About six years ago, I suspect any retailer that saw my name in their diary would shudder. Every meeting would be a series of powerful proof points stressing the importance of new, different, and interesting brands in creating a genuine point of difference in store.
We would encourage them to adopt more progressive KPIs and organisational structures that would enable them to unlock long-term value in innovation, and we would point out where we thought they were missing chances.
I used a clumsy analogy back then: a giant hand trying to delicately pick up a tiny ant, but inevitably crushing it. A smaller hand was needed for the task. In hindsight, it was a poor analogy, and unsurprisingly, no one has reused it. However, the underlying message resonated.
Sainsbury’s came first with its Future Brands programme – the first real investment in the industry into branded innovation. With a team of more than a dozen people at its peak, split into ‘Find’ and ‘Grow’, Sainsbury’s recognised that new brands and products needed to be managed differently from the core range to receive the attention and focus to cut through. The numbers back then spoke for themselves: more than 50% incrementality across a range of over 50 brands… compelling.
Following Sainsbury’s, a handful of other retailers launched somewhat superficial programmes in response – nice PR stories, but with nowhere near the investment needed to make an impact.
YF’s recent partnership announcement with Waitrose prompted me to reflect on how much has changed.
This year alone has seen more investment in branded innovation than the last five years combined. In recent months, Iceland, Ocado, Co-op, Tesco, and now Waitrose have all announced new or expanded initiatives aimed at growing their stables of challenger brands. As someone involved in several of these programmes, I can reassure you they are far from superficial – it’s become a new playing field on which to compete.
The programmes today are extensive and come with significant perks: improved payment terms, media support, access to valuable data, and more. They will make trading so much easier for small suppliers, giving brands support that they could only have dreamt of a decade ago.
However, there remains one unresolved issue, the final piece of the puzzle that needs a more unified approach across retailers: readiness to trade.
For context, YF is the business that founders tend to call when they have overpromised something to their customers and need to quickly solve it – after all, entrepreneurs tend to start with a promise and then move mountains to deliver it. And with innovation programmes onboarding brands earlier and earlier in their lifecycle, we know first-hand how many are not yet ‘ready to trade’ by our definitions.
So as a buyer, how can you be confident that the food safety, supply chain security, financial robustness or team capability are enough? How can you be sure you won’t have to deal with empty shelves, or competition law issues, or the brand going bust?
Unless you are properly auditing all the brands you speak with – including the 99% you don’t plan on listing – realistically you can’t be sure about anything.
That’s why we’re seeing a bit of a peculiar model right now, where innovation teams are half-advising brands on how to run their businesses. They don’t really want to be doing this, nor is running an fmcg brand their core competency, but these innovation teams feel they need to get more into the weeds with brands in order to uphold their promises.
We’ve observed two unintended consequences of this trend.
Firstly, innovation teams are spending more time on the brands they aren’t planning on listing than those they have committed to with contracts. It seems plain to me that these teams should be laser-focused on the 1% of brands they can really influence within their stores, but it’s not the case.
For brands on the journey to listing, they are ending up with multiple ‘mums and dads’ creating confusion and inconsistencies. One retailer innovation team is saying one thing; another is saying something completely different. This drives cost, headaches and ultimately poor outcomes at the brand level.
With dozens of new brands going into major distribution this month – where founders have put a lot on the line for these launches – we will be starting an industry-wide conversation on how we can support retailer teams to focus on the brands they have listed above all else. After all, this is just the final cherry on the cake.
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