The Shopper Forum ™

Welcome to Shopper Marketing Monthly - June Edition

We hope this newsletter will keep you up to date on the latest Shopper Marketing, Shopper Insights and Category Management initiatives.

To find out more contact: 02 9452 7777 or email:info@oblique.com.au

Shopper Marketing News:

Why we buy what we buy...

A shopper wants to buy some cheese, but he must decide between the 197 varieties on offer. Conventional wisdom says that such a huge choice makes it more likely he'll make a purchase. But that doesn't take into account human unpredictability, according to the new discipline of behavioural economics. Aditya Chakrabortty reports

Choices, choices: Why do we buy the items we do?

The Sainsbury's on London's Cromwell Road is hardly a superstore, yet it stocks 197 varieties of cheese (plus another 27 diet versions), 42 types and sizes of bottled water, and enough sub-species of tomato to perplex a pizzeria. It is, in short, a slalom course of options and decisions, of a sort we face every day - from picking gas suppliers to taking out a mortgage. The question is: do we always choose what is right for us?

No, argues Dan Ariely, one of an increasingly influential group of behavioural economists, who analyse how people behave everywhere from supermarkets to stock markets - and they have found a chasm between what traditional economists and regulators presume we do, and what really happens. One of the most exciting areas of research, behavioural economics could overturn many of the assumptions and assertions that shape modern policy-making.

Ariely presents his case, as is the behaviouralist way, based on evidence from real life, such as Sainsbury's. Instead of algebra, he uses shopping trolleys; in place of textbooks, he refers to shelf prices. And to attack the cliche that people always want more choice, he deploys ... jam.
"Economists know all about choosing jam," he says, ambling down an aisle with 73 varieties. He describes an experiment where academics set up a tasting booth in a store in California. On some days they put out six kinds of jam, on others 24. When the booth had 24 types, it was mobbed - "there was more colour, more excitement". But it was the sales that were truly remarkable: with six jams on show, 30% of customers bought a jar; when 24 were out, only 3% did. "Jams are hardly complex things, but people saw 24 stacked together and thought: 'I have no idea how to deal with this.'"
If that is how choosing between strawberry or plum makes us feel, imagine the toll looking at mortgage options takes on the nerves. What Ariely's jam study suggests is that, contrary to economic belief that more choice is better, confronted with too much complexity, we make bad decisions, or stick with what we have already got. An example of that kind of inertia is right behind him. Three Chinese-origin boys are motoring down the aisle, their trolley stacked high with cheese-and-tomato spaghetti ready meals. They are engineering students.
"Did your parents teach you this was good to eat?" asks Ariely.
"No," they chorus.
"There must be other things you could have. Of all the instant foods available in the UK, the only option you like is cheese-and-tomato spaghetti value meals?"
There is no reply, only nervous giggling. It's evidently hard work being grilled by an intense academic in red trainers.
"They have habits!" he beams. Orthodox economists don't recognise habits. "They assume ordinary people do a constant cost-benefit analysis on everything they do. But actually, after you reach a decision, you say, 'That's the end of it!' - and just continue." Which is one reason why more competitors entering an industry does not immediately prompt customers to swap.
Jams, ready meals and a large dollop of human psychology: no wonder these behaviouralist upstarts have come in for some sniffiness from the academic old guard. Most British students still graduate without ever coming across the field. Which is a shame, because a lot of behaviouralism sounds like an extended freshers' week: in the name of research, Ariely has served beer laced with vinegar, and persuaded Berkeley undergraduates to masturbate while filling in questionnaires on laptops (wrapped in protective film, naturally).
Despite such antics, behavioural economics has already produced one Nobel prize winner (Daniel Kahneman in 2002), and is winning over politicians too. While he was a professor at the University of Chicago, Barack Obama befriended two of that campus's most eminent behaviouralists, Cass Sunstein and Richard Thaler. They are now informal advisers to the Democrat hopeful - and their fingerprints are all over his policies. Britain is also starting to cotton on. Just before Christmas, the UK's chief consumer watchdog, the Office of Fair Trading, launched a behavioural economics unit - and in March the National Audit Office called for more government agencies to apply the discipline's findings.

If these are the field's pioneers and politicos, Ariely is its populariser. A professor at the Massachusetts Institute of Technology, his book, Predictably Irrational, clearly sets out the behaviouralists' argument that average people are all far more irrational and more human than economists allow. His lectures are one of the wonders of modern academia; coming on like Jackie Mason with a PowerPoint presentation, he machine-guns through a stream of jokes, optical illusions and a video of a child in a gorilla suit. A few weeks ago, he did the routine at the London School of Economics, and prompted that rare thing in a lecture hall, a stage invasion. Impartial observers swore that they had never seen such excitement among the normally mild-mannered students of portfolio theory.
Back in the supermarket, Ariely is explaining the complications in that most elementary of tasks: evaluating how much to pay for something. "In standard economics, that should be your most immediate thought: how much pleasure is this giving me, and what would I pay for it? Setting that price should come automatically. But in reality it's very hard to do." As if on cue, a blonde woman sails by with a trolley-load of Actimel.
"How much would you pay for this?" he asks.
"Well, I object to paying £4.50. It used to be £4," she says.
"In the States it costs $20. Would you pay that much there?"
"I suppose so. I'm rather hooked."
Another point scored against conventional economics. "First the woman moaned about paying more than £4, then she agreed to pay $20 - £10!" Doesn't that just prove she's very fond of yoghurt? "We all do it ... A standard economist would say that, by definition, every shopper is making the best decision they can. But consumers don't set their own prices from scratch, they're guided by the recommended retail price, or the manufacturer's suggested price - even discounts are set by the shops."

Take the word beloved by shoppers everywhere: free. The very term would normally set an economist's teeth on edge; Milton Friedman, after all, always denied there was such a thing as a free lunch. But like the marketing departments, behavioural economists acknowledge the power of the word. "When you see something for free - for FREE! - it's like pressing a magic button. You forget about any possible downside and just think: Oh my God, it's all good!"
Ariely has been suckered himself. Not so long ago, he went to buy a people carrier to ferry around his family. Next to the dealership was an Audi showroom, offering free - sorry, FREE! - oil changes for new customers. You can guess the next bit: he came home with a sports car too small for anything but posing. "I chose the wrong car because of an oil change worth $150." The Audi cost $30,000.
Do mainstream economists really approach shopping and life with such clear and cold eyes? Listen to the story of Oz Brownlee, late professor at the University of Minnesota. One Friday, he and a colleague stopped to buy some steaks. Finding a long queue, they offered cash to the person in front to swap places. The shopper was dumbstruck - which the academics took as a bargaining ploy, so they raised the price. As news spread down the line, other customers turned hostile. The Minnesota department of economics alumni newsletter goes on: "Attempts to explain that they were ... trying to ascertain whether there was a mutually beneficial trade of time for money that might improve their welfare and that of the next person in line without disadvantaging others met with little success." The economists left without any steak.
Brownlee's mistake was to put into practice something that worked only in theory. That, Ariely and other critics say, is the point: conventional economics tries to make the man fit the model, rather than the other way around.
It wasn't always like this: Adam Smith had his theory of moral sentiments, and Keynes discussed the "animal spirits" of share investors. But as neoclassical economics gained ground, maths replaced psychology. And the human quirks exhibited in everyday practices, from buying chocolate to taking out insurance, were lost.

Neoclassical economists even use their own ideal human in their modelling, called Homo economicus, or rational man. Not so much a straw man as an Excel man, he is a basic creature, says Pete Lunn, a Dublin-based behaviouralist. "Economists treat all people as selfish; as independent; as rational. Those are the assumptions that underpin economics."
Dons debate them at high table, but in Whitehall these beliefs might as well be carved in stone. And the result is some daft policies. Take the opening-up of the directory inquiries market in 2003, when the 192 service was replaced with hundreds of 118-numbers. This was conventional economics in action: give the customer plenty of options and information, and let them make their own way. The result was a jump in prices, a spike in complaints - and what regulators now admit was a shambles. How might behavioural economics have helped? Well, the jams experiment would have proved to officials that too many options only bamboozle people. And civil servants meeting the Actimel guzzler would have seen first-hand our wobbly grip on what constitutes a fair price.
Yet mainstream economics often works. The British tax petrol far more than the Americans, for instance, which is an incentive not to consume as much petrol. And indeed, the cars on our motorways are more fuel-efficient than the ones on their interstates.
Isn't Ariely a bit harsh on orthodox economists? They are after the bigger picture, the Olympian perspective, and from up there, individual quirks blend into one smoothly functioning economy. "That would be true if we all made mistakes in lots of different ways, which would cancel each other out," he says. "But if we all make similar mistakes, there is something systematically wrong. And that is often what really happens." Which accounts for the turmoil in stock markets? "We all get too afraid of what's happening and we feed on each others' fears. The stock market is exaggerating this widespread fear."
So our irrational behaviour is not confined to the chiller cabinets but spills over into the financial markets. It's time to leave the supermarket and meet Anna Sofat, a seasoned financial adviser. The professor wants guidance on what to do if he had a windfall of £3.5m and moved to London. Hmmm. There is obviously a lot riding on his new book.
Sofat asks about risk. How does the economist feel about it? "Money: I don't know - I've never had much. On holidays, I am very adventurous. Sex: somewhere in the middle." There's a pause. Rather a long one. "OK, how should I invest my lump sum?" asks Ariely.
A plan is sketched out: put some in cash, the rest in bonds and property. Expertly done, but it does not answer the economist's implicit question: how can a neat investment plan suit anyone with the variety of attitudes and appetites displayed by Ariely - and, indeed, most of us? Later, the academic is sceptical: "Money and risk are abstract, complex things. But think how quickly she made plans for me to spend my lifetime income. I'd spend the same amount of time planning for my retirement as I would have done on buying a new digital camera."
So what is his solution? "We must be clear about what people can do and can't do. We should trust them entirely on what they know, such as their priorities. And we should completely discount what they're saying on what they can't know - like how much they need for their retirement income."
People cannot always figure out what is in their best interests, he thinks, and experts should accordingly give them the occasional nudge. Our pensions system has already got there: in a few years' time, nearly every worker will be automatically enrolled in a retirement-savings scheme, like it or not. They can leave, but behavioural research suggests that they won't - out of the same inertia that prevented them taking a pension in the first place.
Push that argument a tiny bit further and you cross the thin line that separates economics from politics. Britain has become a full-blown consumer society - one hellbent on giving people maximum choice, even when it harms them. Industrial quantities of booze are sold as loss-leaders in supermarkets; junk mail is full of offers for credit cards (although they have slackened off since the advent of the financial crisis); and it has never been so cheap to fly. Choice is king, markets know best, and anyone who says different is economically illiterate. That is the orthodoxy, anyway.
A few years ago, Ariely met senior executives at a venerable bank in Manhattan, and urged them to produce a "self-control" credit card, one that blocked excessive spending. Guess what? "They never called me back," he writes. "It might have been that they were worried about losing the $17bn in interest charges."
Evening arrives, and the professor is not going to sing for his supper so much as debate for his dinner. He will argue about the first principles of economics at the aptly named Rules restuarant in central London. David de Meza, head of managerial economics at the LSE, has gamely agreed to play a brutal rationalist. Do they really see the world so differently? Let's start with a nice easy one: what should the government do to stave off recession? Ariely thinks President Bush has already grasped one behavioural truth: "After 9/11, Bush urged Americans to spend. He made it a patriotic duty. Avoiding recessions is partly about holding up confidence, so people still feel like spending." Confidence is hardly the issue, retorts De Meza. "One of the features of the boom was overoptimism in spending and markets."
So how would they have avoided the bubble that landed us in this mess in the first place? "Even for economists such as me, it's incredibly difficult to compute how much borrowing is in your best interest," says Ariely. "So you could tell people how much they can borrow."
"But what about entrepreneurs?" asks De Meza. "They borrow a lot. Do you seriously want potential entrepreneurs to sit an exam before they get funding?" Academics evidently do not watch Dragons' Den. "What's the big deal? Let's limit people's ability to hurt themselves in borrowing like we do with seatbelts in driving," says Ariely.

