Dubai Open Program - November’11 Dubai Open Program ...storewars.net/wp-content/uploads/After the...
Transcript of Dubai Open Program - November’11 Dubai Open Program ...storewars.net/wp-content/uploads/After the...
17/11/2011
1
Dubai Open Program - November’11
CCHALLENGESHALLENGES FORFOR
MMANUFACTURERSANUFACTURERS
Dubai Open Program - November’11
Brand Performance
Dubai Open Program - November’11
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
Dubai Open Program - November’11
Brand Performance
Price dimension
Awareness & Newness
Distribution & Shelf space
Out of stock
Horizontal dimension more important than
Vertical dimension
17/11/2011
2
Dubai Open Program - November’11
Brand Performance
Awareness
Preference
Availability
Market Share
Dubai Open Program - November’11
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
Dubai Open Program - November’11
Brand Potential
Market ShareMarket Share ____________________________________________________________________________________________
AwarenessAwareness
Dubai Open Program - November’11
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 ?
17/11/2011
3
Dubai Open Program - November’11
Innovation &
new product introduction
Dubai Open Program - November’11
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
Dubai Open Program - November’11
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%
Dubai Open Program - November’11
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%
17/11/2011
4
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
Dubai Open Program - November’11
Starry Projects
True Innovation
Educating Consumer
Increasing Market Value
Nespresso (Nestle - Krupps)
Senseo (SaraLee - Philips)
Tassimo (Kraft - Braun)
Home Café (P&G – Braun)
Dubai Open Program - November’11
Starry Projects
Shell
Substantial margin uplift from their
premium fuel brands
Additional spend on media = 15% of
incremental profit
17/11/2011
5
Dubai Open Program - November’11
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%
Dubai Open Program - November’11
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
Dubai Open Program - November’11
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
17/11/2011
6
Dubai Open Program - November’11
Metro 2011 Storewars
Dubai Open Program - November’11
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
Dubai Open Program - November’11
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
Dubai Open Program - November’11
Research and Development as % of Sales
Food Companies: 1%
Non-Food : 3%
Pharmaceuticals : 15-20%
Biotechnologies : 20%+
17/11/2011
7
Dubai Open Program - November’11
Fundamentals of Sustainable Growth
BrandingBranding
InsightInsight
R&D / R&D /
TechnologyTechnology
Dubai Open Program - November’11
Branding
Target Market
Differential Advantage
From Functional to Emotional to Values
Less price pressure
Dubai Open Program - November’11
Brand Investment
Dubai Open Program - November’11
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
17/11/2011
8
Dubai Open Program - November’11
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
Dubai Open Program - November’11
Covering all price points
Source: www.unilever.com – Investors Conference Paris, June 2010 Dubai Open Program - November’11
Covering all price points
17/11/2011
9
Dubai Open Program - November’11
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"
Dubai Open Program - November’11
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)
Dubai Open Program - November’11
Positioning – customer perspective
Dubai Open Program - November’11
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
17/11/2011
10
Dubai Open Program - November’11
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
Dubai Open Program - November’11
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
Dubai Open Program - November’11
Dubai Open Program - November’11
Where is the green square?Where is the green square?
17/11/2011
11
Dubai Open Program - November’11 Dubai Open Program - November’11
Want to see it again?Want to see it again?
Dubai Open Program - November’11 Dubai Open Program - November’11
But where is the dark blue triangle?But where is the dark blue triangle?
17/11/2011
12
Dubai Open Program - November’11 Dubai Open Program - November’11
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
Dubai Open Program - November’11
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
Dubai Open Program - November’11
Strategic Triangle
IndependenceIndependence
Customer ValueCustomer Value
Customer Customer
ProfitabilityProfitability
17/11/2011
13
Dubai Open Program - November’11
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
Dubai Open Program - November’11
Negotiations ahead
Dubai Open Program - November’11
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
17/11/2011
14
Dubai Open Program - November’11
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 ?
Dubai Open Program - November’11
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
Dubai Open Program - November’11
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
Dubai Open Program - November’11
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
Gross Contribution per unit €19.50
Volume required to generate the same gross profit 354
Change in Discount 50%
Change in Volume 18%
17/11/2011
15
Dubai Open Program - November’11
Shelf space
Unit Production Cost €40.00
Net Price €70.00
Gross Contribution per unit €30.00
Previous shelf space 10%
Previous Sales Volume 150
Additional shelf space requested 5%
Expected additional sales volume 50
Incremental Gross profit €1,500
Dubai Open Program - November’11
Realistic volumes
• How much can you sell?
• How much can market absorb ?
• Inventory levels: efficiencies
- Manufacturer
- Retailer
• Other competitive factors
- Private label
Dubai Open Program - November’11
Market /Segment Volume Potential ?
Attainable initial share of segment
Competitive Market Price ?
Decent retailer margin
Competitive Advantage to get Customer Acceptance
New products
Dubai Open Program - November’11
What is the actual cost?
Cost of capital: 6% for 180 days
30 days = 1%
Terms of Payment
17/11/2011
16
Dubai Open Program - November’11
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.
Dubai Open Program - November’11
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
Dubai Open Program - November’11
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
Dubai Open Program - November’11
Agree on Exact Formula
Project ID
Composition Changes
Maximal Guaranteed Volume
Transfer Price
Subcontracted Private Label