The value of promotions

Recently I bought two promotional razor packs from Schick containing 6 blades and a razor for R59 each. I was obviously thrilled about a great deal on a great product, but was left asking what the impact would be further down the line?
What is the true value of a promotion? For the retailer, they get to promote their super low prices (often at the manufacturer's expense). For the manufacturer, he has a short term boost in turnover and may gain a significant market share. The obvious winners however, are consumers who grab at the opportunity to save a buck. This all seems great, but what about the negative consequences after the promotion ends?
After purchasing my two promotional packs, I am effectively out of the razor market for about a year, as are many others consumers. This creates an erratic demand that is difficult and expensive for both retailers and manufacturers to manage. Wal-Mart doesn't do promotions - they say you get the best prices in their stores each and every day. It seems to work for them - is this perhaps the cheaper and easier way to retail?

I don't know. If you know, or have any thoughts on the matter, please feel free to e-mail me on craig@fastmoving.co.za.

Craig Ballantyne
craig@fastmoving.co.za

Please feel free to make comments or raise new issues by emailing the editor
editor@fastmoving.co.za

NEWSBYTES

Pick 'n Pay's Ackerman receives Lifetime Achievement Award
Pick 'n Pay Founder and Chairman, Raymond Ackerman, recently received the Lifetime Achievement Award for Consumerism from the Department of Trade and Industry. These awards acknowledge individuals and organisations that champion consumer protection and education. Ackerman received the award for individuals in recognition of his commitment to championing consumerism, and the significant contribution made to improve consumer welfare.

New chairman for Clover SA
John Bredin has been appointed Chairman of Clover SA as of March 2006. Bredin, who takes over from Dr Vos Grey, will also serve as vice chairman of Clover Industries Limited (CIL) and alternate director of Clover Danone Beverages Limited.
Full article: CLICK HERE.

SABMiller seal Topvar deal
Brewing giant SABMiller plc (SAB) have said that following receipt of approval from the Slovak Anti-Monopoly Office on March 13, it had acquired 48.4% of the Slovakian brewer Topvar. Under the terms of the agreement, the controlling shareholders will sell further shares to enable SABMiller to increase its interest in Topvar to at least 67% by the end of September 2006.
Full article: CLICK HERE.

Superbrands finalises council for 2006
Superbrands has finalised the independent Council for Superbrands South Africa 2006. After the tremendous success of the inaugural project in South Africa, which featured more than 80 of the strongest brands operating in South Africa, Superbrands South Africa Volume Two will tell the story of many of the brands who have been instrumental in forming the branding landscape in the nation.
Full article: CLICK HERE.

GLOBAL NEWS

Coke runs dry in Zimbabwe
For the first time in at least 40 years, supplies of Coca-Cola dried up on Wednesday last week in yet another sign of the crippling economic crisis in Zimbabwe.
Full article: CLICK HERE.

Wal-Mart to expand in China
The chief executive of Wal-Mart Asia, Joe Hatfield, has disclosed that the retailer plans to take on 150,000 people in China over the next five years, five times the number it currently employs in the country, as the company prepares for a major store expansion. This year the company plans to open 20 stores in China in both major metropolises and smaller cities - www.planetretail.net

Black Middle Class Myth

For any marketer in South Africa it is vitally important to understand the impact that the "new black middle class" has on the economy. This week we carry a feature from the Unilever Institute of Marketing on the findings of a survey they conducted in conjunction with Research Surveys. The study into the size, make up, buying power and mindsets of the so called new black middle class in South Africa has exploded several myths about this crucially important and fast growing segment of the "black market" that is driving much of the country's economic growth at present. Click here to read the findings.

Please feel free to make comments or raise new issues by emailing the editor
editor@fastmoving.co.za

NEWSBYTES

Fuel prices affecting SA consumers
As worldwide petroleum prices continue to escalate, individual consumers globally are feeling the effects of fuel price increases. Of course in non-producing counties such as South Africa, prices are influenced by both internal and external factors, resulting in dramatic fluctuation.
Full article: CLICK HERE.