Finally, the biggie: is tipping irrational? Yes, thinks Ariely - it's just convention. No, argues De Meza: "What you're often paying for is nice treatment next time around." The manager, John, is called on to provide expert testimony. Poor man, there is a lot at stake: his own profession's interests, as well as serious academic inquiry. Still, after a bit of squirming, he sides with the behaviouralists: "It is slightly irrational, I suppose," he says. But, of course, we leave a tip.

Source: The Guardian UK

A shopper's guide to happier little Vegemites...

RETAILERS would be forced to display the prices of grocery items by the kilogram or litre to help customers choose between different sizes and brands under proposed laws to be introduced to Parliament this week by the Family First senator Steve Fielding. Family First estimates shoppers could halve the cost of their grocery bill if they always opted for items at the cheapest per unit price. A survey of prices had found that the cost per gram of Vegemite in a 150-gram jar was half that of a 60-gram jar. Similarly, the price of an individual tea bag in a box of 25 Lipton tea bags was twice as expensive as in a box of 200. Senator Fielding said yesterday unit pricing was a "no brainer" that would save families money at the checkout. The bill would require support from the Government to become law. However, unit pricing is also on the radar of the Government's inquiry into grocery prices led by the Australian Competition and Consumer Commission

Source: SMH

How chief strategy officers think about their role...

As companies struggle to meet the challenges of today’s complex business environment by developing short- and long-term strategic visions, the role of chief strategy officer (CSO) has become increasingly prominent. Although CEOs remain ultimately responsible for strategic decisions, they regularly look to the CSO to craft and implement successful strategies. But the role’s relative novelty raises critical questions about its function and the degree of ownership it carries.
McKinsey recently brought together CSOs from several high-profile companies to discuss the challenges of the job—starting with its definition and what it entails. The panel included Edward C. Arditte, senior vice president of strategy and investor relations at the multi-industry company Tyco International; Stuart Grief, vice president of strategy and business development at the aircraft, industrial, and finance group Textron; Marius A. Haas, senior vice president of strategy and corporate development at the technology company HP; Dan Simpson, vice president, office of the chairman, at the cleaning-products group Clorox; Annabel Spring, managing director in charge of strategy and execution at the investment bank Morgan Stanley; and J. F. Van Kerckhove, vice president of corporate strategy at the e-commerce company eBay.
Some of the panelists say that they have one foot in the corporate suite and the other deep in the business units. Others believe that while communication with the business units is very important, a CSO’s primary concern is the development of high-level strategy. In that capacity, CSOs grapple with the challenge of balancing short- and long-term goals: handling the multifaceted demands of an increasingly global business environment, they strive to focus on growth without losing sight of productivity. All panel members agree that a close relationship with the CEO is vital for instigating change, but they voice different views on other issues, such as how to interact with the finance function. Renée Dye, a consultant based in McKinsey’s Atlanta office, moderated the panel discussion.
The Quarterly: How well defined is the role of the CSO?
Dan Simpson: The role of the CSO is poorly defined, much like the discipline of strategy itself. Most other C-level executives have high levels of control over their disciplines, fairly clear ownership, and a large staff. But that isn’t true for the CSO. Many things affect the role, from the nature of the industry or company to the CSO’s reporting relationship. But the biggest factor is the style of the CEO, the true chief strategy officer.

