October 31, 2023
UK Managing Director at Ceuta Group, Annette D’Abreo, is joined by Capability Consultants, Dahlia Stroud and Mark Hermeson to discuss how Health & Wellness suppliers and retailers can work together to capitalise on opportunities, delight shoppers, and drive growth in ever-changing economic times.
As prices continue to rocket in the UK and consumers demand more affordable self-care solutions, building synergy can be a game changer for retailers, suppliers and shoppers alike. In a complex, competitive industry like Health & Wellness, collaboration is the key to success in 2024. The question is how…
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“There’s always opportunity in every adversity and diversity post-COVID is that there are now new opportunities to extend these new sort of touch points for Health & Wellness.”
Annette D’Abreo 00:13
Hi, I’m Annette D’Abreo, UK Managing Director at Ceuta Group, and this is the original Ceuta Group Podcast. Today, I’m joined by Ceuta Group’s Capability Consultants, Dahlia Stroud and Mark Hermsen. We will be discussing the impact of markets and economic changes on supplier, retailer and shopper relationships, what the future looks like, and what Health and Wellness brands can do to retain strong client relationships during price rises. It’s a challenge that has become increasingly prevalent in the past few years in the UK and around the world. So — happy to have you both here.
Mark Hermsen 00:50
Annette D’Abreo 00:51
Mark – first of all, to you. What have been the key drivers that you’ve seen in the last 18 months?
Mark Hermsen 00:56
Wow, there’s, there’s been incredible changes in the last 18 months, we’ve seen huge pressures on both retailers and suppliers, in terms of the level of cost price increases in the market. And why that’s put pressure on both retailers and suppliers is that retailers traditionally work off low margins anyway, sometimes as low as 2 to 3%. Which, you know, means that retailers have had to pass through, you know, these increases from suppliers into the market. And there’s been, you know, speaking from experience here, there’s just been a never ending range of cost increases that have come through related to raw materials related to kind of supply chain and logistics, related to fuel. And they’ve all come at the same time and compounded things, you know, for both retailers and suppliers. So it’s been such a tough period of time, you know, I’ve worked in this field for 20, over 25 years, and I’ve never known anything like it. So it’s really, really been a tough period. I think the other thing that happened during COVID, specifically within Grocery and Health and Wellness as well, is about availability in stores, and availability of products. So, yeah, log jams in the supply chain, which is mean, which has meant that products not being available on the fixture. And what does that mean, that’s meant that, you know, consumers have had to take care of their health more themselves, you know, the pressures on the NHS, during the back end of COVID. And the after effects of that, and also access to GPs, you know, I don’t know if it’s the same for anyone else, but I found my GP, you’re on speed dial, trying to get through, you know, so you know, as a result, consumers have taken on self care themselves. And I see that as an opportunity for retailers and suppliers for connected retailers and suppliers to exploit those opportunities. So yeah, tough, tough times.
Dahlia Stroud 02:59
I think I heard it described really well. And we went from kind of, one crisis to another crisis. And actually, it’s just a perma crisis. And we’ve all become used to working in a heightened sense of crisis in a way that a few years ago, we didn’t really see. So that there is just more tension around everything we do, which can potentially cause a lot more friction in terms of the way we work. And the way we engage as well, which is obviously we’ll talk about relationships. Yeah, it’s something to be really mindful of. And I think actually, there’s that real demand from a consumer perspective, in terms of not just make me well, when I’m poorly, but keep me well as well. So how can I make sure that what I do really supports me to make me fit for the future. So that real Wellness mindset is coming through more and more.
Annette D’Abreo 03:41
Yeah, we’re definitely seeing that. So what do you think’s been the impact on the supplier and the retailer relationship?
Mark Hermsen 03:49
Well, things have become more one dimensional, it’s been very focused around price. And that has taken up a lot of the agenda, a lot of the conversation has defaulted to that which is, which is a shame, because, you know, traditionally the best suppliers and the best kind of connected retailers and suppliers, they’ve got kind of multiple contact points across their businesses. And a lot of those have suffered. So whether it’s kind of building joint marketing plans, investing in strategic initiatives, they’ve all suffered. So things have become very one dimensional and transactional in a way, which, you know, is kind of lingered on. I mean, there’s potentially green shoots of recovery. We’re just seeing last week signs of, you know, early signs of things slowing down and essentially deflation next year. But you know, it’s it’s, it’s become one dimensional, but as I said, there’s always opportunity and every adversity and the adversity. Post COVID is that there are now new opportunities to extend you know, this new sort of touch points for Health and Wellness. There’s new areas opening up. I mean, look at the movement with football and mental health focus in the last couple of years ago, a lot of football is coming out and talking about their own mental health. And people, and particularly men, starting to feel more comfortable about talking about their mental health, which is, you know, really, really great for society and also opens up the opportunity for a new market there as well.
