Speed: The Consumer is Changing Faster than the Food Industry can change

1. Speed: The Consumer is Changing Faster
than the Food Industry can change
Richard Kochersperger
Summer 2012
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2. Industry Gurus
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3. Tell Me and I Forget
Teach Me and I Remember
Involve me and I Learn
Ben Franklin
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4. 4

5. 5

6. Goals/Objectives
• Reality Check: An American Economic
Perspective
• View of the Food Industry: Retail/Foodservice
Competitive Landscape?
– Winners and Losers
– Impact Players
– New Developments
• Speed: Key Issues and Opportunities
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7. Reality Check

8. Federal Spending
8

9. Reality Check
American Employment??? 8.2
• Available Workforce: 155 million
• Unemployed/underemployed: 29.7 million
• Real Rate: 19%
• Rutgers Study: 2006-2011
– 27% of the graduating students have full time jobs
– 33% are unemployed
• The median family income dropped 39% since
2007
9

10. Reality Check

11. Reality Check
11

12. Reality Check
• 1 in 7 Americans; 1/10
Canadians are
challenged to feed
themselves
• 2 Billion people
worldwide do not have
enough food to eat!
• 40% of global food
resources are wasted
– Not harvested
– Spoils
– Thrown away
12

13. The “Have” and “Have Nots”

14. Food Inflation
6.6% 14

15. Industry Performance
• Whole Foods: 9.5% • Wal-Mart:
• Fresh Market 8.2% 2.6%
• Costco 7.1% • Safeway: 1.0%
• Dollar Tree 5.6% • Weis Markets: 0.9%
• Target: 5.3% • Delhaize: Food
• Food Inflation 5.2% Lion/Hannaford: 0.6%
• Ingles: 0.1%
• Publix: 4.2%
• • Tops: 1.8%
Fresh and Easy: 3.6%
• Roundy’s: 2.1%
• Ahold: 2.9%
• Supervalu: 5.1%
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16. Closing Thought
Excellence is not a skill.
It is an attitude.
~Ralph Marston
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17. 10 Food Companies Dominate
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18. Food Retail Industry Graveyard
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19. Food Retail Industry Graveyard
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20. Food Industry E R
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21. Food Industry E R
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22. Food Industry Winners
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23. Foodservice Industry Winners
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24. Big Moves
• Target goes to Canada: 130+ stores; rolls out P-
fresh format across the US: 436/200+
• Wegman’s moves into Boston/King of Prussia
• 7-11 Targets the Big Apple
• Wawa goes South to Florida
• Agro Trade shows up in Miami
• America runs on Dunkin’
• Family Dollar opens 500 new stores; Partners
with McLane
• Supervalu to Close Ohio DC
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25. Big Moves
• Shop Rite grows in Baltimore
• Harris-Teeter moves into Washington DC
• Bottom Dollar to Eastern Ohio
• Spartan intros Valuland
• Aldi comes to Houston
• Price Chopper Limited
• Fresh Market opens in California
• Couche-Tard acquires Statoil Fuel & Retail
• Dollar General: 625 stores/40 DG Market
• PFG buy Institutional Food House
• US Food buys New City Packing
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26. Consumer Reports 2012
• 33% changed primary • Wegmans 88
store • Trader Joe’s 86
• 43% looking for lower • Publix 85
prices • Fareway 84
• 25% poor selection, long • Costco 83
lines
• 17% employee rudeness • Harris Teeter 83
• Not enough checkouts • Raley’s 82
• Hy Vee 82
• Stater Bros 81
• Winco 81
• Whole Foods 81
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27. 2011 Retail Market Share
Number of Dollar Share Annual Millions
Stores
Traditional Grocery 40,333 46.8% $480,138
Total C Stores 152,513 15.4% $158,546
Total Non Traditional 54,325 37.8% $387,529
Grocery
Dollar Stores 23,418 2.1% $21,492
Total All Formats 247,081 100% $1,026,215
Future of Food Retailing, 2011 Willard Bishop
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28. Future Growth
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29. Food Service Marketplace
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30. Closing Thought
• FMI2012: Supermarkets Must Adapt to
'Stunning Changes,' Sarasin Says
• The store as we have known it for the last
half a century is being redefined.
• "No one is safe from the vicissitudes of change
that continually rock this industry, in which
technological earthquakes alter the landscape
daily and sometimes even hourly.“
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31. Amazon.com
• Sales: $48 Billion • More e-books than
• 55% North America hardcover and
• 45% International paperback
• Profits: $862 million • Wide variety of
products: clothing,
• Inventory Turnover
shoes, sporting
11/33 days
goods, FOOD!
• Accounts Payable
72 days
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32. Amazon Supply
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33. Amazon Supply
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34. Amazon: My Habit
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35. 35

