business news in context, analysis with attitude

by Kevin Coupe

MIAMI BEACH - I mentioned yesterday in this space that I was about to go on stage at the Food Marketing Institute (FMI) Midwinter Executive Conference here to moderate a panel discussion with three very smart guys: Burt Flickinger of Strategic Resources Group, Scott Moses of Sagent Advisors, and Andrew Wolf of BB&T Capital Markets. Our goal was to look at the business pressures facing retailers and CPG companies operating in a fast-paced business environment while working in an industry that often moves at a glacial pace ... and while it is a little difficult to take notes while asking questions, listening to answers and trying to facilitate a conversation that is both enlightening and entertaining, I'll try to summarize the high points as best I can.

First, we spent some time talking about that word "glacial." There was general agreement that while the word describes how the food industry often operates, especially in comparison to other retail segments, it cannot serve as an excuse - because those who operate in too-deliberate a fashion almost inevitably will be hurt by companies that are constantly innovating, trying new things, even failing occasionally, but always looking to offer new products and services. As Flickinger put it (in a different context, though it is relevant here), "It is okay to be wrong, but it is not okay to stay wrong."

There was no question that the panel believed that the value-driven segment of the food industry will continue to grow. Moses took note of the impact of the young "lost generation," saddled with $1 trillion in college debt and either unemployed or underemployed. Wolf said that it is critical to be price-competitive, and then differentiate from that base, suggesting that it will be during "our next recession" that investment in price formats will really pay off. (I'm sure that the phrase "our next recession" warmed a few hearts in the audience...and probably sent chills down a few spines.)

Wolf made the point that Kroger has been extremely fortunate - its shareholders were willing to give it the time and room to invest in price, and there were no vulture-like private equity firms circling it during the transition. Not all companies will be as skilled or as fortunate, he suggested.

We also spent some time talking about expansion and merger-and-acquisition activity, and I think it is fair to say that everyone agreed that the failures of Tesco in the US and Target in Canada were because of lack of vision, leadership and execution. Flickinger was extremely critical of the boards of those companies, essentially suggesting that they were guilty of a kind of malpractice by not doing the kind of diligence and oversight that they are paid to do.

I think that one of the more important observations of the session was when Moses offered a critique of Instacart, saying, essentially, that adopting that model means ceding control of the delivery part of the shopping experience to an outside company; he noted that Borders really ran into trouble when it ceded control of its online sales to what was then a little company called Amazon.

In retrospect, I think that this a critically important point.

As I think about some of the subjects covered by FMI Midwinter this year, "control" actually was a common thread (even though it was not identified as such). If you are going to talk about allowing shoppers to customize the products they buy to an unprecedented extent (as one speaker did earlier yesterday), you really are talking about ceding control to the shopper. And yet, to maintain any sort of efficiency and effectiveness, retailers and manufacturers have to assert some level of control over the options and how they are presented. It is a delicate balance.

When you talk about experiential marketing in the store, it is all about taking control of the experience, of controlling the store environment to tell a story to the shopper, as opposed to just offering other people's products and slapping a price on them. If you are going to talk about e-commerce investments, it is all about attempting to take control of how technology is used by shoppers, as opposed to simply letting events take their course.

It is all about control. About making sure, to the greatest extent possible, that you have some level of control throughout the marketing, shopping, and even consumption experience. At some level, that's what companies like Amazon try to do as they create "ecosystems" in which their influence is felt throughout the home, the office, and beyond. They become the defining, controlling core, while creating a system in which shoppers can take greater (sometimes just perceived) control over their surroundings, their habits, their lives.

Sure, it is a delicate balance. But companies cannot afford to simply sit on the sidelines to see what other companies do, cannot afford to ponder the possibilities without taking risks, cannot afford to accept that their industry moves glacially.

Go figure, the playwright Edward Albee actually has a line in his play, "A Delicate Balance," about the high cost of inaction:

You know it's going on... up on the hill; you can see the dust, and hear the cries, and the steel... but you wait; and time happens. When you do go, sword, shield... finally... there's nothing there... save rust; bones; and the wind.

A high cost, indeed.
KC's View: