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Morning Briefing Strap Line
Fri 22nd Mar 2013 - Friday Opinion
Subjects: Finding white space, campaign lessons and big box retail
Authors: Paul Charity,  Paul Chase and Chris Edgar

Finding and defending the white space by Paul Charity

Successful out-of-home foodservice brands occupy white spaces. They are successful because they meet market demand that is not being met as well elsewhere. This is the part of out-of-home foodservice that goes unreviewed and is met with frequent snobbery from the intelligentsia. Witness Will Self’s attack on JD Wetherspoon, a brand that has been consistently successful because it meets mainstream market demand with an offer that has broad appeal. It occupies a big white space and would-be competitors have been unable to dislodge it. Mitchells & Butlers, Whitbread and countless others whose names are now footnotes in the sector’s history either made tactical withdrawals to focus on white space elsewhere - or disappeared entirely. Mitchells & Butlers decided that its biggest white space was to be found in arterial road eateries. But it still occupies other areas of niche white space such as Irish music and culture pubs, brasserie dining, country destination pubs and premium bars to name a few. Its slight decline in fortunes in the last two years can be linked directly to others, such as Marston’s and Greene King, tilting successfully at its arterial road white space dominance. Nevertheless, a brand like Harvester, with its 30 million meals sold per annum, has stood the test of three decades because it occupies so much white space. Its expansion into retail and particularly leisure parks offers an ancillary shaft of white space to occupy.

Meanwhile, Whitbread decided that coffee shops were a piece of white space in growth - and it will prosper by exploiting the ancillary white space opportunity of coffee-on-the-go.

Great operators can defend white space for a very long time. In other instances, weaker offers find their white space crowded out, their light eclipsed and returns start to dwindle. McDonald’s is the planet’s best example of successful defence of white space over an extended period of time. The company occupies its own patch of canvas in terms of offer, price and convenience. These three components are executed with such precision and appeal for consumers that the company has found success around the world. Others have coveted the space and been successful in co-occupying their own patches around the margins. But none have dislodged McDonald’s primacy. Even in the last ten years, as competition intensified, McDonald’s has defended its position successfully, barring two months of blipping sales. However, the growth of better burger concepts arises from the emergence of white space around the burger margins - consumers will pay a premium for better taste, ingredients, service and environment. The US better burger growth concept Smashburger, whose chief executive David Prokupek presented at our Propel Multi Club Conference this week, was created by McDonald’s own global concept director Tom Ryan, who was clearly better placed than most to spot the emerging white space.

There are areas of mainstream foodservice where market provision is still so unsystemised that expansion amounts to a turkey shoot. Domino’s Pizza has now enjoyed 76 consecutive quarters of sales growth outside of the US. Its US chief executive told Forbes magazine recently: “The joy of pizza is that bread, sauce and cheese works fundamentally everywhere, except maybe China, where dairy wasn’t a big part of their diet until lately. And it’s easy to just change toppings market to market.” Securities analyst Mitch Speiser noted: “Outside the US, there’s a lot less competition in pizza. There’s not much local competition, and there’s not even much competition from other western brands. Domino’s is the first in, in many markets. So, in 70 countries they’re the pizza sales leader, and in 29 others they’re a close second.” In the US, Domino’s space is jostled by two heavyweight competitors, Papa John’s and Pizza Hut. But in the UK, it’s still a very different story with Papa John’s struggling to establish profitability and Pizza Hut relatively weakened. That Yum! Brands insisted on keeping the delivery arm of Pizza Hut UK hints at the foodservice giant’s sense of the untapped potential to co-occupy space here. Meanwhile, for now, Domino’s UK earnings growth reflects its dominance. And there is still lucrative space to inhabit. Take for example the 24-hour-a-day site that has doubled its weekly takings because there is so little branded competition for the cannabis-addled students who find themselves starving hungry at 4am.

Have you found white space and is it defendable?
Paul Charity is managing director of Propel Info

Campaign lessons by Paul Chase

Two significant things have happened in relation to alcohol policy that should cause us to pause and reflect and see if there are any lessons to be learnt. Firstly, the beer duty escalator - ended by Wednesday’s budget and a penny off a pint; secondly, the all-but-official demise of minimum unit pricing (MUP), at least in England and Wales. What do these two policy changes tell us about how to push back against policies, actual or proposed, that militate against the sector’s interests?

The first thing is that we need to do just that - push back. So much goes uncontested beyond a stand-alone political lobbying exercise that is reactive and can at best only ameliorate the worst aspects of a government reform. EMROs and the late night levy come to mind. The lesson of the successful campaign to reverse the duty escalator, at least so far as beer is concerned, is that it was the result of a concerted and integrated campaign that involved political lobbying by trade bodies that were united for once; a populist campaign that involved drinkers - the 100,000 signature petition, the Commons debate, the mass lobby of Parliament and a letter writing campaign to MP’s. Great credit is due to Camra who have done much of the heavy lifting in all this. 

The other aspect of this success is that the campaign cut through to the mainstream media, not just the licensed trade press. I’m not saying “it was The Sun wot won it”, but it helped! A government faced with a popular campaign which hit all the buttons felt constrained to make a populist gesture, even in these straitened times.

And how do we explain the demise of MUP? It won’t be officially announced until after the consultation on the Alcohol Strategy is formally completed, but it’s dead in the water. Except in Scotland of course where the Ayatollahs of public health, who see nothing beyond their own dogma, will battle it through to the bitter end. But what has caused this U-turn at Westminster? 

