Rod Street

Street talk: Four resolutions for an uncertain 2012

By Rod Street | 9 January 2012

The consensus is that those hoping for an easier year in 2012 could be disappointed. Consumer confidence will remain in the doldrums, competition will remain fierce and economic uncertainty will continue. In his first column of the year, SymphonyIRI's Rod Street suggests some ways in which manufacturers and retailers could look to improve in 2012.

A New Year provides an opportunity for resolutions, for people to make commitments to new goals or reaffirm old goals after spending some time reflecting on the past year and their current position. But, all too often our own goals are abandoned before they've had a chance to be fulfilled. The busy gym in January quickly thins out through the early part of the year.  

Sometimes, the failure to realise our aims reflects our choice of the wrong goals. Other times, it's down to our choice of the wrong execution strategy. However, neither undermines the value of goal setting in the first place.

In our industry, many businesses find their 2011 goals unrealised and hope for an easier 2012. The reality is, as we all know, that this is not going to happen. The challenges of frugal shoppers, hyper-competitive conditions, raw material pressures and economic uncertainty will continue through 2012 and beyond. 

The successful players – retailers and manufacturers – will be those who choose the right goals and a strong execution strategy. Many brands will depend on this for their survival. But survival can't be the objective of goal setting. Although it is measured financially, success and survival is almost always market driven. 

It will be the resolutions that food businesses set in the marketing area that will be critical to a successful 2012. These resolutions will focus the vital energy and activity required to drive success or failure. But where should these New Year resolutions be targeted? Here are four suggestions:

1. Focus sales and marketing targets on value and profit, not volume

Volume is going to be tough to secure this year and value will be even more difficult. It is vital that the goals that commercially-facing staff work towards are aligned on value – be this for sales, marketing or buying teams.

A consistent and determined focus on value will be essential if businesses are to prosper – in correctly identifying opportunities and capturing them profitably. Resolving to review these goals to confirm alignment on profitable revenue is likely to be effort well spent as too often there is not complete alignment.

2. Ensure that your brand is continuing to provide real value

2011 proved highly turbulent and has disrupted many households' views about value. Consumers buy brands because they provide a useful shortcut in their busy lives, a reassurance that they are obtaining something of value. Retailers and manufacturers alike need to ensure that this value equation still stacks up as consumers' needs have evolved. The changes are sharpening the definition of value in every category. Aldi and Lidl proved this to be true when they beat Marks and Spencer and Tesco in the recent Which? Shopper Satisfaction Survey in the UK.  

Executing on goals in this area will demand a good and well-rounded understanding of what value means in the specific markets that a brand competes in – and a strong competitive understanding of how your brand matches up to others on each dimension of value.

It will almost certainly also need a determined focus on innovation for both retailers and suppliers. A merely defensive strategy will not be sufficient. The winners in this area will be pushing through changes that help to create the value consumers are looking for. The industry, as a whole, will need to raise its game and accept some of the inherent risk and waste that innovation inevitably involves. Recessionary pressure seems to have dulled the appetite to pursue this.

A recent review by our UK team highlighted the falling rate of product innovation over the last few years and the weakness of the resulting new product pipeline. Only 16 out of 3,500 new products in the UK achieved an above-average "sales rate index" (a key measure of successful value delivery). These 16 contributed 6% of total sales value achieved by all new products and included Müller Greek Corner yoghurt, Kraft Foods' Belvita and Nestle's Maggi So Juicy. 

The challenge is greatest in grocery for food and drink, which accounts for almost 56% of new products but delivers a below average success rate - just 2.6%. It also needs to be cast wide – innovation is not just about product features and proposition. For manufacturers it might demand innovation in the supply chain, in partnerships for technology or product or in communication. For retailers, it might be channel integration, better tools for managing the shopping process or new ways of boosting availability.

Is innovation far enough up your list of strategies for 2012? 

3. Revisit your pricing and promotional aims and strategies

More sales volume doesn't always equal more profit, even when the immediate goal is achieved. With shoppers pushed to their budgetary limits and revisiting own label, national brands have become more aggressive in their use of promotions in the last few years to appeal to the consumer demand for value.  

But this environment makes the opportunities and costs of effective pricing and promotion all the more important. There are real challenges to premium brands as shoppers have become more sensitised to promotions and start to lose sight of the underlying price of the product and the 'value' that it represents. The value that can be lost by inappropriate price structures, poor promotional mechanic choice, over-deep discounts or simply promotions that get lost in the noise of the marketplace is enormous. With some promotions on large brands it represents hundreds of thousands of euros in a single week alone.

It is no good creating the value for consumers in new product or strong brands and then failing to capture that to support the long-term development of the product or store. Pricing and promotion may be an art but it can be well supported with science. 

2012 is a good time to set some bold goals and robust strategy on this underemphasised area.

4. Check that you are clear what you stand for

The era of defining business objectives in purely financial terms is over (if it ever really existed). The fundamentals of why a business and brand exists and what value it brings to not just its buyers but also wider society is upon us.

A quick look at the emphasis in our industry on 'sustainability' provides a great example of this. It is not merely a line in the annual report but something that is becoming central to the operation and values of many players in the industry – Unilever, Kraft Foods, Sainsbury's and Marks and Spencer to name just a few. 

Add to this important topic others such as local provenance, health, energy and wellness, nutrition, social welfare and many others and there is a wealth of potential ways for brands to offer greater significance to people and in the process remain relevant. Such commitment needs to be authentic, more than simply a tactical communication strategy and indeed may already be present in the aims of many businesses.

Once again the New Year presents a great opportunity to see how well aligned the marketing approach is to these corporate commitments and enable consumers to see the role that a brand is playing in contributing to society as a whole.

So, as 2012 kicks off and we return to the marketplace refreshed, I hope that your New Year business resolutions are well defined and well supported with plans for action. Whatever you prioritise, the year is going to need some brave and bold goals to galvanise a successful year.

Sectors: Baby food, Bakery, Canned food, Cereal, Chilled foods, Commodities & ingredients, Condiments, dressings & sauces, Confectionery, Dairy, Dried foods, Fresh produce, Frozen, Ice cream, Meat & poultry, Natural & organic, NPD & innovation, Private label, Retail, Seafood, Snacks, Sustainability & the environment, World foods

Companies: Marks and Spencer, Aldi, Lidl, Tesco, Kraft Foods, Müller, Nestle, Unilever, Sainsbury’s

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