IFTA: How to avoid brand commoditization | June 2024

Jun 24, 2024

It’s easy to focus on price when retail gets tough. But instead, this session covers how to avoid brand commoditization, by taking a shopper-centric approach to your supplier-retailer conversations.

Once again, ANZ shopper gurus David Shukri and Andrew Arnold share their ‘Insights from the Aisles’. Here, the duo demonstrate what’s going on instore – with a focus on adding value beyond price.


Bonus session download: ANZ Price influence top 5s_Jun 2024

Do you need to take the conversation away from price and avoid commoditization of your brands? Talk to the team today.

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Webinar transcript – how to avoid brand commoditization

Hello and good morning. Good afternoon wherever you are, folks. Welcome to another insights from the isles.

Hello Vanessa, got your and up early. Hope you’re OK.

We’ll come back to you in just a moment. Welcome along team. Give us a thumbs up or a hands up. If you’re if you’re doing well this morning, I hope you’re warm indeed. I hope wherever you are, you don’t need to be warm because it’s already warm. And I want to say thank you for choosing to spend the next 30 minutes and a bit with us today.

Hope you’re not feeling too stressed or overwhelmed right now out there. Super, super busy people out there. I know year end for for many of you. Of course, there’s there’s a lot going on if you’re too screening right now, if you’ve got a bit of multitasking going on, I hope you are smashing your goals this week. And Andrew, as always, is here with me.

And you’re smashing goals on the daily, aren’t you, my friend?

Oh, mate absolutely smashed, smashed every day.

Hello, Christine.
Hello, Rick, uh, Mel, good to have you with us.

Well, look, we know there’s a lot going on. As I said, WIPs, trade conversations, business planning, range reviews, it’s all going on. And Andrew, what was the biggest headache? What was the biggest stress you remember facing when you were head of trade marketing back in the day?

Yeah. I mean, look at this time of the year. Obviously over here in New Zealand, it’s a mishmash of financial years. So some people finishing this in a couple of weeks, some to the end of March, some are doing calendar. But I always used to remember sales would take care of themselves.

For me, it was a cruel… they just did my head at this time of the year trying to make sure you had everything lined up and all the pots of money were, you know, taken care of and spoken for and everything else, that was that was stressful.

Anyone else out there feeling that right now? Feeling the stress of trying to get your accrual sorted? You got what, week and a half left?

I’m sure it’s I’m sure it’s tough.

Well, look, the the next half an hour or so, I hope you got a coffee with you. I’ve got a little bit left here, so I hope you’ve got whatever you need to keep you through the next half an hour.

Take a step back, join us on a on a brief journey now. The the marketing experts, the traditionalists out there will tell you the basics of marketing, particularly from a brand perspective, tell us that differentiating through price is something that really only the value brands can do successfully.

It’s this whole notion of value pricing versus differentiation, then one doing the other doing some sort of blend.

Value brands can typically leverage that pricing strategy more effectively because of the way they’re positioned and do so in the longer term. But for every other brand, price is not typically as effective in terms of a long term strategy.

So how do you feel about that? How do you feel about what I’ve just said?

Does it resonate with anything that’s going on in your business right now? Does it make you feel uncomfortable? But maybe whatever it is you’re feeling right now, lean into it, OK?

Because our focus today is on avoiding commoditization of your brands. That’s what we’re really focusing on in this session. I’m sure nobody, no one on this webcast wants to see that happen to them. So we are concentrating very much on this notion of differentiating beyond price, particularly as inflation begins to start coming out of the market. So if you’ve been there before, you’ll know how we do this.

And if you haven’t welcomed for the first time, excuse me, we’re going to take a look. As usual, Andrew and I, through some new examples that we have seen out in store in recent weeks, tell you what the shopper point of view is and invite some discussion.

So get involved in the chat. I’m sure you’ve got a perspective or point of view. There’s always different ways of reflecting on
these things. We’re going to explore some of those different points of view with you.

And we’re going to base our perspective very much on the shopper proof points that we know to be true. No, no beef and no grudge against any brand or any retailer. We’re just commenting on what we’ve seen.

We know that these posts have had a lot of engagement on LinkedIn and we think it’s a worthwhile discussion judging by the number of people that have signed up for this one.