Annette D’Abreo 05:18
So really, it’s lifting it above the whole price argument, isn’t it? It’s got to detract away from that. And the brand’s got to be much more than that.
Dahlia Stroud 05:26
It’s got to be more holistic than than just kind of fight on price, and I think when you talk about supplier retailer relationships, and some of the impact we’ve seen, across both sides of the table, I think people are exhausted, they’re exhausted of having the same conversations and almost reacting to the market. And now hopefully, for 2024. And unfortunately, I think this was very much a mindset for the last couple of years, which didn’t manifest is that opportunity to reset? How do we want to proactively plan for the future? What do we want to deliver together? What do consumers need more so than how to react to some of those market dynamics, which have really impacted how we’ve traded in the last few years. And I think I would say for anyone listening who’s a retailer or a supplier, really think about how you create a reset moment with the people that you’re working with, to really be proactive in the future, about the opportunities that exist within those Health and Wellness categories to drive growth.
Annette D’Abreo 06:16
So that really, that’s all about having strong relationships really and if we don’t have that collaboration, then things start to break down. So your view about the importance of that.
Dahlia Stroud 06:29
Yeah, I mean, it’s everything that is important in terms of supplier retailer relationship collaboration, and for me, it starts with trust and transparency. And that isn’t always about open book costing or whatever it is, it’s just very much about the respect and the integrity between the two businesses that are working together. And that ability to see that you’re working with someone else as a partnership. So yes, you might be supplying a retailer, but it’s employing that one p&l mindset to drive growth. And I think it’s about facing into challenges together, but also recognising opportunities together as well. So Mark referenced deflation, we’re absolutely seeing some of it coming down the line, how can businesses work together to recognise that and to think about where to reassess the value chain to be able to create value for the consumer and drive that category growth? And I think it’s important to really think about actually, how do you use insight to support that? How do you face into challenges together? And how do you make sure that what you’re doing really drives that incrementality for both businesses as well, I think that’s really key.
Mark Hermsen 07:29
I think it’s about simplifying in a complex market. Yeah. And that’s really where the insights come in. If you can develop really pertinent, clear insights, it’s about making things easier, you know, the responsibility of the suppliers to make things easier for the retailer. Yeah, you know, so if you can do that, and you can, you can demonstrate how you can anticipate trends as well in the market, you know, and react to what’s happening, you know, the likes of, you know, boots, expanding their health, sorry, Sainsbury’s expanding their Health and Wellness fixture, you know, with the word Superdrug, streaming online with premiumising their offer, it’s important to keep close to the pulse and anticipating, and predict what’s going to happen.
Dahlia Stroud 08:10
It’s definitely about relevance. And obviously, we’ve talked about these challenges from an operating profit perspective, the opportunity is for suppliers to work with retailers to think about how they really optimise their range, how they make sure that they protect choice for the consumer, but make sure they do it in a way that’s going to be more efficient and drive value for both parties as well. And I think we’ve been guilty, historically of thinking always from a supplier perspective, that more distribution points is more value. And that’s not always the case, it’s about understanding the opportunity for channels and the opportunity for specific products to meet consumer needs. And being relevant in the right places rather than kind of all things to all people, and actually from a supplier retailer relationship perspective, thinking about how suppliers can really understand retail strategy and create synergies that is really valuable to be able to drive growth together and have those joint partnerships mindset.
Mark Hermsen 09:01
In some ways, things have not changed from how they used to be, you know, this is how suppliers and retailers worked pre COVID. But I think a lot of what happens particularly in the commercial world, you know, took a break during COVID, people were working differently, they were having meetings at home, you know, teams call zoom, you know, sometimes you got to get out there again and meet people face to face. You know, remember how we used to do things, you know, this linking up, you know, and connecting with different parts of organisations how we used to do it. This is tried and tested. It’s just kind of reverting to those ways of working with plenty of new opportunities within the category because they’ve expanded. So it’s an exciting time, actually.
Annette D’Abreo 09:40
And I think just just going back a bit with the work sort of work that that you and your teams do. It’s it’s also about early engagement, isn’t it? It’s about bringing those people having that face to face bringing people together in the room and having everyone collaborating, which is what’s which is things that’s what you facilitated for a few brands, which has led to some great success.
