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    Published on: July 19, 2010

    Symphony IRI

    Content Guy’s Note: This week, SymphonyIRI Group offers another in its series of “think pieces” about the ever-shifting food retailing business, offering a view of the ever-evolving European private brand business that can teach lessons to US retailers looking to make an impact in the own-label arena.

    By Susan Viamari
    Editor, Times & Trends
    SymphonyIRI Group, Inc.


    Like U.S. shoppers, Europeans have been faced with less than ideal economic conditions for an extended period of time. While the “worst” of the recession appears to be over, the road to recovery will be long and fraught with difficulty. As such, consumers are very entrenched in a conservative mindset and are closely monitoring their day-to-day living expenses, seeking ways to save money wherever possible.

    At the heart of day-to-day living is fast moving consumer goods (FMCG). These daily purchases are necessary to feed the family, to maintain health and wellness, and to run the household. Consumers are turning to retailer branded FMCG solutions that offer significant savings over nationally branded products. Across Western European countries, store brands are generally well-entrenched. But, for several reasons, development varies at the country, retailer and category level.

    First, retail concentration differs across countries. Countries with higher levels of concentration, such as Spain, the Netherlands, Germany and the U.K., tend to have more well-developed store brand presence. In each of these countries, store brands account for at least one-third of FMCG sales. On the other end of the spectrum is Italy and Greece, where the retailer landscape is much more fragmented, contributing to lower levels of store brand development. In these countries, store brand share is well below the U.S. share of 18 percent.

    Retailer strategies also play a major role in setting store brand boundaries. During the past 18 months, U.K. retailer Waitrose, for instance, introduced its Essential Waitrose line of more than 800 SKUs. In the Netherlands, Albert Heijn has been rapidly expanding its store brand lines, adding AH Pure & Fresh last summer as well as an extensive line of non-food products. When such dominant retailers undertake sizable store brand initiatives, the impact is sure to be felt across the market.

    Retailers and store brand manufacturers have been heavily focused on development at the value end of the product spectrum in attempt to provide consumers with low cost solutions to their everyday FMCG needs.

    Carrefour Discount, for example, is a line of more than 400 food and non-food products with pricing aligned to hard-discounter policies. The line is popular in France and is being expanding into Italy and Spain. The value end of the store brand spectrum remains a focus. Promotional activity has escalated, and new SKU additions are common as retailers seek to drive penetration and frequency.

    In more recent months, development focus on the mid-to-premium end of the spectrum has escalated. Germany is seeing store brand growth shifting away from the value tier. In the U.K., promotional activity around the Systeme U organic line is heavy. Development of mid- and upper-end store brands is likely to continue in the foreseeable future as retailers seek to drive margin growth and enhance differentiation in a highly competitive environment.

    SKU rationalization efforts will also greatly impact assortment during the next several years. Assortments in major U.S. retailers, including CVS, Walmart and Costco, have been slashed during the last year. Major brand names were cut from the ranks of their assortment, touted as a way to make the shopping experience simpler.

    In Spain, Mercadona cut a number of major national brands from their assortment in 2008 in an effort to offer their shoppers lower prices. In France, Carrefour has also announced plans to reduce assortment by 10 percent this year.

    However, caution is critical. Many customers have not been pleased with retailers’ SKU rationalization policies, so Mercadona, Walmart and Costco have been restocking some of the previously cut national brands.

    Finally, category dynamics play heavily into store brand development. Brand manufacturers have established excellent brand equity across some categories and are reinforcing that position with heavy investments in branding and promotional activity. Innovation tends to be high, and store brand share tends to be lower. Carbonated beverages, laundry detergent, cereal and coffee are all examples of categories in which national brands enjoy a sizable share advantage in the United States and in much of Europe.

    Across these and all FMCG categories, though, the battle for share is far from over. National brand manufacturers are notching up their marketing efforts. Pricing and promotion strategies are being re-evaluated and redeployed with the goal of stemming, and even reversing, share losses. With economies showing signs of stabilization, the battle for share will likely continue to heat up as retailers and national brand manufacturers vie for share in the post-recession world of FMCG.

    SymphonyIRI Group will be releasing its latest research on store brands during the week of July 20. The Times & Trends Report, “Store Brands: U.S. & Europe Store Brand Trends 2010,” will be available by clicking here.
    KC's View:

    Published on: July 19, 2010

    I’m reading a fascinating book by Michael Lewis, entitled “The Big Short: Inside The Doomsday Machine,” in which he tries to bring the same sense of clarity and irony to the Wall Street meltdown that he did to baseball in his bestselling “Moneyball.” (Lewis also wrote “Liar’s Poker” in 1989, in which he described his experiences working for Salomon Brothers ... so he has some familiarity with the territory.)

