Digitalization of shopper journey. Sustainability program, Retail media adoption – Rami Baitiéh

Bonjour. Okay, we can switch in English.

This topic, digitalization, is very important for Morrisons because Morrisons is a family company, 125 years in the UK, mostly in the north of the UK. Morrisons today has 11.5% market share over the UK but 20% in the north of England and Scotland. We have 500 supermarkets. We have 2,000 small stores online, and also we are vertically integrated. So Morrisons today, we produce the product that we sell in the stores — the fresh product. We have 16 factories. It is one of the unique models today that is still family-owned. The Morrison family started it, and now it's private equity and vertically integrated with the factories. I joined Morrisons two years ago, and my first chapter was: what is the impact of digitalization on my company, on the customer, on the supplier — because I'm a supplier of myself — and on the retailer. Now we know that technology and digitalization impact the customer's life. We talked about Generation Z, but everyone — we say that on average everyone spends three hours per day on their smartphone. We have less time, we want more immediacy. We want more online, and the online now we want it now. That's why we have Uber Eats, Just Eat, Deliveroo, whatever. At Morrisons we are doing that. We have relationships and partnerships with Ocado, with Amazon, with Uber Eats, with Deliveroo, because the customers want the product now — immediacy — and the customer has less time because of digitalization. So it has an impact on time. Digitalization has also an impact on the supplier because we need data. Before, we were leading the company with intuition, but not everyone in every generation has perfect intuition. So we need more data, and data is very, very important. Data to know your consumer — we call them the persona. Who are my customers? Do I know my customers? Demographics, their needs, where do they live, their sensitivity to price. I need to know my customers one by one. At Morrisons we have two million customers per day. But I say to my team that we have one customer plus one customer plus one customer, because every customer is very, very important. So data for the supplier is very, very important. And the third is for the retailer-distributor. Now we have cameras in the store that show where we have price errors, and cameras that show the gaps when we have out of stock. We have self-checkout. We use all the scanners. So the store that is not digitalized is very old-fashioned. Digitalization will impact the supplier, the customer, and the retailer. With AI, the artificial intelligence, I asked all my team, my managers — 3,000 managers — to use AI. We use a very simple tool called Gemini. Just Gemini to prepare emails, to prepare minutes for meetings, or to respond to our customers' or suppliers' letters. I also asked my cashiers to tell us what the customer tells them, and then I asked AI to give me a summary of all the comments. AI gave me the summary in two minutes. Last week we asked AI what it thinks about my assortment, about my range, and AI told me: you have five types of coriander — 60 grams, 80 grams, 100 grams, 100 grams — why? My buyer didn't know, but AI knows. So AI is very, very important. And the last thing, when we talk about digitalization, Stefano, cyber security is very, very important. It is not the topic today, but if I had one single advice, it is to protect your company from cyber attacks. The third worldwide war will not be with weapons — it will be cyber security. My company was hit by two cyber attacks six months ago. And now, as we speak, M&S and Co-op in the UK are under cyber attack. Every day there are attempts — one retailer, one supplier — to get attacked. When a company gets attacked, you need to pay a ransom and you lose your data, you lose your production, etc. So this is a very, very important topic that I wanted to share with you today. Thank you.

When you say volume, Stefano, you are talking about the most important challenge, in my humble opinion, for retail in the coming ten years — unless we open new markets. But volume is the most important challenge. Looking also at demographics, because the demographic evolution is very, very stable in Europe. For example, it is not the case in Africa, but in Asia, in Europe, in America, very, very stable. So no reason to grow in volume, basically. And the demographic change comes with some immigration, where the products are different. Also, the distributor needs to adapt to these changes. But volume is going to be the biggest challenge for suppliers and retailers in the future. So what to do? For the supplier, it means innovation is very important. And for the distributor, it means productivity. This is very important. If you want to keep your bottom line as a distributor, you need to work on productivity — how do you get things done with less cost. And for the supplier, innovation is very important. So simplification in distribution for the retailer, and innovation, modernization for the supplier. Let me take some examples. We talked about TikTok earlier. In the UK, customers look at TikTok. Three products that we sold — in two months we had them, and over one hour later we didn't have any more stock. We call it Dubai chocolate. I tasted it, and it's great, but one hour later — no more Dubai chocolate. Other products: a skin cream, A313 — I don't know why A313 — but one hour later, for the skin cream, all the generations went to the store to buy it. And also a brownie — protein brownie. I don't know how it happens, but protein brownie is a very important product. So now, when you talk about protein range, it is very important. The cycle of the product years ago was very long. Now the cycle of the product is a couple of weeks — Dubai chocolate and then nothing, skin cream and then we go to something else. So the volume that you mentioned is a very important challenge. For suppliers, innovation based on data is very important. And for retailers, simplify — you need to do things with less cost so you can keep your sustainability.