It’s something that a lot of you want to engage with as well. So let’s jump into this and get straight to the heart of it. And as we do, you see if I can tee up a quick poll because it’s very relevant to the first example that Andrew is going to pop up in just a second.

So levels of promotions, folks, are you promoting more or less than you were 12 months ago? Or about the same?

Three options? Simple question and it really goes to the heart, Andrew, of what you’re about to demonstrate and visualise for
us in a moment.

I’m going to leave that running actually for a moment, and then I’m going to also pull up your first example.

So here we go.

Hopefully that’s about to come up. I’m going to share it.

There we go got it. Yeah, take the floor, Sir. So this this is really just the the the table setter because this, this was a post that I did about probably about a month or so ago where I was just walking through a pack and save. And I just noticed this. There were just so many rice messages, so many of them on the extra low mechanic, which is the promotional mechanic for pack and save.

And it just struck me because that for the simple reason that about a week or so prior happened the Australian Food and Grocery
Council conference where the Woolworths CEO brand Brad Banducci didn’t actually say say anything that that really struck me more than when he said he felt that that there were too many promotions happening in Australia grocery.

And that was something which immediately went, Yep, totally agree.

And I think the same thing is happening over in New Zealand at the at the time. And this is the sort of thing which has been around for for ages.

But why question. And the thing that I put out, put forward in that post was why do we keep doing this?

Because if it’s not working, if it’s not growing, if it’s not actually growing volume, if all is is is doing is really rearranging the, the, the deck chairs, then why aren’t we doing something different?

And I don’t, I don’t know personally, I don’t care that this is a pack and save where it’s supposed to be cheaper. It’s supposed to be all about budgets, all supposed to be about value. You can still do premium things in a pack and save.

So again, I looked at the numbers and the things that struck out to me first and foremost was the fact that promotions are no more important in New Zealand than they were 12 months ago. Now we’ve been bombarded with messages about how it’s the price of cost of living crisis and prices are going up on this.

For the rest of it, promotions are still no more important than we were a year ago.

So, so if that’s the case, then clearly the promotions are not really doing anything in this in terms of getting people to change their behaviour to do things differently.

The other thing that looked at was prices, the main influence.

So that’s a question that we asked people around is how, how big of an influence on your decision making is price?

And that is actually lower than what it was 12 months ago. And then we then I looked at how many people actually recall buying on
promotion. And the answer is a few more people than there were 12 months ago.

It’s about 50 now percent of people who actually recall buying on promotion. But that’s still way lower than the share of of sales on promotion.

So clearly there’s a disconnect between people who remember that it’s on promotion and people who actually do end up buying on promotion. So that’s actually happening.

Then why, why, why, why are we continuing to to do something so much that shoppers are getting bored with, potentially risking commoditizing our brands?

Why are we doing this, Andrew?

It’s a very good question. I mean, let’s throw this out to those of you who are watching this webcast

Without, well without without pulling any punches I suppose.

But what, what’s, what is the strategy, What is the rationale?

I think Andrew’s painted some fairly compelling arguments.

We’ve got the outgoing CEO of a very major player telling us the promotions are overcooked, overbaked over presents in stores.

We probably feel it that we’re running faster to stand still. I just add to some of those points, as well, that Andrew raised this notion of price as the main influencer of the purchase decision hasn’t changed in Australia in 12 months. And it’s only, it’s only changed 2% over the last four years across Australian stores in total. So hasn’t changed in the last 12 months and it’s only changed 2% in four years.

As to put this in context, a couple of other things that have changed. I think you touched on it just then, Andrew, was this notion of price knowledge. I think you mentioned that one, didn’t you?

Yeah, actually mentioned one. But that’s a good point too. Price knowledge is hitting … People just know the price less and less and less.

Yes. And in Australia the same. So remember we’re putting a shopper lense on this and we’re talking about the extent to which I as the average shopper in a grocery store, in a supermarket, feel I know the price that I normally pay in the category.

It’s plummeting in Australia.

There’s plummeting, which is this sense of not only because inflation is present and distorting perceptions at that end, but of course, because of the level of promotions and so really increasing number of shoppers really don’t know what that price point actually is.

And I just got a couple of comments, Chris, to be competitive with competitors.

