PepsiCo’s profit dented by rising costs as it underlines importance of marketing
PepsiCo’s boss has underlined the importance of marketing and brand, particularly as prices continue to rise, as he committed to improving how the company measures return on investment for marketing.
PepsiCo posted a 4.5% drop to its full-year operating profit in Europe, as a result of rising costs, and higher advertising and marketing expenses in the fourth quarter.
The group, which owns Pepsi, Walkers and Quaker, said the dent to its full-year profits was primarily caused by higher operating expenses, namely a 28 percentage point increase to commodity costs.
It also pointed to the supply chain disruption caused by the implementation of an ERP system in the UK, which impacted the supply of its crisp brands during the fourth quarter and meant supermarket shelves were left without Walkers.
In the fourth quarter alone, operating profit decreased by 16%, primarily reflecting a 41 percentage point rise in commodity costs and higher restructuring and impairment charges. But the company says these were offset by net revenue growth and productivity savings.
It also pointed to higher advertising and marketing expenses as being a contributing factor.
PepsiCo chairman and CEO Ramon Laguarta, said the group is now focused on improving how it measures marketing effectiveness.
“One of the things I think we’re getting better at is measuring our return on investment on our marketing,” he said on an earnings call yesterday (10 February), adding that PepsiCo is “becoming a better data company”.
“We’re able to put better numbers to those investments and have the marketing teams and the commercial teams overall choosing different levers that give us the best return overall. And that’s playing very well. It’s obviously one of the reasons why we’re gaining market share across many categories.
“Strategically we want to continue with these kind of investments, being very rational in the way we invest A&M [advertising and marketing], but understanding that a company like ours, the core competency is building brands.”
He added that it’s more important than ever to build brands given rising commodity costs.
“In situations like we’re having this year where we have to price, we have consumers following us in spite of higher prices. So I think strategically it’s a very important element in our overall growth strategy.”
Overall, the PepsiCo group recorded an 11% increase in operating profit for the year, with net revenue growth of 12.9%.
Waitrose launches rapid delivery service with Deliveroo
Waitrose is extending its partnership with Deliveroo to offer customers a rapid delivery service via Deliveroo Hop.
As part of the partnership, Waitrose will be able to offer customers grocery deliveries in as little 10 minutes. Deliveroo launched Hop in September 2021, which is designed to complement its on-demand service.
Waitrose will be trialling the service at its Bermondsey store in London later this month, offering customers access to 1,000 products between 8am and midnight every day via the Deliveroo app.
The trial builds on the supermarket’s existing partnership with Deliveroo through which it delivers food from 150 stores across the UK.
James Bailey, executive director at Waitrose says: “It’s important that we continue to evolve along with shopping behaviour to give our customers more options for how and when they want to shop with us.
“Deliveroo has given us more flexibility in meeting customers’ needs and expanding our successful partnership to trial Hop gives us an exciting opportunity to introduce more new customers to the excellent food and drink we offer.”
Carlo Mocci, chief business officer UK & Ireland at Deliveroo adds: “Deliveroo Hop complements our existing on-demand grocery service and will build on our successful partnership with Waitrose, improving the consumer experience and bringing a wide range of groceries and household products to consumers’ doors in as little as 10 minutes.”
Unilever boss tells Ben & Jerry’s to avoid issues where it lacks ‘expertise’
A tweet by Ben & Jerry’s about the Ukraine crisis has been criticised by the boss of owner Unilever, who said the brand should refrain from commenting on issues where it doesn’t have “expertise or credibility”.
Last week the ice cream brand tweeted: “You cannot simultaneously prevent and prepare for war. We call on President Biden to de-escalate tensions and work for peace rather than prepare for war. Sending thousands more US troops to Europe in response to Russia’s threats against Ukraine only fans the flame of war.”
But yesterday Unilever CEO Alan Jope said the brand risked “fanning the flames of war” by wading in on the debate.
In a press call for its annual results, Jope said that while Ben & Jerry’s is a “great brand” and gets it right “most of the time” it should not get involved on topics like this.
“They have a great track record campaigning on important issues. But [on] subjects where Unilever brands don’t have expertise or credibility it is best to stay out of the debate.”
Unilever highlighted the superior growth of its purpose-driven brands, including Ben & Jerry’s, Hellmann’s and Dove, in the financial update yesterday, following accusations the business had “lost the plot” with its focus on brand purpose and sustainability.
Jope said its 13 billion-euro brands grew an aggregate 6.4% in 2021. Of those, Dove experienced its fastest growth in eight years at 8%, while he called out Hellmann’s 11% growth and Ben & Jerry’s 9% growth as “key performances” within the group.
Kellogg’s warns of further price hikes
The Kellogg Company has warned it may have to increase prices again as it contends with the rising cost of ingredients and raw materials.
In an interview with CNBC, CEO Steve Cahillane said: “As we enter 2022, we are still seeing double-digit cost inflation. We’re going to see the wraparound benefits of the pricing that we took in 2021 into 2022 … but our goal is to cover all of those input costs with pricing and productivity, and we think we’re in very good shape to do that.”
The warning came as the consumer price index hit a 7.5% annual increase for January, the quickest increase in 40 years.
