Nestlé Enters the ‘Super Premium’ Chocolate Fray

April 25, 2008

DISCUSSION TOPIC:  New Line of ‘Super-Premium’ Chocolates Due From Nestlé

TOPIC SUMMARY:

At a time when the high-end chocolate sector is the fastest-growing segment of the global confectionery market, with annual growth of 8 percent, a new player has decided to get in on the act. As reported by just-food.com, Nestlé, the second-largest chocolate company in the world, plans to make some up-market moves with “a swathe” of new products currently under development.

Although it has 13 percent of the world’s chocolate sales under brands such as Butter Finger, Nestlé Crunch, Baby Ruth and Kit Kat, according to just-food, super-premium offerings represent only four percent of Nestlé’s own total. But, a spokesperson told the website, “there is a clear market for premium and super-premium chocolates in industrialized countries.”

Over the past few months, Hershey and new partner Starbucks, Ghirardelli and Mars have all decided to go for a chunk of the market. U.K.-based Cadbury plans to take its organic chocolate, Green & Black’s, nationwide in the U.S. this year. More experienced at the top end are Lindt & Sprüngli and Godiva, sold by Campbell’s in December 2007 to the Turkish Ülker Group.

In the face of such competition, food industry consultant, James Amoroso, told just-food.com that he finds it “difficult” to think of a “unique brand positioning” in the U.S. for a premium chocolate from Nestlé. It would have been better, he says, to have purchased Godiva to take advantage of what he says is “a century of competence in premium-quality chocolate – the company makes it for the Swiss mainly – and it has got the marketing muscle and the patience required.”
Instead, Nestlé is working with Belgian master chocolatier Pierre Marcolini to develop what they describe as “a number of premium and super-premium top line chocolates with artisan qualities.” The company’s intention is to launch them in developed countries throughout Europe and Asia as well as the U.S. where consumers have greater spending power. No timescale or detailed description of the new products has been revealed. “We prefer to surprise our competitors,” Nestlé told just-food.

Discussion questions:  Given the perception of the Nestlé brand by consumers in the U.S., how would you brand their new line of upscale chocolate products? What’s a smart strategy for them to tap growth in the gourmet chocolate sector?

My post:

It is interesting that Nestlé has waited until now to enter a market that has been booming for some time and has allowed the majors (Hershey, Ghirardelli, Mars) to establish positioning.  However, Nestlé’s strategy may prove to be brilliant.  It is well known that profits typically go to the company that lets others pave the way in establishing consumer acceptance and desire for a product.  Premium chocolate has reached the commodity stage and Nestlé certainly knows how to maximize commodities.

Nestlé will likely brand their premium chocolates with a name other than Nestlé.  I think they should both launch their own brand and look to acquire one or more significant names as Hershey did with Dagoba, Joseph Schmidt and Scharffen Berger.  Developing their own brand is important so they develop competency in developing and managing premium chocolate.  Competency in premium product management is different than competency in mass product management and will make them better stewards of any artisan chocolate brands they may acquire.

Mike Osorio, your Dare to be Contagious! TM strategist

www.OsorioGroup.com

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12918

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Xanadu: the latest mega-development

April 24, 2008

DISCUSSION TOPIC:  Critics: Xanadu Stinking Up Jersey Swamp

TOPIC SUMMARY:

It’s impossible to imagine that Kubla Khan’s vision of Xanadu bore any resemblance to the monumental (some would say monstrous) mall project of the same name that is growing on the edge of the Meadowlands swamp in northern New Jersey.

The project, which has been beset with financial challenges, environmental challenges and critics who know ugly when they see it, continues to move forward largely as the result of one man’s unwavering commitment to the 2.4-million-square-foot entertainment and shopping complex.

That man, Laurence Siegel, is the driving force behind Xanadu, a $2.3 billion project that when complete will include features such as the first indoor ski slope in the U.S., a wind tunnel for sky diving lessons, a wave machine for indoor surfing, and a 287-foot-high Ferris wheel (Pepsi logo positioned prominently in the middle) that will offer riders close-up looks at the Manhattan skyline. Xanadu will also include a movie multiplex with an Egyptian theme (locals scratching their heads over that), dining options galore and acre-upon-acre of upscale shopping destinations.

As a New York Times article pointed out, many who have seen the plans and renderings of the project have reacted adversely. Richard J. Codey, president of the New Jersey State Senate, described it as “yucky-looking.” Others, RetailWire has been told by local sources, refer to the project now as “Xanadudu.”
No matter the naysayers, Mr. Siegel is convinced that Xanadu’s success will dwarf its massive size. “Look at the majestic nature of this space. You’re going to come here just for the ‘omigod’ factor,” he told The Times.

Discussion questions:  What do you think of the Meadowlands Xanadu strategy to create a huge retail and entertainment complex? Are these types of developments in line with where the consuming public is headed?

