Danone: distribution and retail strategy review

Résumé du document

For decades, fast moving consumer goods (FMCG) manufacturers have focused most of their marketing efforts, expertise and funds on their end-targets who are the consumers. The successive laws addressing the relationship between retailers and manufacturers in France have encouraged the food retail industry to undergo a fundamental shift. The retail industry completely changed its strategic and operational skills due to aggressive expansion into new markets and countries.

It cannot be denied that the current environment is not helping the manufacturers; the increase in purchase of raw materials and energy prices along with the economic crisis has had an impact on companies.

Consequently, the balance of power in the new retailer-supplier relationship is leaning towards the trading side. In addition to being the primary way for brands to reach the consumers, the food retailers have created an extremely concentrated retail market after the invention of global retail powerhouses.

As a result, FMCG manufacturers have to be very adaptable because the economic situation is quite difficult.

Danone group is one of the biggest and most famous FMCG companies which has understood the need to reverse its approach in order to retain its commercial power and hence the reason why the group has set-up a Trade Marketing Strategy for several years now. Danone has always had a strong marketing oriented strategy by paying attention to the retailers as well.

Extraits

[...] Danone has always had a marketing oriented strategy, now the group is paying attention to retailers as well. The aim of this file is to explain more precisely why Danone decided to target the retailers but also, and more importantly, how the group is doing. First of all, we will evaluate the brand's approach of distribution and retail issues in order to understand why it was vital for the group to adapt their marketing strategy. In a second part, we will analyze Danone's strategy in terms of Trade-Marketing. [...]

[...] To cut a long story short, retailers know consumption habits qualitatively and quantitatively Listing, product mix structure, merchandising and innovation Product mix structure means number of SKUs, private labels/national brands rate, store adaptation, shelf length and turnover goal. When it is well managed, this structure can vastly improve profit margin and turnover. Consequently, many SKUs exist so that both manufacturers and retailers can benefit. The role of the trade marketing manager is to adapt this mix to the retail store and its consumers' needs as it will not be the same in Auchan, Leclerc or Lidl. [...]

[...] Danone's approach 1. Becoming unavoidable for retailers In order to be as popular as possible for retailers, Danone's strategy is clear: Its brands need to be very strong and its image needs to be positive in order to answer the end-consumers' concerns The power of blockbusters Blockbusters are brands which end-consumers are looking for when they go to the supermarket and are not ready to switch to another brand. Activia and Actimel are good example of Danone's blockbusters. New products and brands are created at a fast pace whereas the room in the stores is not expandable. [...]

[...] In order to be close to each retailer, this structure is divided by retailer banner. One team is in charge of the Carrefour relationship while another is responsible for Tesco, another for Walmart, etc Market analysis and negotiations with retailers Every year, each team takes stock of the past year's performance and explains the next year's strategy. This is very strategic as the team has to convince its customers to list the brand's products. It could be complicated when it is about a product lining in bad economic times. [...]

[...] However, this is not the trade-marketing but the consumer marketing task as it is a strategic point. As a result, this is not where the category managers have the most important power. They still give advice in the promotion prices as well as the price coherence in the shops. It must be said that promotion represents on average 16% of the turnover for a retailer. For instance, Danone recommends to the retailers located in the poor areas to sell its EcoPack, which consists of a cheap pack of six yogurts without the cardboard packaging around, at less than III. [...]