OK. We’ll come back to that maybe in a moment.

Big one here. Thank you. Thank you, Lisa. The rationale appears to be disconnect between high level strategy and executed strategy at category level.

Giving strong prices at category level for promotions is incentivised by buyers with applications and additional support catalogue. Yeah, OK.

Additional catalogue support, customer driven requests.

What he thoughts on all that Andrew?

Well, my thoughts are quite simply that I know we have to do promotions.

So I wouldn’t, I didn’t come down in the last shower of rain. So I do know that we have to do promotions, but there needs to be a point where retailers actually, and I’m not saying that this is something which, you know, is all about supplies, why supplies can be right, all the rest of it. There has to be a point where retailers actually take a step back and say, is this actually achieving our goals?

Are we actually making more profit from these types of activations? Are we actually making sure that shoppers are able to do the things that they want to do and still feel satisfied that they’re getting a reasonable deal every now and then?

That’s my challenge that I’m throwing out on both sides of the Tasman really, is that are we just doing what the populace at large has been trained to do for the last 20 years?

And it’s not working, so some point someone actually has to go, do we try something different?

Yeah, yeah, Lacey Rose added. I swear we’ve been having the same conversation for 20 years that we need to get off the promotional drug. I remember this well, Lisa, myself, I was a buyer 2020 several years ago.

And that’s what that’s what retailers were saying at the time. And, and it’s absolutely as true as it was then today.

I’ll share the results so so you can see how the poll panned out.

So what have we got? 52% are promoting more than they were 12 months ago and only 10% saying less and the and the balance saying about the same.

So clearly that drug is as present and as powerful as ever.

Yep, spot on. We’re not, we’re not idiots. We’re not saying stop the promotions. It’s it’s not about that, but it’s about the balance. And it’s also about the ability to take strong, meaningful, credible proof points into those conversations and put those on the table, which which talk to the the role of price, the role of promotions, how that is evolving or not over time.

And of course, then the other thing which I wanna bridge into now just to keep things moving and that is what else, what are the other levers beyond price?

So absolutely. And those other levers beyond price are really where we as an industry need to try and turn the conversation towards.

Because I think it was you, David actually said the other day that you know, when you promote too much that you’re, if you’re on a race to, to nowhere and who wins the race to nowhere? Nobody does.

So this is the sort of stuff that you want, need to, to be able to take to a retailer and say, why don’t we change the calculus just a little bit and try and move ourselves a little bit away from this endless spiral.

And this is a is a good example, the one on the left that I saw in stores about again about a month or so ago over here in New
Zealand. And you know, Kiwis were recognised this and this is the old classic charm, you know, chip dips and scenario where you
buy a pack of onion soup, you buy a can of reduced cream and you make your own up in about 5 seconds flat.

So the points that I would make with this is that this is talking 100% to the occasion that chips are usually bought

This is a way to premiumize the category. This is a way to actually make sure that or to try and take the conversation away from price. You’ll see it in in the in the image there.

There are a few things that are on promotion, but what I like most about this chip display here is that none of the items that are actually being on that hand cell are on promotion. They’re at full price.

It’s put in front of premium. So for those of you in Australia who haven’t seen it before Heartland, it’s quite a premium brand of chips. And right beside it, just the other side there is Delicio, another brand of premium ships.

So this is this is really smartly positioned. It’s easy as anything and it’s pretty, you know, you’re pretty
smart looking piece of machinery as well, but that’s been put there.

This is just an easy, simple way to make people go.

You know what? I might actually do something a little bit different instead of trying to actually promote the guts out of this.

Yeah. Nice, nice, simple. You like the you like the table tennis balls there, do you? That was straight out of your your frame of reference.

Yeah, I did. I did. But then again, people to call me about how the fact this is all about the fact people buying beer pong. But yeah, I’m obviously too old for that. But yeah, absolutely be upon and, you know, go hard. But for me it was. Have you ever

But I’ll have it.

Well, yeah, you’re right. And it’s like this, we just picking out examples, right? This isn’t, this isn’t to say that everyone should go down this route. This isn’t to say that this is the solution. But it is, as you said, a focus on the occasion, the usage, some engagement, some emotional attachment with the category that does not centre exclusively on price.