“We don’t want prices to get too high, but we’re in an environment where it’s broad-based, it’s across everything, but we’ve been able to cover it. Our pricing performance has been very solid,” he added.
Co-op’s food boss takes career break that could ‘change the system’
The chief executive of Co-op’s food division, Jo Whitfield, is to step away from the business for four months from May to help her sons prepare for their GCSEs and A-Levels.
Whitfield, who took home £1.4m in 2020, will take the time off on an unpaid basis, with some suggesting the move could help pave the way for more people to do something similar.
All Co-op staff are given the opportunity to take an unpaid leave of absence, but while some have praised the move, others have taken to social media, saying taking this amount of time off is a luxury few can afford.
One advocate it Sarah Doole, chief executive of TV production company Red, who described Whitfield as a “fantastic role model” and told the BBC’s Wake Up to Money programme it could help “change the system”.
Whitfield said she had made the decision to help her sons prepare for the “inevitable pressure and emotional turmoil” of their exams.
“I can take this time away reassured by the knowledge we have a strong food leadership team who will keep moving our Co-op forward,” she added.
Co-op group CEO Steve Murrells will take control of the food division while Whitfield is absent.
Thursday, 10 February
Unilever commits to ‘competitive’ marketing spend
Unilever has achieved its highest growth in underlying sales in nine years, according to its full-year results for 2021. Underlying sales growth of 4.5% yielded turnover up by 3.4% to €52.4bn (£44.2bn) . Net profit was €6.6bn (£5.6bn), a 9% increase on 2020.
Thirteen of the group’s brands now account for turnover of more than €1bn each, and these grew on average by 6.4%, says Unilever CEO Alan Jope. Unilever has continued to reshape its portfolio to focus on high growth categories, making acquisitions in the prestige beauty and functional nutrition sectors and agreeing the sale of its tea business, he adds.
“Priority markets of China, India and the US grew at 14.3%, 13.4% and 3.7%, respectively. Our growth in ecommerce was 44%, ahead of global channel growth and bringing ecommerce to 13% of turnover,” says Jope. “In 2022, we will manage a significant input cost inflation cycle and will continue to invest competitively in marketing, R&D and capital expenditure.”
The group says high inflation is likely to cost more than €2bn in the first half of 2022, but continued spend on marketing will help it to maintain its market share until costs normalise.
PZ Cussons invests in brands as margins and market share improve
PZ Cussons, parent group of hygiene and beauty brands such as Carex and Cussons, says it has increased investment in its brands and improved its margins on the back of improvements to its pricing structure and product mix.
PZ Cussons CEO Jonathan Myers says a first quarter decline in revenues was caused by Carex “lapping” unprecedented demand for hygiene products at the height of the Covid-19 pandemic in 2020, but that revenue growth resumed in the second quarter.
The group achieved revenue of £283.7m for the half year to 30 November 2021, down 9.3% compared to the same period last year, for a profit after tax of £27.9m.
“Continued price/mix improvements helped strengthen gross margin in the first half of the year, allowing us to increase media and consumer investment behind our brands and maintain our operating margin. These results demonstrate our ability to use the strength of brands to protect margins in the face of cost headwinds,” says Myers.
He adds that the group has made continued progress against its ‘Building brands for life. Today and for future generations’ strategy.
In European markets demand for beauty brands was boosted by successful marketing activations, increased distribution and promotional efficiency. Shower gel brand Original Source has returned to growth and gained market share with its plant-based ranges, while consumer insight has driven sales of the Sanctuary Spa range.
PZ Cussons chief of marketing transformation says the group had achieved value market share gains on seven of its eight ‘must win’ brands.
Colgate products ‘disappear’ from Tesco shelves
The UK’s biggest toothpaste brand, Colgate, has begun disappearing from the shelves of Tesco, reports the BBC.
The retailer told the broadcaster that Colgate products were in short supply but analysts suggest a pricing disagreement might be to blame as Colgate is available in other supermarkets. Brand owner Colgate-Palmolive has not commented.
“We hope to have a full range of Colgate products available for customers again soon. In the meantime we have strong availability across all the other oralcare products in our range,” said Tesco.
The retailer has replied to customer tweets by saying that Colgate products are not currently listed among its online products.
Yum! Brands sees record growth
Fast food group Yum! Brands recorded its strongest year of growth on record in 2021, reaching new levels of store openings and digital sales, according to its fourth quarter results for the period ending 31 December 2021.
“We opened an astounding 4,180 gross units in 2021, marking the strongest growth year in Yum!’s history and setting a restaurant industry record for unit development,” says company CEO David Gibbs. “We also reached new heights in digital sales that topped $22bn.”
Worldwide sales grew by 9% during the quarter, excluding currency changes. KFC sales grew by 10%, Taco Bell by 11% and Pizza Hut by 4%.
CFO Chris Turner says the results are the result of the group’s strong brands, well-capitalised franchise partners and strong unit economics. “We remain focused on fuelling growth, with confidence in our Recipe for Growth and Good strategies, and delivering on our long-term growth algorithm in fiscal 2022 and beyond,” he says.
Consumers mistrust company practices online finds CMA
Most UK consumers have experienced misleading online practices by businesses and believe companies are being dishonest with customers, according to new research from the Competition and Markets Authority (CMA).