    Anyway, there was a line in the book that brought me up short, because it seemed to describe so much of the universe beyond the world of high finance, and I wanted to share it with you this morning:

    “The options market also tended to presuppose that the distant future would look more like the present than it usually did.”

    A lot of businesses operate that way, I think, for lots of reasons. It is easier, cheaper, and more comforting to believe that the future is going to look a lot like the present. It also takes a lot less imagination, and less of a commitment to innovation.

    It also can be a dangerous mistake, though one that can be avoided if we simply look at our own lives.

    For example, I’m 55. When I think of the world the way it existed just three decades ago ... which isn’t that long ... I cannot even imagine having envisioned all the changes, evolutions and even revolutions that have taken place over the past 30 years. But somebody did. Lots of people did.

    It is the thought-leader’s job to have imagination and be open to innovation. To entertain unpopular and even radical thought. And to not just be open to a future that looks very different from the present, but to prepare for it.

    That’s my Monday morning eye-opener.

    - Kevin Coupe
    KC's View:

    Published on: July 19, 2010

    Fascinating piece in the Washington Post the other day about the moral equivocations in which many people engage:

    “We drink Diet Coke -- with Quarter Pounders and fries at McDonald's. We go to the gym - and ride the elevator to the second floor. We install tankless water heaters - then take longer showers. We drive SUVs to see Al Gore's speeches on global warming.

    “These behavioral riddles beg explanation, and social psychologists are offering one in new studies. The academic name for such quizzical behavior is moral licensing. It seems that we have a good/bad balance sheet in our heads that we're probably not even aware of. For many people, doing good makes it easier -- and often more likely -- to do bad. It works in reverse, too: Do bad, then do good.”

    The Post goes on, “Moral licensing behavior extends ... into dieting.” One researcher found in a recent study “that people ate more chocolate while drinking Diet Coke than while drinking more, sugary fare. Dietitians in the region report all sorts of odd justifications from clients eating bad food while trying to lose weight.”
    KC's View:
    While the behavior described in the piece seems highly familiar, it is interesting to see it described in such detail. What it means, in essence, is that we’re all human.

    It’d be interesting to look at the shopping carts of people who use nutritional labeling systems like NuVal and Guiding Stars and see if, in addition to products that seem to be “better for you,” they also have products that most definitely do not fit that bill. I’d bet that this is the case more often than not...which, in its own way, is a marketing opportunity.

    While you’d have to be careful about selling super premium ice cream too aggressively to people trying to be intelligent about their eating habits, in essence that’s what nutritional guidance allows you to do - make trade-offs and make smart, informed choices that stress moderation. It isn’t about denial.

    Published on: July 19, 2010

    The Albany Times Union reports that all of the supermarket chains owned by Delhaize America - including Hannaford, Food Lion and Sweetbay - have promised to begin selling seafood only from sustainable sources, and will require its seafood suppliers to adhere to its new policy by March 31, 2011.

    The retailer also is pushing its suppliers to use local sources whenever possible.

    “We want our shoppers to have confidence that seafood they buy from us is from fisheries that are viable and maintained for the future,” says George Parmenter, corporate responsibility manager for Delhaize America. “The health of fisheries is important to us as a retailer, both for the long-term product supply and for reducing the environmental impacts of products we sell ... Our company is committed to operating responsibly, and our new program reinforces this commitment.”
    KC's View:
    For an increasing number of consumers, this kind of policy will make a difference in which retailer they choose.

    It also is sort of important for the planet.

    Published on: July 19, 2010

    The Associated Press reports that the Great Lakes Brewing company in Cleveland has re-released a bitter beer that it makes under a new name - “Quitness,” to mark the decision by LeBron James to leave the Cleveland Cavaliers to play with the Miami Heat.

    According to the story, “30 gallons of ‘Quitness’ ale sold out in three hours Wednesday at the company’s downtown brewpub. The beer will return Saturday on a first-come, first-served basis.”
    KC's View:
    Nice touch. If we don’t laugh, we’ll all go insane.

