Archive for 'Supermarkets- the other stuff'

End of an Era

Supermarkets  – Once the only Place to be for the Modern Hunter/Gatherer.  Now just one of many options.

Countdown CEO David Chambers announced yesterday that he is moving on in June. Not an earth shattering event as such. Senior business leaders are constantly on the move, right? Yes, indeed; but there are a few aspects to Chambers’ tenure at Countdown/Progressive that are worthy of consideration. In the first instance, CEOs these days can’t typically point to a thirty-nine year employment record in the business they are leading. In fact, in most businesses someone with such a length of service has no chance to be offered the top job. Secondly, Dave Chambers is likely to be the last participant of the original Foodtown Management training programme who ends up in the top job at Countdown. The early Foodtown supermarket training model of the sixties and seventies was innovative, demanding and future focused, preparing its participants very well for coping with the challenges of modern food retailing and all it entailed.

“Modern” meant something different in those days though. When Chambers joined the training programme, stores were open five days a week, with a late night on Thursday. All store management positions were held by men, automatic replenishment systems were unheard of and computers were something Steve Jobs played around with in his garage. The Internet had yet to be invented, home shopping did not exist and all produce for Foodtown was purchased at the auctions.

We can safely agree then that Dave Chambers has seen a few changes in his career and that is without discussing the various ownership changes at Progressive, the demise of the Foodtown brand in favour of the Woolworths logo/Countdown name, the 180+ stores the company operates today as opposed to the 20+ branches the company had when Dave became a store manager and the many changes he would have seen in his stores over the last 39 years.

In those days, Foodtown stores did still have fully functioning butchery departments, with half beasts getting delivered to every store for processing each day. Today, stores are serviced via a centralised meat processing plant and the stores are void of butchers. A little known side benefit butchery departments provided their store managers with was instant security. When power cuts occurred, butchers were positioned at the checkouts, complete with meat cleavers and other suitable utensils to ensure that full supermarket trolleys did not start rolling out of the doors without their content having been paid for.

Chambers’ produce managers in his early store manager appointments in Foodtowns Kelston, Grey Lynn and Greenlane, were skilled in completely stripping and rebuilding mirror back displays, long before refrigerated cases became the norm. As head of produce during some of those years, I was in and out of our stores on a regular basis and knew all our stores managers. Dave Chambers stood out from the crowd even then, as a skilled professional with an appetite for knowledge and learning, an engaging persona, a willingness for constructive dialogue to achieve conflict resolution, a passion for food retailing and well respected by his staff – something he did not take for granted.

Dave, I wish you well in wherever your new journey takes you to.

Hans Maurer

Brick & Mortar Supermarket Support Programmes Gather Pace!

facebookcheeseblogI took this picture a couple of years ago in The Hague in the Netherlands. The supermarket chain displaying this wheel of cheese complete with facebook sign prides itself in not accepting cash for payment! The Netherlands are a nation of cheese makers, cheese seller and cheese consumers. Seeing entire cheese wheels on display is therefore not altogether surprising. The facebook sign is, of course, a dead give away that the photo was taken within the last ten years and not in the nineties or earlier. Social media is a very powerful tool in the modern food marketer’s arsenal and whoever decorated this Dutch supermarket window achieved a breathtakingly simple execution of an incredibly complex strategic issue that is vexing the minds of supermarket owners the world over. How can the investment in brick & mortar stores not only be protected in the face of the relentless onslaught of the online shopping phenomenon, which said brick & mortar store operators have to join themselves in order to protect their overall market share?  Retailers around the globe are experimenting furiously, as their investment in the traditional brick & mortar model. Consumers are naturally enjoying their new found freedom of existing supply channels being changed, reconstructed or realigned and entirely new channels emerging at a rate of knots.

Woolworth Australia seems to have cooked up an experiment in this category which is worthwhile keeping an eye on. The supermarket corporate has teamed up with eBay.  eBay shoppers can now pick up their purchases in selected Woolworths stores…and will hopefully shop the store at the same time. More details here.

An innovative attempt to use existing distribution capacity, regardless of ownership. Competitors exploring selected channel fusion options based on exceeding consumer expectations.  It doesn’t get any better than that.