A CMA poll of 2,000 UK adults found seven out of 10 has experienced misleading practices and 85% believe companies are being dishonest, while 83% are less likely to buy from companies they mistrust in the future.
A new CMA campaign called ‘The Online Rip-Off Tip-Off’ will seek to help shoppers to spot and avoid websites that are engaging in misleading practices. Nearly one third of retail purchases now take place online, leading the CMA to be increasingly concerned about ‘sneaky’ sales tactics. The CMA’s campaign is fronted by TV presenter and consumer champion Angellica Bell, co-presenter of The Martin Lewis Money Show.
“As online shopping grows and grows, we’re increasingly concerned about businesses using misleading sales tactics, like pressure selling or hidden charges, to dupe people into parting with their cash,” says CMA chief executive Andrea Coscellli.
“None of us would accept these tactics in the real world. But we might not realise how much they influence what we but online,” he adds. “We continue to crack down on practices that could break the law, such as fake reviews. But to tackle this problem from all angles, it’s vital shoppers are armed with the tools they need too. It’s only when we all know what these tricks are, and how they are designed to manipulate and mislead, that we are better equipped to avoid them.”
The campaign has been supported by Citizens Advice. “We hope ‘The Online Rip-Off Tip-Off campaign helps shoppers spot underhand sales tactics – like offers that seem to good to be true or any pressure to buy now – and report them,” says director of policy at Citizens Advice Matthew Upton.
Corona launches ‘Gift the Ocean’ for Valentine’s Day
Beer brand Corona has launched an environmentally-minded Valentine’s gift scheme, after research shows 62% of UK consumers have thrown away an unwanted gift received on a special occasion.
To offer a solution Corona, which is brewed with 100% natural ingredients, has teamed up with coral restoration company Coral Vita to launch its ‘Gift the Ocean’ campaign. The initiative provides a gifting platform that offers 100% natural gifts in the shape of a piece of climate resistant coral, raising funds to restore coral reefs. Each buyer of a coral fragment will receive a digital adoption certificate, which can be shared via social media channels. Prices start at £37 for a small fragment that will grow into a coral ready to be planted in the ocean. At present it is predicted that 90% of coral reefs will be dead by 2050.
“Every year, unnecessary, unwanted, single-use gifts go straight to landfill or the ocean. As the first global beverage brand with a net zero plastic footprint, Corona is committed to making a positive impact on the natural world,” says Corona European marketing director Irini Komodikis.
“As a brand we recover and recycle more plastic from the environment than we release into the world and through our organised beach-clean ups have cleaned over 44 million square metres of beach to date. Through the ‘Gift the Ocean’ project, we want to raise awareness and facilitate showing the special person in your life that you care about them, but at the same time have a positive, rather than a negative impact on the world around us.”
Wednesday, 9 February
Peloton slashes workforce and changes top team amid wider marketing cuts
Peloton is cutting 2,800 jobs globally, including 20% of corporate roles, as the fitness company looks to forge a “clear path to consistent profitability” by slashing marketing spend.
Part of this bid to “streamline” reporting structures and “create clearer lines of accountability” is a major management shake-up, which sees co-founder John Foley step down as CEO to take on the role of executive chair. He will be replaced by former Spotify and Netflix CFO, Barry McCarthy, in what Peloton describes as the “next phase of leadership”.
Reacting to the appointment, Foley says McCarthy has a track record of running subscription business models and success in partnering with founder CEOs at other brands.
The changes also see former Airbnb CMO and Coca-Cola vice-president of global advertising strategy, Jonathan Mildenhall, join the Peloton board.
Describing it as a “humbling time” for the brand, Foley says the restructure plans will put the business in the best position for sustainable growth, the aim being to make $800m (£591m) in annual cost savings. Marketing investment will take a hit, with Foley highlighting “marketing spend efficiencies” as one of the changes to be made.
“The comprehensive restructuring actions we are announcing today will streamline our teams and reporting structures, increase P&L accountability, create a more efficient and flexible supply chain, and enforce greater investment discipline to ensure our spending meets appropriate return thresholds,” he says.
Reporting its second quarter financial results, the fitness brand saw revenue rise by 6% to $1.13bn (£835.4m), while also posting a net loss of $439.4m (£324.8m). Over the period, connected fitness subscriptions grew by 66% to 2.77 million, while digital subscriptions grew 38% to 862,000, taking the total number of subscribers to more than 6.6 million.
In the second quarter, operating expenses grew 93% year on year to $706m (£521.9m), which the brand says reflects “growth in marketing” alongside investments in R&D, systems and capabilities.
Peloton spent $349.6m (£258.5m) on sales and marketing in the second quarter, equivalent to 30.8% of revenue – an increase of 97% year on year. During the second quarter last year, sales and marketing spend represented 16.7% of revenue. The business puts this increase in spend down to a return to “typical holiday marketing”.
Looking ahead to the third quarter, Peloton expects to generate $950m (£702.3m) to $1bn (£739.3m) in revenue, incorporating the impact on demand from reduced sales and marketing spend.
Despite the restructure, Foley says the brand offers a “cost-effective fitness experience”, which is evidenced by high net promoter scores and strong retention rates. It is thought the management shake-up could make Peloton a more attractive prospect for acquisition, with Amazon, Nike and potentially Apple reportedly expressing interest.
GSK ‘on track’ to sell off consumer healthcare business by mid-2022
GlaxoSmithKline says it is “on track” to sell off its consumer healthcare business by the middle of this year, with detail on the overall strategy, capabilities and “superior growth ambitions” to be made public on 28 February.
The business has already rejected a £50bn bid from Unilever, despite the FMCG giant claiming a potential acquisition would be a “strong strategic fit” combining its “consumer and branding expertise” with GSK’s technical capabilities.
Turnover in the consumer healthcare business over the 2021 full year hit £9.6bn, compared to turnover of £17.7bn in the pharmaceutical division. On a two-year basis, consumer healthcare sales excluding brands divested under review grew 4% overall, despite the adverse impact of the pandemic.
Looking solely at the fourth quarter, consumer healthcare turnover hit £2.5bn, fuelled by “strong growth” across the whole portfolio.
The consumer healthcare division made an operating profit was £2.2bn, which GSK says reflected sales growth of continuing brands, price increases and tight cost control, partially offset by the impact of divestments, increased advertising and promotion investment, rising commodity and freight costs and investment in manufacturing sites.
GSK points to the “underlying strength” of its consumer-facing brands and continuing growth in ecommerce. Oral health is the company’s biggest consumer healthcare division, notching up sales of £2.7bn in the year. Sensodyne, for example, delivered high single digit growth reflecting “underlying brand strength”, continued innovation and strong growth across the US, China, India and Japan.
Sales of pain relief products reached £2.3bn over the year, with Panadol growing by double digits thanks to demand in the last quarter. Voltaren grew by mid-single digits, offsetting the expected short-term decrease in the second half of the year in the US after the introduction of private label competition earlier in 2021.
Sales of vitamins, minerals and supplements reached £1.5bn, building on “significant growth” in 2020, with growth of the Centrum brand driven by “successful innovation”. Respiratory health sales fell to £1.1bn, while sales of GSK’s digestive health and ‘other brands’ were £1.8bn. Sales of digestive health brands increased by high-single digits, with particularly strong growth for Tums and Eno.
The disposal of brands across the consumer healthcare portfolio is now complete, having delivered net proceeds of £1.1bn. Chief executive Emma Walmsley says the company has ended the year strongly, with another quarter of “excellent performance”, adding that 2022 is the year GSK will demerge its “world-leading” consumer healthcare business.
“At our capital markets event later this month, we will set out the future growth ambitions and highly attractive financial profile of this business, and the outstanding opportunity it provides for shareholders,” she adds.
Greggs and Primark team up on ‘tasty’ deal
Greggs and Primark are set to collaborate on a “first of its kind” café concept and limited-edition fashion line.
The bakery chain is poised to open a 130-seater café in Primark’s Birmingham store on 12 February called Tasty by Greggs. The café will serve a menu of sausage rolls, bakes, pizza, sweet treats, coffee and hot food-to-go, while customers will be able to make click-and-collect orders via the Greggs app.
Pitched as delivering the “ultimate Greggs experience”, Primark shoppers will be able to relax in doughnut inspired seating areas decorated with flying vegan sausage rolls, pose for pictures on a doughnut swing or take a shopping break in the Greggs picnic area. There will also be a refillable water station and a self-serve coffee cart offering customers the chance to skip the queues.
Tasty by Greggs will take over the mezzanine level at the Birmingham Primark store, sitting alongside barber chain Smokey Barbers, the Primark Beauty Studio and Disney Café.
Greggs and Primark are also launching a limited-edition, 11-piece clothing collection available in 60 Primark stores nationwide from 19 February, a fashion debut for the bakery chain. A pop up boutique located in London’s Soho, accessible by bookable appointment only, will open from 17 – 18 February to offer brand fans a chance to get their hands on the new collection by picking up to two pieces for free.
The appointment booking link will be shared on both Greggs and Primark Instagram and Facebook pages at 10am tomorrow (10 February), allowing 300 customers through the doors across the two days.
The partnership was teased over the weekend through a carefully curated PR campaign, which saw mannequins across several Primark stores accessorising with vegan sausage rolls and steak bakes. Items from the Greggs menu appeared on Primark receipts, as well as across the retailer’s social media channels, paired with an inquisitive emoji.
Both brands then shared a video revealing the new clothing range and Tasty by Greggs café concept on social media.
Greggs branded clothing is something customers have “continually asked for”, says business development director Raymond Reynolds, who claims the first of its kind Tasty by Greggs café will offer an “exciting experience” underpinned by great products.
“We want to give our customers incredible experiences in our stores and offer collections they can’t find anywhere else, with brands we know they love,” adds director of new business development at Primark, Tim Kelly.
“We’re thrilled to have teamed up with Greggs to bring the Tasty Café to our Birmingham store and give fans of the brand the chance to get their hands on the limited-edition clothing range.”
Coty ups marketing spend to capitalise on brand momentum
Coty says it is reaping the rewards of ramping up its marketing investment during the second quarter, with a focus on ROI driving activity across its key brands.
The beauty giant increased advertising and consumer promotions spend to 30% of sales in the second quarter, in a bid to support initiatives with “strong ROI” that fuel “sales growth acceleration”. By comparison, marketing spend represented 26% of sales in the first quarter.
Speaking on an investor call, Coty CFO Laurent Mercier said marketing investment was increased to “capitalise on the strong momentum” of key brands in both the prestige and consumer beauty segments, including the successful launches of the Gucci Flora Gorgeous Gardenia and Burberry Hero fragrances.
Mercier described the ramping up of marketing spend as “undoubtedly the right decision”.
“The increase in A&CP [advertising and consumer promotions] continued to be driven by working media, which more than doubled year-on-year. Importantly, we also invested behind the highest ROI opportunities, while maintaining flexibility to reallocate investments as needed,” the Coty CFO explained.
Marketing spend was used to expand into “white space opportunities” such as prestige make-up and the Chinese market, where Coty grew at six times the market rate in the second quarter.
“We also invested behind our key consumer beauty brands, resulting in a true turnaround of the business. As we head into the second half, we fully intend to keep this momentum going with a high 20s percentage A&CP level,” said Mercier.
The CFO explained Coty’s continued cost-reduction programme is “another lever” enabling the business to fund marketing and raise profit growth.
Coty CEO Sue Nabi reported the company’s second quarter revenue rose by 12% on a like-for-like basis. For the first time in five years Coty grew market share on a global basis in the consumer beauty segment, signs of a turnaround in its mass market cosmetics brands CoverGirl, Rimmel, Sally Hansen and Max Factor.
The beauty giant notched up 21% like-for-like growth in its prestige category over the past six months, fuelled by the “tremendous success” of Gucci fragrances and make-up, as well as Burberry and Marc Jacobs products. In EMEA, sales rose by 14% on a like-for-like basis in the first half and 13% in the second quarter, with growth in all key markets as well as local travel retail.
BT joins forces with EA Sports to bring Hope United kit to FIFA
BT has teamed up with EA Sports to offers players of the FIFA 22 Ultimate Team the chance to play in the telecoms giant’s Hope United kit.
The Hope United campaign launched ahead of Euro 2020 last year, with the aim of raising awareness of online hate. Backed by players from the home nations, who BT works with as part of its long-term football sponsorship, the initiative also offers tech tips on the digital skills needed to tackle online hate.
FIFA Ultimate Team players will now be able to clad their team in the Hope United strip for free until April. BT is also launching a new tech tip to help gamers tackle online hate, featuring professional footballers Trent Alexander Arnold, Jordan Henderson, Danielle Carter and Michail Antonio sharing information on how to report abuse while online gaming.
To kick off the EA Sports tie-up, BT Sport launched the Hope United FIFA Challenge, which pitched footballers Declan Rice, Michail Antonio and Trent Alexander-Arnold against four of the best FIFA esports player – Tekkz, Lisa Manley, FUTcrunch and Ebru – to battle it out for the Hope Cup. The challenge was screened last night on BT Sport 1 and BT Sport’s YouTube channel.
To further promote the campaign, advertising agency Saatchi & Saatchi has created a short film mixing game footage with real life. The film opens on a wide shot of Wembley stadium at the end of a FIFA game, as the hero player walks off the pitch in the Hope United kit. As he walks through the tunnel, the viewer hears a voiceover describing the abuse he’s been subjected to.
The film cuts to the real world and a close-up of a player in his bedroom looking distraught. Launched on BT Sport and streaming site Twitch, social ads will also run across Facebook and Instagram.
“We are delighted to work alongside one of the industry’s leading developers, and one of the most popular game series of all time, to showcase the Hope United initiative and continue to shine a light and fight back against the online abuse people face every day,” says BT marketing communications director Pete Jeavons.
“We hope this campaign will remind people that hate has no place in any game and what they can do to combat it.”
EA Sports FIFA marketing director James Salmon adds: “Video games should be fun, fair and safe for everyone, we want players to enjoy the best possible experience online. We take our responsibilities seriously, providing tools and helping players understand how to use them effectively. That’s why we’ve joined forces with BT Hope United and stand alongside them in asking our players to tackle online hate together.”
Tuesday, 8 February
Asda to stock budget range in all stores after Jack Monroe complaints
Asda has promised to introduce its full Smart Price and Farm Stores ranges into all 581 of its food stores and online, following complaints by anti-poverty activist Jack Monroe.
The supermarket currently stocks 150 products from these value ranges in 300 of its stores. All 200 products will be stocked in all food stores by 1 March.
Monroe criticised Asda on Twitter last month for reducing the breadth of its value ranges, noting a number of products she used to buy at the store were no longer available. One example included a 45p bag of rice replaced with rice costing £1.20.
Supermarket value products have to be “universally available, or it’s as good as useless”, she argued, as she accused Asda of having “taken their eye off the ‘values and values driven’ ethic that once underpinned their pricing points”, and of “chasing the M&S convenience market”.
Asda opened its first “premium convenience store” in October 2021. The ‘Asda On the Move’ (AOTM) stores are to stock a large selection of the grocer’s premium product range Extra Special among its 2,500 products. The retailer has plans to open 200 AOTM locations in 2022.
As well as stocking a wide range of premium products, the stores are designed to match the Extra Special branding.
Asda’s chief customer officer Meg Farren says the business has taken Monroe’s comments “on board”.
“We want to help our customers budgets stretch further,” she says. “We are taking steps to put our full Smart Price and Farm Stores ranges in store and online to make these products as accessible as possible.”
The supermarket has already taken steps to make its value ranges more accessible, adding 100 Smart Price and Farm Stores products to its website this week and increasing the total online range to 187 products.
Volvo unveils DTC platform for pre-owned cars
Volvo Car UK has launched the UK’s first online platform for the sale of pre-owned cars bought direct from the manufacturer.
Volvo Cars Selekt Direct is a direct-to-consumer (DTC) platform allowing customers to search for and buy premium Volvo Selekt approved used cars in a fully end-to-end service, which ends with the car delivered to their home.
The selected pre-owned cars available through the platform undergo more than 150 checks, and come with 12 months’ Volvo roadside assistance, cover for its next MOT test, and a quality guarantee. Purchases can be exchanged within 30 days or 1,500 miles.
Kristian Elvefors, managing director at Volvo Cars UK, says: “In designing Volvo Cars Selekt Direct, we have focused firmly on the needs of consumers, personalising the service so it works in the way that’s right for them. That means not just the convenience of direct online access, but also peace of mind that the process is secure, robust and delivers a premium experience that fully reflects the qualities of our brand.
“With Volvo Cars Selekt Direct, we are improving our service to consumers and developing a blueprint for our transition to online sales. Strategically, our retail partners will remain central to our business in providing full aftersales support, including servicing, maintenance and repairs.”
Volvo has been spearheading an industry-wide move into direct-to-consumer (DTC) sales and marketing, innovative subscription offers and clever customer service. Volvo began to develop its strategy for a more digital approach in December 2019.
Research by the company found one in four people say they find the online DTC concept ‘very appealing’, and Volvo’s car subscription service Care by Volvo delivered 2,500 online new sales in its first year.
The company intends to sell all its new electric models online and for the majority of its UK retail sales to be online by 2025, while all Volvo’s global new car sales are expected to be through online transactions by 2030.
Supermarkets see growth in convenience despite ‘modest’ sales decline
Total till sales at UK supermarkets dropped by 2.9% in the four weeks to 29 January compared to the same period last year, according to new data from NielsenIQ.
However, the data and insights business has branded this a “very modest decline”, as last year recorded growth of 10.6% while the UK was in its final Covid-19 lockdown period.
While online shopping occasions fell by 14%, in-store visits rose 12%. However, online’s share of sales rose 13.1%, up from 11.3% in December and its highest share since July 2021. The channel peaked with a share of 16.1% in January 2021.
Meanwhile, sales in the convenience channel were up 2.1% year on year, as shoppers are no longer limited in how and when they can visit stores. Consumers are shifting spend back to shopping little and often, NielsenIQ claims, with sales increasing for sandwiches (+60%), prepared salads (+29%), flavoured non-carbonated drinks (+27.5%) and mineral water (+19%).
Elsewhere, beers, wines and spirits sales have dropped by 14.2%, frozen foods are down 11%, and packaged grocery is down 8.3%. Delicatessens experienced strong growth of 11.1%, while health and beauty was up 9.4%, pet care was up 8%, and soft drinks was up 5.6%.
“Sales during the first weeks of January are typically some of the lowest in the year and given last year’s lockdown, we’re measuring against very high comparatives,” explains NielsenIQ’s UK head of retailer and business insight, Mike Watkins.
“However, our latest data shows a continued resilience in online grocery shopping and rising sales at convenience stores in recent weeks. This suggests that shoppers are continuing to adopt omnichannel shopping habits, now that all remaining restrictions are lifted.”
Over the coming three months, Watkins predicts a decline in total till growth before bouncing back by Easter, a decline in discretionary spending as cost-of-living pressures rise, and higher visits with smaller basket sizes made across all channels.
Ocado shows ‘resilient’ sales growth as customer base grows 22.4%
Online supermarket Ocado recorded retail sales growth of 4.6% over 2021, reaching a total of £2.3bn.
The growth was driven by a 22.4% increase in the grocer’s customer numbers to 832,000, which drove an rise in orders of 11.9% to 357,000. However, this was partially offset by a reduction in basket size of 5.8% to £129.
While order growth was positive, the business claims to have been “constrained” in the second half of the year by the difficult labour conditions in the UK, as well as reduced capacity at its Erith fulfilment centre following a fire in July.
Ocado Retail, a 50:50 joint venture with M&S, anticipates a return to strong, mid-teens revenue growth in 2022, as it invests around £50m to support long term growth.
However, overall the Ocado Group reported a loss before tax of £176.9m for the year, which the supermarket says reflects increased investment in its solutions business. Seven out of 10 Ocado Smart Platform (OSP) partners are now live on the platform, which has been developed to enable the 10 grocery companies Ocado works with in the UK and around the world to bring Ocado’s consumer experience to their own customers.
“The past year has further reinforced that demand for online grocery is here to stay,” says CEO Tim Steiner.
“In the majority of mature markets, the fastest growing channel is online and to truly win here food retailers need to deliver the best offer with the best economics across all customer missions.