At the table

Dan Simpson, vice president, office of the chairman, at Clorox, was head of strategy and planning for 16 years. Since joining Clorox, in 1979, he has had experience in brand management, finance, M&A, and new-business development.

Stuart Grief, vice president of strategy and business development at Textron (2005–present), works closely with the senior leadership to create and implement strategies for the corporation and its business units. He is also a corporate officer and a member of Textron’s transformation leadership team.

J. F. Van Kerckhove, vice president of corporate strategy at eBay (2007–present), is responsible for the strategic-planning and development process across eBay, Paypal, and Skype. Before joining eBay, he was an associate principal at McKinsey (1999–2005), where he specialized in product strategies for corporations and business units.
Stuart Grief: The CEO makes the ultimate decisions, but it’s our job to explore the facts and alternatives around an issue. We make sure CEOs have a clear understanding of the implications of various choices so that they can make informed decisions.
J. F. Van Kerckhove: The CEO is the ultimate owner of corporate strategy. A good strategy process finds the right balance between top-down and bottom-up engagement in developing strategy, building on the collective wisdom, and exposing its main assumptions. While the formulation of strategy often goes through specific planning milestones, its development is ongoing—at times explicit and at times not. The CSO plays an important role in helping to coordinate and inject knowledge in the more formal strategy process, as well as fostering an environment for more spontaneous strategy creation. The latter often finds its roots in a close collaboration with the business units or field operations at the forefront of experimentation and learning. In a fast-paced industry like ours, the ability to rapidly learn from the field is a true competitive advantage.

At the table

Annabel Spring, managing director of Morgan Stanley (1994–present), is head of the firm’s strategy and execution group, which works directly with senior management to drive strategy, planning, and principal transactions.

Marius A. Haas, senior vice president in the office of strategy and corporate development at HP (2002–present), leads the strategy and corporate development team, whose focus includes driving the strategy and planning processes, as well as managing new strategic initiatives.

