Media&Marketing Alex GibsonNext week Tesco opens its largest store in Ireland at Clare Hall in north Dublin. Tesco Extra, as it is branded, will introduce to Ireland a retail concept that mirrors closely the hypermarket model common in France and Spain.
As the grocery market penetration of the top four retailers - Tesco, Dunnes, Musgrave/Supervalu and Superquinn - approaches saturation levels, retailers have looked to boost their profits via local convenience store concepts, expansion of non-grocery items and aggressive promotion of own-label products.
This latter trend has accelerated in Ireland and Britain where we have seen the emergence of own-brand as a significant part of consumers' weekly shopping baskets. As the quality level of own-brands has increased retailers have, at little promotional cost, been able to boost profit levels.
In an environment where winning retail concepts can be quickly copied, the retailers' own label strategies have taken on an increased importance in helping to differentiate each other from competition.
Such has been the success of Tesco in this regard, that it has been able to take its own-label products into over 90 countries where it does not have a store presence. Here in Ireland, Waitrose own-label food products are to be found on the shelves of Superquinn.
This shift in power from supplier to retailer extends way beyond the advantages accruing to the ownership of the shelf-space and leverage through own-label. With the help of store loyalty cards, retailers today have greater insight into the consumer's identity, profile and spending patterns than any supplier.
This insight is further enhanced by the access that the retailer has on a weekly basis to the customer - an access that above-the-line marketing techniques are finding increasingly difficult to match as audiences fragment and media channels proliferate.
From a manufacturer's perspective, where does this leave the role of marketing? For some the answer lies in an approach to appeal over the heads of the retailers via direct marketing approaches. While this approach has been successfully adopted by companies such as Dell in computers, in the fast-moving consumer goods sectors the reality is that a collaborative approach is needed with the trade.
Many Irish food manufacturers have successfully employed a strategy that recognises the benefits of supplying own-label and sharing in the benefits that this brings. Where strategic considerations and company culture are resistant to the own-label approach, a strategy that actively courts trade collaboration is called for.
Brands with significant marketing support have an advantage in this regard as they are more likely to have an influence in the category management strategies of retailers. This will cost marketers and, with budgets static, the pressure will mount for further shifts from traditional above-the-line methods - such as advertising - to retailer support.
In an article in June's edition of Admap, the UK marketing trade magazine, retail consultant Brian Moore points to the fact that trade funding has increased from 5 per cent to 15 per cent of brand sales turnover in recent years. Marketing budgets are being raided to fund over-riders, display allowances, promotional contributions and co-operative ads.
Where the support is not going directly to retailers, marketing managers are being focused on below-the-line promotions such as multi-buy offers and price promotions. Empirical research would indicate that while retailer margin growth from such promotional activity seems assured, manufacturers face a situation where few of them can expect to make any real profit from it, despite the short term lift in sales volumes that occur.
Whilst the maintenance of advertising spending to support brands and "pull" demand via customers makes sense, marketers face a difficult time in protecting such budgets in the face of the more insistent demands from retailers and sales departments for trade funding.
Going forward, marketing professionals and their agencies will have to become much more literate in the world of promoting at the aisle level and will need a much greater sensitivity to the supplier-retailer interface than exhibited to date.
Cream of the crop
One of Ireland's longest running drinks sponsorships continues next month with the quest to find the Baileys Champion Cow. The competition, which will be held at the Virginia Show, Co Cavan, on August 25th, is jointly sponsored by R&A Bailey and Glanbia Virginia.
The production of Baileys, which is now the sixth largest selling global premium spirits brand, requires 50 million gallons of milk from 40,000 Irish cows annually. Now in its 21st year, the Baileys Champion Cow competition is more than a pageant to find the best bovine beauty, and is only eligible for cows producing 1,600 gallons of milk per year.
We are told by the organisers that the final judgment is on appearance only - good legs, good shaped back and well proportioned udders being the key assets required. One assumes therefore that no advantage will accrue to those entrants who enjoy helping less advantaged cows.
Alex Gibson is a senior lecturer in marketing at the School of Hospitality Management and Tourism, DIT, and presents a weekly marketing programme on Dublin City Anna Livia FM.
