Through a Glass Darkly

<body topmargin=0 leftmargin=0 marginheight=0 marginwidth=0> <table cellpadding=0 cellspacing=0 border=0><tr> <td valign="top" colspan=2 height=110 BGCOLOR="#666699" TEXT="#080000" bgproperties="fixed" background="04900840erlcjm.png"> <div> <B> <TABLE BORDER="0" CELLPADDING="1" CELLSPACING="1" WIDTH="600" BORDERCOLORLIGHT="#C0C0C0" BORDERCOLORDARK="#808080" FRAME="BOX" RULES="ALL" ALIGN="LEFT" HSPACE="0" VSPACE="0" > <tR> <tD VALIGN=TOP HEIGHT= 103 ><NOBR><div> <A HREF="index.htm" TARGET="_top" TITLE="Hoytnet Home"><U><B><IMG SRC="063775a0.jpg" border=0 width="119" height="90" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></B></U></A></div> </NOBR></tD> <tD VALIGN=TOP><NOBR><div> <B>Hoyt & Company</B></div> <div> <A HREF="services.htm" TARGET="_top" TITLE="What We Do"><U>What We Do</U></A> | <A HREF="who.htm" TARGET="_top" TITLE="Who We Are"><U>Who We Are</U></A> | <A HREF="articles.htm" TARGET="_top" TITLE="How We Think"><U>How We Think</U></A> |<A HREF="contact.htm" TARGET="_top" TITLE="Contact Us"><U> Contact Us</U></A></div> </NOBR></tD> </tR> </TABLE></B></div> <bR> <div> </div> </td> </tr><tr> <td valign="top" width=165 BGCOLOR="#CCCCFF" TEXT="#080000" background="04311c00egdysm.png"> <div> <A HREF="articles69.htm" TARGET="_top" TITLE="Chris Hoyt Articles"><U><B>Back to:  Artic</B></U></A><A HREF="articles69.htm" TARGET="_top" TITLE="Chris Hoyt Articles"><U><B>les</B></U></A></div> <bR> <bR> </td> <td valign="top" height=370 BGCOLOR="#FFFFFF" TEXT="#080000"> <div> <B>Brand Marketing</B><B> - </B><B>June 1999</B></div> <bR> <div> <I><B>Through a Glass Darkly (But Soon Face to Face)</B></I></div> <bR> <div> <B>By Christopher W. Hoyt</B></div> <bR> <div> With supplier management personnel ranks thinned to the bone and most people doing a job that two people did five years ago, it is often difficult to find time to look at the big picture: specifically, "where is the market going and how will this affect my business?".  </div> <bR> <div> So for this last article prior to my summer break, I thought it would be helpful to make some predictions:</div> <bR> <div> 1.   The internet will become a core channel for consumer goods but not food. Food, especially perishables, will continue to be bought in stores because most people are unwilling or simply cannot afford to pay the cost of direct-to-home delivery. Just look at Peapod financials if anyone doubts this: in business over eight years and doing all of $68MM in sales with a gross margin of 4% and a net loss of 23%.</div> <bR> <div> 2.   The internet will eventually replace FSIs as the primary coupon delivery vehicle because of its ability to deliver cheaply and target specific consumer groups (or even individuals).</div> <bR> <div> 3.   The core buyers of packaged goods edible and non-edible foods in supermarkets will narrow to four groups:  a) the elderly; b) time-starved two-worker families; c) the affluent who are price and promotion blind, and d) those who cannot afford to drive to a supercenter or club.  What supermarkets will lose is their hold on the middle-income growing-families which, unfortunately for supermarkets, have always been the big food purchasers.</div> <bR> <div> 4.   Smart supermarkets will at last figure out that "what makes a food store a food store" is perishables which no other channel has yet been able to merchandise or distribute effectively.  Albertson's -- always ahead of the pack -- has already done this and skinnied-down certain new stores to allocate only 30% of floor space to traditional packaged goods. Store formats will also evolve to the "small and convenient" from "big and comprehensive." Wal-Mart's Neighborhood Markets and Albertson's mini-marts outside their main stores are early leaders in this trend.</div> <bR> <div> 5.   Private labels will grow to over 30% of the dollar ACV in five to seven years.  This is inevitable as mass volume retailers use private labels to fatten profit margins and as some -- like rapidly consolidating grocers or Wal-Mart -- achieve sufficient household penetration to begin to advertise private labels as though they were national brands.</div> <bR> <div> 6.   Home-cooked meals will shortly escalate to the status of becoming a weekend "event" as this is the only time when the entire family has the time to get together.  Meanwhile, DIY foods will prevail for weekday consumption. Fast food, eat-out and take-home will continue to grow at the expense of store-bought foodstuffs.</div> <bR> <div> 7.   Promotion events will increasingly become account-driven and not supplier-driven.  Large, powerful retailers will soon figure out that the multitude of disparate supplier-driven promotions translates to the consumer as "clutter." To retain loyal customers and draw new consumers into their stores, retailers will develop their own events and suppliers will be made to compete to participate in these events. Having enough money to do so is only the threshold: suppliers will soon have to show how their brands "fit" into or add value to a particular promotion event for a particular retailer. Retailer-developed promotion events will be BIG and finally bring some true excitement back into what has become the mundane world of mass volume retailing.</div> <bR> <div> 8.   There will be a major shake-out in the supplier community as large retailers winnow-down their product selection to the top three brands in every category and fill the gaps with their own private labels. Regional suppliers are especially vulnerable if unable to deliver the brand strength in the broadening geographies of consolidating retailers and meet chain demands for JIT delivery across that broader geography. All major retailers will soon judge suppliers on how much they contribute to their float as well as brand strength.</div> <bR> <div> Draw your own conclusions and have a good summer.</div> <bR> <DIV ALIGN="LEFT"></DIV> <div> <FONT SIZE="1" COLOR="#000000" FACE="Symbol" >ã</FONT> Copyright 1999, <FONT SIZE="1" COLOR="#3333CC" FACE="Arial" ><A HREF="contact.htm" TARGET="_top" TITLE="Contact Us"><U>Hoyt & Company, LLC.</U></A></FONT> All Rights Reserved</div> </td> </tr></table></body>