Supermarket versus superbrand: co-operate to compete

Thomas Maggs is head buyer for cereals and cereal-related products at Morrisco Markets, one of Britain's top supermarket chains. Morrisco has a 14 per cent share of the UK grocery market with a mixture of in-town and out-of-town stores fairly evenly spread across the country. Like most retail grocery buyers, Maggs is tough on his suppliers. He has to be, as competition among the big multiples is fierce and the ability to price low and retain a fair margin is the key to sustained financial success. The breakfast cereal market is highly competitive, fragmented and yet dominated by a number of 'power brands', such as Kellogg's Corn Flakes, Weetabix and Shreddies, all of which spend large budgets on advertising and promotions. Maggs favours deep price cutting promotional activity in this market as he knows that it shifts stock fast. The cereal manufacturers tend to resist this form of promotion as much as they can, preferring to 'add value' to their products rather than reduce price, which they feel tends to undermine premium brand imagery.

Sonya Farquahar is Key Accounts Manager at Morning Foods Ltd, a large manufac- turer of breakfast cereals with one or two heavily supported 'power brands' in its port- folio, such as Powergrains, a protein-rich crunchy cereal enjoying 8 per cent of the cereal market and Slymbites, a tasty, low-fat cereal targeted at young women, ready sweet- ened with aspartame, a no calorie sugar substitute, enjoying 5 per cent of the market. With distinct product differentiators, these two brands hold premium price positions and the company favours added value 'themed' promotions. Each brand is heavily supported with TV advertising. Riding on the back of the success of the two brands, each of them has been recently brand extended to cereal bars, competing with Jordans and other brands. The brand team at Morning Foods want to run promotions on the two brands offering free cereal bars in-pack as a means of generating trial for each of the extensions. Given the importance of these brands, the company is trying to use this as a lever to gain separate distribution for the bars. It seems to be working with most of the supermarket chains, but Morrisco is proving difficult to persuade - they don't like to be dictated to and they don't want another as yet unproven cereal bar on their shelves. Maggs at Morrisco is insisting on some form of deep price oriented promotion.

Objectives: Morning Foods Ltd

Must have:

'Added value' promotions agreed for both brands - Powergrains in sales period May/June; Slymbites in sales period September/October;

Trialofthecerealbarvariantsofeachbrand.

Would like:

StockingofcerealbarbrandvariantsadjacenttoJordans,etc.

Objectives: Morrisco Markets

Must have:

Effectiveprice-basedpromotionsforeachbrand; Noagreementtostockcerealbars.

Would like:

SpeciallyprintedMorriscopromotionalpacks; SpecialpromotionalTVsupport.

Source: Written by Andrew Pressey, Lecturer in Marketing, University of East Anglia. Neville Hunt, Lecturer in Marketing, University of Luton

Question :

Each side has a set of objectives, ranked according to importance. Each party has a fair idea what the other's negotiation objectives will be. Explain the objectives of Morning Foods Ltd. Then, what is the negotiation strategy that used by Morning Foods Ltd? What are the objections that Morning Foods Ltd can expect from Morrisco Markets?