Higher quality at a better price in food retail_ActiveViam_Intermarche
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Higher quality at a better price in food retail_ActiveViam_Intermarche
- 1. Antoine Devos Head of Pricing and Commercial Performance Intermarché David Owen Retail Sales Director ActiveViam
- 3. • #3 Largest French food retailer with a 15% market share • #4 French food manufacturer • Stores are independently owned • Stores from 7,500 to 72,000 sq.ft. • 2 000+ stores in France • $35B Revenue in 2018 Introducing Intermarché “Manufacturer and retailer”: an identity, a strategy, since 1969.
- 4. We live a “price war” on a mature and competitive market 95.9 100.0 92.7 101.8 90 92 94 96 98 100 102 104 2013 2014 2015 2016 2017 2018 Overall National Brands Private Labels Source : IRI France CPG Price variations between 2013 and 2018
- 5. We prepared ourselves for this “price war”
- 6. 20.3 19.6 14.2 11.7 11.3 10.3 4.6 19.9 21.6 15.0 10.9 10.1 10.8 5.9 Carrefour Group Système ULeclerc Auchan Group Intermarché Group LidlCasino Group +2,0 pts +0,8 pt +0,5 pt +1,3 pts Year 2013 Year 2019 Source : Kantar WorldPanel Market Share variation between 2013 and 2019 And we are among the “winners”
- 7. “Higher quality products at a better price” ? Our vision : “We are manufacturer and retailer to help you eat a little bit better everyday”
- 8. Our strategy : create value through good and affordable private label products Being customer-centric to optimize price image and maximize margin-mix Value for clients Value for our business
- 9. Deploying insight-driven pricing at a larger scale Pricing with perfect precision is essential Big data Data Science Pricing rules Monitoring
- 10. One use case : price gap optimization in yogurts category Big data Data Science Pricing rules Monitoring 0% 10% 20% 30% 40% 50% 60% 70% 80% 10% 20% 30% 40% 50% Flavoured custard Fromage Frais VolumeshareforPrivate label(%) Price gap Private Label vs Nat. brand (%) +15% volumes in 12 months +5pts of volume share Cannibalisation of other flavours +8% more expensive than price leader positionning
- 11. Pricing is a (never-ending) journey ! Test & learn approach For both team, management and features innovation
- 12. ActiveViam • Data solution provider since 2005 in Americas, Europe, APAC • Integration of AI/ML with advanced analytics • Highly adaptable
Notas do Editor
- Hello everyone, I’m Antoine Devos. I’m very glad… and stressed to be with you today. Let’s start with a few words on my career : I have a 9 years experience in the retail sector : 5 years as a management controller in the clothing industry, the las 4 years in pricing : Two years as a pricing manager for Leroy Merlin, the largest home improvement retailer in France And almost two years now as the head of pricing and commercial performance at Intermarché, one of the major French groceries retailer…
- … In fact, the third largest food retailer in France with a revenue of 35 billion € and a 15% market share. Intermarché has been created 50 years ago, and counts today more than 2000 stores covering most of the French territory : as a matter of fact the average distance between two Intermarchés in under 20km or approximately 10 miles ! But what makes us different/special is our unique model : Manufacturer and retailer. Each store is independently owned, but together, our private owners, collectively invested to build the 4th French food manufacturer with 62 plants, 11000 employees. And fun facts : we are both the biggest French fishing fleet and the first producer of diapers ! Total stores of 2400 including stores in other European countries like Belgium, Portugal and Poland
- If there are some competitors in the audience, they could probably testify that, the French food market is mature and the level of competition is high. And in a mature market, where value is stable, with no more freeland to conquer, everyone is battling to maintain its market share… almost buying it through agressive promotions and never-ending price drops ! In fact, as we can read on this graph from IRI data, that prices have decreased by around 4% between 2013 and 2018. It’s even worse fort the National brand items that have decreased by more than 7% in 5 years. To gain market shares, competition almost « commoditized » those national brands products, like Coca cola. Why ? Because those products are on the shelves of every retailer, it’s easy to follow and compare the prices fort both clients and competitors… CPG = Consumer packaged goods
- As our company motto is : « tous unis contre la vie chère », in English : « all united against expensive life » Any one can easily understand that we’ve been part of this price war. We even implemented a home-made pricing tool to shoot prices down massively ! I call it pricing with a bazooka. With one simple pricing strategy : erasing last month prices to aligne to the latest prices applied by the price leader. We created a pricing tool that would only focus on competition alignement. A tool that is bombing the place ! Every Month ! Erasing, former pricers to align (with a coefficient) to the lowest price applied by the competitors. And then my team has to do its best to avoid collateral damage : Each pricing analyst spends 10 days per month cleaning the mess : correcting any mistake done by the competitor-alignement machine and restorate price consistency. Only price fixing, only price production. No customer analysis, no scenario, no optimization. Zero intelligence, zero data empowerment… I GUESS THAT IT SOUNDS FAMILIAR TO SOME OF YOU HERE, IN THE AUDIENCE
- But apparently it worked ! In the last five years, with have increased or market share by almost 1 point without any buyout of a competitor. Interesting fact : the companies that invested the most in their price positionning are those who in the meantime improved the most their market share. No 100% correlation but for sure one of the main variables to explain it !
