Changing social habits and demographic changes are impacting on the food and drink we buy and, as importantly, the ways in which we buy it. Understanding, for example, why sales of English wine has soared and how to use that insight is something that is pertinent to all drinks suppliers.
John Nevens, director of Bridgethorne, the customer and category management and shopper marketing specialist, explains.
Majestic recently announced that sales of English sparkling wine had trebled since 2012, likely buoyed by the Olympics and the Diamond Jubilee. Key retailers like Tesco, Sainsbury’s and Marks & Spencer all now stock plenty of domestic wines, many of which have been given five star ratings by customers. Waitrose plans to bring out its own range of English wine next year. Surely this is good news for English wine producers but the development is something that should be of interest to all parties across the sector.
Suppliers need to understand not only how the introduction and take-up of new product ranges can increase overall category performance but also be able to derive insights from changing shopper behaviour to ensure that it not only informs their own new product development but also the nature of their relationship with retailers.
Recent research by Wine Intelligence found that between 70 and 80% of all wine in the UK is sold through supermarkets in the UK; 96% of those who buy wine in the UK told them that they bought their wine in supermarkets. This underlines the importance for wine producers to understand how to optimise their relationship with the multiples. This continued domination of the large multiples means that only suppliers able to offer the most effective insights into category strategies and actionable plans are likely to succeed. As the retail multiples’ hold on the market grows, the battle for shopper loyalty will become increasingly vital. If a supplier can develop its offering based on category insights that demonstrate how to influence the shopper at the point of purchase, the opportunity for success could be significant.
For the retailer it means the supplier needs to be able to demonstrate how they can make their category work for shoppers and grow incrementally. This will allow to add value to the relationship by identifying short and long term, quantified strategic opportunities for the category rather than just its individual brand, and in so doing develop and maintain a more positive working relationship with the large retailers.
Suppliers that fail to implement an insightful and effective category strategy risk a declining relationship with the retailer with less influence on category agenda. Furthermore, should suppliers fail to act on category insights they may find that competitors move ahead of them and exploit new opportunities.
In this sense, suppliers need to address two areas: category management, where you address a defined group of products or services to grow category revenue through increased shopper appeal; and category vision where the onus is on the supplier to identify and quantify the strategic category growth drivers that will influence point of purchase and shopper marketing activities. Conducted effectively, this will ensure the shopper, retailer and supplier are aligned to maximise category growth and sales opportunities.
Suppliers must regard it as their responsibility to help grow categories, increase margins and help the retailer deliver on its KPIs. On one level, this means delivering routine category management tasks that are the bedrock of the retailer relationship: crunching the numbers, completing the analyses, building the reports, undertaking the range reviews and using the insights from the data to show how to grow the category for the benefit of both themselves and the retailer, and how best to channel their investment.
This means simply supplying great products may no longer be enough. From our regular conversations with retailers and their buyers we know that there is frustration that, when it comes to trying to get products listed, suppliers are often missing solid category based rationales. They often don’t know how to extract the best insights from their data, or turn it into a compelling story that resonates with the buyer. Many don’t have or don’t bring in the kind of expertise that will enable them to create an effective retailer relationship.
Second, suppliers need to undertake the research and obtain the insights that will offer retailers joint initiatives for category growth, support annual range reviews and demonstrate an understanding of how both products and shoppers arrive at the point of purchase, and what influences both of those journeys to that point.
Suppliers need to show how they can add value to range and category reviews and demonstrate that they understand key areas like category development and shopper marketing. This means developing and sharing effective channel strategies and shopper campaigns, building joint business plans with the retailer, creating mutually beneficial trade investment plans and in doing so moving from tactical to strategically significant relationships.