Paris, 21-23 June 2006 - The Consumer Goods Forum

Transcription

Paris, 21-23 June 2006
EXECUTIVE SUMMARY
Summit Conclusions
Collaboration at all levels. There is an unprecedented opportunity for the food
retail sector to work together on issues affecting both the immediate value chain
(e.g. data standards) and the wider world (e.g. free trade). Health and sustainability
present the greatest opportunities and responsibilities since, by using their core
competencies, retailers and manufacturers can generate enormous benefits both
socially and commercially.
Innovation meets execution. In a context of intense competition and evergreater consumer choice, innovation has become more important than ever in
order to maintain differentiation and growth. This requires deep consumer
knowledge, supported by research & development, sophisticated data analysis and
experienced local teams. But developing new concepts is not enough: execution is
critical to turn innovative ideas into successful differentiation, and collaborative
relationships will again be increasingly important in achieving this.
Leading a transformation. All companies, no matter how large, have to
transform themselves periodically, especially in the fast-changing consumer and
competitive landscape of the 21st century. The challenge for leaders is to renew
strategy, operations and personnel without destroying the core business and core
values. This is not an easy task since big companies are under constant pressure for
short-term results, whereas their priority is sustainable growth.
CIES 50th World Food Business Summit 2006 – Executive Summary
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Summit Speaker Quotes
“There has never been a time in the history of retail and commerce where international
cooperation and opportunity have been greater.”
Roger Corbett, new Chairman of CIES – The Food Business Forum & Chief Executive Officer, Woolworths
Ltd, Australia
“I don’t think any of us who are truly global support [trade] barriers in any way, shape or form …
It’s a piece of human tragedy what those barriers do … to developing countries, where there is
real unemployment and in some cases starvation caused by these policies.”
E. Neville Isdell, Chairman and Chief Executive Officer, The Coca-Cola Company
“Being big in the world doesn’t help: you have got to be the leader in markets.”
Anders Moberg, President and Chief Executive Officer, Royal Ahold
“20% of success in retail depends on strategy, 80% depends on execution.”
Luc Vandevelde, Chairman of the Supervisory Board, Carrefour Group
“In a world where the strategies of major players are steadily converging, it is the quality of
execution that will distinguish the winners from the losers.”
Patrick Cescau, Group Chief Executive, Unilever
“There is no alternative to innovation. I can’t think of a company in any industry that has
sustained growth and leadership over the long term that has not also been the innovation leader.”
A.G. Lafley, Chairman of the Board, President and Chief Executive, The Procter & Gamble Company
“Within a few years, we won’t be talking about brands any more, we will be talking about health
benefits.”
Franck Riboud, Chairman & Chief Executive Officer, Danone Group
“Real innovation is not born in focus groups.”
Jean-Paul Agon, Chief Executive Officer, L’Oréal Group
“If you fight for the consumer, the profits will flow.”
Raymond D. Ackerman, Chairman, Pick ‘n Pay, South Africa
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Flying HIGH in the Face of Competition
Wednesday 21st June 2006
Opening Session
Welcome to CIES – The Food Business Forum
Claude Hauser, Chairman of CIES – The Food Business Forum and Chairman of the Board of Directors,
Federation of Migros Cooperatives, Switzerland
Since the first event in Rome 50 years ago, the CIES Summit has gathered
retailers and their suppliers from all over the world. This global scope at the
highest level of our industry is one of the main strengths of CIES, Claude
Hauser noted. Moreover, the 50th anniversary Summit has attracted a record
number of participants – 1,200 – representing 47 countries and 370 companies.
The theme of the event, “Flying HIGH in the Face of Competition”, reflects an
intensification of competition under the impact of trends like consolidation, global sourcing,
discount and greater consumer choice. To survive and grow, companies need to provide clearer
value for money, tailored to each given market. Two factors will be instrumental, Claude Hauser
stressed: retailer-supplier collaboration and applying technology. At the same time, the food
sector faces pressure from society, particularly on nutrition, food safety and the environment.
The industry has taken a constructive role in many of these issues but can do more because of its
size and expertise. All these questions are at the top of the agenda of the CIES Board, he
underlined.
Welcome to The Summit
Gareth Ackerman, Chairman of The World Food Business Summit and Chairman of Pick ‘n Pay Holdings,
South Africa
Gareth Ackerman congratulated CIES members and staff for sustaining The
Summit and ensuring that it has remained relevant as it celebrates its 50th
anniversary.
We live in interesting times, he argued: there are many changes in leadership,
marketing strategies, financial restructuring, trading legislation, consumer needs,
the image of the industry, food safety, and the fundamentals of trading. Some of
these challenges are extraneous to our particular industry but have a real effect
on the way we do business – such as hunger, avian flu, demography and culture.
There have been many casualties during a period when companies have been trying to navigate
their way through these many challenges. But challenge stimulates creativity, innovation and new
thinking. The Summit programme is intended to reflect the new opportunities that emerge
through the passage of difficult times, Gareth Ackerman concluded.
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Introduction by Session Moderator
Dr. David Hughes, Emeritus Professor of Food Marketing, Imperial College London
It’s tough out there: the number one concern of retailers and manufacturers in the
2006 CIES Top of Mind survey was competition. Big manufacturers are exiting
categories (e.g. Unilever and frozen food in most of Europe). Among retailers,
Albertsons has agreed to a takeover while the world’s two largest retailers, WalMart and Carrefour, have both left Korea. In this context, the role of The Summit
is to present the views of global leaders in order to see how they fly high in the
face of competition.
Competition in food retailing today
A retailer’s strategic perspective
Luc Vandevelde, Chairman of the Supervisory Board, Carrefour Group
A few decades ago nearly all retailers were local or regional
players and they regarded the multinational manufacturers as the
“common enemy”. But large retailers have turned into global
players and are now cooperating with manufacturers as they
battle with other retailers in both the global and local
marketplace. Luc Vandevelde picked out five imperatives for
competing in today’s conditions:
1. Excellence in your core business. Meeting basic expectations is not enough – retailers
need to offer the best possible shopping experience by placing the customer at the centre of
everything they do. This may sound obvious but it’s all too easy to take your eye off the
customer. Carrefour has spent the last year “getting back to these retail basics.” Firstly, by
bringing down prices in a successful and costly investment. But price alone is not enough: the
company has also revisited other parts of its strategy, for example by reducing the time for
new products to get on to the shelves (from two months to 15 days), and by developing
ready-to-sell packaging in collaboration with manufacturers. These examples demonstrate the
point that, in retail, 20% of success depends on strategy, while 80% depends on execution.
2. Watching your competitive landscape. Competition in retail is primarily a local matter, so
retailers succeed by adapting their assortment and store types. As an illustration, the
manufacturers present at The Summit represent less than 20% of Carrefour’s turnover.
Internationally, retailers have to be aware of everything about a country: in France, the “Loi
Galland” legislation is critical for pricing, while in China, Carrefour has adapted by displaying
live fish.
3. Sustainable, profitable growth. This again is obvious but surprisingly easy to forget. Since
2005, Carrefour has put this principle back at the heart of its strategy, disposing of non-viable
units (e.g. Korea) in order to concentrate on successful or promising ones.
4. Long-term sustainability of your business. There are two main ways this can be done:
expanding geographically into new or emerging markets, and expanding your range of
products and services in more mature markets. Geographically, the “BRIC” countries offer
strong growth, with China’s retail market expected to grow by 10% annually for the next 10
years. Carrefour is growing fast in China (it has opened four hypermarkets in the past month
alone), helped by local partners. In terms of range, food retailers are in a good position to
offer valued-added products and services because they meet consumers every day. One
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example is telecoms: Carrefour recently launched its first offering as a mobile virtual network
operator in Belgium, with the aim of rolling it out across the group in the near future.
5. An organisation that fits the complexity of today’s industry. International retailers face
the complexity of adapting to local conditions, as well as the general complexities of
globalisation (e.g. trade barriers, political instability, social issues). Carrefour operates in 29
countries with four main formats – hypermarkets, supermarkets, hard discount and
convenience stores. Since 2005, the company has reviewed its entire organisation to reduce
complexity at every level. A principle has been that one person alone cannot make all the
right decisions, so these are made by teams under the leadership of José Luis Duran.
A manufacturer’s strategic perspective
Roger K. Deromedi, Chief Executive Officer, Kraft Foods Inc.
The true, higher “calling” of food, Roger Deromedi argued, is about nurturing
souls. Food has a central role in our lives: it is part of tradition, love, families and
just plain enjoyment. There are in fact twice as many hits for “food” as “sex” in
internet searches. But this calling has become more complex than ever because
of a wave of new issues and concerns. For the first time in human history, more
people are overweight (over 1 billion) than undernourished, and as a result
consumers are more focused than ever on health and wellness. Other issues
include time pressure (e.g. a 2005 survey by another manufacturer found that
over 60% of supermarket visits in the US involve the purchase of less than five items) and
demographic shifts, with a growing disparity in age between developed and developing markets.
In the face of this complexity, the industry needs to reintroduce some “common sense”. Roger
Deromedi outlined three areas in which the food companies can come together to help
consumers:
1. Global standards. These may not sound all that interesting but they are critical for
accelerating speed to market and ensuring availability of stock. The savings from reduced
complexity can then be reinvested in improving consumers’ experience, such as by leveraging
data and communicating nutritional benefits. But this means getting serious about data
accuracy, standards and synchronisation – we need to do better than the only 20% of
companies today using global data synchronisation.
2. Trade barriers. With commodity costs soaring in many categories, we need to ensure that
special interests do not benefit from trade barriers. One example is the sugar industry in the
US, which is protected by import quotas, price support and marketing allotments. As a result,
raw sugar costs in the US reached their highest rates in nearly 25 years last autumn. To
illustrate the effect on manufacturers, a 1 cent change in the price of sugar represents $8
million a year for Kraft. The food business needs to speak out on behalf of the Doha talks
and free trade, he urged.
3. Health and wellness. The industry needs to take the initiative in addressing consumers’
demand for better nutrition information and tastier, healthier food. Kraft has made
significant investments to improve the nutritional value of its products (e.g. the Sensible
Solution range, now 31% of US revenues, that flags nutritional benefits and/or lower
calorie/fat/sodium/sugar content), and the information on its packs (it will complete in 2006
a three-year initiative to ensure it provides in all markets information on serving sizes and
calorie/protein/carbohydrate/fat content). These actions are based on the common-sense
approach that the key to weight management is calories-in versus calories-out. In addition,
the company has introduced a marketing code of practice, notably limiting advertising in
schools and to small children. The food industry can help people improve their health by
providing clear labelling. But what we don’t need, Roger Deromedi insisted, are “traffic
lights” that potentially confuse consumers and demonise certain food categories.
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The Essence of Paris
From Cartier to Chloé: how the Richemont luxury group keeps its
competitive edge
Alain Dominique Perrin, Executive Director, Compagnie Financière Richemont SA
Luxury exists everywhere and always has – think of the “potlatch” ceremony
among Amerindian peoples, who confronted each other in wars of gifts. For
centuries until the Second World War lasted the age of “sumptuary luxury”, which
was about displaying wealth. This still exists, as shown by the weddings of today’s
celebrities. But modern luxury has undergone a revolution. Firstly, through the
luxury houses, which shifted luxury from wealth to rarity and quality, and which
developed big brands through networks of boutiques. From the 1970s, luxury
went from a craftsman approach to an industrial model with a quantative vision. At the same
time, the rise of the “jet set” reinvented luxury as the freedom of lifestyle.
As a result, luxury broadened its reach through new categories and retail networks. Cartier
responded by creating “Le Must” range, which spanned products such as pens and lighters, and
developed its own boutiques (250 worldwide today). This development reflected the need for a
simplification of luxury in terms of objects that are easy to live with.
In the 1990s, luxury took two directions: firstly, there was the flamboyant and illusory luxury of
the global brands, like Dior and Gucci. But after becoming saturated with provocation, these
brands have calmed down into a more classical style. Secondly, there was true luxury, as
represented by Richemont, whose real stars are its portfolio of brands, not the designers. The star
brand is Cartier but the group has several other brands with long histories, such as Van Cleef &
Arpels (which is 100 years old and joined Richemont seven years ago), Jaeger-LeCoultre (founded
in 1833 and which maintains a craftsman tradition in watchmaking) and Shanghai Tang, launched
by David Tang as the “first Chinese luxury brand made by Chinese people” and acquired by
Richemont as an experiment for the future. In addition, the company has developed luxury
beyond fashion categories, creating an MBA in food and wine at business school EDC in Paris.
This reflects the fact there is a serious luxury element in food, Alain Dominique Perrin
concluded, as shown by the passion for Bordeaux wine or the success of the world’s top chefs.
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Thursday 22nd June 2006
Morning Session
Leadership & transforming an organisation
Introduction by Session Moderator
Alex Thomson, Presenter and Chief Correspondent for ITN’s / Channel 4 News
Competition is as it has never been before, Alex Thomson reiterated. In addition to business
issues like technology, there are broader society questions like obesity and hunger. In other
words, “Food has become political.”
E. Neville Isdell, Chairman and Chief Executive Officer, The Coca-Cola Company
The transformation of Coca-Cola is by no means complete, but it is a different
company from 2004, Neville Isdell argued. The transition he has led involved
two initial steps. Firstly, to stabilise a company that had forgotten how to win (it
hadn’t met its own expectations since 1997). The second step was to strengthen
the business, notably through a new executive committee (more than half of the
members are in fact new) and a $400 million increase in marketing spending,
despite the effect on share price and earnings.
An initial 120-day period of listening to people in the business led to the “Manifesto for
Growth”; this could have been done quicker with a small team, but the aim is for long-term fixes,
Neville Isdell pointed out. The manifesto incorporates the “Five Ps” – people, portfolio,
partners, planet and profit – and sets out 10-year goals (e.g. to double the value of the Coke
brand and the whole portfolio). The transformation has only just begun, but there have already
been changes that wouldn’t have been possible two years ago – such as the coffee-Coke fusion
drink Blak. There have also been the first-ever corporate-identity campaign, “Every Drop
Counts”, and a first fully integrated cross-media campaign for the Coke brand, “The Coke Side
of Life”.
So is it working? The company’s people are beginning to change, as shown by higher survey
response rates. Going forward, Neville Isdell outlined some paths to growth:
• Growing core carbonated soft drinks: this is the first job because if the company can’t
grow its core, why would anyone believe it can grow anything else?, he insisted. The 3%
growth in the first quarter shows that there is significant growth left in the category.
• Grow other core brands: e.g. sports and coffee drinks.
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•
•
•
•
Develop transitional health platforms: Coca-Cola has mapped out a “Consumer Beverage
Landscape” with 19 need states linked to the broad requirements of “Enjoyment today”,
“Feel good today” and “Feel good tomorrow”. Tea and juices are playing a role in this.
Nurture the system’s health: half of the business is run by the bottlers and Coca-Cola
needs to offer them more innovation and return on investment.
Creating adjacent businesses: without going outside the core, Coca-Cola is looking at
freshly-brewed tea and coffee, and is developing an internet platform, iCoke.
Customer value: Coca-Cola has created a “Collaborative Customer Model” as part of its
transformation. This is because the emerging competitive environment requires the company
to shift its focus from selling through the back door to helping retailers reach consumers
through the front door.
Anders Moberg, President and Chief Executive Officer, Royal Ahold, in conversation with Alex
Thomson
Anders Moberg outlined two phases in his leadership of Ahold
since 2003. Firstly, there was a year of getting the house in order,
when the company was close to bankruptcy. He acted quickly to
shrink the business – divesting activities in Asia and South
America – to make it stronger financially. The second phase has
been building for sustainable growth in the future. Internally, this
has involved becoming much more integrated – compared to the
“loose federation” before – in order to develop synergies. It is also about the customer, who was
forgotten in the financial-driven approach prior to 2003. The most visible change for customers
is prices, and in the Netherlands this focus has allowed Albert Heijn to raise market share and
now profits. Regarding rumours about both Ahold’s future and his own, Anders Moberg noted
that there is always speculation, so he has to get on with setting the tone for the future.
Looking beyond Ahold, he underlined several issues where collaboration has become critical. In
nutrition, the sector has to give “good guidance” to customers who spend very little time
choosing a product, he stressed. Retailers and manufacturers also need to make sure that
legislators do not determine the agenda in health and obesity. Given increased competition,
collaboration is also needed to work on the cost structure and the value chain from raw materials
to consumers. It is not just price, he stressed, but more about how together we live up to the
expectations of customers.
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Patrick Cescau, Group Chief Executive, Unilever
Transformation may be a modern word but successful businesses
have been transforming themselves since commerce began,
Patrick Cescau pointed out. Companies that do not embrace this
idea simply die; this is why the average life of a Fortune 500
company is 40-50 years. From its origins in the 19th century until
the 1990s, Unilever experienced three major transformations: first
becoming a multinational; then diversifying vertically in the
supply chain and horizontally into new business areas; and then refocusing on its core in the
1970s and 1980s.
Latest transformation
By 2004, faced with price pressure, changing competition and consumer fragmentation, Unilever
was struggling. In its latest transformation, it is making changes in four areas:
1. Portfolio: the objective is to build a portfolio weighted towards market leadership and
higher-growth spaces (personal care, emerging markets, the Vitality programme covering
health & nutrition). Where businesses don’t fit this focus, Unilever is exiting – most recently
with much of its frozen food business in Europe.
2. Capabilities: since the strategies of major players are converging, the quality of execution
will distinguish winners from losers. The most valued capability in Unilever used to be
general management, but the aim is now to be world-class in each of its core processes. The
initial priority has been on customer management (“Winning with Customers”). The
company is also outsourcing functions (e.g. in IT, HR and finance) where it makes sense.
3. Organisation: the critical change has been in moving towards a more globally coordinated
model. To do this, Unilever has created two big pillars: “global category organisations” as
experts in shoppers and consumers in all markets; and “regional go-to-market organisations”
to meet the needs of shoppers and retail customers market by market. In particular, country
leaders have been asked to go from focusing 80% of their time on consumers to 80% on
retail customers, by viewing them as partners rather than a channel.
4. Culture and behaviours: the new organisation needs people to be more accountable for
delivery and more willing to work together. But behavioural change is not easy and Unilever’s
history has left a legacy of fiercely independent, entrepreneurial general managers. To
facilitate new behaviours, the company has changed incentive systems, the language used
internally, and some of its personnel – including almost half of its senior leaders in the last
year.
Impact on the business
The transformation has brought improved growth: organic growth moved from almost zero in
2004 to around 3% in 2005 and in the first quarter of this year. This growth has been supported
by the Vitality programme (e.g. pro Activ/Becel margarine with cholesterol-lowering properties),
personal care (e.g. the Dove “Real Beauty” campaign), emerging markets (+9% growth in 2005),
and also marketing (recognised by 17 “Lions” at last year’s Cannes Advertising Awards). At the
same time, it is vital to be clear about what not to change, and leaders have to reassure people
that the values remain the same. At Unilever, these are a commitment to responsible and
sustainable trading, an active role in the communities where it operates, integrity in dealings with
all stakeholders, and a commitment to diversity.
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Managing relentless global competition
Jean-Charles Decaux, Chairman of the Board, JCDecaux SA
1. Extending a unique business model around the world. JCDecaux’s model is based on
gratuity: the company provides street furniture and urban services at no cost to local
authorities and inhabitants, in exchange for the right to commercialise advertising space.
JCDecaux now operates this model in 46 countries and 3,400 cities, generating turnover of
€1.7 billion in 2005. Broadly, the model incorporates three goals: a common strategy (i.e. a
focus on outdoor), strong values, and rigorous processes.
2. Innovation as the key to differentiation. JCDecaux pioneered modern bus shelters in
partnership with designers like Norman Foster. It now offers services from internet kiosks to
bespoke solutions for brand advertisers. This constant innovation is driven by observing how
cities and citizens are evolving. To help it anticipate the city of tomorrow, the company is
working with academic experts. This is important given the deep changes taking place in
media: seven years ago Google was not in media, but now is one of the world’s biggest
advertising companies. As a result, JCDecaux’s business model has moved from B2B
involving city authorities and brands towards B2C involving citizens and consumers. Two
examples of this consumer-focused innovation are Cyclocity – which has turned JCDecaux
into the world leader in urban bicycle-rental services – and interactive advertising displays
that send messages to mobile phones.
3. Sustainable development. JCDecaux is the world’s leading supplier of solar-power bus
shelters and has developed various other initiatives in sustainable development, including a
rain-water recycling system to clean all its advertising columns in Paris. The company believes
that development without responsibility has no value. It puts this principle into practice
through its own ethical charter, industry self-regulation, external auditing (using ISO 9001
and ISO 14001 standards) and responsibility at all levels of the company – contributing to it
being ranked as one of the best workplaces in France for 2006.
