Pricing in Consumer Goods: Developments, …... Pricing in Consumer Goods: Developments, challenges...

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www.simon-kucher.com Pricing in Consumer Goods: Developments, challenges & the outlook for 2019 London, 20 th March 2019 James Brown London office 1 Plough Place London EC4A 1DE, UK Tel. +44 20 7832 6700 [email protected]

Transcript of Pricing in Consumer Goods: Developments, …... Pricing in Consumer Goods: Developments, challenges...

Page 1: Pricing in Consumer Goods: Developments, …... Pricing in Consumer Goods: Developments, challenges & the outlook for 2019 London, 20th March 2019 James Brown London office 1 Plough

www.simon-kucher.com

Pricing in Consumer Goods: Developments, challenges & the outlook for 2019

London, 20th March 2019

James Brown

London office1 Plough PlaceLondon EC4A 1DE, UKTel. +44 20 7832 6700 [email protected]

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Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020

Today’s session

Pricing in 2014 – 2018: Context & experience

COLOURBOX/-

Outlook for 2019/20: What changes, what stays the same

Implications for Revenue Management in Consumer Goods

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Before we begin, three questions

Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020

Who has found the last year tougher than previous years?Q1

How many of you managed to get through price increases to fully offset Brexit driven ForEx cost movements?

Q2

On a scale of 1 to 10… where do you rank your organization’s Revenue Management capabilities?Q3

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Source: ONS CPI dataset, Simon-Kucher Analysis

Back to price growth?

85

90

95

100

105

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115

2012JAN

2012JUL

2013JAN

2013JUL

2014JAN

2014JUL

2015JAN

2015JUL

2016JAN

2016JUL

2017JAN

2017JUL

2018JAN

2018JUL

2019JAN

CPI All items CPI Food

Cost of basket of goods indexed to Jan 2013

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PRICE WAR!

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BREXIT VOTE

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GRAPHICS –equivalent slide for

Inflation (like previous slide on price war) –

ivan is providing some snapshotsINFLATION

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GRAPHICS –equivalent slide for

Inflation (like previous slide on price war) –

ivan is providing some snapshotsINFLATION

Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020

SHRINKFLATION

Revenue Management 2019 Exceedra_InProgress-V3-BIHO.pptx 8

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Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020

UK consumer goods market in context:Looking back 2014 - 2018

Price war Cost shocks Recovery (?)

Rise of discounters

Shopping channel shifts

Fight for share, fight

for relevanceBrexit vote

Broken pack price architecture

Disjointed customer pricing

Locked in promotional cycle

Fear of addressing trade terms

Revenue Management Function

Retailer power balance

Mega merger quest

Increased regulator intervention

Source: Simon-Kucher experience & analysis

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Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020

Looking forward: 2019-2020

Fundamentals unchanged

More cost shocks likely

More regulation on the cards

More consolidation of buying power

Trade terms & customer relationship back in focus

Need for professional Revenue Management function

stronger than ever

Source: Simon-Kucher experience & analysis

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Aldi and Lidl’s combined share of UK grocery market

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

~4% in 2010

~12% in 2018

2010 2015 2020

~11% in 2017

~13% in 2019

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Source: Kantar Market Share data; Simon-Kucher analysis

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“They try and fight us on price but they won’t win, because they define our margin. And we will be 15% cheaper”

Matthew BarnesCEO Aldi UK & Ireland

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2x >50%

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25% cost

shockSimon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020

Items todeclare

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£9.3bn

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87% @ 0%

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+ ++

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Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020

Source: Sainsbury’s statement 19/03/2019

Sainsbury's and Asda have given the detail of their estimated £1.6 billion cost savings to the CMA. This

allows them to fund the £1 billion customer price commitment while also delivering on the commitments

to shareholders of £500m of net synergies, low double digit ROIC (return on invested capital)…..

The two businesses are proposing to merge so that they can lower prices for customers in an increasingly

competitive market, while improving quality and service. They will create cost savings in three ways:

1.By securing lower purchasing prices from suppliers, predominantly by paying the lower of the two

prices that Sainsbury's and Asda currently pay large suppliers for identical products

2.By putting Argos stores into Asda

3.By jointly buying shared goods and services and reducing central costs

By securing lower purchasing prices from suppliers, predominantly by paying the

lower of the two prices that Sainsbury's and Asda currently pay large suppliers for

identical products

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Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020

To our mutual benefit, we need to improve efficiencies, drive volume and deliver growth. We cannot do this without the full support and backing of our Supplier Partners.

We must continue to lower prices and drive volume and most importantly, we must maintain our heritage of delivering amazing, high quality food.

Stuart Manchin’s letter to suppliers, March 2019

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Conditionality

Fold into price

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Source: Simon-Kucher project examples illustrative

... betweencountries

Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020

Lack of price coherency leads us into difficulties…

... within akey account

... within acountry Biedronka

Lidl

Intermarche

Tesco

Kaufland

Carrefour

Lewiatan

Auchan

... betweenchannels

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Simon-Kucher I Exceedra Revenue Management Forum I Outlook for 2019-2020

Source: Simon-Kucher experience and analysis

Looking forward: 2019-2020

More cost shocks / unpredictability

Continued channel shifts & trajectory in shopper buying behaviour

Continued channel shifts & trajectory in shopper buying behaviour

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PRESSURE

Shoppers Retailers Suppliers

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Putting a Revenue Management function at the heart of your business

Manufacturer Distributor Retailer Shopper Consumer

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Revenue Pools

Source: Simon-Kucher experience and anlysis

Identifying, defining and supporting action to target revenue pools

Manufacturer Shopper Consumer

Identification and support in creation of consumption moments and shopping missions

With right product

In right format

In right pack size

At right price point

With right promotions

Through right channel

At right time

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Our advice to consumer goods suppliers:3 focus areas for 2019

Develop strategy for ongoing price development in a fast changing environment: Revisit price, pack and promo architecture across your portfolio and develop a long term plan for value increase

1

Risk assess and revisit customer pricing structures: Prepare for continued demands as the sector gets even more consolidated; ensure TTs are justifiable and defendable2

Bolster revenue management capabilities: Enhance your Revenue Management teams and ensure they are a fully integrated function across the business3

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www.simon-kucher.com

AfricaCairo

AmericasAtlanta, Boston, Chicago, Mexico City, Mountain View, New York, San Francisco, Santiago de Chile, São Paulo, Toronto

Asia-Pacific/the Middle EastBeijing, Dubai, Hong Kong, Shanghai, Singapore, Sydney, Tokyo

EuropeAmsterdam, Barcelona, Bonn, Brussels, Cologne, Copenhagen, Frankfurt, Geneva, Hamburg, Istanbul, London, Luxembourg, Madrid, Milan, Munich, Paris, Stockholm, Vienna, Warsaw, Zurich

London office1 Plough PlaceLondon EC4A 1DE, UKTel. +44 20 7832 6700

About Simon-Kucher

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Simon-Kucher & Partners at a glance

Growth and competitive strategies

Product portfolio (re-)design

Pricing excellence

Sales strategies and sales channel optimization

Customer-centric digital approaches

End-to-end transformation towards commercial excellence

Global presence > 3,000 projects in the last 3 years

World leader in giving advice to companies on howto price their products

Pricing strategy specialists

The world’s leading pricing consultancy

In pricing you offer something nobody else does

BusinessWeek The Economist

Professor Peter DruckerThe Wall Street Journal

World leader in pricing

38 offices worldwide, > 1,300 employees, $360m revenue in 2018Madrid Mexico CityMilanMountain View Munich New York Paris San Francisco Santiago de Chile São PauloShanghaiSingapore StockholmSydney TokyoTorontoViennaWarsawZurich

Amsterdam Atlanta Barcelona BeijingBonn BostonBrusselsCairoChicagoCologneCopenhagen Dubai FrankfurtGeneva Hamburg Hong KongIstanbul LondonLuxembourg

Best consultancy at topline improvement

Source: Forbes, survey of the best management consulting firms in the US, October 2016, 2018 (conducted every two years)

Marketing, brand,pricing, sales

Source: Capital, survey of the best consultancies in France, 2016, 2018 (conducted every two years)

Marketing, sales, pricing

Source: brand eins Thema special edition: Consulting - industry report from brand eins Wissen and Statista, online survey, 2014, 2015, 2016, 2017, 2018

Marketing, sales, pricing

Source: Financial Times, list of the UK's Leading Management Consultants, January 2018

Marketing, brand, pricing

Simon-Kucher & Partners

Simon-Kucher & Partners

on par with

Boston Consulting Group

McKinsey & Company

Capital Forbesbrand eins/Statista

Simon-Kucher & Partners

Financial Times

Simon-Kucher & Partners

on par with

McKinsey & Company

Boston Consulting Group

McKinsey & Company

Boston Consulting Group

......

