We’ve all grown used to volatility, uncertainty, complexity and ambiguity. But even so the first few days of the Donald Trump administration has unleashed a VUCA vortex.
We all expected tariffs. But perhaps we didn’t expect so many, so soon – with Colombia, Mexico and Canada all threatened with the immediate imposition of tariffs – and for these countries to so quickly take corrective actions either to stop or stave off the threat.
As we write this, only China is facing instant tariffs, a 10% charge on all goods imported, effective from today (4 February). The other countries have either climbed down (Colombia) or secured a 30-day delay (Canada and Mexico).
It would be wrong to suggest that either of these countries is out of the woods when it comes to a trade war, however. And Trump’s weaponising of tariffs is quickly expected to escalate still further. The EU will follow “pretty soon” Trump promised at the weekend, while the UK waits on tenterhooks to find out how fickle the small fingers of Trumpian fate will prove to be.
Amid all this uncertainty, it’s hardly surprising that Diageo this morning announced it was withdrawing medium-term guidance on its topline performance.
The immediate source of uncertainty is tequila – imported from Mexico, 85% of the collateral damage from a trade war is expected to come from lost sales of its popular Don Julio and Casamigos brands – but the two-way flow of trade with Mexico (and Canada, for that matter) is highly complex. And of course its scotch whisky portfolio is another likely casualty if the UK is dragged into a trade war. At this early stage Diageo says Trump’s tariffs could cost the drinks giant £161m in the second half of this fiscal year (to June) alone.
So The Grocer’s conference today for commercial directors was timely. As we looked ahead, from the top of the Shard, to the challenging trading conditions in the market, with sticky inflation, higher costs, higher inflation and low growth even before trade wars came into the equation – all the speakers – whether retailers or suppliers – stressed the importance of retailer-supplier collaboration in one way or another.
The morning started with a Q&A with Sainsbury’s chief commercial officer Rhian Bartlett, who spoke to The Grocer’s Adam Leyland about the supermarket’s Next Level strategy, the overwhelming success of Nectar Prices (a 90% buy-in rate saw December 2024 being referred to as a ‘Purple Christmas’) and the inflationary challenges faced by the sector.
But collaboration soon emerged as a key theme, as Bartlett spoke of the importance of working closely with suppliers when looking to move quickly and make changes, a necessity she credits for Sainsbury’s post-pandemic success story.
Sainsbury’s: supporting suppliers
One highlight was Sainsbury’s Future Brands programme. The incubator brands initiative has been the retail springboard of many new brands, with around 15-20 currently under the mentorship of the retailer’s dedicated team. Working closely with small firms and kitchen table entrepreneurs to help these up-and-coming brands grow, Bartlett was at pains to make it clear that Sainsbury’s isn’t interested in rip-off brands. The opportunity was about collaboration for mutual benefit, whether to support the growth of its Taste the Difference range, or to develop exciting new innovation, she said.
In terms of ‘sticky’ inflation, Bartlett admitted it was tough at the moment. Calculations keep resetting, she said, as the system reels from one shock to the next. It was here again that the importance of collaboration was flagged, as having open conversations about where inflation is being pitched will help determine how volume – and price – is affected.
Ocado: helping brands understand
Online pureplayer Ocado Retail has forged close and enduring partnerships with major fmcgs too. “Winning together with our supply partners is core to our DNA,” said CCO Amit Chitnis of the ongoing collaborations.
Indeed, given all purchases are made through its site and only there, Ocado is uniquely placed, he argued, to help brands better understand their shoppers and the shopping journeys they make; test and launch NPD in a lower risk environment; and magnify their marketing spend.
It’s a unique proposition, which offers partners some powerful insight and opportunities. As Chitnis puts it: “In store, customers shop how they move – online, they shop how they think.”
And at a time when consumer behaviour – and world events – feels increasingly unpredictable and uncertain, working with the retailer gives brands the opportunity to “see the future”.
Baskets are filled far in advance – particularly in the run-up to Christmas. “By the first week of October we know which proportion of families have turkeys in their baskets,” Chitnis said. “So if you make stuffing or cranberry sauce you have genuine insights.”
Heinz has developed a particularly strong working relationship with Ocado, added Chitnis – using the platform as a testbed for NPD; adapting branding, positioning and formulation based on shopper reviews and star ratings and how shoppers search within the category.
It’s launched scores of new products on Ocado in the past few years, with more to come, said David Adams, VP sales UK&I at The Kraft Heinz Company. “Ocado is a great partner to support our innovation journey.”
GSCOP: confidence in collaboration
Collaboration also emerged as a key theme in a panel session around GSCOP – featuring Adjudicator Mark White, Ged Futter of The Retail Mind and John Noble of British Brands Group. Coming together on the 15th anniversary of the Groceries Code, all agreed it had transformed the relationship between retailers and suppliers in that time.
“The biggest thing I’ve seen is confidence,” said Futter. Suppliers now felt better able to invest in their businesses, due to the closer and more balanced relationships with retailers.
Not that all is rosy in the world of GSCOP. Last year, Amazon was a prime offender in the Groceries Code league table for the second year running: fewer than half of suppliers said the online giant was complying with the code. At the time, White warned he would launch an investigation unless Amazon urgently responded to the concerns.
Even here, though, the Adjudicator stressed his preference for a collaborative approach. As he pointed out, delivering changes in this way can deliver benefits quicker, while an investigation could take a couple of years – and suppliers wouldn’t see benefits until after its conclusion.
That sentiment was backed up by Noble. “Almost the less you hear publicly about relationships going off the rails and coming back on again, the better that is for everybody,” he summed up. “Fines make it a much more confrontational approach.”
As we’ve seen, the confrontational approach of Donald Trump is having an effect in international trade relations. But when it comes to the ‘trade’, relations work best with collaboration. Everyone can agree on that, right?
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