What if… Christmas 2009 is a sobering time for the drinks industry?
In the first of a series of quarterly 'What if…' columns, Chris Hart, the UK partner of business performance consultancy McKinney Rogers, takes up the issue of Christmas sales and approaches the process through military-derived business practice.
Many industries will be glad to toast the end of 2009. Factory closures and subdued profits reflect the difficulties many industries are facing emerging from the recession.
Drinks companies will be moving heaven and earth to ensure that a toast is raised with one of their products. But while the global economy may be getting back on its feet slowly, unemployment remains high, and a recently-instilled mindset of thrift remains in everything from family frivolity to office parties. It will be a testing time for producers of higher-end beer, wines and spirits.
If Christmas does turn out to be a subdued affair, it is only through advanced analysis of the situation that companies will maximise on their opportunities and realise their hard fought results.
When approaching the Christmas push, every company will have quantity or revenue targets set. However, targets alone do not constitute a plan - companies need to have contingencies in place in case their targets suddenly become unattainable.
The secret to this is going deeper into your reasoning. The most successful companies this Christmas will outline not only what they want to achieve but why, and how this fits into their plan for the next few years. The global goal, and the reasoning should be communicable in a few sentences. Regional heads break down this intention for those reporting to them, together with the purpose behind it. Rolling out a plan this way takes effort, but ensures that everyone involved in the push knows their personal goal and how it fits into the global plan.
Successful companies will also ensure their plan is not a one-dimensional notion of supplier and consumer, but one that deeply considers potential moves not just from competitors but from indirect competitors which take slices of profit between the brewery and the glass.
One danger is that retailers will develop a stronger hand in the coming weeks, as prices are pushed below cost in order to drive down unit prices from drinks companies. Given the stagnation of on-trade sales, suppliers seem to have little option but to push off-trade volumes.
How to overcome arm-wrestling with distributors depends on your drink portfolio, but seeing all the variables in the negotiation landscape is vital to surviving such attacks. Bargain with ratios of high-end spirits to be bought alongside staple beers or ciders. Set prominence requirements if pricing concessions are necessary. Bacardi, as it always does, is employing students to check stock levels over the holiday period. This is a cheap and effective way to ensure whatever end-user demand exists is not dampened by patchy distribution, or at least to keep a good record of which outlets have not performed adequately.
To create an informed plan, whether using students or purchased sales data, it is vital to turn this information into intelligence. Does your analysis of the Christmas sales period include estimated competitor spend on brand awareness events and advertising? Correlating this data to see whether competitors have been successful in influencing sales volumes through non-price techniques gives you vital information. This enables you to choose either to counter these moves or attempt to gain share in less closely-guarded territory.
Businesses typically repeat successful campaigns from previous years. Use the experience your senior team may have from other drinks companies (or markets) to see whether any patterns can be identified. If they knew that John Doe was the driving force behind a given company's annual Champagne push in North America, but has been moved to a different region, there may be scope to exploit the loss of momentum which his departure would have caused.
Taking advantage of lost momentum is as old as conflict itself. Uncertainty is something which can be ill-afforded at such a hectic time as this. If you are not exploiting it in competitors, you must be protecting your own team from it, and showing no hesitancy in setting and adhering to your mission.
To maintain momentum throughout an organisation, your plans should consider both predictable competitor moves and more unexpected occurrences. Who might pull out a surprise celebrity endorsement, value-added or pre-mixed product? What if you have to recall a batch of one of spirits in an unforgiving market?
The best-prepared companies will decide in advance whether they will need to change their tactics in response to unexpected events, or else press on as intended. Either way, the goal is to prevent a loss of momentum in this time-critical period. Your team is then best-placed to capitalise on any regrouping which competitors find themselves needing to do.
The other issue with any big push is to know when, and how it ends. The weeks following a campaign are the best time to debrief the senior team to establish what went well, went wrong and how your efforts should be concentrated differently next year.
The weeks ahead will pass in a flash for anyone ramping up sales efforts ahead of Christmas. By ensuring your team stays focused on their goals, but remains aware of the wider competitive landscape and how to exploit it, your victory will be as resounding as the season will allow.
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In the first of a series of quarterly ‘What if…’ columns, Chris Hart, the UK partner of business performance consultancy McKinney Rogers, takes up the issue of Christmas sales and approaches the proce...
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