New Black middle class: it's economic power
RS, South Africa's leading marketing insights company, in conjunction with the UCT Unilever Institute of Strategic Marketing, has conducted a ground-breaking study into the size, make-up, buying power and mindsets of the so-called new black middle class in South Africa. In so doing, it has exploded several myths about this crucially important and fast growing segment of the "black market" that is driving much of the country's economic growth at present.
Full article: CLICK HERE.

Illova names European Suitors
Illovo Sugar, Africa's top sugar producer, has announced that it is considering bid proposals from Associated British Foods and European agro-industrial cooperative group Tereos. Illovo have said that Associated British Foods, which owns British Sugar, has proposed offering cash for 51% of Illovo shares.
Full article: CLICK HERE.

Pritt maker Henkel joins SA BEE party
German detergent, toiletries, glue and chemical maker Henkel has sold a 26% stake in its South African operations to a black women's investor group, in line with the country's black economic empowerment (BEE) policies.
Full article: CLICK HERE.

SAB get go ahead to purchase Slovakia brewery
SABMiller on Tuesday obtained permission to buy Slovakia's third-largest brewery, Topvar. The $15m takeover is expected to lift SABMiller to the No 1 position among Slovakia's beermakers, overtaking its Dutch rival Heineken.
Full article: CLICK HERE.

GLOBAL NEWS

L'Oreal buys Body Shop
Britain’s well known beauty store The Body Shop is being bought by none other than the world’s largest cosmetics group, L’Oreal Paris for £652m ($1.14bn). The Body Shop has 1900 retail outlets in 50 countries, including South Africa.

Tesco not renewing contract with Woolworths for leisure products
In the UK, Woolworths Group has announced that Tesco has informed Entertainment UK (E.U.K) of its intention not to renew its supply contract for DVDs, music and games products which will now end on April 29, 2007. Under a separate agreement, E.U.K has extended its contract with Tesco for the supply of books until March 2008 and will also continue to support the retailer's online and digital operations.

Major investment program at Boots
Boots has announced a new major investment program in its Boots the Chemist chain as it reinvests a significant part of the GBP1.9 billion (USD3.4 billion) sale from BHI.
Full article: CLICK HERE.

Customer Profitability

In this week's edition we feature an article from Glendinning Management Consultants. It provides an enlightening insight into the realm of trade sales, and asks a number of key questions that most brand managers, and certainly a number of retailers, would be hard pressed to answer.

I believe that brand owners would benefit greatly from distributing the article internally; addressing the issues contained therein, and ensuring that all persons clearly understand their value to each retailer. Essentially, brand owners and retailers are partners, and need to work together as such. Both parties gain from increasing sales and maximising the value extracted out of each sale. If you do this, and do it best in that category, you will dominate that category, whether you are a retailer or a brand manager.
Full article: CLICK HERE.

Please feel free to make comments or raise new issues by emailing the editor
editor@fastmoving.co.za

NEWSBYTES

Shoprite Checkers launch search for extraordinary women
Shoprite Checkers have once again launched their search for South Africa's most inspiring and outstanding women in the eleventh Shoprite Checkers / SABC2 Woman of the Year award. The entire nation now has the opportunity to submit nominations for the nation's most prestigious award for women.
Full article: CLICK HERE.

Woolies milk & yoghurts now hormone free!
Woolworths is the first and only South African retailer to take the step to stock only fresh milk and yoghurts that are guaranteed rBST-hormone free. This welcome advance will be effective as of 1 March 2006.
Full article: CLICK HERE.

Pick 'n Pay's Ackerman celebrates 75 years with R4 million!
Pick 'n Pay's Raymond Ackerman, in celebration of his 75th birthday, has donated a whopping R4 million to the Red Cross War Memorial Children's Hospital. This generous birthday gift makes Ackerman the hospital's single largest personal contributor ever.

Massmart CEO sells 15 %
Massmart CEO Mark Lamberti has sold R57m of his personal stock in the company in the past few days as "part of a portfolio rebalancing". The share price of the retailer climbed 30% in the past year as it rode the crest of a consumer spending wave driven by low interest rates.
Full article: CLICK HERE.

