ECR EUROPE

1
The Importance Of Being Innovative How to
drive Demand and generate sustainable Growth
Demand Co Chairs Tesco and Diageo
July 2, 2007
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We have recognised the challenges

• How focused on the consumer shopper, on driving
  demand and generating growth, is the current
  negotiation model in Europe ?

350 Companies Surveyed
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Systemic barriers

• Lack of alignment of strategic objectives
• Lack of long term visibility
• Retailers are a competitor as well as a customer
  (fear of own label match)
• Buyer-seller 11th hour agreements which impede
  NPD marketing plans
• Lack of innovation to create excitement
• Lack of understanding of how best to execute
  in-store
• Financial constraints (listing fee, investment in
  New Product Development and Introduction,
  returns)

We have become Risk Adverse rather than Play To
Win, we would rather Play Not To Lose
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65 of Revenues are generated by Line/Brand
Extension ? The dynamics of existing products to
leverage growth cannot be neglected neither can
be consumer/shopper loyalty to existing products.
Innovation is not a stand alone process but build
also on existing range
New
65
81
162M
157M
497M
Totally new brand
First year sales
Number of products in category
2
3
1
674M
576M
New sub-brand
215M
9
1
5
Brand
1,773M
75M
Brand extension
1
16
468M
72M
Exactly same
1
1
Existing
Exactly same
Refinement or re-formulation
Significant extension
New product concept to fulfill same use
New concept with new use
Existing
New
Product
Source IRI Pacesetters, top 10 new non-food
launches in 1999, 2001, 2003, 2004 (2000 and 2002
data not available study not conducted in 2002)
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Jointly Agreed Growth Process The JAG

• To drive Demand and Generate Growth in a
  competitive and sustainable way
• User guide for commercial teams a 5-step- new
  business model incorporating innovation and
  other Growth Initiatives into commercial
  negotiation
• integrating various ECR practices to resolve the
  existing barriers
• balancing the short terms expectations with a
  longer term strategy
• 3-year-time frame with yearly terms reviews

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Jointly Agreed Growth Process The JAG

• Why 3 years?
• ? Time to build continuity better manage
  conflicts to avoid disruption in relationship
  (efficiency)
• The Imperatives of sustainability further require
  a long term perspective in the business
  relationship
• Time allows the necessary investments in creation
  and development (eg in store, format or product).
  

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We need a 2-year- overview to see if NPD is a
success a quick success might actually end up
behaving like a promotion and generates less
sales than a regular product
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Jointly Agreed Growth Process The JAG
Step 1 The Context for Growth Sharing of
Knowledge Step 2 Agreeing Opportunities for
Collaboration - New Product Introduction -
In-Store Innovation and activities -
Fixturisation - Promotions - Media and
Communication Step 3 Agree Metrics Size of
the Prize of Collaboration Step 4
Cover all Sales Fundamentals in your
Business Plan Step 5 Analyse Outcomes in
continuity
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July 2 , ECR Demand, Proposed agenda

• The in store environment
• What are
• The levers of growth in the store environment
• the process to agree better collaboration
• Operating Principles
• What set of principles are required to ensure
  effective implementation of the planned growth
  activities, help the delivery of the agreed
  process
• What could be the guiding principles for a Joint
  Agreed Growth Process, a Buyer Seller Chart?
• Deliverable of the Working Group
• An industry agreed process that sets future
  standards for buyer / seller relationships
• A learning environment for suppliers and
  retailers to participate in (Materials,
  Communication, Faculty etc)