Thursday, April 22, 2010
DANCING WITH ELEPHANTS
I feel sorry for Ram Rai who has had his company Jewel of India (fresh and frozen curries) placed into receivership recently. Why? Because he trusted those bastards (one of the the supermarket duopoly), to play fair. He gave them a good product which for many years made them a lot of money. Over time, and ownership change, the relationship changed. The supermarket chain, fiercely (why?) competing with its only rival put all the costs of discounting back to his company. Is this fair? No. Does it happen? Damn right yes. It is not only small producers like Rai and his curries (market-leading curries) that are under the gun, the biggest brands we know are also put under undue pressure. Do they complain to the Commerce Commission? No. Why not? Have you heard of the old saying 'you can win the battle but lose the war'. The 'powers that be' that have the ability to make or break brands can punish 'squealers' and make it very difficult to have normal trading relationships if one does not agree with what they consider to be the rules.
I know of many wine companies, large and small who have been in Rai's position. When they can they wear it and hope that their brand equity will survive the assault (volume times margin being the mantra). Maybe they will come out OK. Unfortunately many cannot survive. In Wednesday's NZ Herald Rai was quoted as saying "what they fail to understand is that each dollar discounted is coming from someone else's pocket". What he means is that if $1, $5, or even $10 is discounted off a product for the consumer, that discount is not coming from the supermarket but from the brand owner. Is this sustainable without some serious product engineering (downwards)?. I think not.
This weeks special highlights from Progressive (Foodtown, Woolworths, Countdown), Stoneleigh range $11.99 ($10 off), Wither Hills range ( about $10 off the chardonnay) and Sacred Hill range $12.99 about $7 off but I suspect with SH they have been beaten up so much over the last couple of years they may be engineering their product to match the discounted prices.