Monday, March 17, 2008

The supermarket shakedown

In Morocco, like in Ontario, there are a few main supermarket competitors. The big kid on the Moroccan block is Marjane, a superstore similar to Walmart superstores in the USA.

There was one major direct competitor with Marjane - Aswaak Salaam. They were better for their bakery, their meats, and their produce, but well behind Marjane in most other areas, particularly selection and imported goods.


The focus of this blog entry is about Canadian supermarket giant Loblaws. Fifteen years ago, Loblaws was in trouble. They were struggling among a plethora of similar supermarkets when Dave Nichols took on the job as president of the company. He turned Loblaws around, taking it from a struggler to an industry leader.

His strategy was simple. It started with the President's Choice brand, most notably at the time, the President's Choice Decadent Chocolate Chip Cookie.

Loblaws previously had their no-name-brand discounted foods. President's choice was the opposite, the premium high-end stuff everybody went mad over. David Nichols himself came on commercials touting new and exotic products. The Memories line of sauces he'd tasted as a food connoisseur travelling the world, Scezchuan; Hollondaise; Kobe. As well as delicious classic American desserts like New York Style Cheesecake and Mississipi Mudpie.

Loblaws soared, and it was the President's Choice line which set them above their competitors and turned them into Ontarios favourite supermarket.

While in Morocco, I thought Aswak Salaam could use a similar strategy. Something lacking in Morocco is imported foods and quality packaged foods. The Decadent cookie, for example, tapped into a market where most packaged chocolate chip cookies were considerably below average.

Aswak Salaam had their bakery, but stuck to the typical French pastries. It wouldn't have been too difficult to find a few exotic recipes, put on a marketing/taste-testing blitz, and create a product loyalty with hot items that middle classes flocked to buy.

In University, I studied retail marketing and remember it as one of a handful of classes I really enjoyed. The course content still feels fresh in my mind because of my keen interest level. I could see the textbook descriptions in supermarkets and malls where I shopped every week.

Having been away from Canada for most of the last ten years, I was a bit shocked to return to Loblaws.

Part of what we studied in my University retail class was brand power. Take Coca Cola for instance. They have their regular Coke, their diet Coke, and a few other spins on Cola, but all very close to the original product.

Companies have to be careful when extending their brand names. Brand extension can create confusion, or at worst, turn customers off. Coca cola found this out in 1985 when they created the product 'New Coke.'
The die-hard consumers felt alienated that their Classic product had been changed. Sales of the original product suffered dramatically, and the company soon removed New Coke from the market entirely.


At Loblaws. Former president Dave Nichols had built the PC brand. Gradually, they extended from cookies to sauces and frozen desserts, but they were always careful to only apply the PC name to excellent quality products. They were building both a brand, and an image for the supermarket as superior to their competitors.

When I returned to Loblaws recently, in February 2008, I quickly realized that this careful brand extension strategy has been replaced by the President's Choice label on practically any product in the supermarket. The current president, like a fallen celebrity on skid row, attached the name "president" to any product. One of my first purchases upon returning to Canada was PC Cranberry juice.
My first annoyance with the product was that, on the label, there was nowhere that it obviously says the cranberry juice is diet or sugar free. My second beef is that it tasted more like fermented cat piss than the tart Cranberry juice I was expecting.

As I walked around Loblaws a few days after that unpleasant experience, I realized just how much the PC label, once an iconic rising brand, was on virtually every type of product in the store.

The vision of the president's decadence as he bites into a delicious desert his chefs had perfected, or of him travelling the world to discover the best dishes, is now replaced with repulsing visions of him wiping his ass with PC toilet paper, then tasting his PC dog food, and washing it down with that horrible cat piss cranberry drink. His cupboard is lined with PC Bleach, PC paper towels, PC ketchup, PC baby food.

PC is no longer a great brand. It's an overextended brand with too many products it has no business being in. Dave Nichol's left Loblaws a long time ago. Had he not, they might be a giant in todays markets. Instead, they are back to being a struggling supermarket.

Had I been President of Loblaws, I would have kept the PC product range narrow. Ketchup, for example, is too generic and too competitive. The PC products I introduced would be things that the majority of people had only ever tasted once in an exotic restaurant.

Unlike trying to extend the brand to every possible product that might sell, I would have instead tried to invade major US supermarkets with the superior PC brand. Either through alliances, or through more aggressive takeover strategies.

Had this been a University report, I'd show graphs and data to back up assumptions that Loblaws has been struggling since overextending the PC brand. Unfortunately, I'm short for time. But I wanted to get my thoughts on this issue out as Loblaws downfall was one of my first disappointments upon returning to Canada.

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