Archive for 'Supermarkets- the other stuff'

My Milk Was Off This Morning

lgmaking_tea_milk_1000_0056One of the more frustrating occurrences in one’s morning…the milk is off! Not good at all when one only notices it after one has poured said milk into one’s tea. A glance at the label and the mood does not get any better. The milk should have lasted for another three days at least. Granted, it is summer – at least in New Zealand – but hey, my fridge works, I drove straight home with my shopping a couple of days ago, the car is air conditioned and the store is five minutes down the road. Where is the problem then?

Let’s start with where the problem most certainly will not be found….at the source. There is nothing wrong with my milk when it leaves the cow. Farmers have a reasonably good handle on making sure it does not go off on the farm, the milk tankers collect like clockwork and the processors tend to get that bit right as well, i.e.; processing the stuff coming out of the cow in a timely and temperature controlled fashion into plastic bottles with various lid colours ready for distribution in chilled trucks. Sooo – if my milk goes off despite the processor having his cool chain under control, the milk sitting in the retailer’s fridge when I bought it and yours truly being able to look myself in the eye with a clear conscience re personal fridge discipline at home….what does that leave us with?

Well, my money is on the retail rear store area being the culprit. Or more precisely…the amount of time it takes for the milk to get from the store delivery dock into the rear store chilled area. All the other steps are dedicated…cow gives milk, farmer stores milk, tanker driver collects milk, factory processes milk, truckie delivers milk,  THEN  BIG BLACK HOLE, retail assistant restocks milk fridge, customer selects milk and takes milk and all other purchases home.

The BIG BLACK HOLE  in my mind is that I have seen several variations to the theme over the years when it comes to milk being delivered to the store. These are, in no particular order,

  • delivery driver leaves milk on rear dock and buggers off
  • delivery driver attempts to raise store receiving staff and when he fails in that endeavour, leaves milk on rear dock and buggers off
  • receiving staff see milk sitting on rear dock but don’t register that milk and sun don’t go together, so the milk stays put
  • receiving staff see milk, but have other priorities, with milk shifting being not being high on that list
  • receiving staff drag milk out of sun into the rear store proper but not straight away into the chilled area.

There are bound to be other scenarios as well but the ones I have listed here  serve the purpose of illustrating a critical aspect of supply chain management when it comes to fresh food, whether we are talking about milk, peaches or bagged salad. The sad truth is that effective  supply chain management is generally consistently achievable when the focus is on individual products or a group of products with similar characteristics and therefore needs. When products with different characteristics and needs appear at a critical supply chain node at the same time, a high degree of personal initiative, the ability to prioritise without waiting to be told and the capability to understand the ’cause and effect’ concept become crucial.

Do supermarkets really train their rear store receiving staff to work consistently to these principles? I think not.

TURDUCKEN ANYONE?

Turducken Source: wikipedia

Turducken
Source: wikipedia

December, 25th, 2013

This is a Christmas story of a different kind. As you read on, you may well think that I have lost the plot altogether, you may wonder where the Christmas connection  takes us, but rest assured there is a Christmas aspect to this story, one that reaches beyond the Christmas Day we are celebrating today in 2013. I watched the news last night and in addition to the guts and glory coverage that television news is all about these days there was a human interest story related to Christmas that that caught my attention. The central theme of the news item was a unique Christmas roast that few people had heard of, that was in increasing demand and had its origins in the Middle Ages.  The roast is called a Turducken, which is a chicken, complete with stuffing, stuffed into a duck and the duck then stuffed into a turkey. The news item featured a Farro Fresh Market and one of its founders was being interviewed about the Turducken phenomenon. A fascinating food story, told in an innovative fresh food retail environment. What a fantastic marketing opportunity.

Cut. Change of Scenery.

In 1996 I rejoined Progressive Enterprises, then owner of Foodtown, Countdown and Three Guys supermarkets and itself owned by Foodland (FAL) , then  a grocery co-operative in Perth, Western Australia. The management team was given three core objectives by the owners. Firstly, streamline the merchandise and operations departments run separately hitherto, into one effective system; secondly, develop the food retail concept of the future; thirdly, improve operating profits. By 1998, the first objective had been achieved. The category management and buying teams had been combined and the operations management structure had been merged into one. A new meal solution concept had also been established and it was being “road tested” at Foodtown Meadowbank. This concept reduced emphasis on selling ingredients and meal components and focused instead on providing shoppers with complete meal solutions depending upon the time they visited the store. An entire kitchen team inclusive of an executive chef was based at the store. The third objective, improving margins, proved a little more difficult.  Restructuring does take time and costs money.  The fact that the Foodtown and Countdown IT platforms were incompatible and needed to be reconstructed from the ground up did not help either.  Nor was margin growth assisted by the fact that the Countdown merchandise sales management & reporting process was a store by store affair which caused major difficulties in understanding category profitability across the group.

In early 1998 FAL lost patience with its New Zealand division – which they did not understand at the best of times.  To put this statement into perspective…Perth based FAL in the nineties was akin to a bunch Four Square grocers having come together and with Progressive they had a tiger by the tail.  The FAL owners understood the grocery business very well…but grocers are not necessarily known for their innovation and strategic foresight when it comes to fundamentally reinventing themselves. And having paid top dollar for Progressive when they bought the chain from the then Coles Myer a few years earlier, they wanted to see a return on investment.

Source: www.allposters.com/

Source: www.allposters.com

Graeme Kelly, the CEO they had only hired a couple of years early was sent packing and after a short intermezzo by Barry Alty, a Kiwi grocer turned Perth based Aussie, FAL recruited Ted van Arkel, a Kiwi based grocer of Dutch heritage as Alty’s deputy and eventual successor.

Ted was a grocer from way back, Woolworths trained, who knew the grocery business upside down, back to front and left to right.  The Meadowbank innovation was initially parked for review and then quietly abandoned. The stores were refocused on the core grocery business, integration of operating systems was further strengthened and the bottom line started to show the improvements the owners in far away Perth were expecting.

Cut. Change of Scenery.

I am a father of three adult children these days.  Doesn’t time fly. My daughter works for a global market research company in Frankfurt, Germany.  My older son is both a history teacher and New Zealand naval officer (don’t ask…it’s complicated). My younger son has just finished a Bachelor of Design and Visual Arts (Photography) degree at Unitec and will hopefully find his fulfillment as an artist.

Earlier this year he started talking about Unitec wanting to essentially make the entire design faculty redundant. He was concerned about that, both from his perspective as well as from that of the affected staff.  Naturally, once these plans were made known to the lecturers, they were no longer entirely focused on the learning needs of their students. Unitec’s position was that the Faculty and the courses it offered needed to be realigned with the core focus of Unitec as a technical tertiary institution.   Reading between the lines….someone clearly thought that there was too much art going on and that the place needed to concentrate on churning out craftsmen instead of artists.

Staff got their redundancy notices on the day the students opened  their end of year exhibition – where they could have benefited from the support of focused staff.  Instead, the staff involved the students in black armband protests and other forms of “passive resistance”. It was not good to observe what was going on.

I had not fully tuned in when my son started talking about the demise of his Faculty.  Partly because I was busy with other things and partly because I knew that by the time these changes were due to take place in 2014, he would have graduated and be on his way.  So it was not until a couple of weeks ago that I went to the Unitec website to check on the composition of the Unitec Council. Interesting.

Cut. Change of  Scenery

Christmas is the time for reflection. When I reflect about how my shopping behaviour has changed in the last three years, I realise that I spend quite a bit of my time, and more importantly money, at Farro Fresh Markets.  They sell the food I enjoy eating. Their stores offer a mix between grocery retailing and retail theatre that I don’t find in the traditional Countdown, New World or Pak’ n Save outlets.  They sell decent Spanish and French wines for a fraction of the price one has to pay for local Pinot Noir.  Their cheese selection is a shoppers’ magnet. A Farro Fresh Market is not necessarily exactly what the 1996 Progressive team  had envisaged…but Farro is the closest to the retail concept Progressive had in mind back then…and their opportunity came when Progressive consigned anything other than the expert grocery model to the ‘too hard’ basket.

What are the big learnings here for me?

  • Horses for courses.
  • Timing is everything.
  • There is a difference between a supermarket and a Design School.
  • The consumers’ food procurement model is changing at a rapid pace.
  • The shopping model I grew up with does not  meet the needs of today’s consumers.
  • Thank God for options, choice and innovation.

The clock will tick over soon. 2013  becomes history and the fledgling 2014 will spread its wings. Let’s hope we can learn from past mistakes and avoid repeating them.

And the practice of stuffing birds within birds and serving them fried or baked at table seems to date  back way beyond the Middle Ages, right down to the Romans and their famous banquets.

 

How Do I Get My Product On The Supermarket Shelf?

guardianMasterclasses are something I immediately associate with food and TV. We can thank Masterchef for that. And the Guardian is a British newspaper. What should I make of those two terms strung together though? The short answer is – anything is possible in a day and age when entertainment by bite size is the norm and the print media resembles a dinosaur and is desperately trying to reinvent itself. The Guardian seems to have determined that it has a role to play in business education way beyond having the latest crop of bowler hatted gentlemen study its financial pages. Which is why it runs a Masterclass dedicated to getting new products, presumably including new produce items, on the supermarket shelf. Details can be found here. If that thought does not appeal, how about waiting for the Walmart “Get On The Shelf” contest to come around again? From time to time, Walmart invites “inventors, tinkerers, thinkers, marketers and everyday Joes” to submit their ideas for scrutiny. BeatlesAnything seems to go these days, as traditional channels of getting business done are reduced to direct contact between wacky inventors and grocery giants and newspapers move into the adult education business. Not that there is much space on those supermarket shelves. Ever since supermarkets decided that their own name belongs on those shelves as well via their house brand and private label product ranges, it tends to be getting pretty crowded on those shelves, with a distinct limit to how many “me too” brands are required. Consumers should welcome that as it narrows the selection typically down to the premium FMCG brand, the retailer’s product and one of the second tier suppliers, just for good measure. Unless, of course, the retailer has a budget line as well as a premium label  he wants to make available. Three is already a crowd. Four becomes a mob – and unmanageable. Luckily, we don’t get to see those positioning exercises too often in the fresh produce area. For now at least, anyway. I seem to recall that supermarket product ranging trends tend to start in the centre grocery aisles before they spread to the perishable departments at the edge of the store. Oh well, The Guardian class starts on Saturday. If you hop on a plane tonight, you will get to the UK on time!