    Published on: July 19, 2010

    The New York Times reports that Pepsi is looking to reignite the cola wars with Coke by producing a new version of a commercial first shown in 1995. In it, the Times writes, “a Pepsi delivery driver pulls into a diner where a Coke truck is parked and sits down at the counter several seats away from the other driver ... The Coke driver slides a can of his product toward the Pepsi driver, who takes a sip, smiles and returns it, but when the Coke driver reciprocates by taking a sip of the Pepsi, he likes it so much that he will not return it. Their expressions suddenly turn furious and, in a final shot from outside the diner, a chair flies through the window. The commercial has been viewed more than 1.7 million times on YouTube.”

    Now, the commercial replaces the soft drinks with Coke Zero and Pepsi Max...and it is the two drivers who come hurtling through the window after the Pepsi driver records the event on his smart phone and threatens to put the video on YouTube.
    KC's View:
    I love the smell of cola wars in the morning. It smells like...lots to write about.

    Published on: July 19, 2010

    The Wall Street Journal reports that Thomas M. Bloch, the former CEO of H&R Block Inc. and the son of the company’s co-founder, has resigned from the firm’s board of directors, saying that “he has grown increasingly worried that the panel would ‘bow to pressure from short-term-oriented shareholders’ as the company's share price has declined. He urged the board members not to tolerate plans that cost the company market share, oversee management's attack on the firm's challenges and avoid short-term objectives that could thwart long-term value.”
    KC's View:
    Okay, you’re wondering right now why this story is on MNB.

    Here’s why.

    First of all, it is right in MNB’s wheelhouse when a business executive puts long-term objectives above short-term market value. H&R Block may not be a retailer that we normally cover, but this is behavior of which we approve...and it deserves to be noted.

    Another thing. A number of stories note that Block has problems with the just re-elected chairman of the company, believing, as Reuters put it, that he has tried to refocus the company on tax preparation, but ... may have missed the ball in acknowledging the growing acceptance of do-it-yourself tax products.”

    Seems to me that if you are in the tax preparation business and have not rejiggered the structure and economics to adjust for the fact that so many people are able to do their taxes on their computers and file them electronically, then you’ve done more than “missed the ball.” You’ve probably lost the entire game.

    This actually goes back to the point I tried to make above in my “Eye-Opener.” How many business leaders preside over the demise of their operations because they don’t acknowledge fast enough the profound changes that are taking place that could make the world unrecognizable?

    Published on: July 19, 2010

    • In Texas, the Lufkin Daily News reports that Brookshire Brothers has “laid off 47 employees at its corporate office, distribution center and central bakery in Lufkin, according to a spokesperson for the company. The laid-off employees were among the 549 workers at the grocery company’s three facilities on Lufkin’s north loop ... The layoffs are the result of a months-long study conducted by an outside consulting company.”

    According to the story, “No top-level executives lost their jobs, nor did checkers or other employees at Brookshire Brothers’ grocery stores.”
    KC's View:

    Published on: July 19, 2010

    James Gammon, a character actor who was best known for playing the gruff manager in Major League, but who also populated westerns such as Silverado and Appaloosa as well as TV’s “Gunsmoke,” died last Friday at age 70 after a battle with cancer of the adrenal glands and liver.
    KC's View:
    One of my favorite character actors of recent years...and he was priceless as the tire salesman turned manager in Major League.

    Published on: July 19, 2010

    • On Friday, MNB noted that the US Department of Defense has awarded Food Lion with its 2010 Employer Support Freedom Award, the highest recognition given by the U.S. Government to employers for outstanding support of their employees who serve in the Guard and Reserve.

    Well, we missed the fact that Dollar General also was one of the 15 employers (none of the others were in the industry) earning the award. Which we acknowledge now, with congratulations.

    • On Friday, we reported on the fact that Walmart and Procter & Gamble were collaborating on their second family-friendly movie to be shown on NBC, but mistakenly identified the first as “Secrets of the Moon.” It was actually “Secrets of the Mountain.”

    Apologies to Walmart, P&G, and the Mountain.
    KC's View:

    Published on: July 19, 2010

    ...for the late posting of MNB this morning, and the late delivery of the MNB Wake Up Call. Travel arrangement didn’t exactly work out as planned, and I didn’t have the internet access I expected. Mea culpa, mea culpa, mea maxima culpa.
    KC's View:

    Published on: July 19, 2010

    ...will return.
    KC's View:

    Published on: July 19, 2010

    In the British Open, Louis Oosthuizen - a 27 year old South African - won the British Open championship at St. Andrews in Scotland by seven strokes. It was his first major championship and, ironically, it occurred on the 92nd birthday of former South African president Nelson Mandela.
    KC's View: