Global Brands Get Local To Serve Knowledgeable

Shoppers Dr. John L. Stanton

Professor of Food Marketing Saint Joseph’s University

Strategy is an interesting word. It may be the most misused word in

business.

Some people use strategy to be interchangeable with planning or just

having a meaning to be "really important."

Definition?

•  There are tons of academic definitions of strategy...most of them boring and not useful.

•  The origins of the word come from the Greek. Meaning the art of the general. Strategy is really about how you intend to beat the competition.

If we think about warfare we recognize that there are three

key elements:

1.  The competitors 2.  Our assets (products, etc) 3.  The battlefield

Or who we fight. Where we fight and what

we fight with!

Two additional points 1.  Strategy takes place before the battle begins. It is the description

of how we intend to beat the competition. I think of boxing. Before the bell rings the corner man, explain in detail how his boxer can win. He explains how his competitor has a weak jaw and a long jab. And he describes what to do. But once the bell rings it is all tactics...can the boxer or will the boxer follow the strategy. I know that many companies have a strategic planning meeting, draw up a beautiful plan and never open it again until the next meeting. The strategy should be the most used document in the company because it describes how you will beat the competition.

Two additional points 1.  If either the competition changes or the battlefield

changes, you better think about changing the strategy. We can look at the battlefield in two ways. One the physical landscape (retail) or the psychological landscape (the consumer). Both have changed dramatically in the recent past and therefore should be reconsidered when developing your strategy.

0.331

0.162

0.078

0.078 0.038

0.015 0.014

Foods Sales by Outlet 2011

1

2

3

4

5

6

7

Grocery

Supercenter

Club

Mass/no super

Drug $ Store Convenience

How has the battle changed?

What would this have looked like 30 years ago?

•  It was about 83% would be grocery store .

•  Lets look at the changing battlefield (retail environment) and ask two questions – How has this changed my strategy – How has changed how we collaborate

Let’s start with “new formats” from old companies

Fresh and Easy is a Tesco format with a focus on convenience and prepared food. They are small

stores with limited assortment but lots of PL

Stores are approximately 9,000 sq. FT. and are designed to offer high quality, fresh food at competitive prices, capturing top-up basket shoppers looking for meal solutions. As part of the convenience concept, stores have a range of around 3,500 SKUs including chilled ready meals, snacks and salads, ready to heat prepared meals, baked goods, fresh produce, meat, poultry, seafood, juice and coffee. Prepared foods account for around 10-15% of the range.

Convenience Food !'Fresh & Easy Ideas' is

designed to create excitement in what is generally a promotion-free environment. Meal ideas are advertised in the retailer's circular and online, and then integrated in-store. Most products featured in the Ideas section are private label.

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Ready Meals

" Tesco’s real strength - healthy, prepared foods - is showcased in the ‘Fresh From Our Kitchen’ section. The department is almost entirely private label and consists mainly of home meal solutions, meaning that the products need to be heated up for at-home consumption

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Demonstrating its mission !Somewhat cheekily, Fresh & Easy gives Californian hybrid car drivers preferential treatment.

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Safeway is at it as well!

•  Safeway got on board with The Market at Vons in Long Beach.

•  •  Supervalu opened a 16,000-

square-foot prototype called Urban Fresh in the Chicago market.

"Everyday IGA will combine the variety and selection of a full-sized supermarket into a more user-friendly format through a carefully focused selection of national and IGA-branded products -- what I like to call a 'solutions store' --

Some Grocery chains are just focused on the

Fresh convenient prepared meal

market and are not part of a bigger

chain.

Like The Fresh Market

The Fresh Market

As Retailers create new formats are you keeping up with the

change

Are You Trying To Fit The New Players Into The Same

Collaboration Models As The Traditional Stores.

Supermarkets are using multiple formats for different markets:

Publix: Hispanic: Sabor & Healthy/Fresh: Greenwise

Delhaize

Whole Foods' company executives are calling the store a "groceraunt," because it not only offers a wide variety of prepared foods' options--along with tons of fresh foods and natural and organic grocery products--but also has numerous and varied in-store dining or restaurant venues in it. This eclectic mix of foods, beverages and much more, which shoppers can take home to eat or cook, or enjoy by dining in the store, equals a Whole Foods' "groceraunt", rather than a mere grocery store or supermarket.

Grocerants the Next Big Wave!

The grocery sector lead by companies like Wegmans, Metropolitan Market, A&P, Harris Teeter and Safeway all are reconfiguring their ready to eat ready to heat grocerants niche food product lineup and repositioning it in their stores. With new products, packaging and consumer price points that are driving traffic. All of these companies are reporting consumer frequency and acceptance way up. The margins for the grocery stores are higher in this niche than the rest of the store; that’s a win-win.

So far Walmart has opened five Walmart Express stores in Arkansas, North Carolina and the Chicago area and is pleased by the results. The company hopes to have 11 of the new stores open by the end of the year. The Walmart Express stores are designed to for rural areas where the population can't support a traditional store and urban areas where space constraints prohibit large-scale outlets.

Low prices stores grow faster and want lower prices

Worldwide Discounter are growing faster than the rest of the market

Genre of Healthy foods/organic food/

local: Whole Foods

Farmers Market Freshness/Quality:

Sunflower Markets

It is not just the major grocery chains that have changed formats.

Look at the “Gas Stations” and convenience stores

Convenience Stores and Gas Room to grow!

•  Nielsen’s research shows that sales of private label products rose over the last year nearly 20 percent to $826 million in convenience stores, compared to a 15 percent increase in drug stores and just under 10 percent in supermarkets.

Exxon

Home Depot

BP

Ye Olde Convenience store has changed

And when you are just

at the pumps they will still try to get some

of your food

dollars.

Coupons are being printed for immediate purchase inside the store!

Convenience Stores

•  The 4.4% growth rate of convenience store in-store sales surpassed the growth rates of other competing channels, including warehouse stores/clubs (4.0%), restaurants (3.4%), drug stores (2.4%) and grocery stores (2.3%), based on U.S. Department of Commerce numbers.

Look At 7 Eleven

The “Express Stores”

•  Wal-mart •  Giant Eagle •  IGA

Wal-Mart Express •  Wal-Mart announced that it was developing a

small format that would range between 15,000 and 30,000 square feet for deployment in either rural or urban environments. The primary small concept, Wal-Mart Express, will and incorporate a pharmacy in some locations and not in others. The stores will also feature varying levels of fresh food products and other items.

Giant Eagle Express

•  The store combined Giant Eagle's GetGo gasoline outlet with a drive-through pharmacy and a specialized grocery store of less than 14,000 square feet.

•  The Giant Eagle Express store is open 24 hours a day, seven days a week. Giant Eagle Express' ready-to-eat menu now includes breakfast, lunch and dinner selections, such as fresh breakfast sandwiches, which were recently promoted for two for $3, along with gourmet muffins, deli wraps and sandwiches.

IGA Express

While IGA Express is their version of the convenience store, featuring essential, traditional food items with upper-end snack, beverage and confectionary items."

Any new Players??

•  How about Truck stops

•  TravelCenters provides professional drivers services for the long haul. The complex design includes gasoline, foodservice, retail, entertainment, and other roadside conveniences.

Travel Centers

Drug Stores have changed Most drug stores have

signs that proclaim “Food Market”

But wait is it a Pharmacy or a convenience store???

•  The Walgreen Co. is changing along with the drug store industry by looking to the past, as well as to the future. The retailer is harkening back to the days of the soda fountain—it has been ramping up its fountain drink, coffee and snacks offering through Café W, a compact counter version of a convenience store’s beverage and snack area.

Almost 10% of their total sales are in edible groceries

How About Famima? Targets upscale women

How about Fast food business getting into the convenience store

business

•  Jack in the box

Dollar Stores

•  DOLLAR STORES ARE RAPIDLY EXPANDING IN FROZEN AND CHILLED FOODS. THE LEADING CHAIN, DOLLAR GENERAL, HAS ADDED COOLERS AND FREEZERS TO 2,400 OF ITS 6,200 STORES, AND PLANS TO HAVE THEM IN ALL

•  DOLLAR STORES TODAY ARE LOOKING FOR PRODUCTS AND PACKAGE SIZES TAILORED TO THEIR NEEDS (SIMILAR TO CLUB STORES). INCREASING "CONSUMABLES," INCLUDING HOUSEHOLD PRODUCTS AS WELL AS FOOD, IS SEEN AS KEY TO BUILDING TRAFFIC.

Look at all the food store items!

And Private Label

Dollar Stores

•  Four stores alone have about 22,000 outlets.

•  There sales are about $17 billion •  There growth rate is a compounded 8%

from 2006 versus 0% for Safeway and 5% for Kroger

Let’s Look at some farther out possibilities

Fresh, nutritious meals and snacks prepared by our on-site gourmet chef.

Home-style Meals Available for Takeout

•  1700 Kinder care Do you think mothers might Value a brand called Kinder Care brand food for Kids

YahooDem

Disney (and I’m not talking about food service)

They already have PL Mac and Cheese what else might they sell?

Have you asked?

Home Depot Don’t they just sell building materials

How many coffee items do you think Staples offers…how about 40? And not one was PL

Available at Staples

Everyone Will Try To Sell Consumers Their Next Meal

•  HSN and QVC are already into food but just starting.

•  One show sold $1million in of pasta sauce 30 minutes! (at $14.00 a jar)

Everyone Will Try To Sell Consumers Their Next Meal

•  Schools are offering take home meals to busy moms.

•  Look at who is behind it!

Companies like Campbell soup in involved

College Books stores

•  Think college students eat a lot?

•  Drink a lot? •  Think they go to the

Supermarket? •  Think Bookstores might

want to make more money as on-line steals their book sales

is selling foods that go with their products

For example they sell pasta sauce with the

pots, spices, oils, candy, mixes for tortillas

etc.

Are you ignoring the emerging distribution for food?

•  Are you putting all their eggs in one basket

Darwin Has Often Been Misquoted As Saying

‘Only the Strongest Survive.’ However, what he really said was “In the struggle for survival, the fittest win out at the expense of their rivals because they succeed in adapting themselves best to their environment.” Charles Darwin (1809 - 1882) The Origin of Species 1859