Dahlia Stroud 10:03
Absolutely. So I think that collaboration is really key. And it’s moving away from the mindset of buyer and account manager and thinking about what resources sit in both businesses, and how can you come together, like you said, we call them ideation sessions. So bringing together the supplier and the retailer to say, what’s the insight telling us? What do consumers need from us? And how do we work together to create a brilliant idea in that space. And it isn’t just about the people in the room to create the idea, but it’s about making it actionable as well. So having the right people in the room who can take it from an idea and really take it to shelf edge to meet consumer needs, and actually doing it between supplier and retailer creates that joint accountability for – how do we do this together? How do we have a kind of one business mindset? And how do we make sure that we then review it together as well and understand the success? And I think you’re absolutely right, we reference brand days, and it is quite a traditional way of doing things and coming together to collaborate and think about ideas from an embryonic perspective together can sometimes generate far more opportunities than than a supplier retailer tell? Or the other way around? In terms of what do we need? It’s about how do we have that joint mindset about creating opportunities?
Annette D’Abreo 11:10
Yeah, I mean, that’s a really important point, it’s no longer about the tail. And I think that’s still out there that you’ll come in with this traditional way of presenting. They don’t necessarily want to hear that.
Mark Hermsen 11:22
This stat is 75% of teams are dysfunctional. I mean, if that’s not an opportunity to kind of help retailers and suppliers work together, I don’t know what is, you know.
Dahlia Stroud 11:32
I think that’s a really interesting point. Because it’s not just about what we do when you think about that supplier retailer relationship, but it’s what’s our way of working across our teams as well. So how are we connecting our resources in the right way? How are we planning our processes together? How are we evaluating performance together, and that is all part of a joint business plan. So, I would suggest that retailers and suppliers think not just about the what but about the how they work together as well, and how they leverage insight together, how they learn from one another, and how that facilitates growth.
Annette D’Abreo 12:02
And also Dahlia, your own background being from Asda, and we have members of the team who are x retailer, buyers, and that just ability to understand how you’re thinking is absolutely critical, really.
Dahlia Stroud 12:18
I think so. And I think obviously, I’ve bought for quite a while. So understanding from a supplier how to get the best out of a relationship, it’s really thinking around, are they listening to the retailer needs? And are they coming back and saying this is where the opportunity lies because of that. So rather than as I said before, kind of a blanket approach or a best fit across all retailers. It’s actually how do you target to meet your consumer and to meet your retailer as well, and and Healthcare is such a broad spectrum from some of the research that I’ve done in previous roles, we’ve really started to understand that you need to take people on a journey to healthier, but that journey might start in very different places for different consumers and for different retailers. So really understanding where they are and bringing them forward. And that balance of educating, but also moving at a pace that’s relevant for them is really important.
Annette D’Abreo 13:06
Yeah, and I think that’s also why some suppliers have that better, broader relationship, because they’re able to bring buyers in Grocery in Multiple Pharmacy and Independent Pharmacy, etc, just a bit more of the background as to why – what is the trend that has led to us being here today.
Dahlia Stroud 13:27
And it’s about understanding where the growth will come from as well in the future and what consumers are demanding of the different categories. So you can look at obviously the volume today in some of the kind of clear areas like pain, but actually some of the growth that’s coming through is not just about the kind of fix me for now. But as I said before, it’s about the how do I stay fit for the future? So it’s about vitamins. It’s about immunity support. So all of those things are new and emerging trends. And it’s about that kind of proactive stance of how do we get ahead? And how do we remain agile in that space as consumer needs change over time?
Annette D’Abreo 14:00
Yeah. So Dahlia, this one’s for you. What do you think the future looks like?