36. 36

37. Amazon: Zappos
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38. Amazon Quidsi
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39. Amazon: Kiva
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40. 2015: 3 largest in the World
rd
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41. Continuous Innovation, 2020+

42. World’s Largest E-Commerce
Co
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43. • Walmart serves customers more than 200
million times per week at more than 10,231
retail units in 27 countries through 69 banners
• WalMart employs 2.2 million associates
globally, including almost 1.4 million in the
United States.
• Walmart is one of the largest private
employers in the U.S., the largest in Mexico
and one of the largest in Canada as well.
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44. Wal-Mart Financials
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45. Supercenter
Source of Volume
13%
Other Each new Walmart Supercenter
Mass
averages $1.7million in sales per week
33% 32% (roughly $900,000 in supermarket item
All Grocery volume).
Other Chains
22%
If Walmart takes 5% to 7% of the $710
Walmart billion grocery industry in 2012, Walmart
Discount will add $35 - $50 billion
Stores
 Over 75% of Walmart Supercenter volume is being captured from
retailers in other major channels.
Source: A.C. Nielsen Channel Service
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46. 46

47. 69 different banners
through out the World
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48. Wal-Mart Growth
Format Actual Projected Projected
2012 2013
Large >60,000 153* 120 130
Format sq.ft.
Medium/ <60,000 1 30 90
Small sq.ft.
Sam’s Club 9 9 15
Total 163 159 235
*43 remodels to Supercenters
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49. Walmart Innovations
• Experimenting with grocery home delivery
– San Jose, San Francisco, Chicago.
• Introduced ‘Goodies’
– Subscription service for new products not carried
in inventory
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50. Farmers Markets
2011: 7,175
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51. Target
• 462/200 stores P Fresh
• 5% Redcards Rewards
• Move into Canada
• City Target: Chicago,
NY, Seattle, SF, LA
• Shopping on the GO
• 5% of profits to back to
communities
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52. Target Move to Food
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53. Which Food Store?
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54. Walgreens
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55. Walgreens
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56. Walgreens
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57. Trader Joe’s
• 370 stores
• $8.5 Billion sales
• 4,000 sku’s
• $1750 sales/per sq foot
• Eclectic mix/Treasure
Hunt
• Hawaiian Shirts
• Great Customer Service
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58. 58

59. Dollar Stores
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60. Tesco
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61. Tesco
Lost $1.2 billion
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62. Wegmans
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63. When there
Is no vision,
the people
perish!
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64. The Consumer Drives
the Food Supply Chain
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65. Customer’s Perspective
• Anytime: 24/7/365
• Any Place: Format
• Anywhere:
geography
• My Way! 65

66. Future Food Shopping
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67. Self Checkout
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68. Scan-Bag-Go!
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69. Scan IT!
69

70. Robot Shopping
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71. Next Generation of Shopping
Try on clothes in 3D, share photos with friends, and store wish-listed items on smart phones
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72. Next Generation of Shopping
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73. QR Quick Response Barcode
A QR code (abbreviation for Quick Response
code) is a specific matrix barcode (or two-
dimensional code) that is readable by
dedicated QR barcode readers and camera
phones.
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74. Virtual Stores
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75. Automatic Shelf Replenishment
Edeka/Witron:
Germany
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76. Drive Through: Europe
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77. Drive Through: Auchan
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78. Food Comes to U!
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79. Everyone wants a piece
of your business!
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80. Substitution: Big Box for Small
Digital for Both
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81. Evolution of E/M/F Commerce
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82. E/M/F Commerce
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83. Evolving Marketplace
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84. E Commerce: Segmented
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85. Free Shipping: E Commerce
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86. % of Total Category Sales Online
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87. On Line Food Sales
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88. Social Media
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89. Social Media
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90. Mobile Ecommerce
Social media marketing is going to blow the shingles
off the roof once people really figure out how to use
it
Megan O’Connor, Levi Strauss 90

