BrandWatch by Michel Gutsatz

Great Value: An Asset at the Service of Walmart’s "Green" Image

Last November 19th, MyPrivateBrand blog told us that Walmart, Mexico, was presenting a new line, "Great Value Terra", at the PLMA 2009 fair. This consists of a range of "green" cleaning products with the catchphrase "Cuidemos Nuestro Planeta" - "Let us care for our planet”.
The "white and blue" graphic identity of Great Value has been enhanced with green: the Terra range, the catchphrase, product benefits and a graphic element - the "leaves" in which products are presented.
Launched and therefore tested in Mexico, it is likely that this range will arrive in the United States soon.
The creation of this "green" subcategory is totally consistent with the Walmart strategy that I discussed on September 6th on BrandWatch:

“Another aspect that struck me is that Walmart's own flagship brand serves as media support to put the sustainable development promise into practice. Great Value becomes the spearhead of Walmart's strategy: cheaper products, good quality, and involved in the "sustainable" strategy of the retailer”.

The Consumers Take Control: The GoodGuide Case

One of the topics to which I frequently return in BrandWatch is the taking over of power by consumers: all mega-trends that I have been analyzing in my studies show that the balance of power between brands and consumers is changing. The preferred tool for this empowerment is the Internet, and Web 2.0 in particular. I shall analyze a recent example that originates in the USA. 

The New York Times of June 14, 2009 announced that Dara O'Rourke, professor of environmental policy, University of California, Berkeley, had launched a website, GoodGuide.com, the purpose of which is to provide consumers with more information about consumer products: When a name is entered, one obtains all the nutritional, environmental and social information concerning it, and information about the company that introduced it in the market.
The objective is to measure the impact of each product on (See the methodology adopted here):

• Consumer health when using the product;
• The health of the employees of the companies - by analyzing methods of production and the risks involved;
• Environment - Analysis of the life cycle of the product (among other criteria);
• Society - Analysis of the social policies of the companies, governance, etc ...

This is a proper expert system, that gathers information from dozens of independent sources. More than 70,000 products in food, beauty, home maintenance, etc. have been analyzed and recorded. The beta version currently available, gives the average prices found on the Web for certain products. We learn that the cereal best rated is "Nature's Path Organic Kamut Puffs" (rating of 8.3 out of 10)… and another organic product has the lowest rating: "Kashi, Strawberry Fields Organic Cereal" (rated 4.1).

"What we're trying to do is flip the whole marketing world on its head", said Mr. O'Rourke. "Instead of companies telling you what to believe, customers are making the statements to the marketers about what they care about".
To illustrate this reversal of power, it is worth noting that the iPhone has an application that scans the barcode of a product on the shelves: All the GoodGuide information concerning this product is then downloaded.
Brands must be vigilant and anticipate the development of such initiatives - which I will put on a par with the announcement of the Sustainability Index by Walmart. They will have to reflect on the consequences of this converging movement of consumers and some retailers (mostly American) and therefore fundamentally rethink their values to align them with the fundamental values of the new ethics of consumption that we see emerging before our eyes: respect and transparency.

Tiffany and "Ethical" Diamonds

The headlines of the Wall Street Journal of October 26 read: "Diamond Industry Makeover Sends Fifth Avenue to Africa". This article, however, only concerns Tiffany: the U.S. luxury brand has set up a factory in Botswana, through its subsidiary, Laurelton Diamonds, company responsible for cutting and polishing diamonds. This is the result of a strategic choice that consisted of establishing vertical integration in order to ensure a supply of diamonds for the brand at a time when producers such as De Beers have entered the retail market by creating their own brand. Since an initial investment in mines proved risky, Tiffany decided to invest in production units for cut and polished diamonds in Canada, Belgium, South Africa, Vietnam and China.
The case of the Botswana factory is interesting. This country has two advantages: it is one of the largest producers of diamonds in the world AND one of the least corrupt in Africa. Tiffany found a considerable advantage: not having to obtain supplies of "blood diamonds" from countries such as Angola, the Ivory Coast and the Congo. Indeed, the United Nations (since 1997) and world opinion relayed by the media have questioned these sources of supply. But in 2006 Botswana authorized new companies to buy uncut diamonds ... if they built units for cutting and polishing them and trained local workers in these techniques.
The factory associated with Tiffany opened in 2007 and Indian and Mauritian artisans came to train the Botswana employees. But the article tells us that the workers went on strike, in protest against the working conditions: they say the plant is "prisonlike", they are threatened by the managers and have no right to variable salaries like other employees.
Tiffany is faced with a real ethical dilemma: to avoid "blood diamond" sourcing, the brand has to transfer know-how to African employees. However, if the contentions regarding working conditions are true, the brand has merely replaced one evil with another. When the newspaper raised the question of the origin of its diamonds to Tiffany's CEO Michael Kowalski, he replied: "We really want the focus ... to be on the quality of the diamond ring, not how it came to be". Here is a CEO who does not understand the paradigm shift that we are living today: customers want both excellent diamonds AND to know where they come from. I wager that they will also keep an eye on the working conditions of the Botswana factory workers. I urge Michael Kowalski to read the 15 questions asked to Walmart's suppliers in its "Sustainability Product Index". The 4th chapter titled "People & Community: Ensuring Responsible and Ethical Production"; question 4 of this chapter is: "Do you work with your supply base to resolve social issues found during compliance evaluations and also document specific corrections and improvements?".  If Walmart, the iconic American company, raises the question of responsibility and ethics amongst its suppliers, how does Tiffany, another iconic American company, think it can avoid it?

The Walmart Strategy in India: JV & Private Labels

On BrandWatch, I referred several times to the new strategy of some U.S. retailers (like Safeway), which consists of building a private label in the U.S. and then selling it abroad at other retailers' outlets - making it into a true national brand. IndiaRetailBiz now tells us that Walmart is implementing a similar strategy in India. Walmart, in November 2006, signed a joint venture with Bharti Retail - a subsidiary of Bharti Enterprises, a company of the Mittal Group, which specializes in distribution. It turns out that India does not (yet) authorize foreign investment in multi-brand retail so Walmart stepped in, in two different ways:

• Walmart provides back-office consultancy in technology, logistics, supply chains ...
• Walmart formed a 50/50 JV, the ultimate purpose of which is to build a chain of Wholesale Cash & Carry stores (where foreign investment is allowed): fifteen of these wholesale stores named "Best Price Modern Wholesale" will be opening in India in the next 3 years - the first was opened in Amritsar on the 30th of May.
  
  

  

  


The question of retail and direct access to consumers then comes up. The answer was simple. Bharti Retail opened stores under the "Easyday" ensign (there are thirty in the Punjab and Haryana - and now in Delhi). These stores have two distinct features:

1. Their graphic identity is a replica of that of Walmart: we are at a Walmart without being there, formally speaking. 

   

   

   

   
 
 
2. Their assortment of private labels (which today represents 15% of sales, and is expected to increase to 30% within 3 years), includes 8 Walmart private labels - including Great Value, George, Equate ...

We find ourselves, for all practical purposes, at one of Walmart's partners, but the American retailer establishes itself in the Indian distribution landscape without doing so officially, by means of its products and its graphic identity: when the Indian regulations change, only the sign will have to be modified and the name Walmart attached.

Walmart Launches the "Sustainability Index"

On the 16th of July Walmart rallied hundreds of suppliers to present their latest initiative: the "Sustainability Index". Walmart enters the world of "sustainable consumption": it has decided to create "a new retail standard for the 21st century" and all its suppliers (brands as well as sub-contractors) will have to adapt.
Walmart bases this on three social facts which will guide their strategy from now on:

• The economic crisis has led consumers towards a new approach to spending ("a new normal"): "they are getting smarter about saving money".
• In our era of growing social networks, the Internet and instant (and shared) information, consumers demand transparency: there can be no confidence without transparency.
• The world population is growing while its resources continue to decrease. While more and more consumers in developed and emerging countries want a better lifestyle ("live better"), access to the middle class standard of living - with increasing pressure on energy and waste accumulation.

As Mike Duke, Wal-Mart CEO, explains: "What this does mean is that we have a responsibility to our customers and to society to keep the "live better" part of our mission relevant in a changing world".

The "Sustainability Index" is the result of this strategic reflection. It will consist of 3 stages:

1. Wal-Mart is going to ask its 100 000 suppliers to answer 15 questions (Téléchargement Sustainability_Product_Index_1 ) concerning the sustainability of their practices (the major U.S. suppliers are given a very short time in which to answer - until Oct. 1), on 4 subjects : reduction of energy costs and greenhouse gas emissions / waste reduction / accountable sourcing procedures and certifications / ethical and accountable production.
2. Wal-Mart is creating a consortium of universities ("Sustainability Consortium") to associate with suppliers, distributors, NGOs and government agencies to build a database on product lifecycles. This information will be available to EVERYONE on an open platform.
3. The information collected will be translated into a simple tool to inform consumers about the sustainability of the products they consume.

This initiative is remarkable from three points of view:

• It is a concerted effort: Walmart invites all stakeholders to join in and share information - and eschew the traditional distributor logic. The initial list of the parties participating in the "Sustainability Consortium" is impressive: Procter & Gamble, Cargill, Colgate-Palmolive, General Mills, Henkel, Monsanto, PepsiCo, Johnson, Tetra Pack, Tyson, Unilever, Waste Management, Alberto Culver, Clorox, ... The only ones missing are the European and Asian groups.
• It is global: Walmart sees this project as universal.
• It throws up new and redoubtable questions that the brands will have to answer: responsible production, responsible sourcing, reduction of waste, etc.

Decidedly the 21st century will be exciting! As a bonus I offer you the video of the day:

Walmart, Sustainable Development and Great Value

For a year now I have regularly written about the new "Sustainable Development" strategy that Walmart has implemented since 2005. I have emphasized it even more, since the No. 1 distributor in the world has a major impact on all its suppliers, namely, the national brands – as happens when Walmart imposes a reduction of 5% on the weight of packaging or introduces a Product Sustainability Index (which I will come back to next week).

I followed a second line of reflexion focussing on a recent and major inflection by Walmart: the extension of its own private label collections. We have tracked the Great Value re-launch. One may also wonder about the future of the principal private label, "Sam's Choice", when we see products traditionally signed Sam's Choice progressively migrating to Great Value (thank you MyPrivateLabel for the photos!): 




I would like to draw your attention today to the convergence between these two strategic axes, and invite you to watch a video posted online recently by Walmart, "The Secret Life of Sour Cream".


What strikes me in this film is the mutual approach that Walmart has established with its suppliers. Since October 2008 a programme called "Walmart Aspect" was set up with 500 private label suppliers, with a view to re-launching Great Value: this is a "Product Lifecycle Management (PLM)" process set up on the Internet, collaborative in nature, in order to optimize the manufacturing process, to speed up innovation and improve consistency.

Another aspect that struck me is that Walmart's own flagship brand serves as media support to put the sustainable development promise into practice. Great Value becomes spearhead of Walmart's strategy: cheaper products, good quality, and involved in the "sustainable" strategy of the retailer.
Finally, I would bring up a question I ask regularly: what happens to national brands? Remember that private labels now account for 22.5% of the Walmart sales volume (17.6% in value) and some analysts predict that this figure will climb to 40% within 3 years! Remember also that Walmart has rationalized its offer and brought it down from between 10% to 50%, depending on the products ... and saw its sales grow! "The more SKUs we took out, the more business went up", said John Fleming, Exec VP and Chief Merchandising Officer. National brands that are not No. 1, or No. 2, or niche brands, without a distinctive offer, should be concerned.

The Walmart Paradox

A recent poll taken among American consumers came up with this contradictory result: Walmart is cited as the company that is the MOST responsible socially and environmentally, AND AT THE SAME TIME the LEAST responsible!  This apparent contradiction is masterfully analysed in "Triple Pundit": click here to read this excellent paper.
It brings up three essential points:

• We live in a period of transition – where new challenges are forged (such as social and environmental accountability), and where the effort required of brands and retailers to deal with these issues is considerable: Rome was not built in one day ...
• Walmart understood (since 2005 - see my notes of 2008 on the subject) that these issues are in the process of restructuring the 21st century and that it is their responsibility to drive this force: that is where the true force of a real visionary retailer resides. 
• Walmart shows the way for others (I should say, "the action taken by Walmart will oblige all retailers and brands to follow the same path"), whether they are its competitors or suppliers (brands), each of them will have to implement real and consistent policies for comprehensive environmental and social accountability.

Even Walmart Can Falter ...

Since December 2008 Walmart has been testing a new store concept in Arizona (to compete with Tesco's "Fresh & Easy"). This involves food supermarkets from 1,500 to 2,000 m2 (that is, half of their smallest size "Neighborhood Markets") called Marketside. "Who We Are: not just your typical grocery store": the signature and corporate colours (apple green and wine-coloured), immediately situate us in a world far more upscale than the traditional Walmart store. Dedicated exclusively to food products, focusing on fresh produce and meals prepared on site ("No time to cook? Count on Marketside"), these stores offer menus Téléchargement Marketside_Menu and products at the lowest possible price ("Marketside, where fresh costs less").

Designed to attract more demanding – and more affluent – consumers, the Marketside logo showed stacks of fruit and vegetables … and did not make any reference to Walmart. 

One can understand this choice: do not influence the opinion of the targeted consumers with the low-price image of Walmart. But voila, it seems that this concept does not work so well because Walmart has decided (very discreetly) to change the name and logo of this brand: the fruits and vegetables are to vanish and a signature "by Walmart" will appear.

Walmart therefore reacted very quickly, realizing that the image projected by this site was too high-end and that consumers did not notice that the prices were indeed quite low. Outcome: reinstate the Walmart name to capitalize on its image and price.

Walmart's Redesigned Value Range is Launched

On March 8th I offered you a "preview" of Walmart's new private label strategy – indicating that the information I gave you was "under reserve".  Walmart has officially just announced the "Great Value" launch on March 16: "Walmart’s Revamped Great Value Brand Delivers Affordable, Quality Choices When Consumers Need Them Most. Retailer Transforms its Great Value Brand with More Products, Consumer Friendly Packaging and Improved Quality".
We find all the features that I described: the highlighting of the brand / white pack / emphasis on product quality / suggestions on the rear / the "Sun" sign indicating affiliation of the private label to Walmart ... and bilingual English / Spanish wording.

"With a strong focus on better quality, Walmart worked with several hundred suppliers and product testing facilities to:
     * Test more than 5250 products against leading national brands to ensure Great Value quality is equal to or better;
     * Conduct more than 2,700 consumer tests to compare the flavor, aroma, texture, color, and appearance of Great Value products against leading national brands;
     * Change the formulas for 750 items including: breakfast cereal, cookies, yogurt, laundry detergent, and paper towels, and
     * Introduce more than 80 new products, such as: thin crust pizza, fat free caramel swirl ice cream, strawberry yogurt, organic cage-free eggs, double stuffed sandwich cookies, teriyaki beef jerky and more, all at unbeatable prices.
"Walmart remains committed to providing our customers with quality national and private brand products at unbeatable prices," said Andrea Thomas, Walmart's senior Vice President of private brands. "Through our Great Value brand re-launch, we are delivering on our promise to provide customers with the quality products they need and want at a price they can afford to help them save money and live better."

 

Walmart: The 'Great Value' Revolution

For several months now Walmart has been announcing a graphic refont of its "Great Value" low price range. Indiscretions on the web, apparently acquired from an inhouse presentation (provided that the slides that one finds on Slideshare are genuine!), give us an idea of the magnitude of the change. I offer you here a quick "before / after" analysis.
 
Three elements characterize the identity of the Great Value brand today:

• A color code typical of the low price range: blue and yellow (think of Leclerc's Eco +, for example)
• A brand name expressed in "minor": placed vertically at the bottom right of the pack.  It is overshadowed by the product visual, and the product name which occupies the top of the pack. It is more of a signature guarantee than a brand asserting itself as such. Also, "Value" is more prominent when compared to "Great".
• Product visuals, extremely "natural" and pervasive: packs that are very colorful, not conspicuous next to those of national brands.

By and large, Great Value is not presented with the attributes of a brand and, in particular, does not mention quality at all. The project that is presented to us is of a different nature: