In preparation for the upcoming London Produce Show and Conference, we’ve been spending a good amount of time in the UK, and a fair amount of that time has been spent visiting retailers.
As the battle has been painted, you have the so-called “Big Four” — Tesco, Sainsbury’s, ASDA and Morrison’s — struggling, while deep discounters, such as ALDI and Lidl, and upscale chains, such as Waitrose and Marks & Spencer, gain market share. This is all true, but we wonder if Whole Foods isn’t a sleeper in the market, one deserving of much more attention.
Way back when Whole Foods first opened its large and high service Kensington Store in 2007, much attention was paid to Whole Foods. Waitrose particularly saw it as a threat and focused on preventing Whole Foods from growing in the UK.
Yet that initial store lost a fortune, and indeed we are told that, only now, seven years later is it moving into the black. As the losses cascaded, other retailers looked away, figuring that model was a failing one.
Kudos though are due to Whole Foods for staying true to its strategic vision, and one notes the distinction in the approach from Tesco’s journey to America as Fresh & Easy. Whole Foods made a mistake with the Kensington store. It was too big, required too much labor for the service and restaurant areas and, as such, it lost a lot of money. But it was just one store, and Whole Foods did not build a giant distribution center.
In fact, it worked with distributors and wholesalers, only building its first small DC last year. Also to gain local knowledge, Whole Foods bought Fresh & Wild, a small chain, back in 2004, three years before opening its Kensington flagship. This dramatically reduced the number of expatriates Whole Foods had to send to the UK. Keeping overhead low, acquiring local knowledge and opening just one store gave Whole Foods that most precious of resources — time. As it developed new stores and closed other stores, it has come upon a formula that in many ways deserves a second look.
We went to visit the new Whole Foods in Fulham. It is a small store, about 23,000 square feet, but it is absolutely beautiful and an incredibly different experience compared to the heavily packaged experience the big multiples proffer in the UK.
Everything is loose and fresh. It has service meat and a cheese bar, innovative things such as bulk frozen fruits sold loose and a very popular in-store smoothie and juice bar.
Now it has to be noted that the big multiples in the UK probably have the most efficient supply chain in the world. They have for decades relentlessly worked to reduce labor needs in stores and to drive costs out of the system.
Unfortunately, reducing costs in the supply chain only produces a competitive edge if one chain does it and others do not. Morrison’s, which doesn’t really play in London, is a bit different, but all the rest of big chains in the UK are, however, ultra-efficient. So they beat each up over price because that is the competitive edge that efficient supply chains produce, but the relentless focus on price just leads to beating up suppliers, squeezing margins out of the system until, in the end, suppliers want to sell you only as a last resort and consumers tolerate but don’t enjoy the low levels of service and lack of warmth.
Now one question is whether, as an American, the Pundit is looking at it wrong. We in America are used to big bulk displays of produce and to interacting with people at service departments. Perhaps the British find all this packaged stuff just wonderful.
We don’t think so, but a look around the Whole Foods clientele base reminds us of another fact: Those who view London as a British market are doomed to fail.
This is a city filled with people from Poland, Russia, Algeria, Nigeria, the Caribbean, Rumania and a whole lot more. And it is not just Americans accustomed to bulk fruits and vegetables. The way they sell product in Algeria carries a closer resemblance to the US practice than to the British.
UK retailers have micro-marketed their stores to ethnic groups, but just recently have started recognizing that London is a world apart. Tesco recently set up a separate focus for London, but there is no evidence of totally different concepts.
Yet the critique of Fresh & Easy when it opened was that it was cold and sterile as opposed to say, Trader Joe’s, which was warm and friendly. This is the same critique a big part of the London population feels toward many British retailers.
Does the Whole Foods model have legs? Certainly management in the UK is still experimenting. Whole Foods opened a store in Scotland, which has struggled, and now they seem intent to focus on London, where the diverse population is more open to the concept.
There is no question that the Whole Foods supply chain is less efficient; on the other hand, because Whole Foods does so much in-store preparation, if the avocados are going soft, it can make guacamole. The big British multiples, which have outsourced everything and do no in-store preparation, have no such capability.
Perhaps the biggest difference that Whole Foods brings to the market is a pivot in focus. All retailers everywhere and all the time have to choose where to focus their attention. In advertising meetings in the US at the right time, you see one inclination urging that cherries be placed on ad, because that is what will delight the consumers. Another side argues for something more stable — pointing out that there might be hail and the cherries may not be available, etc., etc.