Edward C. Arditte is senior vice president of strategy and investor relations at Tyco International (2003–present), where he oversees strategic planning, investor relations, and external communications.
Ed Arditte: That depends on your organizational structure and how many lines of business you have. In a more monolithic type of company, it’s easier to identify issues around which people can rally. For more diversified companies, like Tyco, strategy is driven by the businesses, with appropriate input and guidance from the corporate center. That has proved to be a better approach for us than approaching it from the center outward.
Annabel Spring: I absolutely agree. Our role is to get feedback from the business units, overlay the global trends, and make sure that everybody has identified the right issues. We then prioritize the opportunities across the business units and provide a strategic element for that prioritization. Feedback from the business units is also critical for maintaining that entrepreneurial edge. Morgan Stanley is so specialized and yet complex and global, which is hard to balance.
Marius Haas: The CSO’s role is dependent on CEOs not only because they have the final sign-off on strategy decisions but also because of their skill sets, tendencies, and way of managing the business. The question becomes: how do you complement the CEO’s strengths and weaknesses? My job at HP is to lay out the key initiatives we need to focus on in order to execute the plan. What are the initiatives that could build extra capacity, enhance our plan, or bring incremental operating profits or revenues? We go through those questions to get a sense of which ones need to mature and which ones are clearer from an execution standpoint.
Annabel Spring: The market also affects the CSO’s role. When the market is up, the role addresses long-term vision and investment. When the market is down, it requires restructuring strategy. You have to be able to move with the market and with the CEO.
Dan Simpson: Is it your role per se that varies according to market conditions, or does the difference lie more in the issues you address?
Annabel Spring: “Role” is somewhat of an amorphous word. When the market is growing, it’s easier to see the big picture, sit back, and prioritize across opportunities. In a market downturn, it is very much a tighter, hand-holding role with the business units, and a much more operational one.
Stuart Grief: I find Textron going in the opposite position, which may highlight the difference between industrial and financial companies. When the company is struggling, there’s a need to step back and reexamine things. When the company performs very well, people sometimes believe the good times will continue forever.
The Quarterly: How does a company’s performance modify what the CSO does?
Dan Simpson: Performance changes the issue set, not the role. During performance shortfalls, consistency and conviction become more important—horizons are closer and you focus all the water on short-term fires. But it’s not uncommon for short-term fixes to create long-term problems. A downward spiral develops momentum and becomes harder to turn around. While nearly everyone focuses on the near term, a CSO must be an advocate for long-term health.
Marius Haas: That makes sense, but in our situation at HP, when the company wasn’t performing well, the solution required restructuring. The people running the business were so close to the business that they weren’t able to think outside of the box. The fundamental pieces were broken. We felt that driving for operational excellence was going to deliver more value for us in that period of time.
Stuart Grief: If a company’s doing poorly, one of the first worthwhile diagnoses is an assessment of the quality of the strategy and its execution. If you’re happy with the strategy, you just need to focus operationally to get it done. I wasn’t at Textron at the time, but in 2000 and 2001, the leadership realized, “We’ve got a dead business model. We have to rebuild the company and transform it fundamentally.” It was a strategic issue in need of rewriting.
Marius Haas: I was in a corporate-strategy team at Compaq about eight years ago, where the team spent way too much time focusing on the strategic, long-term view. The CEO liked this model, but none of the other executives felt there was any deliverable value. When I got into the role of CSO, I tried to build a bridge between the CEO and the executives in the business units. I wanted a model that pulled from all of them. You need to be able to dive into a business unit and become a core part of its strategy-setting and operational-excellence initiatives.
The Quarterly: How do you ensure that strategy is executed well?
Ed Arditte: At Tyco, it’s very clear. It is the responsibility of the businesses to act upon the plan, and it’s our responsibility, at the corporate center, to challenge and evaluate the plan. Once it’s approved, our job is to watch it and make sure the right people are being put on the bigger issues.
The Quarterly: When we surveyed 800 executives on strategic planning in 2006, one of the most striking results was that only 36 percent of them said that the strategic plan was meaningfully integrated with human-resources processes—incentive, evaluation, and compensation systems. Does strategy play a role in evaluations?
Ed Arditte: The responsibility is both in the short and long-term results. There has to be a balance, but there’s never a perfect answer for how you balance them. You need a dialogue that aligns resource allocation, people, and money with both the short and the long term.
Stuart Grief: Balancing the short versus the long term is the biggest challenge we have. How do you balance the trade-off between the short-term compensation lift from near-term performance and the investments—and therefore the depressed economics, short term—that make the long-term strategies pay off?
Marius Haas: An implementation plan that has clear milestones and owners is a must. Execution sits in the business units. At HP, we won’t make the hand-off until the business owner understands, accepts ownership, and acknowledges the need to deliver. As to the strategic plan as a whole, we’ve gotten a lot more disciplined. Now we can say, “Here are the levers within our plan that we need to execute in order to deliver. We know the plan, the capacity, and what we can do incrementally. If you’re going to show me a number, you’ve got to tell me how you’re going to get there.” Management has changed how people’s performance was going to be measured at a granular level.
The Quarterly: What’s the dialogue like, though, when a business unit presents a plan that doesn’t have steadily increasing margins, because the unit wants to make a long-term investment that won’t pay off until beyond the current planning period?
Marius Haas: We ask the business unit heads to build capacity in the plan and then reinvest that into areas they believe will be longer-term growth areas. Most of them have now divvied up their portfolios into three areas: emerging market opportunities and initiatives, mature but current businesses, and investments that help generate the required cash flow. We constantly look at that life cycle to see if those investments are in the right areas to generate longer-term growth.
The Quarterly: Is there any advantage to having a closer relationship with the finance function?
Annabel Spring: I think there is a significant advantage to being close to the CFO. I understand the budgeting and am involved in the process, both within the business units and at the corporate level. I’m part of the dialogue—which is critical for credibility and understanding the business. For Morgan Stanley in particular, being close to the CFO is important, given the number of transactions we do for the firm on a principal basis, because you need that back-and-forth relationship in order to be effective.
Ed Arditte: There’s always a debate about who owns the strategy process—accountants, financial-planning people, or business people? But it shouldn’t be a question of where it’s owned, but of who is involved in the process. Do they work together? Are they able to achieve alignment? Alignment is key to the process: it defines what you want to do and, more important, makes sure that everybody understands the priorities. Then you can allocate the resources, evaluate the progress regularly, and provide support when necessary.
Dan Simpson: People commonly confuse strategy and planning. Planning is primarily internal resource allocation and budgeting, which is clearly tied to finance. Resource allocation has to be driven by strategy but isn’t strategy in and of itself. Strategy should be focused on the marketplace and on customers and consumers. You must improve your position in the marketplace and have a clear idea about why people choose your products or services over someone else’s. At Clorox, we try to separate those conversations. One of the things we’ve done in the past is to bar financial components and exhibits from the first rounds of strategy meetings. That way, the discussion focuses on market competitiveness rather than on internal resource allocation.
Stuart Grief: One of the challenges we used to face at Textron, though, was that without finance being deeply involved in the strategic discussions early on, we risked the CFO undoing the strategy three months down the road. A personal relationship with the CFO is really critical—more than reporting to the CFO. Alignment is vital on the road to execution.
Marius Haas: Our plans require three things to be aligned: efficiency productivity, accelerating growth, and capital strategy, both financial and human. We’ve often taken resources out of the capital strategy to tackle inefficiency, generating capacity so we can invest in growth. In those cases, the triangulation of those key areas has been critical.
Dan Simpson: Execution problems are often symptoms of trouble upstream in the strategy-development process—the strategy process has failed to realistically assess current reality, to honestly understand organizational capabilities, to align key players with those who do real work, or, at the end of the day, to create a compelling, externally driven vision of success.
Ed Arditte: It depends on your organization and how centralized it is, but the more a strategic initiative is owned by the business units, the greater the chance of success. Many great corporate ideas fail in the business units because of a lack of ownership.
The Quarterly: What are the most important issues facing strategists today?
Stuart Grief: An important challenge is engaging with the businesses to think differently about what they do by helping them consider different business models, challenging the status quo, and avoiding complacency. It’s hard but necessary in an environment where competitors are more aggressive and diverse than ever.
Marius Haas: The biggest challenge for us is transitioning from an efficiency–productivity focus to a growth focus without dropping the ball on the execution of the efficiency–productivity side. The second challenge lies in migrating external influences and forces to our mainstream thinking. If the customer and technology are evolving, we’re facing an environment of accelerated consolidation in the competitive landscape. Getting ahead of the pack and being the ones consolidating—versus having to react to actions taken by our competitors—is very important.
Annabel Spring: I would echo the short-term versus long-term balance issues but add a layer of globalization. Short-term profit opportunities are abundant in the developed world, as long-term opportunities are in the developing world. You have to do both to get the continuous-growth profile we all need, but managing the timing is a very tricky thing—not to mention a core component of our role in terms of project prioritization, resource allocation, and long-term strategy.
J. F. Van Kerckhove: Given rising customer expectations for the online experience, the high pace of innovation, and the emergence of new business models, we need to sharpen our game continuously and faster than ever, as well as assess what elements of our past success we need to strengthen and from which we need to depart. In that context, our main challenge is strengthening our core business while rapidly scaling our new growth platforms and developing new operational and organizational muscles for our future success. Just as our company has grown rapidly, so has its organizational complexity. We are focusing on simplifying how we do business, creating alignment behind a few clear priorities, and stepping up our organizational agility and effectiveness.
Ed Arditte: As is probably true for everyone here, our businesses are exceedingly complex and growing more so every day. It doesn’t matter if this is driven by developed markets, emerging markets, financial markets, or technology—there are so many changes, and the pace has gotten much faster over the years. Taking a complex set of business issues and simplifying them is a key part of this role. We can’t do it individually, but we have to be facilitators of that process and get alignment around the truly important issues that will drive performance.
Dan Simpson: Externally, our toughest strategic issue at Clorox is the consolidation and globalization of both the upstream cost structure and the downstream retail trade, offset by extreme fragmentation in the media environment. Change in the last 20 years has been extraordinary, and the implications for brand equity and value creation and distribution are profound.

