Supermarkets running on empty, brand loyalty & new product launches

AUSTRALIAN SUPERMARKETS RUNNING ON EMPTY

National audit shows up billion dollar problem

One in four Australian supermarkets (25.5%) are experiencing major issues with shelves completely empty of staple food and grocery items according to just released research* by The Bailey Group, the nation's largest infield marketing company, which covers 97 per cent of all supermarkets across Australia. The Bailey Group's 1,100 workers meticulously audit supermarket shelves regularly on behalf of grocery item clients with one of their key duties to prevent 'out of stock' (OOS)** situations from occurring.

"The 'out of stock' situation is the single biggest issue affecting the supermarket business today," commented Stewart Bailey, CEO of The Bailey Group. "It's a worldwide issue that is costing in excess of $100 billion per year. Simply put, the customer who can't buy what they want will be forced to either go without or trial a competitor product. The worst part is, the product may be available in the supermarket; it's just out the back or high up in the capping above the shelves. With retailer margins being tighter than ever, staff simply cannot replenish supplies like they used to.

"Australians are very parochial when it comes to the brands they are loyal to. If their favourite brand is regularly out of stock with one retailer, they will simply switch to the retailer that has a plentiful supply. It may only be one item in a shopping trolley of 100, but if it is integral to that person's life, the supermarket will lose all profits and sales from these other 99 items as well."

While the loss of a single sale is worrying for most manufacturers, the greater issue is when the customer trials a competitor's product and brand loyalty is eroded in the process. "A grocery-staple which is purchased often can equate to hundreds if not thousands of dollars in revenue over one customer's lifetime. You can't afford to throw that business away" continued Stewart Bailey.

A threefold solution is recommended by The Bailey Group with manufacturers, retailers and in field marketers such as The Bailey Group all working together more efficiently to solve the problem.

Manufacturers need more accurate forecasting and production schedules, while retailers need to focus on more effective stock replenishment processes and systems. The most integral piece of the jigsaw is an infield marketing company that services every super market across Australia. These agents ensure the shelves are always full of the client's product and the negotiated shelf 'real estate' is always adhered to by the retailer rather than being 'muscled' out by competitors. Infield merchandisers also have established relationships with store decision-makers ensuring the client's product receives favourable attention within the store and maintains a strong presence and with increased sales.

"Unfortunately manufacturers cannot rely on retail staff to ensure the shelves are always full of their product. Some retailers are better than others, but there are too many supermarkets in Australia where staff levels are being cut back, products are falling through the cracks and businesses are suffering as a result," concluded Stewart Bailey.


AUSTRALIAN INNOVATION WAKE UP CALL

New product launches double in 12 months, but growth is less than 5%

An unprecedented increase in grocery items being launched over the past 12 months has failed to ignite the interest of everyday Australians, according to the Branding and Innovation experts at the country's foremost Insights consultancy, The Leading Edge. In 2007 there were 6,472 FMCG products launched**, an increase of 69 per cent from the previous year when 3,825 products were launched. Over the same time 'packaged grocery' saw an increase in sales of just 4.7%& with Nielson commenting in the Spring/Summer issue of their Market Place Quarterly report that the overall grocery growth in 2007 was slower than the previous year.

"These statistics prove that releasing new products doesn't automatically lead you down the garden path of untold success and profit," commented Chris Meredith, Senior Branding and Innovation Consultant of The Leading Edge. "At The Leading Edge, we define real innovation as something that drives a change in consumer behaviour. It's this change that brings about real growth. For example, if a new car has such high fuel efficiency that people use it more often, that's a change in behaviour. If a new snack bar encourages you to have breakfast when you'd normally skip it, that's a change in behaviour. But when brands simply refresh their offer via range extensions, new flavours and new pack sizes etc, it helps them maintain their position in the market but doesn't usually change people's behaviour or drive growth.

"What we have seen during 2007 is a huge increase in new products that have been jumping on the bandwagon of a broad trend, such as the wellness trend. Non food products that are labelled botanical/herbal, are fortified with vitamins or minerals or are ethically sound have seen huge increases, sometimes doubling or tripling. And for food products, the hottest trends involve anything fresh and natural."

Chris Meredith believes Australia is still conservative when it comes to innovation in comparison to other countries. "In a global survey# amongst senior managers, USA/Canada was ranked as the most innovation friendly market in the world with 60% of respondents saying that they would increase their innovation budgets next year. Australia/New Zealand aren't shown separately in this report, but in the previous year's report, we came in a lowly 14th out of 15 in the innovation league table.

"While Australian manufacturers should be congratulated for showing bravery and releasing products they believe to be innovative, the new products should be grounded and backed up with solid research and insight into the consumer's needs."

According to Chris Meredith Australian companies need to be less risk averse. It's OK to fail occasionally, so long as you minimise your potential losses and prepare to learn from failure. The rewards of releasing truly innovative products, that change behaviour and have a significant effect on sales, far outweigh the risks.

At The Leading Edge, the Branding and Innovation team provide its clients with a competitive advantage by using deeper consumer and category insights as part of its innovation process. This ensures that new products are grounded in consumer needs and will therefore grow demand and boost profit.