And so each retailer has to always confront whether it will be logistics-driven or merchandising- and marketing-driven? And that makes all the difference.
For a long time, Tesco in the UK saw incredible growth because it opened many more stores. With talk of its incredible “land bank,” it seemed impregnable in the UK. But the ALDIs and Lidls and Costco’s and Whole Foods of the world are finding their way in. Even ASDA, a sleeping giant that was frustrated by its inability to find sites, seems to now be finding a new focus and with Ocado and Morrison’s new online service, real estate isn’t necessarily going to be as important as it once was.
This is going to mean that the giants such as Tesco have to change. Partly they will need to focus on delighting consumers more than driving pennies from the supply chain. And then there is this secret: To triumph they need new and innovative products and that means they will need a supply chain that wants to help them win.
The British suppliers have little choice and so want to work with the British multiples, but you go to foreign supply sources — places that have options — and they will say that the big British multiples are very demanding and don’t want to pay. Increasingly that will mean that the big British multiples will lose out as growers of proprietary varieties divert these valued and sometimes scarce products to markets that will pay a premium. So firms such as Tesco need a cultural shift where they try to win the Miss Congeniality Award when dealing with vendors. That’s not a cultural shift; that is an earthquake.
It is really quite fascinating and important to the future of the industry. We will be discussing this topic and more at the Perishable Pundit’s “Thought-Leader" Breakfast at The London Produce Show and Conference.
You can register to attend right here.
And if your company is interested in exhibiting or sponsoring an event, just let us know here.
It is going to be an incredible event, a unique combination of commerce, intellectual exchange and comradery. We hope you will decide to join us.
When we wrote a piece on the UK market — titled New Opportunities To Sell Produce In The UK Market Emerging From Tumult — we realized that it was tumult in UK retailing that was redefining the market opportunities in the UK. Obviously there are many experts in the UK on British retailing, and we will have more than our fair share of them at The London Produce Show and Conference but, sometimes, an outsider to the market can both speak more freely and see things from a different perspective.
So we asked Bruce Peterson of Wal-Mart fame if he would come to London to share his market analysis. We asked Pundit Investigator and Special Projects Manager Mira Slott to see if she could a sneak preview of what he would have to say in London:
Former Senior Vice President and
General Merchandise Manager
of Perishables for Wal-Mart Stores, Inc.
Q: Bruce you have an interesting background. You built Wal-Mart’s produce program from almost nothing to the largest on earth. You then worked on the grower-shipper side of the business as President/CEO of Naturipe. And your consulting business has given you exposure to a wide range of companies and markets. And you are free to speak openly. Your candid, thought-provoking insights are sure to stir up attendees at the upcoming London Produce Show & Conference. Channeling your transformative role at Wal-Mart Stores, and your presence there during the acquisition of ASDA, what key issues will you broach as UK retail competition heats up?
A: To hit all the issues requires a State of the Union address in regard to where UK retailing is going right now. The whole deep discounter phenomenon is a very, very real trend and difficult challenge in the UK. Retailers in the UK haven’t had to experience that before. UK’s “Big Four Supermarkets” — Tesco, Sainsbury’s, Morrisons and Asda— have had their way in the UK. Even Wal-Mart is feeling the heat from Aldi.
Q: Financial reports show the Big Four being squeezed at both ends. Deep discounters, Aldi and Lidl, continue to grab market share, as Waitrose and specialty segments increasingly nip away from the top, unhinging their retail market stronghold and shaking up long-standing norms. Aren’t there some parallels to when Wal-Mart Supercenters penetrated the U.S. market, pummeling conventional retailers?
A: The consumer value proposition is what it’s all about. That could be the title of my presentation. What entices a person to come to your store? In the UK, so much has been around location and also a private label offering. If you’re a fan of Tesco product you go there; if it’s Marks & Spencer product, you go there.
Asda was the first retailer in the UK that started talking about price. That was one of the things so attractive to Wal-Mart, which operates on the value proposition of price, and a driving impetus for Wal-Mart and Asda getting together. The whole proliferation of discounters in both the States and in the UK presents a huge problem. If your value proposition is centered on price and a consumer can go to another store and get the product cheaper, how do you deal with that?
Q: What strategies do you suggest?
A: It’s really funny because in the UK, retailers are experiencing the same kinds of challenges that traditional U.S. supermarkets, such as Kroger, Safeway and Albertsons, faced when Wal-Mart became a significant player in the marketplace. They have to do things to battle that price pressure.
The difference is that in the UK, in terms of the size of the country, location is still a meaningful factor. Retailers have location solidified that way. It’s a great defense. People aren’t inclined to drive 50 miles to get to the store. In the U.S., consumers showed a willingness to travel quite a distance to shop at a Wal-Mart Supercenter for a good deal.
Q: How much does that consumer mentality cross retail channels? For instance, do you think that higher-end chains may have miscalculated the value proposition of price in consumer purchases? How does product quality and other attributes, such as variety and service, stack up in the value equation with these deep discounters?
A: One thing we found out at Wal-Mart, as Aldi continued to grow in the U.S., just because someone has a lot of money doesn’t mean they won’t shop for bargains. You’d be surprised how many Mercedes are parked outside of Wal-Mart.
We don’t have Lidl in the US, at least not yet. My experience with Lidl has been observing the chain in Germany. I can tell you that Aldi, particularly in produce, has done a much better job with the quality of product it carries.
One thing to note about a Tesco, Sainsbury’s, Morrisons or Marks & Spencer is that variety is broader. In other words, these discounters have great prices, but a limited SKU count. That said, one of the critical strategies for survival: You have to be able to manage assortment very, very intelligently.
Aldi is very private label-oriented. It offers a great price on private label, but is not known as a brand house. That’s another interesting point, because in the UK private label is dominant.
Q: Wasn’t branding strategy at Wal-Mart pivotal in its phenomenal growth, and one of your signature achievements during your tenure there?
A: In the States, Wal-Mart developed a strong national brand strategy. I still feel strongly about that and think it’s a big error that Wal-Mart is departing from that. In the UK, this is already starting a bit. We will see a little more brand emphasis going forward. If consumers are shopping laundry detergent from all these private label retailer names, they clearly will all have different prices but also different quality standards. If you have Tide, Tide is Tide, and you win the battle in pricing in the mind of the customer.
Strategies I used in my early days at Wal-Mart targeted national branding. I chose to carry Chiquita exclusively. It clearly made my value proposition strong. In the US Chiquita is one of the top consumer brands period, because of the marketing for 50-years plus that Chiquita put into it and in bananas they are especially strong. Remember that the other big banana brands really started with other products. In the consumers’ collective mind we assessed that there was a direct connection between carrying Chiquita bananas and being perceived as having quality bananas. Remember, at that time Wal-Mart had zero brand equity in fresh produce, carrying Chiquita not only made people think well of our bananas but it helped build up a trust that all Wal-Mart produce was high quality. It also made it easy for consumers to see we provided the best value in town because the branded product was directly comparable between a supermarket and Wal-Mart.
Q: Isn’t a national brand strategy more limiting in the produce industry?
A: I believe there are only four national brands in produce — Chiquita, Dole, Del Monte, and Sunkist — in the U.S., perhaps five if you count Ocean Spray although with their limited season, that is more a packaged goods brand. There are strong regional brands — Andy Boy is iconic in New York; Driscoll’s has a dedicated following in different parts of the U.S.
You have to think about branding as a pricing strategy. It’s fine to compete on private label, but if you try it with a deep discounter you lose on that because their operating costs are so low and can work on such slim margins. In contrast, if you have a brand pricing strategy, you can gain a competitive edge.
Q: Doesn’t Aldi’s limited SKU assortment also aid in pricing efficiencies?
A: The deep discounter stores are so small they don’t have the room for the assortment.
The warehouse club also operates on a narrowly defined SKU offering, but is a totally different economic model. The original strategy worked on almost zero margins but made money on memberships. In terms of geography and zoning, there is little room in the UK for that kind of model.
In the UK and in a lot of Europe, in general, there tends to be more vertical stores, two- to three-level stores to deal with that issue. It’s hard to build large footprints where there is a high concentration of stores. It’s very, very expensive. Besides the warehouse Club model is built around selling larger quantities. That works in the US, with large garages, extra refrigerators and freezers, but in the UK the number of people with room to store extra product is limited. Warehouse concepts tend to be more business to business oriented.
Q: Aren’t there many divergent variables to consider when comparing U.S. retailing to that in the UK?
A: When people point to how innovative retailing is in the UK, it’s important to consider it’s a totally different social economic model. All the people are concentrated in relatively small areas. They don’t shop in the same way. They don’t have big refrigerators, they don’t have big homes. Everything was designed to manage that lifestyle.
You have to take these other variables into account. There hasn’t been a single retailer from the UK that’s been able to come into the U.S. and make significant inroads. What is the reasoning? It’s because they are totally different markets, which isn’t to say there are certain elements you want to emulate.
The biggest difference between the UK and the U.S. is the distance product travels from its source to the warehouse and the warehouse to the stores. When I was at Wal-Mart, the average distance a supplier’s product would travel was significant. We might ship product 4,000 miles across the country.
In the UK, the average distance between manufacturer and what’s called the depot is 100 miles, and from the depot to the store is 50 miles. In the UK, they don’t have warehouses; they have distribution centers. The difference is logistics and the amount of time the product is sitting. They’re able to minimize the time product is in the supply chain. Bringing in product from elsewhere is a seasonal thing like anything else, but think of Spain, France, and the UK all next to each other. The key, though, is that the product may come from South Africa or New Zealand but once it is in the UK, the distances are short and thus relatively easy to manage.
Q: Could you talk about British procurement systems and relationships between retailers and grower/shippers?
A: What happens in the UK… it’s often the case that the producer sells virtually all its product to a single retailer. That’s not necessarily a bad thing but you’re kind of at the mercy of that retailer. If you have a portfolio of retailers, foodservice providers and wholesalers, your portfolio is easier to balance. I’m a big believer in diversification.
Q: It brings back memories of produce suppliers in the U.S. being concerned about having all their eggs in Wal-Mart’s basket…
A: That’s right. At Wal-Mart, we had a policy that we could only have 25 percent of a supplier’s business. If we exceeded that, we had to get sign off from the CEO of the company. We didn’t want any supplier so dependent on us.
At Wal-Mart, we wanted diversification. It’s a different strategy than retailers in the UK. A Tesco isn’t thinking that way. Asda isn’t thinking that way. None of the UK retailers are. They have more control over their suppliers that way. It’s not necessarily good or bad, it’s just different and must be looked at in the context of the UK market versus the U.S. market.
Q: What happens to traditional British procurement structures as retailers look to buy direct?
A: I’ve found going direct very interesting for a lot of reasons. In its very basic form, intuitively I cut out the middle man, and I can save money. But the middle man often does a lot of different things that don’t necessarily show up in the FOB cost of goods. I actually believe it would make a great economic case study. Of course, that all depends on your supplier relationships, but is it really cheaper to go directly to a grower and not a grower/shipper marketer? There are a ton of variables in determining that.
I know for a fact what our grower/shippers did at Wal-Mart was much more than just giving us product.
Q: In Wal-Mart’s case, weren’t you also having your suppliers manage your inventory? This required sharing of information, which other retailers were hesitant to do…
A: We called it vendor co-managed inventory replenishment. It was a great model. UK retailers do things differently. A lot of retailers in the UK have a single company that does all the procurement. I never understood why that was a good thing, although Asda was resolute in maintaining that system, as were other UK retailers. The funny thing is, that’s about to change.
Asda had a single-source procurement model, and now they’re going to a more diversified model — like what I was doing at Wal-Mart back in 1993. I want to make clear that these different strategies need to be considered, not as right or wrong, but within the confines of each market. In the UK, retailers developed strategies based on the circumstances at that time and were very successful.
Look at Asda. It’s a great company. It gained market share years ago and did some wonderful things. But those things are not necessarily applicable to the U.S. market. The most poignant example of that is when Tesco came over here to the U.S. and failed with Fresh & Easy. They were so good at data-mining, but were unable to read the U.S. market.
At Wal-Mart, we had national brands, but also a very articulated tiered private label offering, just like Tesco and many other retailers. Here’s the philosophical shift between brands and private label: When you do private label and control your own products, you can tell the supplier whatever you want them to do. If you go to Nestle or Proctor & Gamble as a partner, you lose that control.
Q: So, in becoming less autonomous, the retailer/supplier partnerships must be elevated? But you’ll never hear a retailer or supplier say otherwise…
A: You have to look at the transactional component as a collaborative effort with your suppliers. Everybody says, “we have great relationships with our suppliers,” but no, it can’t just be idle talk. You work toward a mutual definition. It’s not just, “I’m going to get this product cheap.” These are very high strategy issues. What I find interesting about the UK is they think they have it all figured out. You can really become a victim of your own success.
One of Sam Walton’s biggest fears was the success of the company; that people would get too complacent and think they had it mastered. When I was at Wal-Mart, we spent two seconds talking about what we did right and about five hours talking about what we did wrong. You’ve got to have this relentless passion for change and never accept the status quo, and the minute you think you’ve got it figured out, that’s when somebody’s going to come in and do a better job than you.
Q: If you’re giving constructive advice to people in the UK retail market, are there a few bullet points you could highlight?
A: What you have to be able to do is articulate your consumer value proposition and execute better than anyone else. You cannot be all things to all people.
The Marks & Spencer brand is like Craftsman tools and Kenmore in Sears; you can only get those brands there. Contrast that to Aldi’s real simple proposition — ‘we have the best price in town.’
The main bullet point is you don’t want to be in the middle. That’s the worst place. If you look at retailing historically, that’s where companies started to fail. I’m basically speaking about three disciplines, and you have to be dominant in at least one of these. You can be operationally excellent, product excellent or service excellent.
Operationally, McDonald’s reigns, while it’s not necessarily the best hamburger place.
Aldi’s expense structure is so low it is the best price in town. Wal-Mart was an example of that at one time. For product excellence, you could point to Nike, Apple, Peter Luger Steakhouse in Brooklyn, or Marks & Spencer because products are so innovative or such high quality. For service, it’s the Ritz Carlton or Nordstrom’s. The Ritz is not the cheapest hotel, but its value proposition is clear. Whole Foods has both product excellence and service excellence. HEB would be another example.
At Wal-Mart, we didn’t want to be known as a grocery store. For consumables, Tide, toilet paper, all those staple things, we had the best price in town. That’s what would bring people into the store, and then we offered produce and other items they would buy when there.
In the UK, what brings people in the store? Number One is location. Ask what brings your customers into your store. Do you know your customer? Have the products in stock when they want them? And at a good price? Retailing is simple. People make it complicated.
What I admired so much about Reggie Griffin [former Vice President Produce and Floral at Kroger] is that he didn’t want to be Wal-Mart. He wanted to be Kroger. On a national basis, Kroger held their own, because they were true to who they were. Everyone wanted to chase Wal-Mart. He understood their value proposition.
Q: What do you make of Wal-Mart’s announcement that it intends to drive organic food prices down by selling Wild Oats brand organic products at more affordable prices?
A: I believe competing on organics is not a smart strategy, but that is a topic for another day. Whole Foods is expensive on a lot of things, but that’s not the point. The most important thing is your merchandise assortment. You have to be smart on that.
I’ve been a proponent for a long time that the mass market as a merchandising strategy is dead. People have so many choices of how to get goods and services today; you have to dominate a segment; get the right assortment, pricing strategy, and know your consumer.
In the early days of the supercenter, retailers would say, ‘we’ve got 650 different SKUs, and Wal-Mart only has 290. The problem is, it doesn’t matter the number; what matters more is what SKUs. The other critical component is managing your stock. You have to be in stock on the products consumers demand.
Q: Going back to our distribution discussion earlier, wouldn’t UK retailers have an edge there in keeping product in stock with their shorter supply chain?
A: UK retailers are perfectly willing to run out of product, willing to accept out-of-stock because they get deliveries every day. It’s kind of OK, but if you’re always out of stock at 7:00 pm, you may be frustrating customers that do their shopping in the evening. But then if you’re over-inventoried with too much product, it goes bad and your customer certainly won’t appreciate that. Keeping inventory tight allows you to save money on one side, but you have to look at the supply chain holistically and geared to the end user.
Q: What’s your advice for attendees on the supplier side?
A: It really depends on the individual grower/shipper and their current circumstances. There is no silver bullet. You have to think about managing the elements of risk. If you’re heavily dependent, diversify your portfolio. It doesn’t happen overnight. You have to set goal posts, and rid yourself of white elephants and the sacred-cow syndrome.
Bruce has been most generous with his time and knowledge. In London, he has agreed to serve as a member of the Perishable Pundit’s “Thought Leaders” Breakfast Panel, which will be presented on Thursday June 5 from 7:30 to 9:15, to give his own workshop and to work with the student groups to help educate and inspire them as to the prospects of working in the produce industry.
We read Mira’s Q&A and identify 10 key issues:
1) The consumer value proposition
The interesting thing here is that it involves focus on the consumer as the first priority. Though, as we discussed here, many UK retailers seem more supply-chain-driven than merchandising-driven. This can be putting the consumer first, if cheap food derived from an ultra-efficient supply chain is what consumers want. But there is a real question whether that is, in fact, the motivation that drives retailers to focus on supply chain efficiencies. Sometimes old habits die hard. Once upon a time there might have been large gains from such a focus but, now, lots of effort may produce only tiny, incremental gains. A new approach may be the key to developing the offer consumers want. This is especially true if the goal is an offer differentiated from that offered by other retailers in the market.
