Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI Management Ventures, Inc. The evolving meaning of value in the current environment.

Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI

Management Ventures, Inc.Management Ventures, Inc.

The evolving meaning of “value” in the current environment

•Presented by Vincent Verdier•MVI

•November 2008

2 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI

Copyright and DisclaimersCopyright and Disclaimers

Copyright © 2008 Management Ventures, Inc. All Rights Reserved.20 University Road, Cambridge, MA 02138 USA (617) 588-4100 [email protected]

No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photography, recording, or any information storage and retrieval system now known or to be invented, without the express written permission of Management Ventures, Inc.

The printing of any copies for back up is also strictly prohibited.

DisclaimersThe analyses and conclusions presented in this seminar represent the opinions of Management Ventures, Inc. The views expressed do not necessarily reflect the views of the management of the retailer(s) under discussion.

This seminar is not endorsed or otherwise supported by the management of any of the companies covered during the course of the workshop or within the following slides.


Defining what VALUE stands for is Defining what VALUE stands for is becoming more complexbecoming more complex

• “Customers told us we were not giving them value. From that day on we determined to follow the customer and not the competition.”

• Terry Leahy 2004, CEO Tesco

Source: Tesco, Financial Times, May 2008

• In response to why more ABC1 shoppers are visiting Aldi:

• “If you went back 10 years, the majority of what I sold was in tins and packets. Now what I’m selling has switched over to fresh foods, chilled foods and ready-prepared foods, and this is a far more appealing range to that kind of consumer.”• Mr Paul Foley, MD Aldi UK & Ireland


VALUE is a ratio between quality and price: VALUE is a ratio between quality and price: but room to manoeuvre shrinksbut room to manoeuvre shrinks

Low Quality Perception

High Quality Perception

High PricePerception

Low PricePerception

Source: MVI Research and analysis

Premium Supermarkets

Discounters

TraditionalSupermarkets

EDLP Supermarkets

VALUE


For non-grocery, Amazon has built the For non-grocery, Amazon has built the best VALUE positioningbest VALUE positioning





Low PricePerception

VALUE

AM

AZ

ON

•Lower price of shipping

•Added categories, including premium products and brands

•Global credit card, access to loyalty card support


Retailers position their VALUE offer by Retailers position their VALUE offer by different meansdifferent means

“Value” private labelsEDLP strategy giving

the best “value”Good “value”?

A mix of price and quality

“Our consumers are spending less.

It is about them getting better value

from Waitrose”.M. Price, MD Waitrose

Source: MVI Store visit; Financial Times, Nov. 2008

Tesco, UK

Wal-Mart, Argentina Carrefour, RomaniaAuchan, Russia


And VALUE does not have the same meaning And VALUE does not have the same meaning everywhere, which impacts place of purchaseeverywhere, which impacts place of purchase

• There are wide geographical differences defining in which type of stores the “cheapest” product can be found...• 1. Western Europe: Fragmentation of the historical HM

shopping trip in favour of price-focus retailers• 2. US/LatAm/China: Consolidation of the HM shopping trip,

still seen as the cheapest place where to shop

• ...Which impacts retailers strategies:• 1. Strategies focusing on building Frequency:

– Straight discounts; Focus on destination categories (i.e. fresh)

• 2. Strategies focusing on building Basket:– 3 for 2 promotions, cross-merchandising


So how do retailers evolve to achieve the So how do retailers evolve to achieve the best VALUE offering?best VALUE offering?

• Retailers as shoppers’ defender

• Redefining “value” in shoppers minds

• Private labels: focus on price or quality?

• Implications


Being on the side of the consumer is Being on the side of the consumer is becoming more importantbecoming more important

Source: MVI Store visit; Lidl; Leclerc; Dia Argentina - CIES

Lidl Spain:“We have negotiated for you!”

Dia Argentina:“If you pay more,

it’s because you want it!”

Leclerc France: “More purchasing power

for you, now!”


Redefining VALUE in shoppers’ minds: the Redefining VALUE in shoppers’ minds: the advantages of EDLP retailersadvantages of EDLP retailers

• “All retailers which became successful, such as Wal-Mart and Tesco, did so by implementing a clear EDLP strategy”• Gilles Petit, ex-MD Carrefour Spain

• An efficient business model that reinforces the value positioning

Source: El Pais, May 2007; MVI Store visit

Mercadona, Spain

Kaufland, Poland


But even EDLP retailers must keep refreshing But even EDLP retailers must keep refreshing the way they communicate on pricethe way they communicate on price

Source: MVI Store Visit

“At Colruyt, you constantly take advantage of promotions run at other retailers. To do so, we collect all circulars, look for promotional prices and compare them with our prices. When necessary, we adapt our prices.Every week, 4,000 prices are collected this way, on top of the regular checks we are undertaking. So you can enjoy the best prices for each product, anytime.At Colruyt, you benefit from all promotions run at other stores!”

Colruyt’s Extra reductions card

Source: Colruyt, MVI Store Visit


Private label is receiving more marketing Private label is receiving more marketing attention in-storeattention in-store

• Globally, retailers are increasing communication on their ranges of private labels

• In the current environment, mainstream retailers are trying to increase awareness of price competitive private labels

• At the same time, the discounters have found that messages concerning quality are increasingly effective


For traditional SM, trading down shoppers For traditional SM, trading down shoppers through PL can a risky strategythrough PL can a risky strategy

Tesco has put signs across the

front of its UK stores to promote

its new “discounter” private label

ranges.

Hit is advertising a wider range of “discounter”

private labels as German price sensitivity has

increased

Source: MVI store visits


While discounters like Lidl are communicating While discounters like Lidl are communicating quality and value of their private labelsquality and value of their private labels

Source: MVI store visits

Germany

Germany

France

Hungary


And supporting PL’s quality and added-value And supporting PL’s quality and added-value at POP allows retailers to gain market-shareat POP allows retailers to gain market-share

Source: MVI Store Visit

•Price advantage•Functional elements•Emotional elements•Quality communication


ConclusionsConclusions

• The crisis is global, however retailers’ responses are local:• Which channel/retailer drives the VALUE positioning in

your market?• How can you align to this positioning?

– 4Ps– Basket driven strategy?– Traffic driven strategy?

• PL are gaining greater exposure, especially at POP• Shopping environments which reduce the amount of

point of purchase advertising benefit private label sales


So where are your brands positioned in this So where are your brands positioned in this environment?environment?




Low PricePerception


VALUE

Thank You!Thank You!

. . . A Partner in Your Success. . . A Partner in Your Success

Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI

Vincent VerdierAnalystEMEAMVI

EMEA Headquarters6 More London PlaceTooley StreetLondon SE1 2QY

[email protected]

Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI Management Ventures, Inc. The evolving meaning of value in the current environment.

Documents

mvi value

licensed site

mvi retailers

mvi research

mvi copyright

best value good value

mvi management ventures

price source