SELLING food and beverages is a battle for shelfspace and mindspace, writes PETER McFARLANE
It sounds to me like the Winemakers' Federation of Australia needs to gain a better understanding of what is going on in the modern marketplace and what it could do to help its members.
I recommend WFA chief executive Stephen Strachan read Store Wars: The Battle for Mind Space and Shelf Space, by Judith and Marcel Corstjens.
The book is a real eye-opener. It clearly explains how marketing of fast-moving consumer goods has become a struggle between manufacturers and retailers for control of consumer "mind space" and retail "shelfs pace".
As the Corstjens explain, for FMCG manufacturers marketing involves understanding retailers, their business and marketing strategies, their strengths and their limitations. The major aim of modern marketing is to affect the balance of power between retailers and their suppliers.
All FMCG, including fresh produce, manufactured food and beverages, are caught up in this marketing vortex and the powerful retail chains are winning.
The Corstjens say the big issue for retailers is that manufacturers' brands are available anywhere and everywhere, as that's what manufacturers want and consumers expect.
The battle for consumer mind space involves the three basic consumer imperatives of convenience, price and quality. The battle is played out daily on television, radio and through the letterbox.
Retailers work their company name as an "umbrella brand", to attract customers and so weaken manufacturer brand loyalty, with strategies such as Coles' "everyday low prices", Woolworths' "the Fresh Food People".
Meanwhile, the manufacturers continue to push their brand message, with the expectation that all retailers will have no option but to carry their leading brands.
Manufacturers are also working together to fight the retailers for consumer mindspace with their "Brand Power: helping you buy better" campaign.
Recently we have also seen 12 of the best performing and longest-standing Australian wine families banding together under the banner, "Australia's First Families of Wine".
The battle for shelf space works by retailers building their networks, and addressing the convenience factor with "a store near you" strategy. Increasing retail concentration also serves to weaken the manufacturers' bargaining power.
Manufacturers seek to occupy as much premium eye-level shelf space as they can, in as many retail outlets as they can. However, not all brands are equal, with some brands regarded as "traffic builders", and other as "profit builders".
Retailers need to balance store traffic with profits. In the past retailers were happy to just sell this shelf space to manufacturers and make their margin on sales of branded product, but this strategy put retailers in a weaker bargaining position relative to manufacturers in price and margin negotiations. These days retailers seek to maximise the value of their shelf space.
The retailers' initial strategy was to gradually replace manufacturer brands with "no brand" generics, which helped them in shelf space and margin negotiations with manufacturers, and attracted the more price-sensitive customers into their stores with their "everyday low prices" strategy.
Invariably this strategy reduces manufacturer-brand shelf space, lowering prices and manufacturer profitability.
More recently, and perhaps of greater concern to manufacturers, are the "own brand" quality products, which are aimed at replacing the leading manufacturer brands with store-exclusive brands. This strategy further strengthens retailer negotiations with manufacturers and builds store loyalty.
The challenge for the Winemakers Federation of Australia is to work out what it can do to strengthen its members in fighting this battle for mindspace and shelfspace.
The key to working with retailers is for food producers and manufacturers to know more about consumers and their own products than the retailers do. That way food producers can add real value to retailers' business - and their own.
In the UK, the University of Kent is helping the local food and farming industry with business tools to help them obtain a greater understanding of their markets and the knowledge needed to help boost profits.
Wouldn't it be great to have a similar service available to Australian food producers and industry groups like the Winemakers' Federation of Australia?
- Peter McFarlane is a horticulture consultant with McFarlane Strategic Services.