2) The challenge posed by Aldi, Lidl and the idea of deep discounters
Bruce is too polite to say so, but when he mentions that the big UK multiples are in a place vis-à-vis Aldi and Lidl that the big American supermarkets, such as Kroger, Safeway and Albertsons were vis-à-vis Wal-Mart a few years ago, that is not a good thing. Albertsons and Safeway have both wound up fodder for acquisitions. Only Kroger has held its own.
3) Location is the key
In noting that in the UK market, where homes are smaller, people are more accustomed to mass transit and frequent shopping, location is the great value-determinant for UK retailers, he sotto voce is saying that the Internet may be an incredible game-changer. If what people really like about their grocery store is that it is close or on the way to home and they don’t switch not because they so love their retailer but because scarce real estate makes effective competition moot, the ability of Internet retailers to offer alternative product, service, price, etc., may be a big game-changer.
4) Vulnerability to discounters in private label market
In a branded market, a discounter’s low price on private label can be blunted by consumer suspicion of quality differences between national brands and private label product. But if everyone has private label product, those comparisons are difficult and depend crucially on consumer perception that one store’s product is better than another’s. What has happened in the UK is that Aldi, specifically, has raised its perception among UK consumers. And it is not just perception… two separate vendors told us that Aldi is buying produce of a quality on par with anyone in the market.
5) More brand emphasis going forward
Branding in the UK in produce is on odd thing. You can go in stores that seem all private label and they will have bagged Florette salads, though it is not clear what that brand means to consumers. In an environment where national brands can hardly exist, Rooster brand has swept the country. Oddly, most of the big multiples haven’t picked up on this as a point of differentiation. Bruce’s point is that if you want to show you are the lowest in price, there is no more clear way to do so than to undersell on national brands.
6) Can warehouse clubs grow?
In the UK, Costco has odd rules limiting shoppers to certain professions. Less than half the UK population is eligible for Costco membership. These rules derive from zoning restrictions that have given Costco some real estate advantages by being able to be classified differently from retailers and thus open in some large industrial sites. This is why Costco selected the UK for its global internet shopping rollout. There are a lot of Brits who can’t shop in a Costco warehouse but can shop Costco online. This is another example of how internet shopping can disrupt the market.
7) Why has no UK multiple been successful in the USA?
Bruce points out that the US is a totally different market, which is true but begs the question of why retailers that have been successful in other very different markets failed in the US. When talking about Fresh & Easy, we hypothesized that it was our common language that threw them off. Somehow in Poland or Thailand, it just was obvious that there were many market differences; in the US, it was easy to think that the cultural differences are minor annoyances easily overcome. Turned out not to be so. In fact, maybe the reason Wal-Mart has been reasonably successful in the UK and Tesco wasn’t in the US is that Tesco made the US a top priority project and threw its best brains into the launch. Wal-Mart has, mostly, left ASDA alone.
8) Diversification vs concentration
At this year’s City Food Lecture (see the report our UK Managing Director Tommy Leighton wrote on the talk here), Charles Wilson, the CEO of the UK’s largest food wholesale group, was forthright:
Both British and international suppliers have plenty of growth opportunities outside the UK supermarket sector, he said, pointing to IGD growth estimates in the alternative food sales channels over the next five years. The out-of-home sales channel is expected to expand by 18%, convenience retailing by 28%, discount retail by 65% (although Wilson believes that could be underestimated), and online by 95%. At the bottom of the expansion pile are the supermarkets, with predicted growth of just 8%.
…Online players with various formats also have a fantastic opportunity to take growth from other channels and engage directly with the consumer.
“Simply go where the growth is,” was Wilson’s advice to suppliers. “It’s better to put your best products, best people and support into channels that are growing, rather than the no-growth supermarkets.”
Yet pursing varied markets is a big challenge for many vendors grown accustomed to hitching their wagon to one star and riding it. That has been a very successful option for a long time. It doesn’t seem likely to be a high growth path for the future.
So the issue becomes who has the skills and willingness to pursue new channels and new opportunities.
9) Buying direct
There is no question that is what UK retailers are telling us they want to do. Whether it will work out to be more profitable is very questionable. When Wal-Mart moved away from its assigned Distribution Center system that Bruce Peterson developed, it claims it saved money on procurement but it definitely developed — as we noted — massive increases in out-of-stocks. Even if Wal-Mart bought cheaper, which is certainly not established, what was the cost not only in lost sales but in alienated and dissatisfied customers, in being out of stock?