Spending spree to continue after Xmas frenzy
South Africa's retail sales rose a whopping 8.9% in the period up until December 2005. Retail sales are the main measure of consumer demand, and analysts say this spree will continue. In the three months to December, sales rose by 8.1% compared to the same period 12 months ago.
Full article: CLICK HERE.

SPECIAL FEATURE

So, how much money do you make for your customers anyway?
Say the words "customer profitability" to most South African suppliers today and the best of them will tell you they have a pretty good handle on which are their most profitable (and unprofitable) customers. They are so internally focused they can only see the financial equation from their side of the table. Gary Carp, the Director of Consulting at Glendinning Management Consultants discusses this and asks why so few suppliers in South Africa are able to grasp, quantify and articulate the real profitability they deliver to customers and leverage this competitively.
Full article: CLICK HERE.

GLOBAL NEWS

Reliance may spend billions on retail
Reliance Industries, India's second-biggest firm by market value, might invest 150 billion rupees (R21 billion) to open shops and supermarkets across the country. The firm aims to set up a chain of about 1 575 stores between December this year and March next year, and plans to hire 500 000 people.

Zim bread cost on the rise
On Monday last week, the price of bread rose by more than 30% as stores in Zimbabwe opened for business, the latest blow to consumers in the country's teetering economy. A regular loaf went up to Z$60 000 (about R3,68), from the government-controlled price of Z$44 000 (about R2,70).

Brands Under Fire

Recently there has been much said about South African retailers lagging behind their international counterparts in terms of the strength of their retailer branded products. According to a report from Planet Retail (see below), it seems that the growth trend of retailer brands is set to continue. This trend must be having a profound impact on brands - for example, 45% of all goods sold by Tesco are their own, and a staggering 37% of $310.5 billion in sales by Wal-Mart were of their own branded products.

The question is, how will the owners of strong brands counteract this trend and begin to win back market share? One thing is for sure: South African brand owners need to have an aggressive strategy to defend their market share from retailer brands. I strongly recommend that brand owners and retailers read the full report from Planet Retail. To do so contact Tim Cooke on tim.cooke@planetretail.net

Please feel free to make comments or raise new issues by emailing the editor
editor@fastmoving.co.za

NEWSBYTES

Out of stock, out of mind, out of business
Let's face it: out-of-stock is the bane of every shopper and retailer's existence. It is detrimental to brand and store loyalty, as well as the store's cash opportunities. Frankly, out-of-stock in one store equals a sale for another - "if it is not on the shelf it cannot be bought". Chris Olivier, CEO of The Smollan Group discusses the damaging implications of stock shortages.
Full article: CLICK HERE.

Retailer brands will continue to grow
In a new report, Planet Retail have forecast that private labels are to continue to show impressive growth across both food and non-food categories. Although their penetration is likely to slow in more mature markets such as the US and Europe, their presence is expected to increase in developing regions, driven by globalisation of the world's leading retailers.
Full article: CLICK HERE.

Woolies and Wellco strike a healthy deal
Woolworths and Wellco Health have joined forces in an exclusive strategic partnership to produce and customise a range of adult and children's health supplements under the Woolworths brand. There is a huge demand for health products driven by what has been termed a "global wellness revolution." Products are anticipated to be launched later this year.

Massmart to keep growing building materials chains
Massmart Holdings have announced plans to continue investing heavily in its building materials division. This sector is anticipated to be one of its greatest new sales generators.
Full article: CLICK HERE.

SABMiller go large
SABMiller, one of the world's leading brewers, have announced a brand plan which aims to invest US$50m in a new global brand campaign for its international premium beer Peroni Nastro Azzurro over the next 18 months. The launches will commence in the UK, and then move to US, South Africa and Romania.
Full article: CLICK HERE.

GLOBAL NEWS

Strong first half for Woolies Australia
Australian retailer Woolworths has reported a strong rise in first half earnings, with cost cuttings and recent acquisitions helping the retailer deliver a 22% gain to AUD543.1 million (USD413.8 million).
Full article: CLICK HERE.

Wal-Mart to implement sales strategy
Over the past four decades, Wal-Mart's unwavering growth has been undeniable - with 3 900 stores, they almost saturate the US market. After this continuous and steady growth, Wal-Mart have admitted that it has become hard to grow and say that it is now the company's sales strategy, not new retail outlets, that will determine Wal-Mart's future.
Full article: CLICK HERE.

Convenience Retailing

This week's FMCG Files is an action packed edition, with many FMCG companies reporting their (very positive) interim results, an in-depth discussion with David Kneale - the newly appointed CEO of New Clicks Holdings, and some very interesting insights into Convenience retailing in South Africa by AC Nielsen.

Convenience Retailing is a hot topic at the moment, and I was fortunate enough to attend The RMF International Convenience Conference last week. With a host of international speakers, the conference was enlightening and I have no doubt that those who attended gained a great deal. Disappointing however was the poor turnout from franchisees - input from the Americans (who by the way run 140 655 convenience retail outlets) would surely provide valuable insight and help to boost our national standard of convenience retailing.

Look out for a report back on the conference in next week’s edition.

Craig Ballantyne
craig@fastmoving.co.za

Please feel free to make comments or raise new issues by emailing the editor
editor@fastmoving.co.za

NEWSBYTES

Excellent results for Shoprite
The Shoprite group has reported excellent results in the six months to December 2005, growing turnover by 13,7% to R16,621bn when the extra week in the corresponding period in 2004 is discounted. Shoprite CEO Whitey Basson said that the group's results can be attributed to a high consumer confidence in South Africa.
Full article: CLICK HERE.

Massmart shows record results
South African retail and wholesale group Massmart showed record first-half sales, profits, cash flow and profitability, but warned its full year earnings growth is unlikely to repeat this performance.
Full article: CLICK HERE.

Tongaat Hulett shine
Sugar and aluminium group Tongaat-Hulett on Monday reported a 126% increase in headline earnings from R206m to R466m for the year to the end of December. This translated into headline earnings per share of 452.4 cents, compared to 202.5 cents the previous year.
Full article: CLICK HERE.

Expect positive results, says Rainbow
Ahead of their full year results due in May 2006, Rainbow Chickens said on Wednesday that they expect headline earnings and headline earnings per share for the year to be 80%-100% higher than the previous year. Earnings and earnings per share are expected to be 65% - 85% higher than the previous year.

Convenience stores are evolving traditional shopping approaches
In today's time pressured world, convenience becomes increasingly important to South African consumers. Shopper habits are constantly evolving, along with developments in retail offerings. Over the past ten years in excess of 1,400 forecourts have opened in the country and over 280 franchise convenience stores (otherwise known as branded superettes) have sprung up, destined to change traditional approaches to shopping.
Full article: CLICK HERE.

New study explodes myths about SA's new black middle class
According to the landmark "Black Diamond" marketing survey conducted by the UCT Unilever Institute of Strategic Marketing and Research Surveys, the benefits of BEE only favour a privileged few. This is just one of the fascinating facts on SA's burgeoning black middle class - formerly referred to as the "emerging" market.
Full article: CLICK HERE.

SPECIAL FEATURE

Clicks to boost pharmacy, support Government
2006 looks set to be a fruitful year for New Clicks Holdings following the appointment of David Kneale, new CEO. Despite the group having come under scrutiny in previous months, Kneale is determined to turn around the group's performance by making Clicks the authority in Health and Beauty in South Africa.
Full article: CLICK HERE.

GLOBAL NEWS

Wal-Mart positive on FY performance
Wal-Mart have reported that net sales for the fiscal year ended January 31, 2006, were USD312.4 billion, an increase of 9.5% over fiscal 2005. Net income for fiscal 2006 increased 9.4% to a record USD11.2 billion, up from USD10.3 billion in fiscal 2005.
Full article: CLICK HERE.

Convenience store numbers increase in USA
Recently released data from the National Association of Convenience Stores in the USA shows that that at the end of last year the number of convenience stores in the country stood at 140,655, an 18% increase over 2004.