My post:

Despite the design concerns, the combination of cool & unique entertainment with great stores should create a success for Xanadu.  This project reminds me of, and is dwarfed by, the mega hotel/shopping/entertainment projects in Dubai.  With the economy likely to be tough for quite some time and making vacations less affordable, residents in the NY area will be glad for a unique “almost vacation” getaway, similar to Mall of America.  I believe we will see more of these projects over the years and they will certainly put pressure on existing malls to reinvigorate their offerings to compete for share of ever-shrinking time and wallet.

Mike Osorio, your Dare to be Contagious! TM strategist

www.OsorioGroup.com

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12914    

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Kids learning to be thrifty?

April 22, 2008

DISCUSSION TOPIC:  Kids Without Cash

TOPIC SUMMARY:

In the past it has seemed as though teens had an inexhaustible supply of cash. Whether it was from part-time jobs, money from the Bank of Mom and Dad, birthday, graduation, gifts, etc. – kids were out and spending.

Now, it seems, even indefatigable teens and their wannabes (tweens) are cutting back due to a lack of funds. The costs of products that kids buy are going up with everything from gas to a slice of pizza to jeans at prices this generation has never seen before.

According to a piece by USA Today, teen hiring has been down five percent since March of last year. The same report noted that some economists believe this could be the worst year for teen spending since the early 1990s.

Same-store sales at retailers targeting teens were down 0.5 percent last year compared to increases of 3.3 percent in 2006 and 12.1 percent in 2005, according to figures from the International Council of Shopping Centers and UBS.

Discussion questions:  How acutely affected are teens and tweens by the current state of the economy? How important are teen and tween dollars to retailers? How should retailers be adapting to current conditions to maintain the link they have with these consumers?

My post:

How parents communicate to their kids impacts those kids’ reaction to all societal topics:  drugs, sex, violence, and certainly the economy and responsible financial decision-making.  The current economic situation provides parents with a terrific opportunity to teach valuable life lessons regarding thrift, savings, value, and prioritization. 

Certainly the simple fact that parents have cut back allowances and other funding methods has led to less teen spending.  The lower the family is on the economic ladder, the more acutely this is felt.  Those lost dollars are of great import across many parts of the retail landscape including convenience and grocery stores, quick-serve restaurants and of course, teen and tween apparel and accessory stores.  Retailers must focus on their own value proposition, be it price, quality, service, social networking, etc., and should not start focusing on price if that hasn’t been their calling-card.  Stick to your niche – this economic valley too shall pass.

Mike Osorio, your Dare to be Contagious! TM strategist

www.OsorioGroup.com

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12908    

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Should retailers raise prices?

April 21, 2008

DISCUSSION TOPIC:  Inflation Rears Its Ugly Head

TOPIC SUMMARY:

Another retro trend from the seventies is working its way back to retail. Unfortunately, it’s inflation.

Retail prices are expected to rise in many categories – e.g., apparel, footwear, toys and electronics – that have largely enjoyed a deflationary cycle over the last two decades. For retailers, many will be challenged to raise prices without irritating customers who have grown used to bargains.

The reason for the price gains are mainly due to higher manufacturing costs coming from China. Among the factors driving up the gains: rising wages in China, the devaluation of the dollar against the (RMB), escalating raw material costs such as steel, and rising fuel costs that are increasing freight costs and the cost of plastic. And many of these drivers – particular the weakening dollar against the yuan – are expected to get worse before getting any better. According to an article on Slate.com, some Chinese factories are now asking their American customers for price increases of as much as 20 percent to 30 percent.

That leaves American retailers to devise new pricing strategies to avoid overwhelming consumers hooked on $3 T-shirts and $30 DVD players. A manager of several discount stores confided to Slate.com that his company has started raising prices of certain goods while putting others on sale. Others are considering bringing in lesser quality goods to meet price points expected by consumers, or being more aggressive around opportunistic buys.

Longer term, suppliers will be challenged to find a manufacturing hub as cheap as China. Other countries seen as possible replacements, such as Vietnam and India, don’t have infrastructure to handle the volume production that the world depends on for cheap goods. Other countries expected to gain a stronger look include Indonesia, Mexico, Malaysia, as well as Brazil or Kenya.

Discussion questions:  How can a retailer maintain its value proposition to consumers in industries facing inflationary pressures? Should they be raising prices sooner rather than later?

My post:

I predict the silver lining in the current situation will be the failure of several so-called retailers which are really private equity owned financial instruments (some of which has already started).  When a retailer’s strategies are based on the basis of short-term financial results needed by short-term financial owners, a sustained downturn will frequently crush that retailer.  The ability of a retailer to raise prices appropriately based on real market conditions depends on the level of trust built with their customers over time.  Trust comes from strategies based on the customer and the brand vision.  Retailers who have built trust can phase in price increases because their customers will trust that this is appropriate given the market realities.  

Prices must be raised now vs. later to ensure the continued financial health of the enterprise.  Those retailers with strong trust-based relationships with their customers will continue to thrive, and those that don’t, won’t.