Source: McKinsey

Australian News:
Woolworth's buys $57Million stake in pub owner

Australia's biggest grocer Woolworths Ltd bought a strategic stake in pub owner Australian Leisure and Entertainment Property Group (ALE) for $57 million in cash. Woolworths paid Hedley Leisure & Property Trust (HLG) $3.34 per security for the 19.9 per cent interest in ALE, the Sydney-headquartered supermarket company said in a statement on Monday. HLG, which has agreed to pay Woolworths compensation if it sells the securities below $3.34 a security, will also receive ALE's next dividend.Woolworths said it had no intention to increase the holding beyond what it bought

Source: SMH

Supermarkets reject rip off claims...

A rose is a rose is a rose ... suppliers say some supermarket brands charge premium prices for generic products

Australia's major supermarket chains have hit back at claims they are ripping off consumers and suppliers by using the same products in their various in-house brands, but charging different prices.Victoria's peak farming body today accused the major grocery chains of using the same products in their private brands, sourced from the same suppliers, but then pricing the items according to their position in the market.The Victorian Farmers Federation (VFF) addressed the Australian Competition and Consumer Commission's (ACCC) grocery inquiry in Melbourne today.VFF deputy president Meg Parkinson said the chains had up to three different in-house brands."There's a home brand, there's a medium one, then there's the top one," she said. "They don't say Woolworths or Coles, they have got another name. "Basically the product is the product. You're paying a different price for the brand, not for the products. It's pure profit. "It's usually the same people who are supplying them at the same price." But a Woolworths spokeswoman today dismissed the claims as "nonsense". She said Woolworths, or Safeway as it is known in Victoria, has two tiers of private labels, Homebrand and Select. Each brand had different suppliers, different ingredients and a different grade of product. She said this was clearly evident on the items' list of ingredients. Coles spokesman Jim Cooper said its three in-house brands - Coles Smart Buy, Coles Finest and You'll Love Coles - had three distinct quality and price tiers. "Any claim we take one product and re-badge it three times is absolute rubbish," Mr Cooper said. ACCC chairman Graeme Samuel, who is heading up the inquiry, appealed to the VFF to find growers who would be willing to provide confidential evidence of any bullying, harassment, oppression or unconscionable conduct by parties in the supply chain. "We want to hear about these because they are really important in terms of our understanding of their position in the marketplace today," he told the Melbourne hearing. He issued a similar plea to the National Farmers Federation at an earlier hearing as part of the inquiry in Canberra last month. The inquiry, which is investigating the competitiveness of retail prices for standard groceries, is due to report to the federal government by July 31

Source: SMH

Two senior appointments made at Coles...

Coles owner Wesfarmers has made two senior management appointments to help drive the supermarket chain's restructure. A senior executive with Asda WalMart in the United Kingdom, Stuart Machin, will become Coles' operations director. Under this role, he will be responsible for the performance of more than 700 Coles supermarkets across Australia. The role of general manager fresh produce will be filled by Peter Pokorny, who has held key positions in fresh produce and the supply chain during more than 30 years in Australian retail operations. Wesfarmers managing director Richard Goyder said Mr Pokorny would be invaluable in improving Coles' fresh produce - a key focus since Wesfarmers acquired Coles for $20 billion last year. Shares in Wesfarmers were five cents lower to $39.75 at 1327 AEST

Source: SMH

Coles accused of pumping up petrol prices...