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Alex Thomson interviews the four morning speakers on “Flying HIGH in the Face of
Competition”
Asked how he deals with perceptions that Coke is not healthy and embodies America, Neville
Isdell reiterated that carbonated soft drinks can play a role in health and lifestyle. The company
makes no apologies for Coke – which is about fun and refreshment like Starbucks – but it also
offers zero-calorie Diet Coke. Regarding anti-US sentiment, he noted that it depends where and
when: in Chile, South Africa and Spain, Coca-Cola has been voted the best local company. There
was turbulence in the Middle East at the start of the war in Iraq, but this proved temporary.
Consumers don’t make a political statement when they buy Coke, he insisted, they want
refreshment.
Asked what is the biggest misconception about their company, Patrick Cescau argued that there
is both a real perception that the Unilever was not performing as expected, and also a
misconception that this is because of the company’s structure. Neville Isdell cited as the main
misconception about Coca-Cola that it can no longer be a growth company: it will take time to
deliver but it’s up to us, he stressed. Anders Moberg pointed to the misconception of the
amount of synergies that can come from the different parts of the Ahold group. Jean-Charles
Decaux, meanwhile, offered a misconception his own company was guilty of: five years ago it
didn’t see the change in media coming from internet, so now it has to be more careful in media
planning.
Regarding trade barriers used by Western countries, all the speakers expressed their support for
free trade. Patrick Cescau noted that Unilever does most of its business in emerging markets, so
is a firm supporter of liberalisation. Along with Coca-Cola, it is also a member of the
Transatlantic Business Dialogue, which estimates that US and EU GDP could be raised by 1.5%
if trade barriers between them were removed. Ultimately, you cannot avoid trade, he insisted:
fibre-optic communication has made the world smaller, and China and India are producing 10
times’ more PhDs and engineers than Europe.
Neville Isdell also pointed out that we have moved from the “hero CEO” of the 90s to the “evil
CEO” in many ways today. Some fellow CEOs let us down so we have got to work together to
regain confidence, he urged.
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Afternoon Session
Growing through innovation or acquisition?
A.G. Lafley, Chairman of the Board, President and Chief Executive, The Procter & Gamble
Company
We all face the same basic challenge, A.G. Lafley argued: sustainable growth. The
growth challenge is never-ending: P&G needs to grow its top line $3.5-4 billion a
year (the low end equivalent to the turnover of Ariel). Moreover, we are all caught
in a price/cost squeeze: P&G had to absorb more than $750 million in higher
commodity and energy costs in 2005. But sustainable growth is possible and
P&G’s experience shows that a balance of acquisition and innovation can be a
strong path to growth.
Growth by acquisition
Most acquisitions fail, particularly large ones. P&G is one of the few consumer products
companies with a growth model that includes a defined contribution from acquisitions (1% of its
4-6% long-term sales goal). Nearly half of the company’s sales today come from acquired brands
and businesses. Five choices have been decisive in P&G’s acquisition success in the past decade:
1. Businesses that fit strategically and are attractive structurally: since the late 90s this has meant fastergrowing, higher-margin, more asset-efficient businesses in beauty, health and personal care.
2. Brands with equity and the potential to grow when complemented by P&G: e.g. Iams, Wella and
especially Gillette.
3. Integrating quickly when the business benefits are clear, moving slowly when they are not as clear.
4. Strength and continuity of leadership: while trying to retain key leaders in acquired companies,
P&G makes sure it has the internal talent to lead acquired businesses before proceeding.
5. Communicate clearly, consistently and frequently with all stakeholders: in major acquisitions, the range
of audiences is broad and diverse (e.g. investors, retailers, governments, employees).
Growth through innovation
There is no alternative to innovation: it is the driver of organic growth. The most important and
often least understood aspect, A.G. Lafley pointed out, is that it is a process; there is a clear
distinction between invention and commercially successful innovation. P&G’s approach to
innovation is characterised by four elements:
1. Leading innovation. Nearly 40% of the top 10 new-product initiatives in the US each year
over the past decade have been from P&G. Three factors have been critical: being very clear
about where to play (e.g. beauty, health and personal care, and low-income consumers in
developing markets); being equally clear about how to win (e.g. core competencies, cash and
cost productivity); and being specific about how to measure innovation success (e.g. R&D
productivity by net outside sales per employee).
2. Learning fast. This is principally about increasing the productivity of “knowledge workers”.
Such productivity is not about working harder or longer but smarter. P&G has opportunities
given its size and diversity (135,000 employees serving more than 160 countries).
3. Unleashing & focusing innovation. P&G is aiming to create a culture that strikes a
balance, avoiding both unfocused and constrained innovation. One important aspect is taking
advantage of every available source, replacing any “not invented here” thinking with a belief
in “re-invented here”.
4. Making the pie bigger. We can make the pie much bigger by working more closely
together. This point is often lost in the discussion of industry consolidation. P&G believes
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that the power shift is not from manufacturer to retailer or vice versa, but from manufacturer
and retailer to shopper and consumer. This consumer revolution creates the greatest
opportunity for manufacturers and retailers to work and grow together, A.G. Lafley
concluded.
- A.G. Lafley in conversation with Alex Thomson
Asked if the size of Wal-Mart meant P&G was less transparent
with other retailers, A.G. Lafley argued that his company has to
be transparent because its customers are serving the same
consumers, who vote on consumer-goods brands every day.
Regarding his previous comments that P&G was too American in
the US and too European in Europe, he explained that, while it is
important to be very connected locally because consumption is
very local, you have got to reach across the world to deliver the best innovation – an invention
happening in a garage in India could be useful for France.
On research & development, A.G. Lafley cited P&G’s emphasis on innovation through new
technologies. Specifically, the company has found 10 new technologies in which it wants to be
leader and has connected with specialists to develop them. This is part of its “Connect &
Develop” programme, which has opened the doors to outside sources of innovation; 35% of
new products last year had at least one external partner and the goal is to increase this to 45% by
the end of the decade. Concerning food categories, he explained that P&G is only present in two:
coffee in North America and snacks with Pringles worldwide. While P&G is not going to expand
the coffee business internationally because coffee tastes are very local, Pringles is very global
because it works everywhere if you adapt the flavour, and is easy to ship in its metal cans.
Franck Riboud, Chairman & Chief Executive Officer, Danone Group
Franck Riboud said that he didn’t have an answer to the
question of acquisition versus innovation. You have got to be
flexible, he underlined, and Danone has been very opportunistic
in its approach.
The company’s growth model is mainly based on organic
growth, although it has made over 50 acquisition moves in the
past decade targeting small or medium companies. Since 1996, it
has refocused from nine to just three categories – fresh dairy, beverages and biscuits – and this
has supported higher organic growth (an average 6.6% for 2000-05 versus 2.6% in 1996). Levers
for this organic growth have included: “leading market positions” (Danone is the worldwide
leader in fresh dairy and packaged water (by volume), number two in biscuits, and generates 80%
of group sales from local market-leader positions); a “health positioning” that goes back decades
to the initial sale of Danone yoghurt in pharmacies, and which analysts rate as stronger than that
of other major manufacturers; “new frontiers countries” (China, Indonesia, Mexico, Russia and
the US) that have doubled their share of group sales to 25% since 1999; and “blockbusters” in
dairy, with four international brands (Actimel, Danone, Danonino and Activia) generating almost
€1 billion each in annual revenue.
