Asda is removing duplicate brands from 10 more categories. Chloe Smith asks how suppliers will be hit by the range rationalisation
At Asda supplier conferences chief merchandising officer Darren Blackhurst is fond of recounting the six different types of cheese grater stocked by the supermarket in times of yore. Not any more, he adds.
But the range rationalisation hasn't been restricted to sharp kitchen utensils. Blackhurst has been slicing and dicing brands since the summer of 2007 - with early purges, as revealed by The Grocer, taking out the likes of Princes tuna and I Can't Believe It's Not Butter - and last week he announced plans to take the grater to a further 10 categories.
In some ranges Asda will cull between 20% to 30% of its SKUs, Blackhurst estimates, admitting: "These are sizeable events in those respective marketplaces. Removing 20% of a range from a business of our size can have quite a dramatic knock-on effect. "
As one branded supplier says: "I am sitting here very worried."
Blackhurst refuses to specify which categories Asda will now target, but the most vulnerable ones, according to Will Hayllar, associate partner at management consultancy OC&C, are those with a high fragmentation of brands, where the category itself is mature and product differentiation is more difficult.
"One of the roles brands play is to drive innovation in a category, keeping the premium there that private label can sit beneath," he says. "In some categories there are elements of probably not enough innovation." Asda's move, he adds, is "not a new direction, but is maybe a new level".
Blackhurst says the brands that remain will be the "brands that save customers the most money".
The implications are ominous, believes Hayllar. "Ultimately, if you're not the biggest, you have to earn your place on the shelf by offering more attractive margins to the retailer."
Marcus Vallance, MD of SalesOut, which tracks the distribution of brands through the supply chain, agrees that the decision on which brands to delist will be driven as much by cost saving as consumer trends. "Asda's statement says it is going to look at the investment from the brands," he says. "The logic would say this is an investment-related decision, not a consumer related decision. Who is going to help the margin? Every category manager will have been challenged on which brands they think they can lose."
But a systematic purge of brands is not without risk, says Aidan Bocci, CEO of Commercial Advantage. "Customers get very cross, very quickly if their favourite brands are delisted."
Asda insists the process is grounded in rigorous consumer research "This isn't as black and white as people might think. We are not going round the store and saying there's three of that, we only need two, let's take one of them out," says a spokeswoman. "It depends what customers are asking for, what they are buying and what they are being confused by. Every category is different.
"With any range change, we will listen to customer insight, and look at sales data to see what is selling well and what isn't. If we didn't, we'd still be selling Lucky Charms and Dasani."
Instead it's stocking more of the products that do sell, like Fray Bentos (up 41% in the 12 weeks to 31 January), Birds Custard (up 26%) and Bisto (up 20%) as examples.
"It means we free up space for the key value items," Blackhurst explains. "We are seeing sales of key branded items increase quite dramatically. Some of that is because we are working with brands. And some is because of latent demand in the marketplace, given the times we are in."
It's also, he insists, a strategy that works for the remaining brands. Though Blackhurst refuses to go into Asda's sales specifics, overall sales of Utterly Butterly were up 36% [Nielsen MAT 4 Oct 2008]. Ominously, sales of I Can't Believe It's Not Butter fell 12%.
At Asda supplier conferences chief merchandising officer Darren Blackhurst is fond of recounting the six different types of cheese grater stocked by the supermarket in times of yore. Not any more, he adds.
But the range rationalisation hasn't been restricted to sharp kitchen utensils. Blackhurst has been slicing and dicing brands since the summer of 2007 - with early purges, as revealed by The Grocer, taking out the likes of Princes tuna and I Can't Believe It's Not Butter - and last week he announced plans to take the grater to a further 10 categories.
In some ranges Asda will cull between 20% to 30% of its SKUs, Blackhurst estimates, admitting: "These are sizeable events in those respective marketplaces. Removing 20% of a range from a business of our size can have quite a dramatic knock-on effect. "
As one branded supplier says: "I am sitting here very worried."
Blackhurst refuses to specify which categories Asda will now target, but the most vulnerable ones, according to Will Hayllar, associate partner at management consultancy OC&C, are those with a high fragmentation of brands, where the category itself is mature and product differentiation is more difficult.
"One of the roles brands play is to drive innovation in a category, keeping the premium there that private label can sit beneath," he says. "In some categories there are elements of probably not enough innovation." Asda's move, he adds, is "not a new direction, but is maybe a new level".
Blackhurst says the brands that remain will be the "brands that save customers the most money".
The implications are ominous, believes Hayllar. "Ultimately, if you're not the biggest, you have to earn your place on the shelf by offering more attractive margins to the retailer."
Marcus Vallance, MD of SalesOut, which tracks the distribution of brands through the supply chain, agrees that the decision on which brands to delist will be driven as much by cost saving as consumer trends. "Asda's statement says it is going to look at the investment from the brands," he says. "The logic would say this is an investment-related decision, not a consumer related decision. Who is going to help the margin? Every category manager will have been challenged on which brands they think they can lose."
But a systematic purge of brands is not without risk, says Aidan Bocci, CEO of Commercial Advantage. "Customers get very cross, very quickly if their favourite brands are delisted."
Asda insists the process is grounded in rigorous consumer research "This isn't as black and white as people might think. We are not going round the store and saying there's three of that, we only need two, let's take one of them out," says a spokeswoman. "It depends what customers are asking for, what they are buying and what they are being confused by. Every category is different.
"With any range change, we will listen to customer insight, and look at sales data to see what is selling well and what isn't. If we didn't, we'd still be selling Lucky Charms and Dasani."
Instead it's stocking more of the products that do sell, like Fray Bentos (up 41% in the 12 weeks to 31 January), Birds Custard (up 26%) and Bisto (up 20%) as examples.
"It means we free up space for the key value items," Blackhurst explains. "We are seeing sales of key branded items increase quite dramatically. Some of that is because we are working with brands. And some is because of latent demand in the marketplace, given the times we are in."
It's also, he insists, a strategy that works for the remaining brands. Though Blackhurst refuses to go into Asda's sales specifics, overall sales of Utterly Butterly were up 36% [Nielsen MAT 4 Oct 2008]. Ominously, sales of I Can't Believe It's Not Butter fell 12%.
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