10) Mental attitudes that create success
One of the best business books is former Intel CEO Andy Grove’s tome, Only the Paranoid Survive. Much as exotic species survive on islands because they are free of natural predators, so an island mentality can easily develop where because one is better than the local competition one believes oneself to be the best. What is the Aldi and Lidl threat but a story of how two competitors developed just a little distance away in Germany and nobody saw them as a threat? Instead of trying America, why didn’t Tesco develop its own deep discount format? We don’t know the answer, but we know that being open to different ideas and different people, to new ways of doing things and to the idea that the future cannot be extrapolated from the present is an important part of being successful in the future. Waking up every day and knowing that someone, somewhere is about to change the game you’ve become good at playing is the way to keep focus on the events necessary for success.
Of course, to help people explore new ideas, focus on what might be coming down the pike and explore who might have an answer that can help you prevail in changing times — all these are reasons we launched The London Produce Show and Conference.
Please join us and hear what Bruce Peterson and others have to say. Engage with thought leaders from around the world, interact with producers and buyers seeking a path to success.
You can register to attend right here.
Book a hotel room right here
And if your company is interested in exhibiting or sponsoring an event, just let us know here.
It is going to be an incredible event, a unique combination of commerce, intellectual exchange and comradery. We hope you will decide to join us.
We’ve never met Abe Gorelick, but Annie Lowrey at The New York Times has made him the poster child for the long term unemployed in a piece titled Out of Work, Out of Benefits, and Running Out of Options:
BOSTON — Abe Gorelick has decades of marketing experience, an extensive contact list, an Ivy League undergraduate degree, a master’s in business from the University of Chicago, ideas about how to reach consumers young and old, experience working with businesses from start-ups to huge financial firms and an upbeat, effervescent way about him. What he does not have — and has not had for the last year — is a full-time job.
Five years since the recession ended, it is a story still shared by millions. Mr. Gorelick, 57, lost his position at a large marketing firm last March. As he searched, taking on freelance and consulting work, his family’s finances slowly frayed. He is now working three jobs, driving a cab and picking up shifts at Lord & Taylor and Whole Foods.
“I’m not in my basement, unshaven, unshowered, drinking a bottle of Scotch a day,” Mr. Gorelick said. “I’m out there working these jobs, meeting people and trying to make something happen. But it is exhausting. It is stressful. It is difficult.”
We wish Mr. Gorelick well, but Ms. Lowrey did a disservice to her readers in simply running the parts of the story that seem to have fit with the narrative she wanted to present, because something is very wrong with this story.
First, she didn’t ask any of the logical and obvious questions that a reader would want to know to determine if this is really a public policy problem or if this is really a choice that Mr. Gorelick has made. Simple questions: Is Mr. Gorelick willing to relocate? Has Mr. Gorelick insisted on a salary minimum for accepting a new professional position and what might that be? Is he willing to change professions, say, from marketing to sales?
Second, if Mr. Gorelick is willing to do all that might be necessary to get a new professional position, there is still something off about this report. Mr. Gorelick attended the Wharton School at the University of Pennsylvania and has a master’s degree in Business Administration from the University of Chicago. These are among the top business programs in the world. Since he is 57-years-old, many of his classmates are wealthy and in important positions in business.
Mr. Gorelick is in marketing, so we can assume he has cultivated and retained many relationships. So if he is willing to do what it takes to reestablish himself, what does it say about the way Mr. Gorelick is perceived by people who have known him a long time that not one of these captains of industry is prepared to offer their friend and classmate a position? The reporter here didn’t seem to interview anyone to find out why they were choosing not to extend Mr. Gorelick any offers of employment.
Third, it is not clear why Mr. Gorelick needs a job at all. Marketing involves lots of project work, and an esteemed professional active in the field for 30 years — now able to offer bargain prices as he works from his house without rent or overhead — should be able to make a living with his own firm. Look at a guy such as Dick Spezzano. Had Vons not been acquired by Safeway, he would have probably stayed employed, but when the luck of the draw turned against him, he leveraged a lifetime of knowledge, contacts and connections and made his own luck. That Mr. Gorelick can’t make this happen is odd and tells us that there is more to this story than we are being presented.
Fourth, the piece is quite oblique about Mr. Gorelick’s financial situation. It says that he is the family’s “primary breadwinner” but not whether his wife made 49% of their earnings or 2%. It says he has had to wipe out his retirement accounts, but not what kind of cash reserve he had built up over his decades in business. It says he has struggled to cover his mortgage but not how much the mortgage is or whether he had a mortgage at 57 because he had bought an extravagant home or refinanced to use the money imprudently or anything at all about why he is so broke at 57 when he supposedly had such a successful career.