Dahlia Stroud 14:03
Well, gosh, that’s a really good question. And I think you’ve got so many different things coming down the line. And as I said before, the presence of kind of awareness of health in front of mind for consumers more than ever, and you’ve got legislation coming down the line in terms of smoke free Britain for 2030. So huge questions there in terms of the opportunities from a smoking cessation perspective, really that kind of mindset of where that incomes going to go and where that size of prize, in terms of the wallet will sit lots of questions around the future of vaping and what that means, what the NHS are doing within that space. And then you’ve got legislation that’s already landed like HFSS, which is broader in terms of food, but really thinking about how do you tackle the obesity crisis? And in all of those spaces, there’s actually physical spaces up for grabs and retailers to think about how do you sell different things and how do you drive that Health and Wellness offer at shelf edge? I think obviously, that there’s a huge amount of change from a packaging perspective and some real demands in terms of sustainable living. The Health and Wellness category is hugely packaged, some of it because it’s got to be in terms of protecting the product. And that’s really important and product quality and efficacy is really key in this space. But there will be some packaging that can be re-evaluated. And I would encourage people to not be scared about the cost of sustainability. And think about how you innovate and approach sustainability in a way where you can think about assessing your whole value chain, and really get some opportunity out of it. And all of that comes back to those ideation sessions, the collaboration, and the joint thinking between suppliers and retailers about how you do, do these things. And leveraging opportunities together, I think we’ll see a huge amount of demand for healthcare that’s related to aesthetics and that kind of holistic view of kind of shampoos with vitamins in and things being enriched in terms of the nutrition that they bring to you and how they really, I guess, give you you more than they have previously in some of that space, and an explosion of online as well. I think you had some interesting points there, Mark.
Mark Hermsen 15:58
I think, just the other point to add to that really is the current one not just unique to this category, but also around kind of security and pilferage that you’re seeing within, you know, pervasive across society at the moment, it’s a huge problem. So in a high value, particularly free premium, as we’ve talked about earlier, earlier, you know, the high value items and how we protect those and secure those along with the packaging that’s sustainable. It’s also fit for purpose packaging. I mean, I remember 20 years ago, show my age working with Gillette and they were securing their razor blades, you know, because they were the most highly pilfered item on the fixture. But as we premiumise, it is a consideration and important consideration that we need to build into our plans as well.
Annette D’Abreo 16:38
Correct. I think, quite often you’ll go in and present your product and, and it would get to the well, not maybe not today, but certainly a few years ago, you’d get to the 11th hour about to end and someone in another department would say but this needs a pilferage, anti-pilferage device on it. And suddenly, if that had happened at the start, if you’d been able to discuss it early enough, that would have been incorporated, and then it becomes unaffordable when somebody so it goes, it all goes back to those earlier discussions just about so that you consider everything really.
Dahlia Stroud 17:10
And it’s a smart choice, isn’t it because I’ve worked before in areas where we’ve had to do pregnancy tests in boxes. But actually, it’s a really discrete item you want to buy. So having it in a plastic case to manage leakage actually means that you’re creating huge barrier to entry for people who actually need the product. So it’s that way, as well, of making sure that it remains accessible to the consumer, which is really important.
Annette D’Abreo 17:33
Yes, and at the same time, making sure that the efficacy is understood. So packaging doesn’t necessarily reflect that this isn’t as good as the product but looks shinier and with more plastic on it. And that’s part of the education as well. So and I think as you said earlier, Dahlia, the whole value change that sustainability can be all the way from how the outer come shipped, where’s it’s shipped from? How has it shipped into the UK? And then what does the case packaging look like? Etc, etc. So there’s so many different steps that we can talk about when we’re talking about the full product.
Dahlia Stroud 18:11
And I think that point of education is so relevant, because people are really wanting to understand, you know, that made me well, what, how do I understand this product versus this product? How do I medicate a cold or flu? Versus how do I medicate a fever? And then lots of things about kind of what does this vitamin mean? And what does this nutrient mean? Or how is this actually going to help me and I think the more that we can do to support that education, and the more that suppliers and retailers can partner together, actually, one of the things that we did at Asda was used some of the space on fixture to help consumers understand what the vitamins would help them with and give some real kind of tangible opportunities to say this will help with bones or this will help with immunity in a way that we hadn’t used that language to communicate with them before. And that actually saw value grow, even though it was use of space for education, rather than for product.
Annette D’Abreo 18:59
Yeah, that’s a great example. When we’re talking to our retailers, what sort of information can help us stand out and be a better supplier partner.
Mark Hermsen 19:09
All types, really this kind of macro and micro, but if you looked at a macro insight, you know, the BRC study last just last week actually was talking about for necessity categories, like Health and Wellness, consumers are shopping around like they are for other categories, but they’re more prepared to accept, you know, price increases, which for me puts things in good stead for the category for 2024. Because that shows me that, you know, people are prepared to pay, you know, for necessity items, and that should add value to the category going forwards.
Annette D’Abreo 19:37
Well, Mark, Dahlia, thank you so much for your time today. It’s been a great conversation.
Dahlia Stroud 19:41
Mark Hermsen 19:42
Thank you, I enjoyed it.
Annette D’Abreo 19:43
Okay, thank you.
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