Today's Buy-Sell relations between A-Branders/Retailers have
not been very successful in capturing this value
We will have to explore alternative business models to capture
this value 3
A.T. Kearney 7/06.2008/45510
Consumers are becoming more diverse,
presenting new opportunities
Aging Population
Growth of
Multi-cultural Societies
Polarization
of Wealth 4
A.T. Kearney 7/06.2008/45510
Consumers dont stay in their segments
anymore
One and the Same Consumer
Consumer is the integrator: consumer = N<1 5
A.T. Kearney 7/06.2008/45510
Consumers want everything and want it
everywhere
Source: IRI Consumer network, 2007
Everything
Everywhere
Well-Being
Sustainable
Experience
Number of CPG channels shopped: %
of consumers in the U.S.
73% of consumers shop in
5 or more channels
Authentic
Five
25%
Six
27%
Seven
17%
Eight
4%
One
1%
Tw
o
3%
Three
7%
Four
16% 6
A.T. Kearney 7/06.2008/45510
There is a lot of discretionary consumer
spending to go after
-6%-5%-4%-3%-2%-1% 0% 1% 2% 3% 4%
Food
Energy
Consumer dur.
Clothing
Communication
Misc.
Tourism
Education
Entertainment
Health
Housing
Traffic/Travel
Shift-share in %-p for household
expenditure e.g. Germany
Source: Deutsche Bank Research, 2007; Planet Retail, 2008; A.T Kearney Analysis
2003 vs. 2030
Consumer expenditure vs.
share of retail e.g. Germany 7
A.T. Kearney 7/06.2008/45510
Agenda
There appears to be more untapped consumer value out there
than ever before
Today's Buy-Sell relations between A-Branders/Retailers have
not been very successful in capturing this value
We will have to explore alternative business models to capture
this value 8
A.T. Kearney 7/06.2008/45510
Industry consolidation creates a stronger focus
on efficiency
Notes:
(1) Share of sales held by the top 5 retailers in 13 of the biggest MGD markets worldwide
Source:
Planet Retail, 2007; * The figure for the Unites States is taken from A.C Nielsen, 2005
Consumers
Retailers
Suppliers
91%
88%
76%
72%
65%
63%
62%
58%
57%
36%
0%
50%
100%
Finland
Sweden Belgium Switzer-
land
France
Germany Nether-
lands
United
Kingdom
Spain
United
States
Acquirer
Acquired
Deal Size
Year
Suppliers are consolidating
$57 billion
2005
$23 billion
2008
$16.8 billion
2007
$13.4 billion
2000
$5.6 billion
2002
$5.5 billion
2007
Retailer concentration
(1) 9
A.T. Kearney 7/06.2008/45510
2%
4%
6%
16%
23%
17%
0%
5%
10%
15%
20%
25%
Latin
America
Asia
Pacific
Emerging
Markets
North
America
Europe
Global
And more retailer vertical integration
through private label
Notes:
(1) Figure in bubble represents growth rate over 2004-2005
Source:
A.C Nielsen, 2005
Retailers
increasing private
label penetration
Private label share and growth
Consumers
Retailers
Suppliers
6%
6%
11
%
6%
4%
7% 10
A.T. Kearney 7/06.2008/45510
Resulting in retailers and suppliers competing
directly with each other
Source: M+M Planet Retail, 2007; Fortune Global 500, 2007
150
80
70
68
60
53
51
50
50
43
245
4
93
54
28
0
50
100
150
200
250
300
350
400
450
Own Brand
Other Brands
Revenues $ billion; 2007
5 of the top 10 FMCG brand marketers are retailers 11
A.T. Kearney 7/06.2008/45510
Everyone seems to believe in collaboration,
however, results have not been spectacular
Transactional
Collaborative
Suppliers and retailers expect to
collaborate more in the future
Source: A.T. Kearney Supplier-Retailer Survey
despite results falling short of
expectations
High
Low
Extent desired results achieved 12
A.T. Kearney 7/06.2008/45510
Collaboration is limited and random
Number of suppliers and retailers collaborating in different areas
Source: A.T. Kearney Supplier-Retailer Survey
NPD Idea generation
NPD Shared
Funding
Many
Few
Customized ingredients
Many
Few
Shared Warehousing
Customized trade
terms/pricing
Customized
brand
Supply chain (SC)
Exclusive Offerings
Product Innovation (NPD)
Retailers
Suppliers
VMI 13
A.T. Kearney 7/06.2008/45510
Extent of collaboration
Extent of
achieving desired
results
Source: A.T. Kearney Supplier-Retailer Survey
Doing more does not necessarily provide more
value
Supply Chain
Product Innovation
Exclusive Offerings
Retailer
Supplier
High
Low
High
Low 14
A.T. Kearney 7/06.2008/45510
Agenda
There appears to be more untapped consumer value out there
than ever before
Today's Buy-Sell relations between A-Branders/Retailers have
not been very successful in capturing this value
We will have to explore alternative business models to capture
this value 15
A.T. Kearney 7/06.2008/45510
Many well-known value-creators overcame the
strong Buy-Sell interface
Consumers
Retailer Controls Upstream
Manufacturer
Controls Downstream
Retailers
Suppliers
Interface 16
A.T. Kearney 7/06.2008/45510
Proliferation of Consumer Needs
Affordable
Premium
Each of these value creators targeted real value
Cut out non-value adding
to lower costs
Add on value-enhancing to
elevate experience 17
A.T. Kearney 7/06.2008/45510
They matched this value focus with operational
specialization
No travel agents
No seat reservation
E-ticket only
Optional in-flight meals
Limited destinations
Single type fleet
Key KPI = turnaround time
25 30 drink varieties; 20 types of beans
New drinks introduced 4x per year
Third Space
Free songs from iTunes
My Starbucks idea
Ready-made chilled coffee in supermarkets
Source premium coffee, not lowest cost
Key KPI = Customer Snapshot
Cheap, no-frills travel
The ultimate coffee shop experience 18
A.T. Kearney 7/06.2008/45510
They reconsidered the entire value chain
Instant affordable furniture
Component
Manufacturing
Component
Manufacturing
Manufacturers
Brand
Store
Assortment
Warehousing
/ Shelf
Supply Chain
Management
Development
Design
Design
Order
Generation
Pick & Pack
Last Mile
Delivery
Assembly
Component
Manufacturing
Component
Manufacturing
Component
Manufacturing
Consumers!
Installation 19
A.T. Kearney 7/06.2008/45510
Lastly, they locked in value through appropriate
commercial and business models
Incre
asing
ly alig
ned o
bject
ives
Examples of collaborative commercial arrangements
Selling services
directly
(e.g.Amazon
Marketplace)
Shared upside
(e.g. Senseo)
Shared
resources (e.g.
Shop in shop in
dept stores)
Exclusivity
(e.g. House of
Hoops, Target
cheap chic)
Joint Venture
(e.g. North
American Coffee
Partnership)
Vertical
Integration (e.g.
PL, Zara,
Nespresso) 20
A.T. Kearney 7/06.2008/45510
Breakthrough can only be gained by re-thinking
your business
Decide on the type of real value you want to pursue
1
Match this value focus with operational
specialization
2
Identify the type of collaboration you need and the
players that need to be involved
3
Create appropriate arrangements to lock-in the
value
4 21
A.T. Kearney 7/06.2008/45510
The coming years