I love this word — earlier, co-opetition. Co-opetition. I loved it. Thank you very much for this. Because some wrong mindset thinks that the supplier and the retailer should be opponents. I believe that we are two links of the same chain. The producer, supplier, retailer to the customer — even if you are doing both because you have thirteen factories. Exactly. It's like a river that flows from here to here to here. If the retailer spends their time being against the supplier, and the supplier against the retailer, the customer is alone, and someone will come and take the customer. So I believe this win-win relationship based on trust and based on long-term relationship is absolutely important in our life, given the challenge, which is volume. Every three months I do a meeting — not like this one, this one is fabulous — but I do a meeting with my suppliers. Every three months I have a meeting with every supplier to say: how can we improve things together? Because this win-win relationship is very important to accelerate, otherwise someone will come with a faster proposition. Maybe technology could help. And technology and data is very, very important. Today there is a loyalty scheme. Loyalty scheme is very important to get the data. At Morrisons we went from 50% to 80% of sales under the loyalty scheme. So we know everything about the customer. We know their email, we know what they buy, we know everything. And this data we put on a platform and we give access to suppliers. So every day you know the sales, availability, promotions, what the customer thinks. This is very important to share the data between suppliers and retailers, because both supplier and manufacturer are two links of the same chain to serve the customer. I talk about it because I am a manufacturer. I used to work for Carrefour before, but Carrefour is not a manufacturer. Now Morrisons is a manufacturer, and I know how important is the relationship between manufacturers and retailers.

Yes. Actually, sustainability is a value. For me as a person, as a company, sustainability is a very big value and it's important. Sustainability is more important for customers when times are good, and it's less important when inflation is high, of course. But for me it is a value. I always try not to put sustainability against the business or the business against sustainability. I will give some examples. Sustainability, for me, is five chapters. Number one is climate. Number two is water and energy. Number three is about the products. Number four is about plastic. And number five is about people — diversity, training, etc. People — this we can do it tomorrow. There is no conflict between training our team and sustainability and the business. Plastic — it is our responsibility to reduce the plastic. This will improve the product cost, will improve the environment, and will improve the usage for the customer. So it's about business. Yes, we can do our research and innovation department, and every supplier has research and development. Yes, we can work on plastic. Let's reduce the plastic. Number three — products. Customers now are looking for more products with protein and less with salt, sugar, and high-fat products. So let's propose better products step by step, not all of the sudden. And also, work on waste. Rather than stopping the beef industry — because I have abattoirs and I work a lot with it — I can't stop that. Customers want to eat beef, I will give them beef, no problem. However, we know that 30% of the quantity of produced beef goes to the bin. So what if we stop the 30% and improve the environment and improve the result? I will be looking for the area where there is no conflict and I will work on it. This 30% is great enough to help the supplier, to help the shareholder, to help the customer, to help the retailer. So rather than focusing on the areas of differences, let's focus on the areas where there is no conflict. And this is what I do. For example, for water — I ask my stores. I have 2,500 stores. What are the stores that spend more water than others? I've got 100 stores — they spend much more. Why do you spend more water? There's a problem in the pipe that we didn't see. Fix it. But I will not ask people to stop drinking water because of sustainability. So we need to manage the conflict, actually, because of sustainability. Sustainability is very important for me. Communication doesn't cost anything. When you put on the product 'plastic reduced' or the origin of the product, these kind of information on the product, this is very important for the customer.

Retail media as a retailer — now I speak as a retailer, and then I will speak as a manufacturer, because I'm both retailer and supplier. So you're talking with yourself. Exactly. So as a retailer, retail media is very important because of two things. Number one, now we are doing the job for the customer — we are filling the shelf — and the volumes are stagnated, and you need some support that is different from back margin, front margin, these kind of things. So this, let's say, is innovation in retail. But also, when you put retail media in the store — with digital screens, or even stickers. I see a lot of stickers on the ground or on the shelf that remind the customers about the brand. This will bring some data, and this data and additional volume has a value, and this value we call retail media. But this was born with Amazon. We remember in the past when Amazon started to deliver at home — they didn't make any earning from home delivery, it was loss-making — but they made a lot of earnings from retail media. When you were going on the website, you had the advertising from many suppliers, and then they got the retail media. And then the stores asked themselves: why don't we have retail media as well — on our online but also in the store? My figures show that every time we have screens with digital retail media, and even when we have stickers or a dedicated fixture or bay in the store, the volumes for the supplier increase. The more you invest in communication and publicity in the aisle, the volume will increase. And this increase of volume has a cost — we call it retail media. My advice, to be very objective: when you have proved that you have a volume increase, I suggest for suppliers to invest in retail media. When you have proved that the sticker and the screen is really in the store and you don't pay for nothing, this is very important. Retail media is very positive for the supplier because you get volume and you get data. It's very important for the retailer, and it's very important for the customer because the customer gets the publicity and knows more about the product.

What I'm doing now at Morrisons — we have all the data that is available, normally fifteen days or thirty days later and you need surveys etc. But my own data for the supplier is available at the end of the day. So I can tell every supplier: out of the 100 SKUs that I have with you, ten were out of stock, ten had great sales, ten were bought by this customer, by this persona. What is my availability by store? What is my price? All this data I can provide to the supplier just immediately. We are working with Nielsen as well on a platform where we can provide this data immediately to the suppliers. So you don't need to wait fifteen days, thirty days to talk about the past. Real time to project the future. Let's talk about today — this will be closer to the future. This is what I call data monetization, because when you provide data, you get something in front. And this is win-win, because the supplier can ask — sometimes I need this data and this report — and the platform is able to give them the report they ask for. This is very customized, bespoke reporting that helps the supplier and the retailer. And when you have the supplier and the retailer working together, of course they will find solutions faster and better to satisfy the customer. Because at the end of the day, we are all here thanks to one person — the consumer. If the consumer is happy, we are here. If the consumer is not happy, something else will happen. So we need to work together in order to keep the consumers. And we don't have many consumers — we have one plus one plus one plus one.

Gracias. Thank you so much.