Transcript joint value creation beyond price

JOINT VALUE CREATION
BEYOND PRICE
November 12, 2004
BACKGROUND
• Market place increasingly challenged by
deflation and declining or stagnant market
size.
• Less genuine innovation and reduced
loyalty to both manufacturers’ brands and
to retailers’ outlets.
• Manufacturers and retailers rely more and
more on “price” as the only value driver.
DEFLATION IN GROCERY PRICES
Change in real grocery prices, 1993-2001 in constant money
U.K.
Germany
Italy
-7,9
-6,0
-3,8
Spain
U.S.
France
Source: WEFA (National Statistics Institutes and OECD)
-1,7
0,3
0,6
ECR EUROPE BOARD
• The current trading environment, shaped
among others by discounters, has
emerged because ECR retailers and
manufacturers have not yet been able to
totally fulfil consumer wishes.
• Price is only one value driver. ECR Europe
recognises the role played by other value
drivers (e.g. health, convenience,
proximity, changes in household profiles).
• Any discussion on consumer value needs
to be based on shopper insight and
identification of consumer needs.
BOARD RECOMMENDATION
• The Board recognised the
importance of such a discussion.
It recommended that the Advisory
Group take it further at its next
meeting, focusing on consumer
needs, value creation and
alternative business models.
JOINT VALUE CREATION
BEYOND
PRICE
BRIEF
PROJECT OBJECTIVES
• Review the current environment and
present innovative solutions in the
shopping experience and product
offer which lead to market growth by
addressing other consumer/shopper
value than price
• Analyse the joint business process to
increase shopper and consumer
attraction and loyalty.
GROWTH IS FOCUSING ON CHANNELS WHICH
EMPHASISE PROXIMITY/CONVENIENCE/SERVICE
Drivers Underlying Discounter Growth
Shopper/Social Demographics
Price/Value
Discounter Appeal
Proximity
Store Selection
• 63% - close to home
• 45% - good value for money
• 45% - used to it
AC Nielsen – Shopper reseearch
Ease of Shopping Experience
•
•
It takes 20’ to run weekly shopping at discounter,
45’ in supermarket (vs 90’ 10 years ago)
On average for every shopping hour
– 32 minutes are spent in car
– 28 in store
Source:adapted from ID Research, The New Bottom Line
ECR BOARD – November 28, 2003
Not everyone is driven by price…
SHOPPER SHARE IN PRICE SEGMENTS
CATEGORIES:
Low pricesegment
Middle price
segment
High price
segment
MIILK
38.1
18.5
43.4
YOGHURT
24.1
60.8
15.1
LAUNDRY
28.1
13.1
58.8
DISHWASH
23
22.4
54.6
HEALTHCARE-
28.9
45.5
25.6
FRAGRANCES
40
-
60
SHAMPOO
22.8
44
33.2
Diller study Germany - 2003
Store Format Sales Growth
+70%
+60%
•Drug stores: Atmosphere,
Focus and Service
Drug Stores
+66%
+50%
Discounters
+48%
+40%
+30%
Hypers
+31%
+20%
+10%
0%
1999
2000
2001
ECR Brussels – Better Shopping – P.Polman
2002
Supers
+24%
2003
ROADBLOCK TO VALUE
CREATION BEYOND PRICE
The buyer-seller relationship looking
on quick return rather than looking to
build sustainable value for
o the consumers and shoppers
ofor the companies.
THE RECOMMENDATION
• ECR Europe shall set up a project to
improve Joint Value Creation Beyond
Price.
• The project aims at encouraging a
wider usage of Joint Business
Planning via the development of
principles, education and training with
the understanding of shopper and
consumer needs as its foundation.
Joint Value Creation Beyond Price
The society Trends
Understanding Consumer/shopper Value
Understanding Retailer/Manufacturer
Strategy
Joint Value Creation
Management
Scope : product/service offerings
Scope : shopping environment
Value
Measurement (KPI)
= Joint Business Planning
JOINT BUSINESS PLANNING
Integrates
various ECR
demand and
supply side
processes
and add on
financial
dimension
PROJECT DELIVERABLES
• Cross-category shopper insights that
support value creation beyond price
• Principles of joint business planning to jointly
create value for the shoppers and the
consumers
• Business cases which demonstrate
sustainable joint value creation
• Joint value creation KPIs
• A joint Business Planning training program
to leverage all value drivers
ORGANISATION OF WORK
• Minimum 5 retailers would need to actively
engage in the project
• Champions should be recruited: P.Polman
accepted.
• The project group would require an
involvement of 2 day-a-month – at least in
the project beginning
• Importance of the role of national
initiatives stressed
Call for nomination responses
Retailers Confirmed
A.Heijn, Interdis, Selex, Superquinn,
Tesco, Tradeka, Veropoulos
Manufacturers:Confirmed
Barilla, Colgate Palmolive, Ferrero, Heinz,
Heineken, Henkel, Kraft, Nestle, P&G,
Unilever
Academic: University Of St Gallen
Joint Value Creation Beyond Price
• Questions?
• Comments?
• Interest?
• Next steps?
SUBMISSION FORM
In your folder
PARTICIPATION IN ECR EUROPE PROJECT
VALUE CREATION BEYOND PRICE
Please return form by November 26, 2004
• Name (of person filling out the form) :
• Company / Organisation :
I would like to nominate the following person to :
•  Take part in the project team