Why Profits Matter

tesco2Is a supermarket company entitled to make a profit? Of course it is. Does a supermarket company’s adoring public care about the profit the business makes? You bet. How do customers get to hear about a supermarket company’s profits? Well, if the supermarket company in question is listed on a Stock Exchange and is therefore obliged to follow forecasting and reporting rules stipulated by that exchange, then the answers to all sorts of questions, including the ones about profit, can be found in the paper and on the web.

The Tesco finance team appears to have temporarily misplaced its abacus.  Tesco has overstated  its half-year profits by £250million was. Analysts suggest this to be  ‘principally due to the accelerated recognition of commercial income and delayed accrual of costs’.

Aha! Here are my 5 pence worth.

‘Commercial income’ is retail-speak for money generated through supplier deals, be that case allowances, shelf allocation fees, weekly promotional activity or catalogues. The term ‘accelerated recognition’ suggests that monies handed over by suppliers amounted to less than was contained in the forecast at the beginning of the financial year. And the only way that can occur is if the supplier agreements are incentive based; i.e., determined by the volume of stock the retailer manages to move through his promotional activities.

Why would a retailer not be able to move the amount of stock they had forecasted? How about – because he is loosing market share…

A retailer’s accounts are finely balanced between the money he pays for goods, the price he charges their customers, the fees he can demand from his suppliers for granting improved access to shelf space in numerous variations, the competitive position taken in the marketplace and market share percentage achieved. Wheels do not come off overnight. But when the first wheel is as loose as it appears to be at Tesco and if the operator is as significant as Tesco, then a fundamental shake-up of the market place is not an unrealistic expectation.

The high cost of low prices

A few weeks ago we had the PMA Australia New Zealand Fresh Connections Conference here is Auckland. An all-round success in terms of attendance.  One of the industry stalwarts I bumped into there was Lex Wilcox, retired potato and onion grower/packer/shipper from Pukekohe and one of the brains behind the success of AS Wilcox Ltd in his day.  Lex has earned his retirement through decades of hard work for his company, the Pukekohe Vegetable Growers Association and the Vegetable & Potato Growers Federation, one of the predecessors of Horticulture New Zealand.

Catching up with Lex reminded me that he had sent me a 2006 article from the Sunday Start Times recently, entitled, “The high cost of low prices”, together with a philosophical statement by John Ruskin on the common law of business balance. Ruskin’s authorship of this ‘law’ can not be verified.  The one sentence version is “There is hardly anything in the world that someone cannot make a little worse and sell a little cheaper, and the people who consider price alone are that person’s lawful prey”.

Lex sent the article in response to my blog entry on “Supermarkets, Growers and Food Prices” which introduced an earlier Guardian article on the topic.  Long before the supermarket bread war kicked off last weekend.  Lex’s article makes interesting reading – as does the longer version of the Ruskin quote.

It is an interesting social dilemma that is being played out.  Supermarkets compete for market share on the basis of product/price specials. Nothing wrong with that.  Consumers have come to expect ‘hot deals’ every week.  And they’d better be good or they vote with their feet.  Should suppliers contribute to supermarkets lowering their retail prices to attract more shoppers through their door? I don’t see why not, as long as the consultation process is alive and well, suppliers are not expected to produce loss leaders on a scale that threatens the viability of their overall business and when accompanied with a ‘give and take’ attitude.

These bread wars are not the last product/price action we have seen.  The game is changing. Online shopping is gaining favour with consumers globally.  Brick and mortar investments into new stores are getting harder to justify and being caught in the middle is not a pleasant experience any longer.  Tesco is the perfect example right now.

Supermarkets, Growers & Food Prices.

munichmerch1One of the more intelligent articles I have come across in recent years on the topic of supplier relationships in the perishable food area can be found in the Guardian.  Here is a poignant part of  the article’s last paragraph which should have some resonance in our part of the world too.

“…farmers need to be paid enough to invest in our agricultural base. We actually need to pay a little more for our food now to avoid paying much more later. A price war might be good for consumers in the short term. It might offer some sort of relief. In the long term, however, we would all be much the poorer.”

I wholeheartedly agree with this sentiment but would even be more specific. Growers and farmers need to receive sufficient enough a price for the food they produce to provide them with a reasonable income as well as a return on their investment.

The background to the article is the market share loss being experienced by the UK’s main stream supermarkets at present, with the writer analysing the predictable price cutting strategies being implemented from the perspective of their potential impact on Britain’s self-sufficiency in food production.   A very worthwhile read.