91. Mobile Ecommerce
• Mobile Stats:
• 5.9 Billion subscribers
• 8 Trillion SMS messages sent in 2011
• 11+ Billion apps downloaded, 1 in 4 never used
again
• The number of mobile searches quadrupled in the
last year
• 8.49% of global web site hits come from mobile
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92. FCommerce
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93. F Commerce
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94. Ipad/Tablet Changes the World
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95. Future Connectivity
http://www.youtube.com/v/uIzNmVMOYm0&fs=1&source=uds&autoplay=1 95

96. Key Observation
• “Insanity: doing the same thing over
and over again and expecting
different results.”
Albert Einstein
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97. Complexity

98. 98

99. Food Logistics Issues
• Shortage of Human Resources
• Energy
• Environmental/Sustainability
• Technology
• Urbanization
• Ethnic Demographics
• Speed: the ability to react to make decisions,
quicker, faster, more effectively than your
competition!
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100. Work Force Shortage
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101. Driver Shortage
• Estimates: As high as 400,000 by 2015
• Government regulations will eliminate at least
5% of the drivers
• Increase in freight rates at 5%/yr for inbound
products
• Increase in inventories to prevent outs due to
shortage of drivers
• Outsourcing will not solve the problem!
101

102. DC: Automation
Take Fingerprints
off the Box!
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103. Transportation
• Improve driver
performance through
education and training
• Intermodal/Rail
• Collaboration/Consolid
ation
• DSD strategy
• Customer Incentives
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104. Energy
104

105. Energy
105

106. Alternative Fuels
Natural Gas
Electric
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107. Green Supply Chains
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108. Smart Way Transportation
• Aerodynamics
• Super Singles
• Auto Tire Inflation
• Low Viscosity Lube
• Hybrid Power
• Automatic
Transmission
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109. Technology
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110. Expanded Bar Codes
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111. Temperature Sensors
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112. RF-ID
Alive and well!!
Developments:
– Eliminate the check out
process at the store
– Improve inventory
management
– Reduce mistakes unloading
products inbound/outbound
– Monitor temperatures
throughout supply chain
– Minimize paperwork
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113. Control Towers
• Proctor/Gamble, Sysco, Walmart, Supervalu
• Centralized Traffic and Transportation
• Incorporates sophisticated software to analyze/see
all routes/equipment; inbound and outbound
• Optimize entire supply chain: Visibility and
Control
• National Bids
• Convert to customer pick up
• Full Trucks/Balance workload
113

114. Satellite Communications
V to V: Cars, Trucks,
Airplanes, Trains
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115. Nanotechnology
Contamination Sensors Pesticide Reduction
Anti microbial Packaging Tracking, Tracing, Brand Protection
Improved Food Storage Texture
Enhanced Nutrient Delivery Flavor
Green Packaging Bacteria Identification and Elimination
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116. Urbanization
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117. Urbanization
• Traffic
• Smaller Stores/Trucks
• Road Restrictions
• Parking
• Noise Levels
• No Docks
• Security
• Congestion
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118. Urbanization
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119. U. S. Demographics
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120. U. S. Demographics
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121. Rise of the Ethnic Focused Retailer
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122. Speed: The Consumer is Changing Faster
than the Food Industry can change
122

123. Future FCPG Industry
Supply Chain
Command Center Information
Control Tower Retailers ??????
Strategic Hub
Information The Consumer Information
Suppliers Distributors
Third Party
Manufacturing Alliances,
Network Partners
Regional, global plants
Bulk, Semi-finished,
Information Filling Finishing, Information
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124. Closing Thought
• It’s not the strongest companies
that survive,
nor the most intelligent,
but the ones most responsive to change!
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