - are ageing and their food choices

will be influenced by health, travel and new

experiences.

Additional Consumer Trends & Comments

ƒ

Apples, bananas, oranges and watermelons account

for over 60% of fresh fruit consumed

ƒ

Consumers buy more fruit than vegetables

ƒ

Average produce purchase is about $3.76

ƒ

Produce snacking is up

ƒ

In 1999, 14% of consumers used produce as a snack

compared to 31% in 2000

ƒ

Vegetables account for over 64% of produce sales

Food Safety Concerns

ƒ

Consumers fear unknowns such as…

ƒ

cross contamination, pesticide residues,

biotechnology and terrorism

ƒ

76% of all consumers believe their produce is safe,

yet 65% still have concerns about harmful chemical

residues

ƒ

Apples, grapes, strawberries, lettuce and tomatoes

rank highest among consumers of at risk produce

Food Safety Trends

ƒ

Move towards increased demand for Organic Foods

ƒ

Produce represents over 50% of organic food sales

ƒ

Organic produce sales account for 3% of total

produce sales

ƒ

Tomatoes and apples are the most often purchased

organic produce

ƒ

Ages 45-54 and 18-34 are the prime consumer

Improving Food Safety – What’s needed

ƒ

Research to improve breeding and reduce

pesticide use

ƒ

Increased tracking of product from field to fork

ƒ

Third party safety and sanitation audits

Fruit and vegetable retailing - Summary

Opportunities

Threats

Supplier

•

Food safety

concerns

Consumer

•

More choice

•

For the

time-poor: more

convenience

•

Food safety

failures

Retailer

•

Convenience

trend: “Meal

solutions”, clever

packaging, fruit

snacks

•

Health and

wellness trend

•

Travel – exotic

fruits

•

Changing

shopper behaviour

- more critical and

demanding

•

Food safety

concerns

Wholesaler

•

Sell directly to

consumers

•

Increased use of

produce in food

services

•

Suppliers selling

directly to

consumers

•

Food safety

concerns

•

Organic produce

increasingly

popular

•

Health and

wellness trend

•

Convenience

trend - packaging

•

“Agri-tourism”

Content

International Grocery Retailing Overview

Today’s Issues in Grocery Retailing

The Changing Consumer

Fruit and Vegetables Retailing Issues

Overview

Food safety

Category Management

About Category Management (CM)

“The process of managing items in a product category as

a strategic unit by determining pricing, merchandising,

promotions and product mix based on category goals,

the competitive environment and consumer behaviour”

How to promote category growth

ƒ

Best done through cooperation

between the manufacturer and

the retailer

ƒ

Need to move away from the

transaction agenda and focus on

mutual benefits

ƒ

Investment in P.O.S – Point of

Satisfaction!

ƒ

Jointly set out to understand the

consumer

5 Ps IN-STORE

PLAN TO FOCUS

ON PREMIUM

PRODUCTS

Shelf space

organization

In-store

communication

Use of

special display

Shopping

environment

Supplier / Retailer Collaboration for CM

Suppliers and retailers form an integral part of CM

implementation

Suppliers and retailers should work together to help them

understand consumers better

However, their category goals may be very different!

Alignment of category management goals between the retailer

and supplier is a necessary requisite for successful CM

implementation

Experience shows suppliers have experienced a lack of

willingness from retailers to share loyalty data etc.

For the CM collaboration to work, each party needs to understand

“what is in it for the other party”.

Uncover Opportunities/Provide Solutions

Assortment/Space

Assessment &

Solutions

Pricing

Assessment &

Recommendations

Category Assessment

•

Industry

•

Consumer/Shopper

•

Market/Retailer

Promotion

Assessment &

Solutions

Objective: deter-mine

the optimal

assortment,

recognising the

competitive

environment (consider

market coverage,

deletions, retains and

additions)

Reduce uncertainty of

making a pricing

decision. By analysing

the pricing environment

and identifying

oppor-tunities increased

margin and sales goals

can be increased and

achieved.

Gather insights in the

areas of base vs.

incremental volume,

% lift by promotional

vehicle, promotion

performance by key

holiday, quality of

merchandising

support, etc.

Category growth cases

Shelf space organisation – clear segments and pricing makes it

easier for the consumer

Shelf lay-out in the Auchan & Colgate-Palmolive collaboration case:

Traffic flow

Kids

tooth-brushes

Premium

tooth-brushes

Basic

tooth-brushes

Battery

brushes

Battery

brushes

New product

New product

HOT SPOT

HOT SPOT

High price

Low price

Pro-

mo-tions

The case of Carrefour and Gillette –

Collaboration for Innovation and Category Growth

Central development of the model:

“Change the rules” as principle

Generic model - Mach 3 Turbo application

Last launches SWOT analysis

Process:

“Ideal” launch brainstorming

Reinforce each Marketing mix element

Think “out of the box”: no “Sacred Cows”

Start from Markets reality

The case of Carrefour and Gillette –

Collaboration for Innovation and Category Growth (cont.)

Central Objective: Get store teams on board!

Joint information to stores

The case of Carrefour and Gillette –

Collaboration for Innovation and Category Growth (cont.)

January

February

March

April

May

June

Gillette Strategy

Gillette Strategic

Media Plan

•

Secure core user base:

-Convert Premium System Users

• Focus on razor penetration

PRINT

Drive Categories cross purchase

TV

TV

TV

Carrefour-Gillette

Joint Innovation Plan:

Distribution

Shelving

Pricing

Promotion

Push Order

Display

In Store visibility: Shelf material,

Check out, in store advertising

Premium price positioning

Display

launch

1st

folder

Beauty

event

Father’s

day

January

February

March

April

May

June

Gillette Strategy

Gillette Strategic

Media Plan

•

Secure core user base:

-Convert Premium System Users

• Focus on razor penetration

PRINT

Drive Categories cross purchase

TV

TV

TV

January

February

March

April

May

June

Gillette Strategy

Gillette Strategic

Media Plan

January

February

March

April

May

June

Gillette Strategy

Gillette Strategic

Media Plan

•

Secure core user base:

-Convert Premium System Users

• Focus on razor penetration

PRINT

Drive Categories cross purchase

TV

TV

TV

•

Secure core user base:

-Convert Premium System Users

• Focus on razor penetration

•

Secure core user base:

-Convert Premium System Users

• Focus on razor penetration

PRINT

PRINT

Drive Categories cross purchase

Drive Categories cross purchase

TV

TV

TV

TV

TV

TV

Carrefour-Gillette

Joint Innovation Plan:

Distribution

Shelving

Pricing

Promotion

Push Order

Display

In Store visibility: Shelf material,

Check out, in store advertising

Premium price positioning

Display

launch

1st

folder

Beauty

event

Father’s

day

Carrefour-Gillette

Joint Innovation Plan:

Distribution

Shelving

Pricing

Promotion

Push Order

Display

Push Order

Display

In Store visibility: Shelf material,

Check out, in store advertising

In Store visibility: Shelf material,

Check out, in store advertising

Premium price positioning

Premium price positioning

Display

launch

1st

folder

Beauty

event

Father’s

day

Display

launch

1st

folder

1st

folder

Beauty

event

Father’s

day

Beauty

event

Father’s

day

Father’s

day

1 year time table: 6 months pre and post launch

Joint and cross-functional taskforces

Fast-growing categories –

example from Australia