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THE ART

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Provide an understanding of Private Label. Identify common ... Kroger (Ralphs) 18% Safeway. DISCOUNT. CHAIN. Source: Supermarket News. DELLMART & COMPANY ... – PowerPoint PPT presentation

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Title: THE ART


1
THE ART SCIENCE OF PRIVATE LABEL PRICING
  • W. FRANK DELL II, CMC
  • OCTOBER, 2003

2
AGENDA
  • INTRODUCTION
  • ISSUES DIFFERENCES
  • PRICING APPROACH

3
Objectives
  • Provide an understanding of Private Label
  • Identify common pricing mistakes
  • Present a better approach

4
The Starting Point
5
Private Label - USA
  • Initiated by
  • Necessity
  • Pride
  • Lower priced commodities
  • Second tier quality
  • Second tier packaging
  • Follow the Brands lead

Commercial TV
6
Sales by Channel
Mass Merchants exceed 7B
7
Private Label Share
8
Top Categories - Sales
CATEGORY SALES
1. Milk 6,500.0
2. Fresh Bread Rolls 2,300.0
3. Natural Cheese 2,000.0
4. Fresh Eggs 1,700.0
5. Ice Cream / Sherbet 1,100.0
6. Carbonated Beverages 848.5
7. Vegetables 746.6
8. Fz Plain Vegetables 702.0
9. Rfg Juice/Drinks 633.3
10. Sugar 628.0
9
Top Items - Growth
ITEM SHARE
1. Non-Carbonated Water 7.2
2. Fz Orange Juice Concentrate 16.9
3. Tomato Paste/Sauce/Puree 3.5
4. Rfg Orange Juice 5.5
5. White Granulated Sugar 20.7
6. Tomato Paste/Sauce/Puree 1.9
7. Rfg Butter 16.0
8. Cream Cheese Spread 1.1
9. Evaporated/Condensed Milk 17.2
10. Dry Macaroni Cheese Mix 1.1
10
External Drivers
Consolidation
Channel Blurring
11
Internal Drivers
Competitive Sameness
Gross Margin
12
Private Label Response
Upgrade Quality
Upgrade Packaging
Expand Assortment
Gourmet Products
13
AGENDA
  • INTRODUCTION
  • ISSUES DIFFERENCES
  • PRICING APPROACH

14
Retailers Goals
High
  • Gross Margin
  • Quality Ratio

Low
  • Price Image

15
CONSUMERS PERSPECTIVE
  • Recall up to 200 item prices
  • Frequently purchased items
  • High consumables
  • Translates to 500 - 1,000 items creating the
    retailers price image

16
Observation
  • Much of retail pricing seems to be follow the
    leader
  • Not unlike a dog chasing its tail

17
Private Label Not Comparable
  • Differences
  • Manufacturer
  • Formula
  • Size
  • Positioning
  • Packaging
  • Excludes commodities

18
Low Prices Not The Answer
19
Price Elasticity
20
Retail Price Space Interrelated
21
Private Label Price Discount
CHAIN DISCOUNT
Safeway 18
Kroger (Ralphs) 22
Ahold (Stop Shop) 22
Albertsons (Jewell) 23
Wal-Mart 25
Delhaize (Hannaford) 27
Safeway (Dominicks) 28
Price Chopper 30
Source Supermarket News
22
Channel Pricing Strategies
23
AGENDA
  • INTRODUCTION
  • ISSUES DIFFERENCES
  • PRICING APPROACH

24
Not Just One Private Label
  • Commodity (sugar)
  • Alternative (soup)
  • Gourmet/Super-premium (cookie)
  • Natural/Organic (juice)
  • Unique (Trader Joes)

25
Retail Strategy
26
Category Role
  • Destination - To be the primary category provider
    and help define the retailer as the store of
    choice by delivering consistent, superior target
    consumer value.
  • Routine - To be one of the preferred category
    providers and help develop the retailer as the
    store of choice by delivering consistent,
    competitive target consumer value.

27
Category Role (Cont.)
  • Occasional/Seasonal - To be a major category
    provider, help reinforce the retailer as the
    store of choice by delivering frequent,
    competitive target consumer value.
  • Convenience - To be a category provider and help
    reinforce the retailer as the store of choice by
    delivering good consumer target value.

28
Category Strategy
  • Strategies
  • Traffic Building
  • Transaction Building
  • Profit Contribution
  • Cash Generating
  • Excitement Creating
  • Image Creating
  • Turf Defending
  • Characteristics
  • - High share, frequently purchased, high of
    sales
  • - Higher Ring-up, impulse purchasing
  • - Higher Gross Margin, turns
  • - Higher turns, frequently purchased
  • - Impulse, lifestyle oriented
  • - Frequently purchased, highly promoted, impulse,
    unique
  • - Used to draw customer base

29
Pricing Philosophy
  • Hi Lo
  • EDLP
  • Velocity
  • Faster selling priced lower than slower
  • Size
  • Larger sizes priced lower than smaller
  • Flavor/Pattern
  • Priced as group

30
Understand The Category
  • Purchase frequency
  • Solo, multiple or joint purchase
  • Competition
  • Inside store
  • Outside store

31
Product Factors
TYPE QUALITY PACKAGING
Commodity
Alternative
Gourmet
Organic
Unique NA
32
Set Item Objective
33
Honest Assessment
  • Product quality
  • Product performance
  • Packaging
  • Retail space allocation

34
Honest Value Determination
PRICE
VALUE
QUALITY
35
General Private Label Pricing
QUALITY DISCOUNT
11 10
10 15
9 15
8 17
7 20
6 Discontinue
36
Commodity
37
Alternative
38
Gourmet
39
Organic
40
Unique
41
Summary
  • Art
  • Strategy
  • Tactics
  • Design
  • Assessment
  • Science
  • Share Objective
  • Retail Space
  • Price Point

42
Thank You
43
  • W. Frank Dell II, CMC
  • President
  • DELLMART Company
  • 125 Hardesty Road
  • Stamford, CT 06903 USA
  • Tel 203-968-8609
  • Fax 203-968-8613
  • e-mail Wfdell2_at_msn.com
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