Alternatively – talk to us.

Give the CERA job to TESCO

copyright Guardian

copyright Guardian

Where is the ‘fine line’ then? The supermarket industry’s Rubicon? Tesco already sells anything from Life Insurance for your pets and travel to distant shores to party services. By the way, you can get your groceries there as well, including fresh produce…. In future though, starting in South London by the looks of things, shoppers will be able to just pop down from their high-rise flat to their local Tesco store on the ground floor…their Tesco flat that is in the apartment building Tesco has built!

The days when supermarkets just focused on selling FMCG products to willing buyers and saw their place in the supply chain as connecting manufacturers and shoppers are long gone and nowhere is that more obvious than in the UK. For the last 20 years, UK supermarkets have been depicted as the bad boys on the block for developing standalone stores and shopping centres at the outskirts of towns and therefore deconstructing High Streets. High Street now becomes a very viable proposition for smaller format food stores run by supermarket chains and, hey…if there is some urban development that can go with it, the much the better.

We have a whole city that needs redeveloping…may be we should sack the Canterbury Earthquake Recovery Authority and invite Tesco to have a go?  Can’t be any worse by the looks of things.

Meantime back here in New Zealand politics, the Labour Party Leader Selection Carousel has started to spin and Shane Jones, the contender least likely to be successful, stated on national television that supermarkets are akin to ‘brown shirts’ and needed regulating. His point being that a duopoly as exists between Countdown and PAK”n SAVE /New World does not provide sufficient competition to keep food prices affordable.

He has a point about duopolies – but only up to a point! We have three limitations in this country which are underlying factors of the duopoly situation that has evolved over the decades – because our food retail industry sure did not start as a duopoly operator.

Firstly, we are a nation with 4.5 million inhabitants which does not give us critical mass in any way, shape or form. Secondly, one-third of New Zealanders are akin to a giant Gannet colony, squeezed together in the Greater Auckland area. This means our lack of critical mass is enhanced further in a negative sense. Thirdly, as a food exporter, our domestic price structure for meat, dairy and fish is linked to what we can achieve for our goods on the global market.

You can’t just regulate that, get real, Jonesy. Your Leader before the one trying to sell snapper in Parliament was bad enough when he wanted to upset the simplest and most effective GST system in the world by making fruit & vegetables GST exempt. The chaos that would have caused is nothing compared to what would happen if you attempted to regulate supermarkets.

All this suggests to me that there is money to be made with an inoculation system for wannabe party leaders which ensures they are administered a healthy dose of economic realism before they wander off and make rash promises in order to be elected.

I wonder whether I could obtain a grant for the necessary research from the Minister of Everything?

The Grocery Fullfilment Conundrum

The local Auckland paper, the New Zealand Herald, recently published an article discussing supermarket pricing.  That in its own right is not a surprise, newspapers tend to pursue this topic when there is no other news about. This article differed though from others. In the first instance, the focus of the article was not the usual supermarket fare, food and FMCG consumables, but the journo offered opinions about the wisdom of buying typical non-supermarket items such as stationery, slug pellets and medicines from supermarkets.  The verdict? It could well be cheaper than buying those items where one would usually buy them. Ok, one would expect that though from a supermarket, wouldn’t one?  The question NOT asked is even more interesting. WHY are supermarkets moving into all sorts of other product? Answer – With consumers increasingly shifting towards online grocery buying, brick and mortar store operators need to figure out what else to put onto their shelves in order to keep the turnover going.
amazon feshSupermarket companies like Woolworths here in New Zealand may well be very successful with their on-line activities but they face a dilemma. Right now, on-line customer fulfilment occurs via a number of selected stores where ‘personal shoppers’ take the groceries from the shelf. The problem with that approach is that the goods come attached with the costs of getting them onto that shelf in the first place. Then adding the ‘personal shopping’ and distribution costs makes the whole process a fairly unattractive financial proposition. The smart solution is therefore to pick the goods at a distribution centre where the cost of getting into the store and the cost of the retail environment itself don’t figure in the cost of sales. The trouble with that approach is that individual unit fulfilment cannot be run out of distribution centres geared to dispatch goods by the pallet load. Pursuing that approach will lead to having to build dedicated distribution centres. Not the kind of thing you want to do if you already own stores which make money by stocking goods on their shelves for people to buy….and we are back to square one.

That’s why we need to sit up and listen very carefully if companies like Amazon suddenly decide to enter the grocery fray...particularly, the FRESH arena.  They are not encumbered by stores and dated paradigms.

There was another point of note in that article I mentioned at the beginning of this blog entry, but that will have to wait until tomorrow.