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Global Brands Get Local To Serve Knowledgeable Shoppers Dr. John L. Stanton Professor of Food Marketing Saint Joseph’s University Strategy is an interesting word. It may be the most misused word in business. Some people use strategy to be interchangeable with planning or just having a meaning to be "really important." Definition? • There are tons of academic definitions of strategy...most of them boring and not useful. • The origins of the word come from the Greek. Meaning the art of the general. Strategy is really about how you intend to beat the competition. If we think about warfare we recognize that there are three key elements: 1. The competitors 2. Our assets (products, etc) 3. The battlefield Or who we fight. Where we fight and what we fight with! Two additional points 1. Strategy takes place before the battle begins. It is the description of how we intend to beat the competition. I think of boxing. Before the bell rings the corner man, explain in detail how his boxer can win. He explains how his competitor has a weak jaw and a long jab. And he describes what to do. But once the bell rings it is all tactics...can the boxer or will the boxer follow the strategy. I know that many companies have a strategic planning meeting, draw up a beautiful plan and never open it again until the next meeting. The strategy should be the most used document in the company because it describes how you will beat the competition. Two additional points 1. If either the competition changes or the battlefield changes, you better think about changing the strategy. We can look at the battlefield in two ways. One the physical landscape (retail) or the psychological landscape (the consumer). Both have changed dramatically in the recent past and therefore should be reconsidered when developing your strategy. How has the battle changed? Foods Sales by Outlet 2011 $ Store Convenience Drug 0.015 0.014 0.078 0.038 0.331 Club 1 0.078 Mass/no super Grocery 2 3 4 5 Supercenter 6 7 0.162 What would this have looked like 30 years ago? • It was about 83% would be grocery store . • Lets look at the changing battlefield (retail environment) and ask two questions – How has this changed my strategy – How has changed how we collaborate Let’s start with “new formats” from old companies Fresh and Easy is a Tesco format with a focus on convenience and prepared food. They are small stores with limited assortment but lots of PL Stores are approximately 9,000 sq. FT. and are designed to offer high quality, fresh food at competitive prices, capturing top-up basket shoppers looking for meal solutions. As part of the convenience concept, stores have a range of around 3,500 SKUs including chilled ready meals, snacks and salads, ready to heat prepared meals, baked goods, fresh produce, meat, poultry, seafood, juice and coffee. Prepared foods account for around 10-15% of the range. Convenience Food !'Fresh & Easy Ideas' is designed to create excitement in what is generally a promotion- free environment. Meal ideas are advertised in the retailer's circular and online, and then integrated in-store. Most products featured in the Ideas section are private label. 23 Ready Meals " Tesco’s real strength - healthy, prepared foods - is showcased in the ‘Fresh From Our Kitchen’ section. The department is almost entirely private label and consists mainly of home meal solutions, meaning that the products need to be heated up for at-home consumption 27 Demonstrating its mission !Somewhat cheekily, Fresh & Easy gives Californian hybrid car drivers preferential treatment. 77 Safeway is at it as well! • Safeway got on board with The Market at Vons in Long Beach. • • Supervalu opened a 16,000- square-foot prototype called Urban Fresh in the Chicago market. "Everyday IGA will combine the variety and selection of a full-sized supermarket into a more user-friendly format through a carefully focused selection of national and IGA- branded products -- what I like to call a 'solutions store' -- Some Grocery chains are just focused on the Fresh convenient prepared meal market and are not part of a bigger chain. Like The Fresh Market The Fresh Market As Retailers create new formats are you keeping up with the change Are You Trying To Fit The New Players Into The Same Collaboration Models As The Traditional Stores. Supermarkets are using multiple formats for different markets: Publix: Hispanic: Sabor & Healthy/Fresh: Greenwise Delhaize Grocerants the Next Big Wave! Whole Foods' company executives are calling the store a "groceraunt," because it not only offers a wide variety of prepared foods' options--along with tons of fresh foods and natural and organic grocery products--but also has numerous and varied in-store dining or restaurant venues in it. This