Published on: January 14, 2009Notes and comment from “Content Guy” Kevin Coupe…
ORLANDO -- Now that’s more like it.
While the first day of the annual Food Marketing Institute (FMI) Midwinter Executive Conference here came in for considerable and deserved criticism for an relatively unchallenging agenda, the second day was a vast improvement, featuring a pair of morning sessions that focused specifically on critical issues facing the retailers and manufacturers in attendance.
“The new transformational economy” was the subject of Thomas J. Blischok’s presentation, and the president of consulting and innovation at Information Resources Inc. (IRI) ripped into it with vigor and passion – probably because more than a year ago he was talking about the fundamental changes taking place in consumer attitudes, and the times have proven him to be prescient.
Blischok suggested that current events actually have “no real comparable period in US history,” and he urged the audience to recognize and act upon certain realities about both the world and their businesses. Perhaps the most significant of these realities – at least when seen from the food retail perspective, is the shift in consumer priorities when going to the store – using lists to buy only what they need and will consume, using coupons and tracking sales to find the best deals, eating more at home and bring more meals and snacks from home in order to save money, and even engaging in what is called the “downturn diet,” which translates to “eating smaller portions, cutting out junk food, drinking a beverage instead of eating a snack, eating a snack instead of a meal, and even skipping meals to save money.”
One enormous shift taking place, he said, is away from impulse buying. At the beginning of 2008, he suggested, about 40 percent of buying decisions were being made in the store, while by the end of the year that number was down to 25 percent, and is expected to go even lower this year. “This means that you have to rewire your marketing efforts to compensate for shifts away from impulse purchasing,” and the industry has to develop “highly rationalized marketing and merchandising programs” that are “customer-centric.”
As a result of all these changes, Blischok said, manufacturers and retailers have to work together to get their assortment right, have to be more specific and relevant about new product introductions, and even have to rethink how they market to shoppers, “since there is a growing resistance to hard-sell tactics.”
Other notes from Blischok’s presentation:
• Unemployment and the lack of available credit “are driving more shopping decisions than anything else,” he said.
• IRI’s “misery index,” Blischok said,” was causing a “shock to the system” that was forcing consumers to both tighten their belts and change traditional shopping rituals and patterns, and that many of these shifts could be permanent.
• The shopper tradeoff between national brand and private label “is expected to continue well into 2009,” he said, “no matter where you are on the economic spectrum.”
• The reduction in fuel prices is a “fundamental nonevent” in terms of how consumers see their financial viability.
While Blischok seemed optimistic that the industry will adjust to changing circumstances, a kind of manufacturer-retailer “cooperatition” is needed, he said, “to meet shopper affordability needs.”
The other presentation was a panel discussion about the business case for sustainability, and focused in large part on findings by the Coca-Cola Retailing Research Council (CCRRC), which brought a wide range of industry personalities together in Beijing last year to focus on this issue.
Some of the most persuasive arguments were made by John Gummer, a member of the British Parliament and the former UK secretary of state for the environment, who noted that he is a conservative politician ho believes in global warming. “But I don’t care if you believe in climate change or not,” he said, “because the world is going to be run as if climate change is happening.” He urged the businesses in attendance to get it right when it comes to sustainability issues, because the alternative would be for governments to impose their solutions on business, “and we don't want them getting in our business.” By getting ahead of the curve, Gummer said, business can assure that legislation “works with the grain,” instead of being drafted by politicians “with no connection to real life.”
“We won’t change the world unless it is profitable for the market,” Gummer said,” because only the market is powerful enough to change the world.”
Gummer noted that there are a range of areas in which the food industry can make a sustainable difference – ranging from the use of water and electricity in stores to the sourcing of local products and the elimination of waste – and said that virtually all of these can be positive for the bottom line.
Gummer said, “Sustainability is doing more with less, and I cannot thing of a better definition of succeeding in a downturn.” In fact, he said, economic downturns are actually a good time for sustainability moves because it is a perfect time “to put our houses in order, be cost effective, and actually make huge profits for our businesses.”
There was an extended discussion about plastic bag usage by the panel, with Delhaize’s Denis Knoops, senior vice president of business and concept development and new business opportunities, saying that the company’s shift to reusable bags just in Belgium had saved in one million euros. Alfred A. Plamann, CEO of Unified Grocers, said that he had “mixed feelings” about plastic bag bans or taxes; he said that while some demographics might be ready for such moves, others would resist them, and that a one-size-fits-all approach to such issues may not be most effective.
Gummer noted that in the UK, Tesco helped shift customers to reusable bags by offering them one point on their loyalty card for every bag they brought into the store during a shopping trip, and that they’ve already cut plastic bag use by 40 percent.
However, it requires real commitment. Knoops recalled that he was recently interviewing someone for a sustainability-related position with Delhaize, and when the man was handed coffee in a Styrofoam cup, he actually offended and said he didn’t want to work for a company with sort of disregard for the environment. “That’s why we want you,” Knoops said, and he noted that the man has been extremely effective in bringing about sustainable and integrated change.
Note: The complete Coca-Cola Retailing Research Council report, “Sustainability In Retailing,” can be read by going to http://www.ccrrc.org and clicking on the tab that says “Global.”
- KC's View:
- These two sessions were an excellent one-two punch focusing on how retailers and manufacturers need to change their thinking and their actions to be effective in a transformational economy going through permanent – and hopefully, sustainable – changes.
It seems to me that a critical component of this kind of thinking is that it has to be cultural for the organizations that adopt it, and it has to be integrated into all the various components of a company’s operations. Organizations cannot afford to be less to be fully committed to rewiring their marketing or sustainability efforts…nor should they accept anything less than a “pedal to the metal” approach to momentum.