That Was Quick - Tesco Out of Coles Bid

As reported by Kamcity:

AUSTRALIA: Tesco Said To Be Backing Off From Coles War
Tesco has decided not to try and bid for the Coles Group, according to Reuters, citing a source familiar with the situation. Tesco’s withdrawal of interest will leave the battle for Australia’s second-largest retailer open to conglomerate Wesfarmers Ltd., and a consortium including private equity giant KKR. Tesco had reportedly appointed Merrill Lynch to look into a possible Coles offer, but has now decided it was not a sound move. The source said, “They viewed it as a massive turnaround being required and a huge resource commitment". It is worth noting that Tesco usually prefers to set up its own operations in a new market, and grow organically, rather than through acquisitions. The Australian Financial Review newspaper separately reported that negotiations between Wesfarmers and Coles were in the final stages for a start to due diligence. Other local newspaper reports said KKR was close to finalising a joint venture with Woolworths to bid for Coles.

With thanks to Brian Moore at

Kamcity.

Is Your Account Profile a Photo or a Video?

What's the difference between a photo and a video? A photo is a snapshot and, so they say, tells a thousand words. A video shows the same scene with the passing of time. How many words is that? Many more I hazard to guess.

In our work we get to see many Account Profiles. From large scale grocery Account Profiles to notes about customers on the back of a business card. Whatever the form, we all understand that information is power. There are many terms for it - wiring, intelligence, DNA etc.

The question I have is how well do we understand changes in our customers over a period of time? History has a way of helping us predict the future and if we track trends in how our customers operate and perform, we might start to preempt and influence much of their future activity.

There's a terrific post on this by Adrian Slywotzky at SalesMotivation.Net. Adrian discusses the importance of keeping up with your customers no matter how they change.

Its all very well to have a complete and up to date account plan and profile, but if you don't use that information to determine where your customer is going, you're destined to fall behind.

Areas where change has a big impact:

• Personnel. Buyer churn is a common and deliberate strategy of retailers to disrupt supplier relationships.


• Business process. How decisions get made and executed is a critical part of the knowledge map. Businesses constantly change their policies and practices as they chase efficiency and effectiveness.


• Strategy. In the pursuit for shareholder value, companies review their overall strategies and day-to-day tactics frequently.

A great KAM knows that and keeps pace with the changes. At JSA we call this your Customer Engagement strategy.

When the top 5-15 accounts for many FMCG/Consumer Goods suppliers produce 70-80% of the business, Customer Engagement is no longer a function, it's a mission.

Failure to establish relations other than with “go-to-market” functions, risks being out of the loop when significant changes emerge in customer organisations. The good news is that with fewer accounts, more in-depth relationships between retailer and supplier management teams can be established and maintained.

Remember retailers have a greater need for supplier funding than they care to admit. It must be tempting for them to revert to the behaviours that have always worked….arrogance, threats, abuse, bullying.

But, retailers do have good ideas and there are some highly capable retail decision makers. All retail decision makers are busy…if suppliers can’t be efficient or innovative, they will be abused - and they probably deserve it. We have to justify a different positioning – grab their attention because we can add value.

Carrefour, the French global retailer, estimates that it has more than 20,000 suppliers worldwide. Each one of those suppliers wants to have broad-based access and solid relationships with the top managers at Carrefour. Competition for access, like competition for shelf space, is intense. Only those organizations with a strong benefits story are likely to succeed. Luckily, because most suppliers so thoroughly mismanage customer engagement, those few that spend the time to plan and execute well will see positive results.

So what is a Customer Engagement strategy?

An engagement strategy is a re-thinking of how a company goes to market. The era when customers were thought of as purchase orders is over. Trade demands require ever-greater commitments to information, services and people. Yet, from assortment optimisation to vendor managed inventory, the overwhelming percentage of activity is directly or indirectly related to product sales – moving cases. In developing a strategy, here are some things we should acknowledge:

1. Acknowledge that customer engagement is everybody’s business: Leaving account management solely to account managers is a recipe for non-competitiveness


2. We engage to learn and profit…not to serve: broad-based engagement is not an exercise is customer service. If the organisational attitude is “We’re here to help…”, the point is being missed. The mission is learning and building – not serving


3. Broad based engagement is a pillar of success – As important as products, funding or logistics


4. There will be resistance: To engage means that both sides must actively participate. It is a fact of life that the customer is considerably less motivated to enter and maintain an engagement that the supplier


5. We, the supplier, will, therefore, drive the process
   

So, whatever knowledge you have about an account needs to be more than a mere snapshot. It must help you predict the your customers intentions and actions.