Innovation is the key to fuel these drivers, Franck Riboud stressed. He offered the following
examples:
14
•
•
•
•
•
Strengthen health positioning. Danone has developed products with proven health
benefits (e.g. Activia for digestive comfort) and also new health platforms to address changes
in society (e.g. “healthy ageing” and “good nutrition in emerging countries”). This activity is
founded on research & development, based at the Daniel Carasso Research Centre in Paris.
Adapt global concepts locally. This is one of Danone’s strengths, with the back office
serving to accelerate the launch of good local concepts. For example, Activia has been
expanded from being yoghurt-only to other concepts like fermented milk, depending on the
country.
Stretch categories. In water, Danone has moved from natural water to incorporate
flavoured and functional water drinks as well. These new varieties have enabled Danone to
reinforce its market leadership in water in countries like the UK and Poland.
Distribution to convenience outlets. Danone supplies millions of small stores. To improve
its performance, it studied snack food companies to learn about the convenience channel.
Actions such as visiting an outlet or installing a fridge can raise sales sharply.
Crack the price barrier. 3 billion people worldwide live on less than 2 euros per day.
Danone uses an “affordability” model in its “new frontiers” markets to create price points in
relation to income levels. In South Africa, it is rolling out this model with the Danimal
yoghurt that is priced at 1 rand (€0.10) each while still offering the benefits of the Danone
brand in taste, nutrition and safety. This strategy is part of Danone’s wider ambition to “bring
health through food and beverage to as large a number of people as possible.” In a further
project, Danone has partnered with micro-credit bank Grameen in Bangladesh, with a
yoghurt factory to be opened there in November. Like in South Africa, Danone will use
yoghurt “ladies” for distribution, an idea borrowed from Japanese partner Yakult.
Differentiation in action
Serge Papin, Chief Executive Officer, Système U, France
As a cooperative of independent retailers, Système U has a
distinctive business model. The long-term health of the group –
which is currently the fifth-largest retailer and second-largest
supermarket network in France – depends on the balance
between the individual interests of the store owners and the
common interest of the banner.
Three convictions
1. Customer demand: the “everything under one roof” model is in decline, Serge Papin
asserted, as the age of the retailer’s offer is giving way to that of customer demand. That is
why Système U see themselves as traders as much as retailers, listening to the customer’s
requirements. Specifically, the group tries to satisfy simultaneously the consumer (with
products), the customer (with the store and service), and the citizen (with community
involvement).
2. Proximity: this means both physical proximity in store locations and a close relationship
through the level of customer service. Système U’s network is concentrated in small towns
and the provinces. Its store owners, with their freedom of action and local ties, adapt the
banner to each area and are also heavily involved in community programmes.
3. Human factor: internal training institute “Force U” offers programmes for all staff, with the
opportunity for high flyers to become store owners, helped by financial assistance.
Changing times
15
Mass retailing has played a major role in the modernisation of society, but customers’ concerns
are different today. They have become unpredictable, hopping between different brands. In their
attempt to juggle “enforced” spending such as housing and petrol, and “preferred” spending
such as internet and mobile phones, the food budget is the first to be cut. It’s a fact and we have
to live with it, Serge Papin insisted. At the same time, customers are demanding transparency
from retail, as they question the size of retailers and the value of brands. Système U has
responded by developing private label (which now accounts for 45% of purchases made) as
“preferred” brands, while retaining the largest selection of national brands among French
supermarkets. Consumers in France, meanwhile, are faced continuously with rhetoric about the
decline of their country. What they need, Serge Papin concluded, is confidence in the real
strengths of France (its economic size, its cultural identity, its tourism) rather than the selfdefeating pessimism of the “declin-ologue”.
Friday 23rd June 2006
Morning Session
Sustaining success as a global leader
John B. Menzer, Vice Chairman, Wal-Mart Stores, Inc.
Sustainability and the role of business have become a big issue for Wal-Mart, John
Menzer explained. The company thinks that sustainability is positive for its
reputation, helps recruit and retain staff, is very profitable, and improves the
quality of life for everyone. At its Year-Beginning Meeting, Wal-Mart announced a
series of long-term goals and interim targets to support sustainable development.
For example, it wants to be 100%-supplied by renewable energy in the future, and
is aiming to make its new stores 30% more efficient within four years. These goals
are being supported by a variety of pilots, such as the use of LED lighting for shelves (50% less
energy used) and the recycling of grease from in-store rotisseries to make fuel.
These sustainability efforts are based on the idea of creating more value for stakeholders. This
means maturing over time from a model of “economic value” (customer, shareholder) to one of
“(direct) stakeholder value” (employees, community, supplier + customer, shareholder) and then
finally “societal value” (earth, social + employees, community, supplier + customer, shareholder).
This evolving definition of value relates to the changing role of business in the 21st century. The
growth of business is such that, out of the world’s 100 largest economic entities in 2004, 42 were
corporations, not countries. At the same time, the world’s population is growing fast (it is
forecast to increase from 6.5 billion today to 8 billion in 2025), particularly in regions where there
has been relatively little consumption of energy and resources. Climate change is also a serious
issue for both business and communities.
In this context, Wal-Mart sees the opportunity in “moving faster together” through collaborative
initiatives. Important areas of activity include:
• Waste: Wal-Mart has had the biggest impact in packaging, for example by reducing the
packaging for its own-brand toys, saving $3.5 million in transport. Innovation has also come
from suppliers. Unilever’s All Mighty brand is a good example since it contains a third of the
water of comparable detergents, allowing savings in transport and packaging materials.
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•
•
Product standards: Wal-Mart has adopted the EU’s Reduction of Hazardous Substances
(RoHS) standards and is introducing them this year in the US for computers. It has also
committed to making all its fish certified by the Marine Stewardship Council within three
years.
Organic: Wal-Mart is now introducing organic clothing. To develop this range at a price
close to standard clothing, it spent a lot of time in the field with spinners. At the same time,
since it can take several years to adopt organic standards for products, it is important for
companies to communicate that they are in a transition.
Jean-Paul Agon, Chief Executive Officer, L’Oréal Group
The deciding factor in the success of both L’Oréal and retailers is
innovation, Jean-Paul Agon insisted. Why? Firstly, because we are
living in a post-globalisation, post-information age being reshaped
by companies like Apple and Google, for whom innovation is
quintessential. Secondly, innovation is far more crucial in beauty
than in other consumer-goods businesses: beauty is basically
supply-driven – understanding consumer dreams and turning
them into reality – rather than demand-driven. Thirdly,
innovation has always been at the heart of L’Oréal since it was founded by a scientist-inventor.
So how does this “innovation machine” work? Jean-Paul Agon described it as a meeting of
scientists and creative marketing people:
• Science: this is vital to look into the future, rather than just observe consumer habits.
L’Oréal is in fact the organisation that dedicates the greatest resources to research in hair and
skin care, areas that are not studied by medical schools and pharmaceutical companies.
L’Oréal’s recent inventions have included the “Colourless Colour”, the first photonic makeup, based on the colour structure of butterfly wings. Looking ahead, progress in
biotechnology and genetic research holds out the prospect of creating completely
personalised cosmetics.
• Creative marketing: these teams have the job of turning science into products. L’Oréal uses
very young and diverse teams, who are exposed to inspiration in the beauty capitals of Paris,
New York, Tokyo and Shanghai. They also benefit from the company’s presence in various
distribution channels and professions. For example, L’Oréal has more than 1 million
hairdresser customers while it has a close relationship with dermatologists through Galderma,
its joint venture with Nestlé.
Summing up, Jean-Paul Agon argued that the future is bright for L’Oréal and its retail customers.
Beauty should be one of the best categories in terms of future growth and margins because of the
endless innovation opportunities, he insisted.
17
The changing face of shopping - different time, different place, different
need
“How half the world shops” - Results of the McKinsey
International Study
Peter N. Child, Director, Leader of Global Retail Practice, McKinsey & Company, Inc.
A world in waiting
The “BRIC” countries – Brazil, Russia, India and China – are big, growing and
their populations are much more confident about their future than their Western
counterparts. For example, a further 90-190 million Chinese are forecast to join
the consuming classes by 2010. The BRICs are thus consuming new things and
modern retail is expanding there. However, the four countries also share three
major problems: inhibiting regulation, fragmented distribution, and a
preponderance of low income.
Attitudes and constraints
The McKinsey study found immense diversity between and within the countries. The research
used a quantitative survey of BRIC shoppers together with focus groups, home visits and
shopper diaries to establish five main attitudinal segments among shoppers: “frustrated” (lowincome living beyond means), “frugal” (price-obsessed who don’t enjoy shopping), “traditional”
(fresh shoppers who distrust the modern/foreign), “diligent” (value seekers who enjoy shopping)
and “discerning” (quality seekers who are the least price-constrained). The segmentation showed
wide differences between the countries: in Brazil, the most prevalent segment was “frugal” while
in China it was “diligent”, perhaps explaining the fast growth of modern retail.
Looking at the shoppers surveyed as a whole, Peter Child underlined the need to recognise their
rational and intelligent approach to consuming: we should never mistake behaviour we don’t
understand as irrational, he warned. The research showed three broad elements in the shopping
behaviour of the BRIC shoppers. Firstly, they enjoy shopping: 40% of shoppers across the
BRICs said that shopping was a leisure activity. Secondly, they have fears connected with food,
with 30% stating that promotions are designed to sell unsafe products. Thirdly, they are
demanding cooks and shoppers, especially in fresh products. Shoppers in Brazil and India shop
once a day, while in China the average is almost twice a day.
Key constraints in all the countries are money and access. “Struggling” shoppers will buy certain
foods (e.g. bread, dairy and vegetables in Russia; cake, oil and spices in China) and check prices
carefully on these. As they become “consuming” shoppers, they move towards proteins (e.g. fish
and meat in Russia; breads, eggs and meat in China). In terms of access, the big majority of
shoppers will go to a store up to 15 minutes away. For low-income households, the total cost of
the shopping trip, including travel time and expense, is critical.
Answering the call
Modern retailers can unlock these constraints in the BRIC countries. For example, fear of food
can be addressed by communication on hygiene standards, while access can be improved by
buses to hypermarkets. The McKinsey study showed that acceptance of modern formats was
50% higher among consumers already exposed to them. To exploit this potential demand,
retailers have to mobilise and tackle issues like supply chain, food safety and regulations. Looking
forward, retailers also have to anticipate the specific developments in each of the BRIC countries,
18
from the “one more hurdle” of informality in Brazil to the “opportunity to shape” in India where
everything is up for grabs.
Grocery case study
Richard A. Anicetti, President & Chief Executive Officer, Food Lion, LLC
Traditional grocery stores in the US are continuing to lose market
share and shopping trips to other formats like supercentres and
dollar stores; for example, their number of shopping trips per
household has fallen for the past eight years (from 85 in 1998 to
68 in 2005). Food Lion, a division of Delhaize Group operating
over 1,500 stores mainly in the south-east US, found itself “stuck
in the middle” of the value continuum going from price at one
end and quality/service at the other. Its historic response had been about “sames” – same price,
assortment, store – but the environment had changed.
The “tyranny of the average” results from non-customer-focused activities, which lead retailers to
think in terms of “average price”, “average inventory” etc. To move away from this, Food Lion
adopted segmentation. But while loyalty programmes often establish upscale, downscale and
middle shoppers, Food Lion used a more detailed approach by combining its loyalty data with
external sources for demographic data as well as data on spending in other channels. This allowed
the company to creating eight customer segments (e.g. “Savvy Singles”, “Babies & Bills”) that are
mutually exclusive but collectively exhaustive in describing the market. These segments informed
Food Lion’s decision to group its stores into 13 “clusters” that reflect primarily one segment
while also incorporating secondary groups. This customer focus has also informed Food Lion’s
decision to use distinctive brands – Bloom, Harveys, Food Lion and Bottom Dollar – based on
different need states.
This effort at “Rebuilding Around the Customer” is supported by a scientific approach, Rick
Anicetti concluded. In particular, the retailer applies a rigorous approach to developing and
testing its strategies, from the “hypothesis” stage to the final roll-out. Executional excellence is
the key to differentiation, he insisted, and to achieve this you must have a “culture of execution”.
Department store case study
Philippe De Beauvoir, President & Chief Executive Officer, Le Bon Marché, La Samaritaine, La Grande
Epicerie de Paris, Franck et Fils
Philippe De Beauvoir explained how Le Bon Marché has re-invented itself since
1988. The store was founded in 1852, in the same period as many other
department stores. After enjoying a growth period during 1900-1970, the
department store format went through a decline in 1970-1990 in the face of
competition from hypermarkets, with the result that the number of outlets in
France has been divided by four during the last 20 years.
In 1988, Le Bon Marché was characterised by an easily accessible location, convenience, tradition
without distinctive specialities, and more of a “general store” approach than a department store
one. In its repositioning, certain elements were not changed: the location, the size and its singlestore status. However, the new strategy brought significant changes: a store that delivers valueadded, rather than volume; a craftsman approach to create a unique offer; an identity shaped by
19
the interior design; and a decentralised organisation adapted to the small size of the company.
Overall, the aim was to become the most selective department store in Paris.
Concretely, the Le Bon Marché developed a new logo, which associated the company name with
the “Rive Gauche” area of Paris. It also implemented a long-term plan to reorganise all spaces in
the store, for example by reducing the number of departments on the ground floor from 14 in
1988 to three in 2006. In its product policy, the priority was given to “inspiring products”, so that
customers perceive the store’s selection of brands as a purchase recommendation. The aim with
these brands is to create “intangible value”, which develops loyalty, confidence and even love
among customers. Commercially, intangible value also allows the company to grow its margins.
In terms of results, the new strategy has driven top-line and bottom-line growth: Le Bon
Marché’s sales have increased from $180 million in 1990 to $400 million in 2005, while its
operating income has risen from $10 million to $30 million.
Mobile shopping case study
Pekka Somerto, Head of Lifetime Relationship Management, Nokia Strategic Marketing, Nokia Corporation
Life goes mobile
Already today, the number of mobile phone users worldwide has
overtaken that for PCs/PDAs, and almost a third of these mobile
users now access internet with their phone. Camera-phones,
meanwhile, have overtaken in unit sales digital cameras and other
“potential blogging devices” (i.e. PCs, PDAs), while mobile
phones as a whole have overtaken consoles as the most
commonly used platform for video games. Whereas in 1990 the
majority of internet access was via mainframes and in 2000 via
PC, in 2010 this will be via mobile phones, Pekka Somerto forecast.
People point out that the fixed internet is free, whereas mobile connections are paying. But look
at other areas: libraries are free, but we buy books and newspapers; tap water is free but we
increasingly buy branded bottled water; and email is free but twice as many people use SMS textmessaging. This “next internet” via mobile phones will add mobile-service opportunities like text
and picture messaging for m-marketing and m-payment (including with RFID), and a seamless
home system with connection to TV etc.
Generation C
The “Generation Connected” share decisions and opinions in real time. Everything is now being
done via SMS, from dating to cheating in school exams. This trend is important for business
because the Gen-C see themselves as powerful, their favourite tool is the mobile phone, and as a
result all “community behaviour” will migrate to mobile – from blogging to TV. As illustrations,
a worldwide survey by advertising firm BBDO found that more than half of mobile users take
their phone to bed, while market researcher mobileYouth found that young consumers spend
eight times’ more on their phones than on music.
Mobile commerce emerging
M-commerce is emerging in both physical and intangible, local and remote services. A welldeveloped area is banking and an emerging one is card payment – in Korea, half of consumers
are already paying using their mobile. A major revenue source is music: while much of the
attention has been taken by Apple’s iPod player and iTunes downloads, mobile phones account
for 19% of global music sales (e.g. ring tones), while cumulative sales of MP3 phones reached
over 100 million units last year. Above all, commerce via internet will migrate to the mobile
phone sooner rather than later, Pekka Somerto concluded.
20
Closing Session
Flying high, flying far, flying further
Back to the future of food retail:
A celebration of the key learnings from the rise of modern retailing
Raymond D. Ackerman, Chairman, Pick ‘n Pay, South Africa
From MMM to CIES
Alongside Professor Hutt of the University of Cape Town and Gottlieb
Duttweiler of Migros – who both championed consumer sovereignty –, the major
influence on Raymond Ackerman’s retail career has been Bernardo Trujillo. His
seminars at NCR on “Modern Merchandising Methods” (MMM) offered an
understanding of the US supermarket industry and gathered pioneers of mass
retailing from around the world, such as Denis Defforey of Carrefour. In
particular, Trujillo taught the “Four Legs of the Table” – strong administration,
strong merchandise, social responsibility and advertising, and people – which Pick
‘n Pay still lives by today. Among the specific learnings Ackerman gained from Trujillo were:
• “If you fight for the consumer, she will fight for you”: like Tesco under Jack Cohen, Pick ‘n Pay built
its reputation partly by breaking price-fixing by suppliers. In the US, an early supermarket
operator, John Schwegmann, even went to jail for trying to break minimum prices for milk
set by the state of Louisiana. He was later rewarded by being elected several times into public
office.
• “Always offer variable-price merchandise”: EDLP is popular now but stores need excitement –
think of the trade done by stores in holiday areas because people are happy. Pick ‘n Pay once
ran a promotion selling chickens for 10 cents each, causing chaos in Cape Town.
• “Doing good is good business”: Pick ‘n Pay gives 8.5% of its after-tax profits to social causes and
this social responsibility contributes to making its “tills faster”.
CIES, meanwhile, took off where MMM left in terms of retail learnings. Important ones have
included franchising: thanks to a conversation with a previous head of Albert Heijn, Pick ‘n Pay
adopted the concept and it is now the biggest growth area for the company. Another crucial
learning was succession planning: prompted by a speaker at CIES 15 years ago, Raymond
Ackermann hired a consultancy in the US to develop a succession plan, and Pick ‘n Pay now has
a CEO from outside the family while remaining firmly a family company.
Pick ’n Pay
Pick ’n Pay today runs 570 stores across several countries, employing 50,000 staff and generating
sales of $6-7 billion. Raymond Ackerman shared some anecdotes to illustrate how the company
anchors everything it does in the “Four Legs of the Table”:
• Raymond Ackerman once struck up a conversation with a customer of a rival retailer and
found out that she had stopped shopping at Pick ‘n Pay years earlier because a cashier refused
to take back an item, in breach of company policy. Ackermann took her name and address, as
well as those of her family and friends who had also deserted Pick ‘n Pay, in order to write
apology letters.
• When it was the victim of an extortion attempt, the perpetrator placing poison in cans of
food, Pick ‘n Pay was open with the press and the public. It benefited from its long-term
relationships, as Ackerman received piles of supportive letters referring to times when the
retailer had helped the customers concerned.
21
Looking to the future, Raymond argued that, while business practices must change, business
principles must never change. Above all, retailers have got to be “grasshoppers”, close to the
ground, because you never know it all, he concluded.
“Joint Venture number 6….”
Christian H.A.C. Morel, Chairman, China-Europe Management Centre, Honorary Citizen of Shanghai &
Chairman, Hello Europe Nihaoouzhou.com
Chris Morel shared his experience as a pioneering investor in China. He led
negotiations during 1978-1983 to create telecoms operator Shanghai Bell, a joint
venture involving Alcatel, and only the sixth-ever joint venture in China (versus a
cumulative total of 525,000 by July 2005). Compared to the initial target of $50
million per year in sales by 1998, Shanghai Bell reached $2.1 billion in
consolidated sales in 2003. The company has expanded its activities by
subcontracting installation and high-volume production, and creating subsidiaries
or joint ventures for specific products like mobile phones.
Chris Morel gave a variety of figures that illustrate the country’s size and rate of change: GDP
reached $2.2 trillion in 2005 (+11.6%), with a target of $4.0 trillion for 2020 (7.4% annual
growth); 200 cities will have more than 3 million inhabitants by 2020; local cars had a 26%
market share in 2005, double that of 2001; there have been 1.7 million new mobile-phone
subscribers per week in 2006; and three Chinese joined the Forbes list of dollar billionaires in
2004. This transformation of the Chinese economy has been driven by consistent long-term
policies, focused on exports in some industries, generating revenues to import technologies and
skills in others.