eclectic mix of foods, beverages and much more, which shoppers can take home to eat or cook, or enjoy by dining in the store, equals a Whole Foods' "groceraunt", rather than a mere grocery store or supermarket. The grocery sector lead by companies like Wegmans, Metropolitan Market, A&P, Harris Teeter and Safeway all are reconfiguring their ready to eat ready to heat grocerants niche food product lineup and repositioning it in their stores. With new products, packaging and consumer price points that are driving traffic. All of these companies are reporting consumer frequency and acceptance way up. The margins for the grocery stores are higher in this niche than the rest of the store; that’s a win-win. So far Walmart has opened five Walmart Express stores in Arkansas, North Carolina and the Chicago area and is pleased by the results. The company hopes to have 11 of the new stores open by the end of the year. The Walmart Express stores are designed to for rural areas where the population can't support a traditional store and urban areas where space constraints prohibit large-scale outlets. Low prices stores grow faster and want lower prices Worldwide Discounter are growing faster than the rest of the market Genre of Healthy foods/ organic food/ local: Whole Foods Farmers Market Freshness/Quality: Sunflower Markets It is not just the major grocery chains that have changed formats. Look at the “Gas Stations” and convenience stores Convenience Stores and Gas Room to grow! • Nielsen’s research shows that sales of private label products rose over the last year nearly 20 percent to $826 million in convenience stores, compared to a 15 percent increase in drug stores and just under 10 percent in supermarkets. Exxon Home Depot BP Ye Olde Convenience store has changed And when you are just at the pumps they will still try to get some of your food dollars. Coupons are being printed for immediate purchase inside the store! Convenience Stores • The 4.4% growth rate of convenience store in-store sales surpassed the growth rates of other competing channels, including warehouse stores/ clubs (4.0%), restaurants (3.4%), drug stores (2.4%) and grocery stores (2.3%), based on U.S. Department of Commerce numbers. Look At 7 Eleven The “Express Stores” • Wal-mart • Giant Eagle • IGA Wal-Mart Express • Wal-Mart announced that it was developing a small format that would range between 15,000 and 30,000 square feet for deployment in either rural or urban environments. The primary small concept, Wal-Mart Express, will and incorporate a pharmacy in some locations and not in others. The stores will also feature varying levels of fresh food products and other items. Giant Eagle Express • The store combined Giant Eagle's GetGo gasoline outlet with a drive-through pharmacy and a specialized grocery store of less than 14,000 square feet. • The Giant Eagle Express store is open 24 hours a day, seven days a week. Giant Eagle Express' ready-to-eat menu now includes breakfast, lunch and dinner selections, such as fresh breakfast sandwiches, which were recently promoted for two for $3, along with gourmet muffins, deli wraps and sandwiches. IGA Express While IGA Express is their version of the convenience store, featuring essential, traditional food items with upper-end snack, beverage and confectionary items." Any new Players?? • How about Truck stops • TravelCenters provides professional drivers services for the long haul. The complex design includes gasoline, foodservice, retail, entertainment, and other roadside conveniences. Travel Centers Drug Stores have changed Most drug stores have signs that proclaim “Food Market” But wait is it a Pharmacy or a convenience store??? • The Walgreen Co. is changing along with the drug store industry by looking to the past, as well as to the future. The retailer is harkening back to the days of the soda fountain—it has been ramping up its fountain drink, coffee and snacks offering through Café W, a compact counter version of a convenience store’s beverage and snack area. Almost 10% of their total sales are in edible groceries How About Famima? Targets upscale women How about Fast food business getting into the convenience store business • Jack in the box Dollar Stores • DOLLAR STORES ARE RAPIDLY EXPANDING IN FROZEN AND CHILLED FOODS. THE LEADING CHAIN, DOLLAR GENERAL, HAS ADDED COOLERS AND FREEZERS TO 2,400 OF ITS 6,200 STORES, AND PLANS TO HAVE THEM IN ALL • DOLLAR STORES TODAY ARE LOOKING FOR PRODUCTS AND PACKAGE SIZES TAILORED TO THEIR NEEDS (SIMILAR TO CLUB STORES). INCREASING "CONSUMABLES," INCLUDING HOUSEHOLD PRODUCTS AS WELL AS FOOD, IS SEEN AS KEY TO BUILDING TRAFFIC. Look at all the food store items! And Private Label Dollar Stores • Four stores alone have about 22,000 outlets.

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