Coop Estonia's plan to run fewer, more profitable promotions in 2022

Thom Iddon-Escalante

Head of Marketing

Estonia is a contender for Europe’s most competitive grocery retail landscape. Today, 7 major players compete for the attention of 1.3 million consumers, after Lidl entered the fray earlier this year. Having cornered a quarter of the grocery market, Coop is Estonia’s market leader by a considerable margin. Oliver Rist, Coop’s Purchasing Director, plans to keep it that way.

Oliver leads a team of 40 pricing, assortment, and merchandising specialists, and describes his main responsibility as to provide “the best tools, training and processes to help this team deliver the best quality work”.

He also acknowledges that Coop’s business, which consists of 19 cooperatives made up of 330 stores ranging from rural mini-marts to urban hypermarkets, presents particular commercial and logistical challenges for his team to tackle.

Coop's 19 cooperatives are spread across Estonia

Here are some of those challenges:

#1 Servicing small rural stores with appropriate stock from international manufacturers, whose minimum logistical packaging volumes are often too large.

#2 Matching product pricing with consumer purchasing power, which varies substantially across the country.

#3 Keeping promotions interesting and fresh in larger stores without filling small stores with promotions that affect half their assortment and consume their margins.

#4 Operating effective promotion tactics (i.e leaflets and banners) while allowing for complexities like multiple store types, different featured products, and variable pricing.

To tackle these challenges, Coop has invested in an effective assortment tool to better utilise store space and manage inventory.

While this tool provides some basic promotion functionality, it does not sufficiently support Coop’s promotion management plans. And because, as Oliver puts it, “we’re not a software company, and we’re better off focusing on our core business”, integrating third-party promotions analytics software makes most business sense.”

Enhancing Coop’s promotions capabilities

Coop can expect to turn over €800 million in 2022, a quarter of which will be generated on promotion. By Estonia’s standards 25% promo share is fairly low, but Oliver sees no particular reason to increase it. He rather plans to “increase promotion profitability, while keeping promo share the same”.

Achieving this will yield clear benefits. Today, Coop’s purchasing team spends around a third of its time working on promotions. For Oliver, automating some of these tasks and maintaining the promo share will free up more time for key activities, like “researching and building a better assortment” and “developing better relations with manufacturers and partners”.

He also recognises that even a modest increase in promotion profitability has a major impact on the bottom line.

One of Coop's larger stores

3 ways to make the plan work

First, tried-and-tested processes generate positive outcomes. Positive outcomes encourage people to trust processes.

Today Coop’s purchasing managers maintain slightly different ways of working. If, however, armed with better promo performance and forecasting data supplied by Formulate, purchasing managers can make more evidence-based decisions and rely less on gut feeling, working practices are more likely to converge.

As a consequence, Coop can provide customers with more of the products they want at the right time and at the right price, run more effective campaigns, and negotiate better deals with suppliers, increasing revenues and profits, and reducing costs.

Second, the purchasing team is set to adopt a promo master plan that encompasses around 90% of all Coop’s promotions. This plan will reduce ad-hoc planning, while allowing for seasonal campaign tactics, and enable more testing and experimentation.

Developing a centralised master plan will also make it easier to onboard new team members, and establish fairer KPIs and other performance-based metrics.

Third, Oliver’s team will continue to build on the progress already made using Formulate’s evaluation tools to identify underperforming campaigns.

Promotions that fail to drive sales or profitability, or have negligible basket effects, can be removed from circulation, swiftly cutting costs and saving valuable resources.Estonia is a contender for Europe’s most competitive grocery retail landscape.

We at Formulate are thrilled to work together with Oliver and Coop, to help them succeed in 2022 and beyond.

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