Siân Harrington reports as industry bosses debate the convenience market’s future
The setting may have been the Zen-like interior of London’s minimalist Hempel Hotel, but the debate was anything but chilled. At a gathering of industry bosses to discuss the future of the convenience market, the message from brand manufacturers was short and sharp: we are not responsible for the survival of the independent sector.
Rather, it is the role of symbol groups and wholesalers to ensure independents can fight back against the might of Tesco and Sainsbury, retailers and suppliers heard at the forum organised by convenience specialist SRCG.
“Our principal responsibility is to meet the needs of consumers and our customers,” said Unilever Bestfoods UK sales director Tony Smith. “We do not have a semi-social role. We cannot be responsible for the broader issue of the survival of the sector.”
Big Food Group chief executive Bill Grimsey said the lack of a level playing field on price would make it harder for independents already “radically disadvantaged” to react as the structure of the industry took on a very different shape.
But he agreed it was not the role of suppliers to protect independents but the responsibility of the symbol groups and wholesalers - those who made their money and delivered shareholder value by distributing to these retailers.
“The notion of suppliers doing that is wrong,” said Grimsey. “It is up to us to match Tesco. Wholesalers need to get better and quicker. Our obligation is to meet customer needs. It is up to us to harness the strengths of independents who put their heart and soul, and often their house, into their businesses.”
Spar UK managing director Jerry Marwood agreed: “The challenge for us is to become rounder suppliers of retail strategy to independents. Our job is to make business less complex for the supplier and consumer.”
This does not mean, however, that suppliers are absolved of all guilt. Those manufacturers present conceded they could manage product innovation better. Among retailers’ criticisms was the fact some suppliers undertake major product launches without ensuring the supply chain for independents is full of product and that some are still loath to try new ideas and products with independents.
“We have 12 million transactions a week, yet in some cases suppliers are still saying they won’t take a risk,” said Marwood.
But suppliers pointed out that doing business with independents is not always easy. “Convenience retailers are only interested in trading. There is a hurdle regarding category management and consumer understanding. You can go in five times and still find boxes of crisps on the floor,” claimed PepsiCo International senior VP Tom Kuzio. “We will invest the time and effort if we think we will get a return and execution, but there seems to be some lethargy in the market.”
However, Musgrave UK executive chairman Eoin McGettigan complained that manufacturers generally regarded independents as a route to market rather than customers. “You need to get into the clothes of the independent retailer. Look at what annoys them, what problems you can solve and then come up with innovative solutions,” he said. “When you are working 18 hours a day, you are not interested in category management. You must innovate through understanding rather than teaching the sector to behave like multiples.”
Andy Thornton, managing director of SRCG, said suppliers would stop investing in retailers who did not shape up. “They either want to get into the 21st century, in which case suppliers can help, or they don’t. Suppliers will take money away from retailers that don’t show a willingness to change and put it behind those that do.”
The verdict was that those that do would not only be able to compete more effectively with the likes of Tesco and Sainsbury, but in many cases outdo them. The key is to move the focus away from buying terms and onto areas in which they can make a difference. Price is important but not everything - a fact borne out by research that shows shoppers only get worked up about price if they feel the retailer is not delivering on other basics, such as availability and range.
“Meeting real shopper needs, rather than simply selling, is the key to justifying price premiums,” said Mark Thorpe, director of Spa Research, which carried out the study. “Within convenience, price increases in importance to the shoppers in direct proportion to retailer failure to deliver.”
Offering a truly local service was one way to meet these needs, said Nigel Hardy, trading director, multiple grocery channel, Gallaher. “There is a difference between what the big box retailers do - meeting the mass market via small supermarkets - and what independents can do - meeting customer needs at a local level,” he said. “One does regionality, the other locality.”
Richard Lancaster, trading director at Jacksons, agreed: “A Tesco Express opening on our doorstep has no more effect than any other independent opening. The multiples dictate the products that customers buy, but they are not as close to the local market.”
But the multiples would learn, said former T&S chief executive Jim McCarthy. “What we see them doing today is not what we will see tomorrow.”
So independents must not just become Tesco me-toos. They must exploit their strengths through identifying categories in which the multiples have weaknesses - food to go, services, beer and papers.
According to TM Retail managing director David Saunders, location is still a critical factor. “You underestimate importance of location at your peril. In 10 years’ time location will still be the absolute driver for a good c-store,” he said.
There is no doubt the multiples’ entry into convenience has been good for consumers, at least in the short term, but could it actually benefit the independents? As McGettigan pointed out, they made consumers aware they were not trading down by going to a small store. The new formats get a more positive response than formats that have not had a refit for more than four years. Even if the number of independent outlets shrinks from 55,000 to 30,000 and Tesco’s estate runs to 2,000, there will still be 28,000 independents out there. And they will be in a much better shape than they are today.