Jason Wenn

Coles and Tesco?

UK media reports suggest Tesco may be on the move to buy the Coles Group There have been several reports that Merrill Lynch have been engaged to provide advice on a possible bid.

With Tesco are under pressure with its huge US launch and some regulator interest in the UK it seems an unlikely scenario. It makes for interesting speculation though.

What might we expect if Tesco bought Coles? Some insight can be gained from Tesco's head, Sir Terry Leahy. Sir Terry recently commented on seven trends that will have a "swift and dramatic" impact on retailing:

1. The consumers' desire for simplicity - its a fast paced life and we have too many choices.


2. The consumers's desire to save time - its a fast paced life and who wants to spend it in the supermarket?


3. The growth in categories that contribute to their health and looks - the baby boomer phenomena rolls on


4. Globalisation as it impacts the economies of scale in the supply chain, but also in the optimisation of business processes - i.e. nearly all Tesco's IT is sourced out of India


5. The availability of information makes the consumer choice process faster and easier, but has also introduced other decision criteria - i.e the ethical/environmental footprint of the retailer/manufacturer, the healthy heart tick, nutritional information


6. Trust. In the age of the War on Terror, consumers are looking to for organisations and retailers they can trust.


7. Environmental - we are indeed moving back to the greengrocer. With climate change, emissions and carbon footprint hot topics, consumers are looking for ways they can reduce their environmental impact. Consequently they seek retailers and products who support that.

"Just as the opportunities for businesses, which get it right, are greater than ever before, so the penalties for those who get it wrong are equally dramatic. There is no gentle decline, no hiding place for retailers or suppliers who fail to spot consumer trends or adapt to changing markets" - Sir Terry Leahy

So if Tesco did make a successful play for Coles what might we see change?

Who knows, but something needs to happen quickly.

For some, Coles have been fighting a rearguard action, mostly focussed on defensive activities to guard share, but more recently focussed on activities to optimise earnings and cash. With takeover offers from KKR, Wesfarmers already in the news, rumours fly of excessive internal pressure on buyers and store managers to keep inventories down and extract maximum terms from new lines and major promotions. With this sort of focus on maximising cash flow and short term profit, Coles needs to be sold soon. There is nothing sustainable about OOS and five types of canned asparagus. If the "For Sale" sign is in the yard for too long, Coles will see any P/E multiplier diminish as potential purchasers lift the bonnet and witness the ever growing strategic black hole.

What does these mean for KAM's?

• Stay in touch with the financial imperitives of your category and buyer. These are changing weekly if not daily.


• Failing that, propose promotional activities that meet the need for cash flow and short term earnings.


• Keep on top of execution. Store management morale is reportedly low. We've had one report of a supplier paying for $1million for an end display and getting less than 70% of stores complying.
  
• Expand your network. As things evolve, we're likely to see high level of churn. Staff at Coles are under excessive pressure and some will choose "to seek excellence elsewhere". Others will jump. Whatever happens there will be corporate memory loss. You need multiple contacts for continuity.

Remember a great KAM not only knows the people, plans, processes and measures, but also knows how they're changing. And aren't they changing!

Jason Wenn

A New Client - Village Roadshow

At JSA, we've commenced our latest project with Village Roadshow. It is an exciting project with extensive work with their Key Accounts, Sales Management and Field Sales operations.

Roadshow are the number one player in DVD business. With recent blockbusters - Happy Feet, Lord of the Rings and the Matrix.

A few facts for you:

• The DVD business is still a stong growth category for retailers - inspite of piracy (valued at $250 million this year) and Internet downloads.


• Many of the Mass Merchants treat DVDs as a loss leader category


• It costs a lot more than the $2-3 people think it costs to produce a DVD. Aside from the physical costs there is the costs associated with royalties. But more than anything its the risk they take with new films that needs to be factored into the cost of successful ones.

Brandon Hill is the Sales Director at Roadshow. Some of you might remember his last stint as NSM with Bonds - so it's good to see clients coming back for more.

Brandon has already achieved some great things at Roadshow and we look forward to helping them maintain and extend their Number One position.

We'll have some more news as the project progresses.

Jason Wenn