The nation's consumer watchdog has accused supermarket giant Coles of neutralising discount shopper dockets by raising petrol prices above the average.
The four-cents-a-litre discount was "really to nought'' as Coles was the first retailer to lift petrol prices from the midweek trough, it said.
Shares in Wesfarmers, which owns Coles, closed up 2.1%, or 78 cents, at $38.63.
Coles was also the pump price leader, Australian Competition and Consumer Commission (ACCC) chairman Graeme Samuel said.
"In the last three or four weeks, they've suddenly become the price leaders in terms of that price hike that occurs on a Tuesday evening or Wednesday morning, in the price cycle that occurs in the eastern states and South Australia,'' Mr Samuel told ABC Radio.
"What we've discovered is that in a significant number of their sites, they're first to increase the price. We've also discovering that if you take it into account, these petrol price discount vouchers that they have been using for some time are effectively being neutralised by the high prices they're charging. "The four cents a litre is really to nought.''  
Mr Samuel advised consumers to carefully watch competing prices because some big variations - up to 20 cents a litre - were available.
"You think you're getting a four-cents-a-litre discount but, in fact, at many of the Coles service stations you're actually paying for more than that in terms of higher prices,'' he said.
"You're better to shop around for a lower price that will more than exceed in terms of the discount of four cents a litre that Coles is offering.''
The difference in pump prices on a Wednesday morning could be as much as 15-20 cents a litre, Mr Samuel said.
"That's an enormous amount of saving that motorists can extract just by watching and looking and examining carefully where they should be buying their petrol.''
Mr Samuel said the ACCC received reports from abound 4000 service stations throughout Australia each day

Source: SMH

Woolworth's sees food inflation easing...

Australia's largest retailer Woolworth's has said that food inflation in April eased off in its supermarkets.
The company added that recent price inflation would have been worse were it not for intense competition in the sector.
According to Woolworths' third-quarter financial update, prices had increased by an average of 4.5% across its stores.
Speaking at a lunch organised by the Australia-Israel Chamber of Commerce, Woolworths CEO Michael Luscombe reportedly said inflation has fallen back under 4% last month. 
According to local reports, Luscombe later told reporters that produce deflation was driving the easing in the overall inflation rate in supermarkets while competition between retailers was also helping to keep prices down.
Luscombe's remarks come as an inquiry - backed by the Australian government - investigates grocery prices in the country.
The Australian government handed the Australian Competition and Consumer Commission the task in January in a bid, it said, to ensure consumers get a "fair deal at the supermarket".

Source: Just-food

Australia could become niche wine player...

Australia could be forced to give up its place among the world's biggest wine exporters within 50 years and become a niche player, a new report predicts.
Britain's oldest independent wine merchant, Berry Bros & Rudd, believe that hotter temperatures and water shortages will spell the end of mass wine production in Australia.
It has also forecast China to become the world's top wine producer by 2058, which is also when Berry believes the traditional bottle of plonk will be replaced by cartons.
Berry's study of what the global industry will look like in 50 years paints a disturbing picture for Australia, which last year exported nearly $3 billion worth of wine.
It says the effects of climate change will hit traditional wine growing regions in South Australia, Victoria and NSW and force producers to move to the cooler climes of Tasmania to focus on high-quality, boutique wines.
"By 2058, Berry's predicts Australia will be too hot and arid to support large areas of vine," Berry's report said.
"It will no longer be renowned for volume wine and will become, instead, a niche producer, concentrating on hand-crafted, terroir-driven, fine wine."
If the predictions come true, they could have a dire effect on one of Australia's most valuable agricultural exports.
Australia has become the number one supplier of imported wines in the lucrative UK market and is number two in the United States.
However Berry's wine buyer Jasper Morris says it's not necessarily all over for Australian vintners.
"There's no reason why they couldn't concentrate on the upper end of the market," he told AAP.
"You can compensate for the lack of volume with an increase in value. The value of Australia's wine exports may reduce but the price per litre could go up."
Morris said Australian wine makers could experiment with Spanish grape varieties which thrive in hot conditions while continuing to grow their famous shiraz and chardonnay grapes in cooler regions.
Another option would be having vineyards near the northern towns of Darwin and Cairns, where grapes could flourish in tropical conditions and be harvested twice a year to help Australia keep up its production of mass produced cheaper wines.
Other growers could set up wineries in China, which Berry tips will be the world's biggest producer within the next five decades with wines to rival the best from France.
"There's so much land available and labour is extremely cheap," Morris said.
"If I were an Australian wine industry leader and was starting to get worried about the prospects for running large scale vineyards, I would be investing in China."
But the wine merchant says that in the future, wine drinkers will not care where their favourite tipple comes from.
The Berry report says the trend started by Australian drinks giant Fosters of sourcing grapes offshore from Chile and South Africa will increase, meaning that future wines will be "grape or blend specific" and known by their brand names rather than their country.
It also seems the tradition of buying wine in bottles is set to end as retailers and importers try to cut costs.

