«efficiency gains seen as pro competitive..(when

Transcription

1 WHAT IS THE JAG? 0

2 Competitiveness of the European Food Industry, Commission Report difficult to achieve long terms relationship with supermarkets..yet the value added will result from the ability to achieve strategic objectives ( )..better collaboration across the food industry distribution network, relying on data sharing using ICT tools, is one of the prerequisites to enhance food industry productivity «efficiency gains seen as pro competitive..(when without) harmful consequences for the consumers» Competition Commissioner 1

3 WHY THE JAG? THERE IS A LACK OF ENTREPRENEURSHIP, HENCE GROWTH We need to create and develop economic activity by blending risk taking, creativity and/or innovation with sound management EU Commission Action Plan for Entrepreneurship Entrepreneurship is one of the 7 indicators of innovation tracked by the European Commission in its European Innovation Scoreboard How focused on the consumer and shopper, on driving demand and generating growth, is the current negotiation model in Europe? We have become risk averse: rather than Play to Win, we would rather Play Not To Lose - ECR Co-chair Demand Not at all focused Not really focused Focused Relatively focused Very focused Source: ECR Europe Conference 2

4 Recognition that lack of alignment between growth plans and trade negotiation can lead to growth destructive behaviour Tactical promotion destroying NPI Listing Fee as a criteria for New Product Introduction Sometimes a bias to avoid shopper metrics criteria Inadequate assortment to shoppers needs Lower success of NPI in countries applying listing NPD profiles fee in Germany 33% of launches either die within one year or sales drop steadily late peakers growers flatties early peakers droppers died Italy Germany UK 0 Copyright IRI, Confidential and proprietary. «..slotting allowances run the risk of acting as a barrier to entry or expansion of smal suppliers less able to make these payments regarding sales potential of their products» UK Competition Report, 2008 «consumer may find themselves confronted with products which have been chosen because a generous incentive payment could be secured rather than because they are considered 3 attractive to consumers» 10 7

5 Recognition that lack of alignment between growth plans and trade negotiation can lead to missing growth opportunities eg Retail Media All recognise its value as media explosion (consumer more & more exposed) media fragmentation (lower impact/reach) growing importance of the last 10 feet increases YET Low engagement fear that retail media becomes an element of back margin discussion between manufacturers and retailers 8 practices which distort the relationship should be examined and discouraged such as excessive fees paid by suppliers for services provided by retailers European Commission Communication on the functioning of the food supply chain in order to lower prices for consumers. December

6 THE JAG: A MORE RATIONAL FRAMEWORK FOR NEGOTIATION, WHICH WILL ALLOW MORE GROWTH TO COME ON THE MARKET Current approach Less time to build strong fact base Less time to agree on growth actions Jointly Agreed Growth (JAG) JAG Jointly develop clear, fact based, understanding of market context and trends More time spent negotiating More % margin needed to finance Financial negotiation Growth actions less effective Less growth Jointly develop growth strategies Sign a business plan focused on driving demand and generate growth Offers a framework for negotiation "It is not the last penny you leave on the table that determines whether or not the retail company is going to be successful. It is whether or not you work together to best satisfy that customer that allows you to sell more" ECR Conference 5

7 WHAT IS THE ADDED VALUE OF THE JAG? Commercial discussion starting with a shopper and consumer-centric approach for stimulating demand More focus on business development "Anything about accelerating the business" A longer time horizon "Working earlier together, more strategically" Openness to multiple players in the category A fact-based framework for negotiation 6

8 «Multiple players in the category» «The more, the merrier» to really induce behavioural change towards more professional trading relationship and achieve more competitiveness (efficiency gains) «Category Captain»/ «preferred supplier» 7

9 PROCESS STEPS FOR SUCCESSFUL JAG COLLABORATION JAG process a three-year rolling JAG plan Annual milestones to be set Program reviewed throughout the year Buyer-Seller accountable for functional liaison, planning coordination, agreement and execution follow-up Step 1 Review the economic and shopper environment Step 5 Monitor & adapt Step 4 Execute the JAG plan JAG Step 2 Review sales and agree on prioritized growth levers Step 3 Define and agree on 3-year JAG plan Cross-functional teams drive analysis and planning to support Buyer-Seller JAG common language and way of working = to spend more time on what to do rather than discuss how to design reporting 8