A number of factors: firstly, narrative. The government can see how MUP could be characterised as a kind of pasty tax - something that affects the poor man’s pint but not the price of a bottle of wine for a Notting Hill dinner party. Secondly, ideology: figures like David Davis, Andrew Lansley and Theresa May have been asking whether intervening in a free market to fix prices, in the name of social engineering, is really something that a Conservative-led government should be doing. Thirdly: mainstream media interest, the opposition of public opinion and a Scotch Whisky Association that is determined to battle this through the courts, including the ECJ. So, lots of long-term political and financial pain, and no short-term political gain. Added to which: someone explained to the Chancellor what MUP might cost the Exchequer.

The lessons for me are that we can succeed in reversing policies damaging to the sector if we are united; if we augment political lobbying with a populist campaign that involves the drinker and cuts through to the mainstream media. In short: campaigning must face outward, not inward. We must talk to the drinker, not just to ourselves.

The health lobby won’t give up on pricing, but we can now expect to see its attention switch to restricting availability and advertising and marketing. Cumulative impact policies are a real threat, particularly now that licensing authorities can take local public health considerations into account. Early evidence is that cumulative impact areas may not be restricted to small, town-centre footprints, but could cover much larger geographical areas. Given the importance for return on investment that accrues from new-build premises, this is an especially worrying development. And local authorities are about to be made responsible for promoting public health and well-being. This is a recipe for the worst kind of over-zealous, curtain-twitching moral busy body local politics - of the kind that will exasperate local licence holders and stymie development. 

Here is where we need a more subtle, long term campaign that counters the health lobby narrative that drives government alcohol policy and balances the debate. The health lobby have put their opinions out there in the market place of ideas. Their view has become the consensus view because over the long-term they have consistently done what we haven’t done - augmented their lobbying with public campaigning that makes it on to TV and into the mainstream print media. We need to contest the health lobby’s narrative using precisely the methods they use. It requires the will to do it, and commitment of the necessary resources.

Will the lessons of the successful campaigns of the recent past be learned and taken forward?
Paul Chase is a director of CPL Training and leading alcohol policy commentator

Solving the ‘dead space’ issue in ‘big box’ supermarket retail by Chris Edgar

From the 1990s onwards the received orthodoxy in UK supermarket retail was that ‘bigger’ meant ‘better’. In a ‘race for space’ operators such as Tesco and Asda opened hundreds of square footage per annum - largely edge of town hypermarkets - in which they were able to expand their ranges into non-food categories such as electrical, audio, books, clothing etc. At the time the winners were perceived to be those that sunk capital into new out-of-town sites and/or extended their existing space (through mezzanines and ‘bolt-ons’).

This strategy was fine as long as companies could sweat these large expensive assets, optimising sales through constant range and product extensions. However, the onset of internet trading, commoditising or cannibalising many of these non-food categories has rendered a fair degree of this space redundant. Over the last three years item sales in these hypermarkets have declined by approximately 2% per annum, with (in some cases) only food price inflation and expansion into the convenience sector propping up organisational like-for-like sales comparisons.

The question that many of the operators of these ‘retail cathedrals’ surrounded by a ‘sea of car parking’ face is how they are going to utilise their larger assets more effectively given current consumer trends?

The purchase of the ‘better’ family urban casual dining concept Giraffe by Tesco last week (approximately 50 sites purchased for a consideration of £50m) - alongside their investment in ‘best’ coffee concept Harris + Hoole - gives us some indication as to where the supermarket behemoths are heading in this regard. The ‘eating out’ restaurant and casual dining market in the UK has fared better than retail during the recent downturn (performing at 3-4% annual growth), with consumers still prepared to deploy their discretionary spend on ‘small treat’ occasions.

‘Retailtainment’ malls such as Westfield, Merry Hill, Trafford Centre and Meadowhall have had few problems finding tenants for their ‘food courts’. Consumers seem very keen to combine retail therapy with gastronomic indulgence! Can Tesco achieve the same?

For sure, the provision of better food service offers might better utilise hypermarket ‘dead space’, attracting greater footfall and encouraging longer dwell times. Other offers that will be engineered into this space over time might include upmarket concessions, services (health and beauty), pop-up market traders etc. Such moves would increase the atmospheric dynamic of visiting hitherto functional environments.

However, this dramatic increase in variety in supermarket retailing threatens to disrupt the very factors that led to organisational success in the first place - huge volumes underpinned by lean supply and service systems. Going beyond the simplicity of volume and value, means encountering (and dealing with) the complexity of variety and ensuring quality over a range of unfamiliar products and services.

In the case of Tesco, whilst the investment in ‘emotional’ products and services that will fill space, whilst simultaneously increasing the ‘personality’ of its brand and sites, seems to be a sensible move - its success will rest on whether their business model will cope with greater complexity. History tells us that we should not bet against them!!
Professor Chris Edger, the author of ‘Effective Multi-Unit Leadership - Local Leadership in Multi-Situations’ and ‘international Multi-Unit Leadership’, is Professor of Multi-Unit Leadership at Birmingham City University where he researches and teaches the ‘art and science’ of high performance service-based retail, hospitality and leisure. He is a former director of human resources at Mitchells & Butlers

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