There is mention that Mr. Gorelick has considered selling his home, but there is no mention of how much equity the family has in the home or of whether it is larger than they need or in a very expensive neighborhood.
The piece doesn’t identify Mr. Gorelick’s wife but an obituary in The New York Times for Samuel Eckstein mentions his son-in-law, Abe Gorelick. Mr. Eckstein’s daughter, now named Laurie Gorelick, appears to own Laurie Gorelick Interiors. Now we have no way of knowing how profitable a business this is, but it seems well established and it seems that Mr. Gorelick could at least take over marketing this family business and help make it more profitable.
And the family does seem to have options. Laurie Gorelick not only went to Wharton undergrad herself, but she is an attorney, having graduated from New York University School of Law, but she has elected not to practice.
They don’t seem to be facing destitution. Laurie Gorelick has tweeted about her intention to become a snowbird in 2016. And Jordan Gorelick, who seems to be their son, studies at Colgate University, an elite private school and has won recognition as a DJ.
Fifth, there is no mention of family or friends. The fact that he and his wife both went to Wharton out of high school indicates a high achieving family. It seems odd that nobody should have any position or projects to give Mr. Gorelick or any ability to extend any help so he doesn’t build up credit card debt. If family and friends know something about Mr. Gorelick that makes them not want to extend help, this tells us something important to know in evaluating the situation.
The article discusses an experimental program in which some long term unemployed are given career counselors:
Mr. Gorelick was paired with the career coach Edward Lawrence, whom he has met with about 10 times to talk through his résumé, outlook and job search over coffee at Panera Bread or in the local library. So far, Mr. Gorelick has not landed a full-time position. But he says the sessions have helped him remain an attractive candidate, with phone and in-person interviews taking place.
“He knew nothing about me and had no preconceived notions,” Mr. Gorelick said. “He could look at my work and give me constructive comments in a very objective manner. I think that in and of itself is extremely valuable.”
This is all very nice and might be of some utility. It is, however, odd that a mature marketing professional would need this much help. And although it is good to know how people who don’t know you might perceive you, it is much more likely that a 57-year-old professional will find a job with someone who does know him, has many pre-conceived notions, etc.
Basically these pre-conceived notions, based on decades of watching someone work, are a 57-year-old’s greatest asset — unless of course the preconceived notions are negative.
For individuals, it is easy to draw lessons from a story like this:
• Save money — both so you can live if your income gets cut off and so you have the flexibility to take a new job. You might need money to relocate or to carry family expenses until a new job, which might be commission-based, can start to kick in.
• Minimize fixed costs such as home and car payments for the same reasons.
• Maximize learning and networking. If you look at people such as Dick Spezzano, Bruce Peterson, Bob DiPiazza, Reggie Griffin, while actively employed, they all became chairman of PMA or United. This certainly broadened both their learning and their contacts which enabled them to build consultancies when they ended full time employment.
• Conduct yourself — at all times — in a way that would make people want to be associated with you and want to hire you. Lots of us are now teaching our children about the dangers of posting things on Facebook, Twitter or Instagram — we warn that one day images of debauchery could come back to haunt them. Here is another secret… Although worrying about what strangers think is prudent, it may be even more important what your friends and family think about you. Do they perceive you as honest, hardworking, prudent, thrifty, willing to go the extra mile, loyal, etc? Would they gladly vouch for you because they see the risk as minimal? Or do they think you are fundamentally lazy, not interested, counting the days until vacation?
For society, the story is hard to read without more information. The author of the article seems interested in making it a federal case:
In Washington, the plight of the long-term jobless has largely faded from the policy conversation. At the moment, the federal government offers virtually no help to the 3.8 million Americans who have been out of work for more than six months. The maximum duration of unemployment insurance payments fell from as long as 73 weeks to 26 weeks in most states in January.
Yet this couple, a husband with an MBA from the University of Chicago and the wife with a law degree from NYU, seem a particularly weak case for federal aid. They have already been given a blessing in terms of an elite education that we will never be able to offer most people.
Of course, it would be nice if everyone could make a lucrative living doing whatever they want, wherever they want to do it. But this couple has been given many tools to make a living — an Ivy League education, law degrees, ownership of a business, etc. The reporter just didn’t dig deep enough to tell us why Mr. Gorelick is in such a difficult position.