10 SHOPPERS! We can make it simple The logic makes the difference The current business situation of retailers : From a strategy based on (1) size (= square meters), to (2) a deeper profitability understanding (= tariffs) and (3) differentiation (= clients) (3) Sales change (2) Profitability JAG takes SHOPPERS first (1) Shoppers 9

11 PROCESS STEPS FOR SUCCESSFUL JAG COLLABORATION Step 1: Growth at 2% Step 1 Review the economic and shopper environment Step 5 Monitor & adapt JAG Step 2: Option A: 3% growth targeting z shoppers segments with y investments Option B: 4% growth with investments x relying on regions w & y Step 2 Review sales and agree on prioritized growth levers Step 5: Plan Achieved Year 1: 2.5% growth 2% growth Year 2: 3% growth Revised Year 3: 3.5% growth Year 2: 2.5% Year 3: 3.5% Step 4 Execute the JAG plan Step 3 Define and agree 3-year JAG plan with required investments Year 1: 2.5% growth Year 2: 3% growth Year 3: 3.5% growth 10

12 Growth levers! Category drivers identified by the Supplier (1) Core business practice = activation of current 4P s share choices and priorities motivate Shoppers change (2) Quantify new ways to boost core drivers = a more efficient way to plan in both organisations more resources on selected drivers mix changes a different way to implement in stores (3) Quantify new drivers = new shoppers targets new stores / channels profiles new brands offer "Many enterprises innovate through better use or exchange of information, organization, change in relationship with other firms or institutions" European Innovation Scoreboard, Eurostat, October

13 QUANTIFY GROWTH DRIVERS AND THEIR RESPECTIVE RETURNS ON INVESTMENTS growth 8,2% non promotional growth 6,9% price index 1.1% rotation index 1.5% promotional growth assortment index 2.4% 1,3% distribution 1.9% 12

14 STEP 2 : PRIORITIZE GROWTH LEVERS Collaboration Assessment Quantitative analysis Estimate of additional sales and ROI per growth lever Impact High Medium Low Low Assortment Pricing Product innovation In-store activation Medium Promotions On-shelf availability High ECR BOARD19/03/ Ease of implementation Based on FTE and investments needed, time for implementation, and intensity of collaboration required

15 The JAG process Step 3 Step 1 Review the economic and shopper environment Step 5 Monitor and adapt JAG Step 4 Execute the JAG plan Step 2 Review sales and agree on prioritized growth levers Step 3 Define and agree on 3-year JAG plan Objectives Finalize JAG plan by agreeing on: Growth Targets Investments allocation Activities Key performance indicators (KPI) and JAG plan monitoring Year 1: 2.5% growth Year 2: 3% growth Year 3: 3.5% growth Growth by which shopper strategy (increase transaction, purchase frequency, penetration, shopper segments/regions )? Which growth for which investments for which activities (assortment, npi, in store displays )? 14

16 JAG = a way to strengthen trade investment effectiveness for both retailers and suppliers : JAG, based on Sell-out How to grow better together: - Focus on shoppers - Share measurements - At right times - With a longer term view integrated as a part of JAG step 3 Investment, currently based on Sell-in How to allocate better our resources: - Select growth / efficiency drivers - Agree on performance - Assess regularly - Reduce risk change align teams in organisations shape common interest Grow Mass Profitability 15

17 The JAG process Step 4 and 5 Step 1 Review the economic and shopper environment Step 5 Monitor and adapt Objectives Step 4 Execute the JAG plan Step 2 Review sales and agree on prioritized Step 2 growth levers Review sales and agree on JAG prioritized growth Step levers 3 Define and agree on 3- year JAG plan Ensure realization of targets of JAG collaboration: Review project plans and monitor progress Evaluate overall collaboration 16 Objectives Step4 Ensure alignment on JAG plan Develop clear implementation plan that ensures a fluent progress of execution

18 Develop a comprehensive toolkit for commercial teams, covering the process, the methodology and the analytical tools needed to develop flexible JAG plans matching the needs of different players (large and small), Different categories (growing and flat), levers (product innovation, promotion innovation, communication innovation, etc.) and Different market contexts (more developed countries with consolidated retailers and less developed countries with more fragmented retailers). 17