Please find following news feeds from around both locally & the globe highlighting the latest trends and insights into Private Label development.
PLMA International – Global Insights Update – August 2016
Please click this link for PLMA International’s August 2016 update
25th August 2016
Coles to cut product range by 15 per cent- Herald Sun
CUSTOMERS can expect Coles’ shelves to look very different over the next two years as its product range goes Down, Down.
Speaking to analysts during Wesfarmers annual results briefing on Wednesday, Coles managing director John Durkan said the supermarket would cut the number of products on its shelves by 10 to 15 per cent over the next two to three years.
But the actual number of items removed may be much higher, as Coles continues to replace branded products with its own-brand versions.
“You should expect over the next two to three years we’ll take our SKUs [stock keeping units] down somewhere from 10 to 15 per cent net,” Mr Durkan said.
“We’ll be bringing new SKUs into the business, both Coles brand and branded, therefore removing the tail of the underperforming SKUs.”
Mr Durkan said reduction in product lines to date had been crucial for delivering efficiency and productivity gains throughout the supply chain.
“But of course we have to do it in the right, customer-facing way,” he said. “We’ll do it very carefully, category by category, on a store-by-store basis.”
Mr Durkan pointed out that the savings were used to continue lowering prices on those products kept on the shelves.
“As I’ve been saying for a while now, our investment in terms of value is really going to be funded by all of the efficiencies and productivities we see come out of the business,” he said.
“I still see many opportunities to become more productive and efficient in the business, across the end-to-end supply chain. A lot of it is rationalising our range size to bring that down. That brings a whole lot of efficiencies to every part of our supply chain.”
Speaking to media following the briefing, Wesfarmers boss Richard Goyder said the 10 to 15 per cent reduction target had been in place since Terry Bowen had been Wesfarmers’ finance director.
“Every additional SKU you put through your supply chain creates complexity and therefore creates a cost,” Mr Goyder said.
“I’d still argue you can go into a Coles and find too many options in some product ranges and we’re working our way through that because we want our customers to come with us.
“We don’t want to do what Coles did prior to the acquisition, which is to just unilaterally take products off the shelf — that gets customers off-side. That’s why it takes a bit longer but as a consequence we’ll be more efficient.”
Private labels currently make up about one quarter of all supermarket sales, according to market research firm IBISWorld, and that is projected to grow to 28 per cent by 2021-22.
Coles does not reveal internal breakdowns of the proportion of private label to branded products, and a spokesman wouldn’t say whether the supermarket intends to increase that figure.
Coles stocks around 25,000 products, compared with around 2000 at discount rival Aldi. According to market research firm IRI, private label brands were a key driver of Coles growth last year, even drawing customers away from Aldi.
Earlier this year, Canstar revealed customers were warming to Coles private label brands in a way they never had before, with Coles’ own brands taking top spots in long-life milk, toilet paper and dishwasher detergents.
Coles’ full-year earnings rose 4.3 per cent to $1.86 billion with food and liquor sales increasing 5.1 per cent to $32.6 billion, and the crucial comparable sales growth lifted 4.1 per cent.
Prices fell by 2.4 per cent in the last quarter of the financial year — Coles’ strongest price deflation in 11 quarters — working out to $192 million in lower prices.
If Woolworths underperforms when it presents its annual results on Thursday, it will represent the 28th straight quarter the nation’s biggest supermarket has been beaten by Coles.
Today’s result marks 33 straight quarters of comparable sales growth for Coles, going all the way back to the takeover by Wesfarmers in 2007.
25th August 2016
Woolworths’ billion-dollar loss a symptom of a sector in turmoil- Planet Retail
After a less-than-stellar showing by main rival Coles yesterday, Woolworths’ FY results spelled out starkly the problems besetting Australia’s leading grocers. The company posted an AUD1.23 billion loss as price cuts ate into margins and better-performing competitors continued to eat into its market share.
|PLANET RETAIL’S VIEW|
Despite Woolworths recording its first-ever annual loss as a listed entity, CEO Brad Banducci stated that the business is making strides in its efforts to reconnect with Australian shoppers. In particular, he highlighted improved same-store food sales in Q4. While these were still down 1.1%, it was a slight improvement on the declines recorded in previous quarters. He added that same-store sales had actually tipped over into positive territory in the eight weeks to 21 July, showing a 0.8% gain.
Woolworths has set great store by listening to its shoppers and its learnings have seen it working hard to transform its stores, with a special emphasis on improving its fresh produce offer. Another move, announced this week, has been an overhaul of what was widely perceived as a badly-conceived loyalty scheme.
It has been price competitiveness, though, that has had the biggest impact on performance. As Coles discovered, discounts and promotions take a heavy toll on overall performance and the question remains as to how long this can be sustained.
Keeping the customers is imperative
In the meantime, Woolworths is working hard at improving customer services and has claimed a degree of success with its initiatives so far. It flagged steadily improving customer satisfaction ratings during the year, peaking at 77% in June. Team Attitude and Time In Queue delivered the best scores, the company stated, but Availability and Fruit & Veg were areas that were still in need of work.
These metrics will be significant going forward, as Woolworths’ massive investments in price will count for little if they cannot retain customers once this period of discounting passes. And that does seem likely eventually, as the business surely will not be able to sustain discounts indefinitely. For the full year, Woolworths reduced average prices by 2.3%, with a 2.7% reduction in Q4. The company claimed it had invested in excess of AUD500 million in prices during the year.
Reconfiguring for a new climate
It goes without saying that this has been inspired by Aldi’s seemingly unstoppable growth in the Australian market, with the discounter predicted to secure market share of 20% within a few years. While price investments have been one means of securing margins, we have also seen Woolworths make other moves to trim the fat from its operations, notably its exit this week from its disastrous foray into the DIY business with Masters and the Home Timber & Hardware banners, operations that have been nothing but a drag on the company’s overall performance.
Likewise, the future of the BIG W discount variety chain must also be in doubt. Woolworths claims it still sees a future for the banner, but given the losses piled up this year, the feeling must surely be that a disposal would bring in much-needed resources for the bigger fight ahead. In recent months we have heard rumours of potential interest from serial M&A bandits Steinhoff International. Were the price right, it may be enough for Woolworths to consider offloading the business.
Capital will undoubtedly be needed in the short-term as Banducci will likely come under a degree of pressure from shareholders to hasten up the turnaround. The CEO has said the transformation process will take anything up to five years to be completed. Investor patience rarely lasts that long.