Source: SMH

Coles' new boss plans 5-year turnaround

Wesfarmers' Coles new supermarket division head Ian McLeod is planning a multi-billion dollar revival in the next five years. "I'm under no illusion in relation to the scale of the challenge that we face, but I'm actually confident we can rise to that challenge. This is a three to five year transformation programme and there aren't any real magic bullets," he added. McLeod was the chief executive at Halfords before being recruited for Coles in February this year. "It's a medium term turnaround, not a short term fix. You've basically got a business here that is not fundamentally broken but I think it has lost its way," he said. The company also announced two new appointments, Joe Blundell as marketing director and Gavin Parker as director of store format development. McLeod plans to spend the next month visiting many of Coles' 700-plus supermarkets around Australia

Source: Planet Retail

Global News:
UK: Retailers launch industry wide environment pact...

For the first time in the UK the retail sector has united to introduce a set of comprehensive industry-wide pledges to tackle climate change.
Retail giants, including Asda, Sainsbury & Tesco have agreed upon a number of targets for the next five years.
Commitments include cutting emissions, cutting water use, reducing waste sent to landfill, reducing packaging, offering energy efficient products, developing carbon footprinting on goods and improving recycling for customers.
Over 40% of the total retail industry has signed up to the scheme.
British Retail Consortium, the organisation behind the initiative, told just-food today (30 April) that while the pact alone may only have a limited impact on climate change the real hope is that retailers will exercise a degree of influence on their customers.
"Can these proposals make a difference to climate change? In and of themselves, no," a spokesperson for the BRC commented.
"Only a small proportion of CO2 emissions come from the retail industry, but it is hoped that retailers can use the special relationship they have with consumers to change their behaviour. By creating incentives and making it easier for consumers to reduce emissions there is a greater chance of this."

Source: Just-food

UK: Asda plans to move into mortgage market...

In the UK, Asda is planning to move into the mortgage market and is conducting a tender to find a mortgage broker for outsourcing business. As of now, three brokers have put in offers. The company also plans to direct its customers to the chosen broker for market advice. The deal would be very similar to the one it has with Lifesearch to offer protection advice. It is said that the advice will be offered primarily over the phone. At present, the company already offers home insurance, pet and travel insurance, savings accounts, credit cards and child trust funds. It is also considering moving into the equity release and annuity sectors in the near future. Asda head of financial services Gev Lynott said: "We do not think the mortgage market is working well for many consumers. We have been looking to find a way into the mortgage market for some time but it has been difficult to get the interests of the providers, brokers and customers in line. We want to be able to tie it all in, the mortgage, the home insurance, the protection and anything else the customer needs. We want to be essentially a one-stop shop for a good deal."

Source: Planet Retail

US: Childhood obesity hits plateau study claims...

Childhood obesity rates in the US may have reached a plateau after decades of continuous increases, a government report has claimed.

According to a study released yesterday (28 May) by the Centres for Disease Control and Prevention, obesity rates in children and teens stabilised at 16% between 1999 and 2006.
The data, which was published in the Journal of the American Medical Association, was based on a survey of over 8,000 children aged between two and 19.

The report was unable to pin down the causes for a stabilisation in the level of childhood obesity. Causes posited include efforts to increase awareness, such as public health campaigns, and the possibility that there has been a natural levelling off related to the proportion of the population with a genetic susceptibility to obesity.
Cynthia Ogden, the lead author of the report and an epidemiologist for the National Center for Health Statistics, commented: "It doesn't mean we've solved it, but maybe there is some opportunity for some optimism here."

Responding to the report, the Grocery manufacturer's Association's chief scientist, Robert Brackett, said the food and beverage industry was "committed" to reducing obesity. Brackett added: "We will continue to provide consumers with healthier options, market our products responsibly and invest in programs that promote healthy eating and more physical activity

Source: Just-food

UK: Aldi footfall up 25% amid shopper cutbacks...

Discount retailer Aldi has said that footfall in its UK shops has increased 25% year-on-year over the past three months as consumers look for ways to cut their grocery bills.
Annual sales, the retailer said, have risen from GBP1.3bn (US$2.5bn) last year to GBP1.5bn this year.
Aldi claimed that this growth was the result of its lower prices, which it suggested are between 20% and 30% lower than its supermarket rivals.
The company said the growing numbers of customers coming through its doors can partially be explained by its increasing appeal to consumers from higher socio-economic groups. The middle classes now account for about half of its shoppers, up 17%, the group revealed.
 "Our research suggests that consumers seem fully aware that Aldi offers lower prices but they are now also realising that those savings don't require any compromise on quality," Aldi's UK managing director Paul Foley said.
Aldi's offer is almost 100% private label and the company said this was part of its recipe for keeping costs down; while its offer is broad it is not deep.
"For those who need a store with piped music, a choice of 42 yoghurts and who can't pack their own shopping bag, then maybe Aldi's not for them," Foley said.
"But for those who want guaranteed quality at low prices every day of the week, then the current economic climate simply makes Aldi an even more obvious choice."

Source: Just-food