12 May 2008


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srcg wake-up: back to basics

srcg

Food Price Inflation

Convenience

Scott Annan, srcg director, says getting back to basics is back in vogue

Scott Annan: back to basics

The weekend’s TV and press are so full of ‘basics’ stories one could almost imagine it was an orchestrated campaign by one of the big marketing agencies.

To learn Ant and Dec are not our favourites; the Labour Party will, after a decade in power, start to listen to the ordinary people; black clad Morris dancers are performing pagan fertility dances; and disaster faces estate agents.

I included the last one as it made me smile.

Piers Morgan even used that most basic of descriptors, “shit”, on Sky News on Sunday morning after the 9am watershed in describing how the government has wasted our money by not fixing the basics.

Even the OFT has gone back to basics with a rash of new price fixing investigations on dairy, tobacco and now more than 100 branded goods.

The enquiries we received in April are more about basics than about development or strategic programmes.

This is true for both manufacturers and retailers, as they tell us they are feeling the pinch of increased food prices, mortgages, petrol and utilities hitting their pockets.

Last week we received enquiries from retailers about optimising impulse, pricing, ranging and relevant promotions; and from manufacturers about category management capability, promotions, retailer alignment, selling stories and shopper insights.

These areas are traditionally around half of our enquiries and business; the enquiry rate is nearer 80% for the start of May.

What does all this mean and how long will it continue?

Manufactures and retailers tell us they are not changing their strategies, but for the next year or two they wish to hold their top and, if possible, their bottom lines through a mix of cost cutting, efficiency, targeted marketing and tighter basics.

As big oil companies make record profits from upstream production and transporting oil, their retail operations are feeling the pinch with the £5 plus gallon biting into their shop sales.

Two managers told me last week they are off budget between 9% and 14%. Food and coffee are down the most but impulse confectionery, snacks and drinks are also suffering.

Both companies have used the words back to basics in their discussions with us.

I expect this trend will be with us for a while as companies announce head count freezes and hold off on major capital investment or npd programmes.

History shows our industry comes out of these difficult times leaner and fitter.

This time around, I believe the industry will have a very different shape, as oil is unlikely to drop below the $100 a barrel mark so anything that touches oil will stay high priced. Retailer brands will grow as shoppers look for value.

The biggest brands will grow as they have our trust. These investments in basics programmes look increasingly shrewd.

Perhaps some of those redundant, loudly branded estate agent Minis can be recycled to representatives and store managers or as promotional prizes?

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