The setting may have been the Zen-like interior of London’s minimalist Hempel Hotel, but the debate was anything but chilled. At a gathering of industry bosses to discuss the future of the convenience market, the message from brand manufacturers was short and sharp: we are not responsible for the survival of the independent sector.
Rather, it is the role of symbol groups and wholesalers to ensure independents can fight back against the might of Tesco and Sainsbury, retailers and suppliers heard at the forum organised by convenience specialist SRCG.
“Our principal responsibility is to meet the needs of consumers and our customers,” said Unilever Bestfoods UK sales director Tony Smith. “We do not have a semi-social role. We cannot be responsible for the broader issue of the survival of the sector.”
Big Food Group chief executive Bill Grimsey said the lack of a level playing field on price would make it harder for independents already “radically disadvantaged” to react as the structure of the industry took on a very different shape.
But he agreed it was not the role of suppliers to protect independents but the responsibility of the symbol groups and wholesalers - those who made their money and delivered shareholder value by distributing to these retailers.
“The notion of suppliers doing that is wrong,” said Grimsey. “It is up to us to match Tesco. Wholesalers need to get better and quicker. Our obligation is to meet customer needs. It is up to us to harness the strengths of independents who put their heart and soul, and often their house, into their businesses.”
Spar UK managing director Jerry Marwood agreed: “The challenge for us is to become rounder suppliers of retail strategy to independents. Our job is to make business less complex for the supplier and consumer.”
This does not mean, however, that suppliers are absolved of all guilt. Those manufacturers present conceded they could manage product innovation better. Among retailers’ criticisms was the fact some suppliers undertake major product launches without ensuring the supply chain for independents is full of product and that some are still loath to try new ideas and products with independents.
“We have 12 million transactions a week, yet in some cases suppliers are still saying they won’t take a risk,” said Marwood.
But suppliers pointed out that doing business with independents is not always easy. “Convenience retailers are only interested in trading. There is a hurdle regarding category management and consumer understanding. You can go in five times and still find boxes of crisps on the floor,” claimed PepsiCo International senior VP Tom Kuzio. “We will invest the time and effort if we think we will get a return and execution, but there seems to be some lethargy in the market.”
However, Musgrave UK executive chairman Eoin McGettigan complained that manufacturers generally regarded independents as a route to market rather than customers. “You need to get into the clothes of the independent retailer. Look at what annoys them, what problems you can solve and then come up with innovative solutions,” he said. “When you are working 18 hours a day, you are not interested in category management. You must innovate through understanding rather than teaching the sector to behave like multiples.”
Andy Thornton, managing director of SRCG, said suppliers would stop investing in retailers who did not shape up. “They either want to get into the 21st century, in which case suppliers can help, or they don’t. Suppliers will take money away from retailers that don’t show a willingness to change and put it behind those that do.”
The verdict was that those that do would not only be able to compete more effectively with the likes of Tesco and Sainsbury, but in many cases outdo them. The key is to move the focus away from buying terms and onto areas in which they can make a difference. Price is important but not everything - a fact borne out by research that shows shoppers only get worked up about price if they feel the retailer is not delivering on other basics, such as availability and range.
“Meeting real shopper needs, rather than simply selling, is the key to justifying price premiums,” said Mark Thorpe, director of Spa Research, which carried out the study. “Within convenience, price increases in importance to the shoppers in direct proportion to retailer failure to deliver.”
Offering a truly local service was one way to meet these needs, said Nigel Hardy, trading director, multiple grocery channel, Gallaher. “There is a difference between what the big box retailers do - meeting the mass market via small supermarkets - and what independents can do - meeting customer needs at a local level,” he said. “One does regionality, the other locality.”
Richard Lancaster, trading director at Jacksons, agreed: “A Tesco Express opening on our doorstep has no more effect than any other independent opening. The multiples dictate the products that customers buy, but they are not as close to the local market.”
But the multiples would learn, said former T&S chief executive Jim McCarthy. “What we see them doing today is not what we will see tomorrow.”
So independents must not just become Tesco me-toos. They must exploit their strengths through identifying categories in which the multiples have weaknesses - food to go, services, beer and papers.
According to TM Retail managing director David Saunders, location is still a critical factor. “You underestimate importance of location at your peril. In 10 years’ time location will still be the absolute driver for a good c-store,” he said.
There is no doubt the multiples’ entry into convenience has been good for consumers, at least in the short term, but could it actually benefit the independents? As McGettigan pointed out, they made consumers aware they were not trading down by going to a small store. The new formats get a more positive response than formats that have not had a refit for more than four years. Even if the number of independent outlets shrinks from 55,000 to 30,000 and Tesco’s estate runs to 2,000, there will still be 28,000 independents out there. And they will be in a much better shape than they are today.
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