When Sainsbury’s recently announced its strategy to address losses to the discounters, the reactions from some suppliers were extreme.
On the news that it was assessing both the ‘emotional’ and ‘functional’ connection to consumers and shoppers of all brands across some 34,000 SKUs, the Grocer reported that Sainsbury’s declares war on brands’’ and that some suppliers ‘’were left reeling’’. The prospect of their precious portfolios being relegated to the ‘commodity’ brand list and therefore being in imminent threat of delist, clearly impacted the commercial directors of many a Sainsbury supplier. Sleepless nights were made worse by reports of requests for a 20% reduction in the cost of goods sold in order to secure listings.
Sainsbury’s perspective is that it is looking to establish ‘a home for brands’, offering shelf space for brands with genuine points of difference and real emotional connections, as part of a differentiated range strategy that needs to clear out the dead wood, reduce SKU duplication and therefore reduce overall levels of complexity and cost – all mission critical in their attempt to win back customers lost to the discounters.
Setting aside the as yet undetermined cost of goods concerns, put simply, we at Quantic agree with Sainsbury’s. The days when secondary and tertiary brands could expect to warm the shelves of UK retailers, supported by the crutch of ever-increasing promotional spends, are long gone. The news coming out of Holborn shouldn’t come as a surprise to anyone working in the industry. It might be harsh, but it’s today’s current reality.
Retailers sell categories. Categories, of course, depend on brands, but Brand managers’ portfolios are of little interest if they don’t perform against today’s consumer expectations and help drive overall category growth. Brands are the industry lifeblood, bringing quality solutions against consumer’s needs, they provide innovation, new technologies and ultimately, new footfall into retailers. Retailers value brands for all of these reasons, but only those which genuinely deliver. So, if your portfolio isn’t keeping pace with evolving consumer needs better than your competitors, why should any retailer support your brands? Describing them as ‘commodity’ might hit a raw nerve, but in reality, it probably isn’t far off the mark.
Retailers are looking for suppliers who are in touch with changing category dynamics and who adapt accordingly. Retailers want to tap into their suppliers’ insights to supplement their own research. Suppliers with real clarity on where their categories are heading, based on the best consumer and shopper insights, are well placed to future-proof their portfolios. Future-proofed brands remain consumer-relevant.
Leading suppliers understand and anticipate the context in which their brands operate – the category itself. They adopt a Category Marketing approach and have a clear vision for the category’s development. They understand quantified targeted growth drivers that unlock new consumption behaviours. They understand the barriers preventing the targeted new behaviour happening and they set strategies to overcome them. They are clear on the consumer typologies they need to target and the channels, missions and shopper needs through which they can best reach them. They internally align across marketing, customer marketing and sales functions so that there is a series of connected capabilities delivering against a consistent and common objective.
Leading suppliers then align their category vision with their key retailers. Developing the category becomes a common language and a common objective demonstrated on a daily basis and not at one-off reviews held at fancy off-site venues. The best suppliers prioritise growth opportunities with their customers. They create joint business plans built on the execution of activities aligned against their shared and agreed understanding of strategic imperatives. They shape these plans based on that retailer’s own strategy and shopper typologies.
Finally, leading suppliers do one more thing brilliantly – they understand that category growth should be fuelled by their portfolios. They align their brands against the drivers of growth. Every piece of renovation, innovation, brand communication or shopper marketing execution can be understood by their retail customers against the agreed strategic priorities. Their brands are future-proofed against the best understanding of tomorrow’s changing consumption patterns. Future proofed brands remain relevant. Relevant brands stay on shelves – no questions asked, by Sainsbury’s or anyone else…