Collaboration, not negotiation, sets the tone at conference

11/20/2012

For the grocery industry to succeed in the years ahead, retailers and suppliers need to do more "collaborating" and less "negotiating." That was a recurring theme at Canadian Grocer’s second annual Thought Leadership Conference on Monday.

The conference brought together some 300 executives from across the grocery channel at the Fairmont Royal York hotel in downtown Toronto. They listened intently (and occasionally scrawled notes) as presenters discussed topics ranging from sustainability and technology to consumer insights and forecasts for 2013.

The need to collaborate was driven home early by Joe Crafton, president of marketing and sales service company Crossmark.

Crafton cited a study by the Grocery Manufacturers Association called “Winning Where it Matters” that found successful consumer packaged goods companies are five times more likely than non-successful companies to make collaboration with retailers a strategic priority. They are also six times more likely to share new product ideas with retailers at least 18 months before launch.

Crafton said that deep supplier-retailer collaboration is a departure from the historic “bow-tie” approach that saw suppliers negotiating with retailers.

“Everyone shares the shopper,” Crafton said, so it makes sense for suppliers and buyers to work together. “You cannot do shopper marketing sitting in your office. You have to be in front of the customer.”

Without collaboration, he added, effective category management will be impossible, shipping will be more expensive and data management will be fragmented.

Bob Fregolle, global customer business development officer at Procter & Gamble, picked up on the same idea during his speech. He argued that negotiating is failing the food industry. He urged retailers and suppliers to move beyond talking and to start collaborating more often.

Technology

Given how quickly consumers are adopting smartphones (more than half of Canadians now own one), it was inevitable that technology would pervade several speeches.

Crossmark’s Crafton, for instance, predicted that loyalty cards will soon make their way onto smartphones and said retailers should be excited by this development.

“Smartphone shoppers have 14 per cent higher conversion rates,” he noted. And 58 per cent of smartphone owners use their phone to shop in the store. That means companies can tailor campaigns and offers to each individual customer. “Now we’re trying to sell the right message to the right shopper in the right moment.”

Russ Dunham, vice-president for Nielsen's NeuroFocus business, spoke about neuromarketing, a relatively new field that studies consumers' cognitive and sensory response to products and ad campaigns.

According to Dunham, retailers, manufacturers and distributors need to seriously consider consumers’ subconscious. That, he says, is where many purchase decisions are made.

Once companies figure out what customers are actually responding to through sophisticated research (rather than what consumers say they’re responding to), the companies can improve their marketing campaigns, product packages and overall store experience.

Take, for example, NeuroFocus’ work with a “chip and dip” company. The company (which Dunham did not name) wanted to improve its marketing campaign, and knew the only way to do this was to learn the “highlight of the product experience” for the consumer.

So Dunham and his team took the act of eating chips and dip and broke it down to its component parts (such as opening the package, scooping the chip into the dip, and eating it). The highlight, they discovered, was the anticipation around eating the snack after dipping. Armed with this knowledge, the company built a successful marketing campaign around the dipping process.

The lesson, Dunham noted, is that neuroscience can help sell products.

Panel

A CEO panel, moderated by Canadian Grocer editor Rob Gerlsbeck, closed the day. It featured four big-name presidents from the food industry: Shelley Broader of Walmart Canada, Eric La Flèche of Metro Inc., Darrell Jones, of Overwaitea Food Group, and Tom Gunter, of ConAgra Foods Canada.

The presidents agreed that the price-driven mindset shoppers have had since the recession started in 2008 will continue persist over the next year. “We do treat this as the new normal,” said Broader, adding that Walmart’s research shows shoppers have an average $37 less disposable income than they did last year. This, she noted, means customers will be willing to travel and research for the lowest-priced products.

La Flèche said retailers have to offer more than just rock-bottom prices to stay competitive. That can mean convenience or good service.

When asked if they were watching online grocery shopping and drive-through formats (the kind seen in Europe), the CEOs were unequivocal: Yes. But none of the leaders said whether they planned to launch similar initiatives soon.

The question “What is the most exciting thing in your business right now?” produced interesting answers from the panelists. For Gunter, it’s the ethnic shifts, demographic changes and the growing importance of discount stores. “What are you going to do to address them?” he asked the audience.

Jones agreed with Gunter, noting, for instance, that Edmonton has become a “huge multicultural melting pot,” forcing supermarkets there to deliver a unique mix of products.

Broader argued the savvy customer is her greatest excitement. Social media, she said, is “exciting and dynamic,” and allows retailers to communicate directly with consumers.

Gerlsbeck then asked whether retailers were witnessing the demise of the centre store. La Flèche said his company was certainly “not abandoning” the centre store, but rather, finding new ways to tailor the assortment for specific demographics.

Jones, meanwhile, said natural and organic foods are categories that are drawing people into the centre store. “Niche products will bring people back,” he argued.

Broader acknowledged the industry “may have found ourselves irrelevant in the centre store.” The specific community that surrounds each store has to be targeted and served, she said, and companies need to be “flexible enough to meet those needs." Here, she cited Walmart’s own Store of the Community program in which Walmart hyper-targets selection in each store to the people who live around it.

Finally, Gunter advocated for new and innovative merchandising strategies. “I still see sections that remind me of what I saw when I first started my career.”

Priorities in 2013 varied by CEO. For Broader, it’s talent acquisition and retention. “Retailers struggle with an image that you can’t have a great career in retail,” she said. “You can.”

Jones said the top item on his to-do list is continuing to earn the trust of the community through strong food safety practices.

La Flèche said growing discount square footage is on his radar for 2013, while Gunter noted that the key for the New Year will be adjusting strategies to ensure the company is always making the right choice.

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