Mike Osorio, your Dare to be Contagious! TM strategist

www.OsorioGroup.com

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12906    

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Nordstrom expands during the downturn

April 18, 2008

DISCUSSION TOPIC:  Is Now a Good Time for Retailers to Build?

TOPIC SUMMARY:

The economy is slumping and retailers, at least some, are still opening new store locations. Does that make sense and what will the push to open new units mean for retailers once the current downturn is history?

Nordstrom is among those opening new locations even as consumers curtail spending. The company plans to open eight locations this year including a new unit opening in Clinton Township, Mich. today.

Discussion questions:  Is now a good time for retailers to be looking to build new stores? Do economic slumps, particularly those that have hit the real estate market, represent an opportunity for retailers? Does the process for site selection change during economic slumps?

My post:

Retail has in general become an over-leveraged business, increasingly owned by private equity and other financial interests.  This model requires an ever-increasing store base fed by strong economic growth.  As long as the sales increase, private equity can flip their holdings every 3 years or so at increased multiples.  Other financial owners can leverage the value of their holdings into additional growth or to purchase additional assets.  

It all falls apart, however, during a persistent downtrend such as the one we’re experiencing now.  The lesson we learn from Nordstrom’s continued expansion strategy is that when a retailer can stay focused on driving financial success through excellent service to their core consumer vs. artificial leveraging, cash flow will always exist to take advantage of real estate expansion opportunities during economic downturns.

Mike Osorio, your Dare to be Contagious! TM strategist

www.OsorioGroup.com

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12899    

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Influencing Word-of-Mouth Marketing

April 11, 2008

DISCUSSION TOPIC:  Friends and Family Seal the Deal

TOPIC SUMMARY:

If you want to influence a consumer’s purchasing decisions, then it’s almost always best to get to their family and friends first. If you can convince family and friends to recommend a product or service, then you’re a long way down the road to making the sale. But how, just exactly, do you get friends and family to make a recommendation? That is the grail that most marketers seek and few find.

According to ZenithOptimedia, word-of-mouth (WOM), specifically those recommendations from family and friends, ranked highest in purchasing influences in the firm’s Touchpoints ROI Tracker study.

Discussion questions:  How do brands that generate positive word-of-mouth and personal references do it? How is it that (any brand you’d like to identify) is able to generate recommendations from family and friends when others do not?

My post:

The only way to generate positive word-of-mouth and personal references is by having a great product/service delivered in a manner that exceeds customer expectations.  Companies cannot manufacture referrals and positive comments.  When they try, it is usually disastrous.  The way to have engaged customers is through engaged employees.  If companies want positive word-of-mouth and referrals, they must start by focusing on their employees.

That said, there are tools that companies can use to analyze, if not influence, the dialogue.  The growing influence of social media outlets like Facebook, YouTube and others provides companies with both a way to analyze current word-of-mouth opinions and a means to react to any negative perceptions.  Used wisely and sincerely, communication through these portals can provide a company with good intelligence and a platform for customers to speak out.

Mike Osorio, your Dare to be Contagious! TM strategist

www.OsorioGroup.com

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12886    

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Asda demonstrates sincere staff recognition

April 9, 2008

DISCUSSION TOPIC:  Asda Cheers on its Staff (and Their Namesakes)

TOPIC SUMMARY:

Anyone reading the small print of Asda’s press ads would apparently see announcements of staff birthdays and special occasions. This is one way in which the supermarket chain, owned of course by Wal-Mart, celebrates along with its staff and makes sure the world knows what a family-oriented business they are.

As an added twist, one store manager pointed out that his fruit and vegetable department is looked after by one Bob Hall who shares a name with a horse running in the Grand National. The annual steeplechase is one of the biggest and most popular races in the country. To honor their own in-house Bob, Asda decided to back the 100 to one outsider and encourage everyone to yell their support on the day. If the horse won, produce Bob would get the takings, estimated at more than £4000 ($8000).

Store manager, Nigel Palmer, said “It’s part of our drive to show everyone at Asda that they are the most important people in the company. Our colleagues have made Asda the successful company that it is today, and we want to make all of them famous.

Discussion questions:  Are programs such as Asda’s Bob Hall contest worth pursuing by large retailers? How would you assess their impact on employees and customers? What other feel-good programs would you recommend for larger chains looking to bond with local employees and local communities?

My post:

I believe strongly that it is critical to a retailer’s long-term health to develop a culture that consistently creates opportunities to recognize individual and team efforts, small and large.  The key is the recognition must be spontaneous, sincere and well-communicated both inside and outside the organization.  This is not a “program”.  Rather, it must be a true cultural phenomenon developed over time and led by c-level management who provide the example.

Mike Osorio, your Dare to be Contagious! TM strategist

www.OsorioGroup.com

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12880    

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Thank you for visiting my blog!  Please subscribe using the RSS button and comment on my postings.  Comments are the life-blood of any blog and I appreciate yours!