A major problem for China’s development is achieving balanced growth: GDP growth of 7% is
necessary to create jobs and avoid social tensions, but the government is having to slow down the
economy to avoid overheating. Other problems are the development gap between coastal and
inland regions, and the size of bad loans to state-owned enterprises (SOEs). However, the
current government is addressing these issues: it is notably encouraging R&D and innovation
with tax incentives to support the development of global Chinese brands (e.g. computer
manufacturer Lenovo); it is pushing SOEs to become more competitive – using China’s entry
into the World Trade Organisation (WTO) to drive momentum; it is opening up the banking
sector to competition (from 2007); and it is tackling regional inequalities by encouraging
investment inland and by abolishing the tax on agriculture.
So is China a benefactor or a malefactor for the world? It is a “blessing” for the world economy,
Chris Morel insisted, given its huge, growing domestic demand and low-cost manufacturing base
for export. Urban areas are expected to account for 75% of the population by 2050, creating
fantastic opportunities for growth. Ultimately, the Chinese do not understand Western surprise at
the country’s development: they see it simply as a return to their previous role in the early 19th
century, when China claimed 30% of global GDP, versus 7% today.
22
Cooperating to succeed:
How the Chinese Market will continue to develop under an open
policy
Mr. Zeng Wei JIANG, Vice Minister, Ministry of Commerce, People's Republic of China
Retailing has developed rapidly under China’s “opening-up” policy, Vice Minister
Jiang Zengwei explained. Consumer retail sales increased 42-fold during 19782005, with average annual growth of 15%, and retail chains – department stores,
supermarkets and franchise stores – now claim 12% of the total. Retailing has in
fact become the most market-oriented industry in China, with around 95% of
consumer goods and fresh produce distributed freely, and with heavy foreign
investment ($4.9 billion by 2005) that is accelerating following the ending of
restrictions on foreign direct investment in December 2004.
To maintain a good environment for retailing, the Chinese government has established six
priorities in its policy for the sector:
1. A clear regulatory framework for the sector.
2. A positive environment for investment, for example through measures covering consumer
rights, intellectual property and retailer-supplier relations.
3. Development of commercial networks in urban areas, with an emphasis on efficient use of
resources and a balance between different types of commerce.
4. Improving the competitiveness of retailers, encouraging large companies to develop joint
ventures or overseas interests, and small companies to acquire modern IT, logistics and
marketing practices.
5. Staff training in modern retail concepts.
6. Strengthening the role of trade associations to act as a bridge in the development of retailing.
Under China’s current five-year plan (2006-2010), retail sales are forecast to grow by 11%
annually to Y10 trillion ($1.3 trillion), and this will add renewed vitality to global retail, the Vice
Minister stressed. He encouraged companies to attend the Trade and Investment Fair in Central
China next year and looked forward to hosting The 2007 Summit in Shanghai.
23
Keynote Closing Address
Reinhold Messner
Reinhold Messner was born in the Dolomite Mountains in Italy, so it was an
obvious choice for him to become a mountaineer. He learned three important
things from climbing: to reach a goal you have to know exactly what it is; you
have got to know in advance how to reach a summit, as you can’t see what’s
further up while you’re climbing; and once you are on the rock face, you have to
forget everything else and concentrate on climbing. Reinhold Messner described
several periods in his career:
Climbing peaks
On his first Himalayan expedition, he left with tonnes of equipment and a large team, but
experience taught him that the ascent could be done with a few kilos, no oxygen and a very small
group. In climbing Kanchenchunga, the world’s third-highest peak but the hardest to reach, he
set off with a friend and a local climber and after a week they reached the summit. But there was
no celebration: it was too cold and there was too little air, so they started the descent
immediately. So why climb so high? When you see big spaces you feel reborn, you see how
beautiful life is, he explained.
Crossings
After reaching various peaks, climbing got boring for Reinhold Messner, so he decided to
attempt “horizontal” expeditions. After crossing Antarctica in 1989-90, he set out a couple of
years later to cross Greenland with his brother. They reached their goal after 35 days through a
mixture of walking and boarding (using a snow board and wind sail). Their motivation came from
the fact they chose the longest route – from north to south.
Accident and after
After an accident forced him to stop climbing, he developed other activities. He entered politics
by being elected to the European Parliament; studied the sacred status of mountains in many
places around the world – including Mount Kailash in China; and also became a self-sufficient
farmer in the South Tyrol in Italy.
The Gobi Desert
After five years doing other things, Reinhold Messner had the idea of crossing the Gobi Desert.
When he asked the Mongolian authorities if he needed a permit, they said there were no rules
since no one would be crazy enough to attempt it! The first 1,000km went smoothly as he was
able to move between nomad camps. But in the middle of the trek there was a 300km stretch
with no people or water. He calculated he needed 10 days to cross it and took 35 litres of water
with him. But at 60 years of age, he was unable to do 30km per day and was soon running out of
water. He decided to push on and after 10 days was saved by Mongolian police patrolling the
border with China. They set him on course for the final 800km, which he completed.
Mountain museums
You need new ideas and projects, Reinhold Messner reiterated, and his current adventure is
developing a chain of museums about mountains (the fourth one opened 10 days ago in the
South Tyrol). They tell the stories of mountains, particularly their sacred significance as shown by
the connection between most religions and mountains. The museums are thus not about art or
nature but human nature: we go to mountains to see the hidden angles of our soul, he concluded.
24
Closing Remarks and Handover of CIES Chairmanship
Claude Hauser, departing Chairman of CIES – The Food Business Forum & Chairman of the Board of
Directors, Federation of Migros Cooperatives, Switzerland
Roger Corbett, new Chairman of CIES – The Food Business Forum & Chief Executive Officer, Woolworths
Ltd, Australia
Claude Hauser thanked CIES members for their support during his chairmanship. The Paris
Summit, featuring a dozen CEOs on stage, had shown that the industry is aware of both its
strengths and its responsibilities, he underlined.
Roger Corbett congratulated Claude Hauser on overseeing a period during which CIES
conferences were full and marked by great programmes. Setting out his priorities for his two-year
term, Roger Corbett argued that there has never been a time in the history of retail and
commerce where international cooperation and opportunity have been greater, especially
regarding the industry’s fundamental mission of “feeding the people of the world in the most
economical and effective way.” CIES would remain pertinent in debate at all levels, he promised,
from broad issues like globalisation and social responsibility to basic operational concerns like the
ability to open stores tomorrow morning. He encouraged members to attend the 2007 Summit as
an opportunity to see the economic drivers that are China and its great commercial city of
Shanghai.
25
Networking moments facilitated by the Official Sponsors at
CIES World Food Business Summit
26
27
Innovation Zone
See you in Shanghai!
28
MARK YOUR DIARY
51st World Food Business Summit
20-22 June 2007
Pudong Shangri La, Shanghai
People`s Republic of China
CIES – The Food Business Forum
International Headquarters
Paris
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info@ciesnet.com
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Fax: +81 33 504 3663
a.okumura@ciesnet.com
CIES - The Food Business Forum works in
partnership with the China Chain Store and
Franchise Association (CCFA)
Tel: +33 1 44 69 99 22
c.leung.vermorel@ciesnet.com
29

Paris, 21-23 June 2006 - The Consumer Goods Forum

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