The implications for suppliers in Australia of the recent 10% range reduction announcement by Coles supermarkets, our #2 retailer with c.25% market share, are significant and those suppliers that are not prepared could face a tough time.
As the supermarket group faces a range of pressures from mandated market regulation through the consumer watchdog (the ACCC) and on-going government enquiries, from its green-for-red long-term rival in Woolworths and from the cost-of-living crisis fuelled rise of discounters Aldi & Costco, it has turned the clock back to ‘Project Simplification’.
Strategists and market analysts can opine on the merits of a move to ‘out-discount a discounter’, reducing range complexity to drive end-to-end efficiency and improving the shopper experience with better availability and clearer shopper decision making. With H1 results due to be posted later in February it will be interesting to see if the shoppers champion has ‘helped Australians eat and live better every day’, or if last year’s 2.1% increase in Net Profit After Tax can be beaten year-on-year.
Suppliers, both large and small, will be in the buying team sights through this range cull. Coles, just like any other retailer, sees this period like a messy relationship break-up. “Any savings we make, we keep, any savings you make, we share”.
With one hand the buyer will dangle the carrot of “put forward your best offer to gain space and range” whilst the other hand wields the stick of “pay-up now to save your business”, now doubt in an approved Grocery Code compliant template script.
Suppliers should take a leaf from the Coles Foundations statement. Focus on Financial discipline to sharpen the compelling commercial argument to support their brands and sku’s with shopper data on loyalty combined with brand innovation and demand-generating investment plans. Then do your preparations for a tough negotiation – be clear on your ambitious ask, get internal alignment to hold the line, and get ready your long list of asks for what you want in return for any extra investment you chose to offer the retailer & always get something in return.
Listening & working with our CPG clients, we see the time old tactics being rolled out here again by the Big & Mighty, when the going gets tough. However, when additional pressure becomes pain, on Farming, Manufacturers & the Consumer, there comes a point when enough is enough. No surprises I guess to part of the messaging, when Gina Cass-Gottlieb publishes her latest finds from the ACCC in the coming weeks. It’s now time for action.
Editorial Credit:
Coles – Nils Versemann / Shutterstock.com
Woolworths – Daria Nipot / Shutterstock.com