“Over the last 20 years Ocado Group has been a pioneer in the development of online grocery retailing. With the innovations to the Ocado Smart Platform announced in January 2022, we have again re-set the bar, demonstrating decisively that an online grocery service powered by OSP is able to offer what the customer wants with the economics the retailer needs.”
Media habits of different generations begin to converge, new data shows
Last year saw a “surprising” increase in similarities between the commercial media usage habits of older and younger generations, the latest IPA TouchPoints report reveals.
The correlation between the media use of 16- to 34-year-olds and those aged over 55 from a time-spent perspective was 58% in 2015, but by 2020 had fallen to 21% as those aged 16 to 34 adopted digital behaviours at a faster rate. During the first lockdowns in 2020, that figure dropped to 8%, showing a 92% difference between the two audiences.
However, data for 2021 post-lockdown has revealed an increase in similarities to 18%, for the first time in six years.
The pattern is similar when looking at the reach of media channels, in which the correlation between people aged 16 to 34 and those 55+ has risen from 21% and 23% in the 2020 and 2021 lockdowns to 52% in post-lockdown 2021.
According to the fourth edition of the Making Sense report, 16 to 34s have reached “peak digital penetration”, so patterns of consumption are “levelling out”. Meanwhile, the Covid-19 pandemic has driven rapid digital media uptake among the 55+ age group, and the expectation is that this will continue in future.
However, the IPA has warned marketers not to be “fooled” into thinking the behaviours of these different age groups “bear any resemblance to each other” within these different platforms.
“While we should certainly feel encouraged by the rising correlation figures we have seen, it’s still really important to bear in mind that increases in similarities in reach and time spent figures only tell part of the story and alone, they don’t give any indication of how the media is used by the different audiences,” explains the IPA’s head of marketing and data innovation, Simon Frazier.
“As the commercial media landscape continues to evolve, an experimental mindset, more diverse media plans and a stronger focus on outcomes, have never been more important for marketing to be effective in both the short and long term.”
The data also reveals a significant swing towards digital media over non-digital in post-lockdown 2021 for the first time. For all adults, the split has grown from 58:41 towards non-digital in 2015 to 46:54 in favour of digital in 2021. Digital-first edged ahead in early 2020 with a 51% share but subsequently dropped to 48% and 45% in the 2020 and 2021 lockdowns.
For those aged 16 to 34, 78% of all curated commercial media time was spent with digital channels. Online video has seen the most significant growth over the last five years of any channel and now commands a greater share of media time than live and recorded TV among that same age group.
Frazier adds it is “clear” from the report’s data that the combination of digital and non-digital media has the “greatest potential for brand-building today”, and that opposing media platforms often work “far better in harmony” than in competition.
Monday, 7 February
Tesco warns prices could rise by 5% this spring
Tesco chairman John Allan has warned supermarket prices could rise by 5% this spring as energy costs and supply chain pressure hit retailers.
Allan told the BBC the worst of the food price rises is “yet to come”, adding that over the past three months Tesco’s price inflation had been maintained at 1%. The Tesco chairman claimed a combination of surging energy prices, National Insurance increases in April and, “to a much much lesser extent” the rising cost of food, will squeeze the finances of lower income households “still harder”.
Reflecting on the cost of specific products, Allan explained that while the price of coffee is increasing, Tesco’s cheapest tin of baked beans is less expensive than it was five years ago.
“As far as Tesco is concerned, we have 2,100 products on our lowest price. We’re either price matching against Aldi, or it’s our own exclusive at Tesco range. That number [of products] has been increasing in recent months rather than decreasing,” he told the BBC.
In a statement to the BBC, supermarket rival Sainsbury’s claimed to be “investing in value” to help shoppers cope with the rising cost of living.
Regarding staff pay, the Tesco chairman disagreed with the Bank of England’s governor Andrew Bailey, who last week said workers should not ask for big pay rises to avoid sparking wage inflation. Allan explained that Tesco, which employs 300,000 people nationwide, had already offered 5%-6% pay rises to distribution staff and is currently negotiating similar wage increases with store employees.
Amazon and Nike both eye potential Peloton acquisition
Amazon and Nike are both reportedly interested in the acquisition of troubled fitness company Peloton, which has lost $20bn (£14.8bn) in value since November.
The Wall Street Journal reported interest in the brand from online giant Amazon, while the Financial Times says Nike is in the preliminary stages of a potential bid. If Amazon were to purchase Peloton it would be the company’s biggest acquisition since its $13.7bn (£10.1bn) takeover of grocer Whole Foods in 2017.
Peloton, which will report its second quarter results tomorrow (8 February), has struggled to maintain subscriber growth since gyms reopened with the end of global lockdowns. In a trading update released last month, the brand reported subscriptions of 2.77 million, falling short of the expected 2.8 million to 2.85 million. The company is now worth less than a fifth of the $50bn (£36.9bn) valuation it notched up under lockdown.
Last month, Peloton was forced to deny reports it was pausing production of its bikes, although chief executive John Foley hinted job cuts were looming, citing the need to evaluate the “organisation structure” and size of the team.
In August last year the brand slashed the price of its original Bike product by roughly 20% to appeal to an “everyday price point” and offered longer-term financing options for its Bike+ and Tread products. Earlier in May 2021, the company was forced to its recall its treadmill product after dozens of reported injuries and the death of a child.
Peloton was hit with further negative publicity in December when its bike product featured in the death of Mr Big, a key character in Sex and the City reboot And Just Like That. The brand created a spoof ad with Mr Big star Chris Noth suggesting the character was still very much alive, which Peloton was forced to pull the same week after sexual assault allegations were made against Noth.
Spotify promises $100m for ‘historically marginalised groups’ as Joe Rogan episodes are pulled
Audio giant Spotify is pledging to invest $100m (£73.8m) in the “licensing, development and marketing” of music and audio content from “historically marginalised groups” in response to the backlash against US podcaster Joe Rogan.
Yesterday (6 February) in an email to staff, Spotify chief executive Daniel Ek sought to distance the brand from “incredibly hurtful” comments previously made by Rogan, saying they “do not represent the values” of the company. However, Ek reiterated his belief that “silencing” Rogan is not the answer, the Financial Times reports.
Spotify has removed around 70 episodes of Rogan’s podcast after musician India Arie posted a video of the podcast host using a racist slur on his show. The streaming giant was also told by artists Neil Young and Joni Mitchell to remove their music from the platform after a virologist critical of Covid vaccines appeared on Rogan’s podcast. In total, the app has pulled 110 episodes of the podcast.
In 2020, Spotify paid around $100m to exclusively host The Joe Rogan Experience, which is the platform’s top podcast with monthly downloads of almost 200 million. Ek has drawn criticism for claiming the brand is a platform not a publisher, an argument previously used by Facebook. However, the Financial Times reports that in his latest message the Spotify chief executive admitted the lines were blurred.
“We are not the publisher of [The Joe Rogan Experience]. But perception due to our exclusively licence implies otherwise. So I’ve been wrestling with how this perception squares with our values,” said Ek.
In Spotify’s fourth quarter results published last week, the business registered a double digit increase in the number of monthly active users engaged with its 3.6 million podcasts compared to the previous quarter. During the fourth quarter podcast share of overall “consumption hours” on the platform reached an all-time high.
Tony’s Chocolonely admits child labour was used in its supply chain
Anti-slavery chocolate company Tony’s Chocolonely has admitted 1,701 child labourers were involved in the production of its chocolate in the year to April 2021, up from 387 children in the previous year.
The brand, whose motto is ‘Let’s make chocolate 100% slave free’, designed its bars with an uneven pattern to reflect the inequality in the global chocolate trade and has adverts drawing attention to the fact 2 million children work illegally on chocolate plantations.
However, in its annual ‘fair report’ Tony’s Chocolonely admits there were 275 cases of child labour at its five long-term partner cooperatives and 1,426 at its two new cooperative partners. This is equivalent to a child labour prevalence rate of 3.9% at the five long-term partners and 50.5% at the two new partners.
In the report, Tony’s Chocolonely reiterates its mission to produce “100% slave-free chocolate” and says it believes modern slavery – the practice of adults and children being forced to work on cocoa farms without pay – is unacceptable in all its forms.
The company adds that while it has “never found” any cases of modern slavery in its supply chain, it does find cases of child labour.
“But before your alarm bells go off, know this: finding cases of child labour in the supply chain means change is happening. We want to find the children performing illegal labour. Only then can we work with the families to address the problem,” the brand said in its report.
Last month, Tony’s Chocolonely also defended its use of Swiss chocolate manufacturer Barry Callebaut, which reportedly identified 21,258 cases of child labour in its supply chain. The chocolatier explained that it pays extra to have its cocoa beans kept separate to Barry Callebaut’s other clients, adding that it needs to prove the scalability of its business in order to tackle change from within.
Tony’s Chocolonely has found fame for its anti-slavery stance, as well as attracting some criticism. In December the brand has forced to apologise for upsetting children after deliberately leaving one of the windows on its advent calendar empty. The chocolatier said it left the window empty to start a conversation about inequality in the chocolate industry, but children were disappointed to find no treat on 8 December.
Aldi sees 500% increase in plant-based sales
Aldi’s sales of plant-based products surged by 500% year-on-year during January, a trend the supermarket expects to continue this year.
The retailer expanded its plant-based range for Veganuary by more than 50% in response to demand, having experienced a 250% increase in sales of its vegan range in 2021 compared with the previous year.
The supermarket’s vegan offering spans ready meals, frozen food, bakery products and confectionery. Last month products such as Aldi’s Plant Menu Spicy No Chicken Burger, Plant Menu Vegan Cheese and Plant Menu Vegan Blondies and Brownies proved particularly popular.
Managing director of buying at Aldi, Julie Ashfield, says in response to the UK’s growing appetite for plant-based food the supermarket intends to expand its vegan offering. Describing the switch to plant-based diets as a “year-round” trend, Ashfield expects these products to remain popular throughout the year.
The demand for vegan products at Aldi comes as rival supermarket Waitrose introduces potato milk brand Dug to 220 stores this week. In its 2021/2022 Food and Drink Report, Waitrose described potato milk as one of the key “social eating” trends for 2022. Sales of plant-based milk alternatives are reportedly worth £400m annually.