- So why am I here, telling you my story ? If we are in a commodity-like market, and if manufacturing lower prices, even if its painfull / time consuming makes you gain market share, there is no room for « higher quality products at a better price » Here comes our challenge ! Our challenge as a company and as a pricing department ! Good Price positionning will always be a basic for a mass market supermarket chain, but there is space to do it more efficiently. -> To But We have a vision : « We are manufacturer and retailer to help any one eat a little bit better every day Pricing must embody this vision And we want to start a pricing journey to ensure our vision : Keeping decreasing the prices of national brands, lowering our margins rates and threatening our private labels volumes. In you How to implement a pricing strategy that empowers this vision ? How we ensure that we sell more and more private label products, with a good quality at an affordable price (as being discount is in our DNA, and as we adress all the people from France, no segmentation possible) to more and more customers ! New customer expectations : -> Consumers have new definitions of quality -> New ways to prepare meals are growing in popularity -> Customer service expectations are evolving
- This corporate strategy must be embodied by our pricing strategy. VALUE FOR CLIENTS Offering private label products thats suits their needs and wallet. -> Answering to what consumers say : they want to buy food that is tasty and good for their health, and also for the environment, the others (for instance the farmers) -> and answering to what consumer do : keeping in mind that puchasing power is under constraint and keeping prices attractive VALUE FOR OURSELVES How to create a virtuous circle : producing the right product, at the right price positioning so that we can get volumes to keep investing : -> on our plants to meet the new consumers needs -> on our stores to refresh constantly our concept with news features and services
- We decide with our board to empower pricing with data and a digital tool ! So they gave us a good sniper riffle to be more precise. Alright, no more weapon analogy ! We can’t be precise and tackle thousands of products ! We need a powerful tool I could continue on my former analogy saying that we need to remplace the bazooka with snipers. But it would not do the work. Because our people number is limited and the insights unlimited, we can’t succeed even if they transform themselves into shoot efficient prices with Big data : aggregating internal and external data sets Data science : uncovering customer-insights Turn insights : into evolving products clusters and adjust price rules parameters accordingly Run and compare and follow up price scenarios impacts within a data analytics platform (from global perspective to the finest granularity) That what we choosed Activeviam is all this features in the same platform
- Yogurt category is a category where our private label products have a poor price index against the price leader : we are 8% more expensive And it is very costly to invest to decrease our prices for the all category to reach a better index : over 10m€ investment The board did not want to spend that much money Taking into account only competitor prices we would only know that is average price gap on the market is 30%. But is it efficient price-image and margin wise speaking ? Using big data from our sales transactions, we found interesting insights : there is a price gap for each consumer need ! We understood that they were no need to sale at a 30% price decrease the fromage frais and that we could maintain a 50% volume share with only 20% price decrease in comparison to the national brand item. We have a possibity to raise prices of Fromage Private label item without wide cannibalization from national products. Maximizing our revenue and margin, even if it deteriorates our price index it wil have almost no impact on our price image… Conversely, we have some price gap issue with the vanilla flavour custard
- There is no perfect answer. Things are moving all the time starting with your team and your understandin