Simon-Kucher & Partners

MT Magazine

Strategyconsulting

111 1

Boston Consulting Group

McKinsey & Company

...

Source: MT Magazine/Erasmus University: MT1000 2018, survey of the best strategy consultancies in the Netherlands, December 2018

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Consumer pricing*

Transparency of achieved price

Trade terms assessment and benchmarking

Cross-channel price management

Price-pack architecture

Trade-promo effectiveness

Retailer specific RSPsand Promo calendars

* Retail price setting is at the sole discretion of the retailer

We support our Consumer Goods across all areas of Revenue Management

Brand/Pack level commercial goals

Portfolio pricing strategy

Pricing strategy

Design and management of primary price research

Market research and analytics

Development of performance tracking, data capture and gaps

Data and reporting

Design of RM organisation set-up, governance and processes

RM Org and Process

Customer pricing

Design and implementation of complete customer pricing and trade terms frameworks

Development of price and promo guidelines comprehensive review or tackling specific challenges

Ensuring pricing strategies align with overall corporate goals – at all levels

Transparency of achieved price

Trade terms assessment and benchmarking

Cross-channel price management

Customer pricing

Design and implementation of complete customer pricing and trade terms frameworks

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Source: Simon-Kucher & Partners

With a global network of Consumer Goods & Retail experts

Manuel Osorio

Partner, Sao Paulo

LATAM

Ricky Rubi

Partner, New York

Americas

Vincent Duong

Director, New York

Americas

Toni Puigdellivol

Director, Boston

Americas

Shikha Jain

Senior Director, Boston

Americas

Guillermo Sagnier

Partner, Barcelona

Spain

Fan Chen

Managing director, Beijing

China

Kazuto Yamashiro

Senior Director,

Japan

Jason Carley

Senior Director, Sydney

AUS

Jochen Krauss

Partner, Singapore

SE Asia

Tim Brzoska

Partner, Cologne

Europe

Lauren Carter

Director, London

UK

Eduard Bonet

Managing Partner, Barcelona

Spain

Mert Terzioglu

Managing Partner, Istanbul

Europe

Onno Oldeman

Managing Partner, Amsterdam

Netherlands

James Brown

Partner, London

UK

Andreas von der Gathen

Executive VP, Bonn

Global

Florent Jacquet

Partner, Paris

France

Martin Crepy

Partner, Paris

France

Bjoern Dahmen

Partner, Bonn

Europe

Nina Scharwenka

Partner, Munich

Europe

Greg Harwood

Director, London

UK

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Source: Simon-Kucher

Your UK contacts at Simon-Kucher & Partners for Revenue Management in Consumer Goods

1 Plough Place

EC4A 1DE London

United Kingdom

Bockenheimer

Landstrasse

33 60325 Frankfurt

Germany

Lauren Carter

Director

Tel. +44 20 7832 67 00

Fax +44 20 7832 68 00

[email protected]

www.simon-kucher.com

Director

Member of Global Consumer & Retail practice

Expertise in trade term strategy, value pricing and portfolio architecture

Greg Harwood

Director

Tel. +44 20 7832 67 00

Fax +44 20 7832 68 00

[email protected]

www.simon-kucher.com

Director

Member of Global Consumer & Retail practice

Expertise in pricing and brand research for FMCG, with relevant UK and US experience

James Brown

Partner

Tel. +44 20 7832 67 00

Fax +44 20 7832 68 00

[email protected]

www.simon-kucher.com

Partner

Head of Consumer & Retail practice in the UK

Leads UK engagements across all Consumer Goods sectors

Commercial strategy & organisational design

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