Magnus Andersson – Wernersson Ost

Wernersson Ost (Eng. “Wernersson cheese”), is a Swedish cheese manufacturer founded in 1930 by Tage Wernersson. Today, Wernersson Ost is owned by the Norwegian group TINE, the second-biggest dairy business in the Nordics. In this recent interview Magnus Andersson, CEO at Wernersson Ost, shares his insights on promotions in the FMCG industry as a cheese manufacturer.

Magnus specifically highlights the strength of Wernersson’s salesforce, merchandisers and distribution as key drivers for growth. Furthermore, he delves into the different scenarios when promotions are mostly used, the different types of promotions, as well as the inflation’s effect on the promotion landscape and how he thinks the future will look in terms of promotional strategies.

SalesForce and Distribution as ingredients for growth

First, it is important to recognise Wernersson’s role in the market. As a cheese manufacturer, the main customers consist of retailers and the main sales locations are physical grocery stores. This implies that key drivers of growth lie heavily in the sales force and merchandisers having direct contact with the customers. Magnus highlights the importance of building discussions with customers to maintain high customer satisfaction, “Essentially, what we sell in that market is the power of customer dialogue,” he says.

Distribution is the second significant driver of growth mentioned. With an efficient and agile distribution, Wernersson remains an attractive partner for retailers to work with. At the moment, products can reach store shelves in Sweden within only a few days after being manufactured, even when being shipped from various locations in Europe. In the future, Magnus predicts this timeline to become even shorter. Especially in the FMCG food industry, a manufacturer that can offer customers a quick product turnover and support customers when products are running out, is an attractive partner to work with.

“Being able to create distribution is an incredibly important skill today, especially in the grocery trade.”

When asked about how Wernersson follows up on the KPI of distribution, Magnus specifically highlights the pick-up rate as an important metric. With the pick-up rate, Wernersson can see exactly how many products are sold in every Axfood group store in Sweden every week. However, not all retailers are willing to provide this information to manufacturers. Therefore, Wernersson also uses consumer insights provided by market research agencies to understand what the consumers want. “I believe we can grow quite a bit with greater consumer insight, so to speak, and an understanding of how consumers function, but also how chains build and drive their categories, is also interesting,” Magnus adds.

Reasons to use promotions

Moving on to the topic of promotions, Magnus mentions that promotional campaigns are incredibly important both for customer satisfaction and Wernersson’s growth strategy. Three main reasons for using promotions are named. The first one, which accounts for around 50% of why promotional measures are used, is to maintain a rapid product turnover. In these cases, promotions are often needed to get rid of product surpluses from old promotions that might have failed or campaigns that have gone awry so that new products can come in instead. For this reason, an effective distribution chain is also crucial, keeping customer satisfaction high.

The second main reason to use promotions Magnus calls the relationship-building part. This is linked to central agreements where Wernersson’s key account managers have negotiated activities with the grocery store chains to set up a number of activities per year with that chain. These are built into the agreements that Wernersson has with their customers, and this part stands for roughly 25% of the promotional measures.

The last reason is the brand-building part. This is when new products are introduced to the market and Wernersson quickly wants to expand the trial and drive volume. Before the pandemic, these kinds of promotions were more common. However, after the pandemic and inflation, consumers are more price-sensitive and have become less loyal to their old favourite brands, buying “whatever is cheaply placed on display”. As for now, this part stands for around 25% of the promotions, but Magnus would preferably see the parts being more equally divided.

“Before the pandemic, in-store sales campaigns were very brand-driven. In connection with inflation, it has become very much about the product price.”

Digital and Traditional Promotion Mix

Diving into the different types of promotional techniques used, Magnus touches upon the integration of digital and traditional promotional tools, from social media and digital campaigns to physical in-store promotions and sponsoring external events, as a form of sales activation. Digital material is becoming the preferred thing for many retailers, as they are becoming more reluctant to have big signs or physical branded material in stores.

Although the discussion around digitalisation and AI for promotions is a hot topic, certain traditional promotion methods still are proven to work. Magnus mentions product placement as the first thing to drive volume in the grocery trade. “The place you get in store is still very much so that A-location sells twice as much as a B-location which sells twice as much as a C-location which sells twice as much as a D-location” he says. It is very simple math in the context, and Wernersson’s salespeople are always trying to get the products in A placements, as these have the highest pick-up rates.

Since today is very price-driven, price promotions include campaigns like “3 for 2”, or specific kilo/product prices using “magical” price points like .99 crowns or similar are also certain ways to get product sales up. Then there are the in-store activities such as product demonstrations, which do sell well and give a better placement in the store, but are more related to brand-building than price discounts.

For consumers, digital in-store activities also start to work better than physical activities where a consumer has to do something extra to win, for example, the traditional “send in and win” promotions. Magnus highlights the importance of linking consumers’ activities to mobile phones and digital to get an effect on promotions;

“These ‘Send in and win’ campaigns are completely dead. But if you can spin on the mobile phone and win directly, it has an incredibly high impact today.”

Challenges and Future Opportunities in Promotion

When asked about the challenges Magnus sees with promotions, two main things were mentioned. Generally, grocery store chains want to have more control over their inventory through new integrated warehouses, making it more difficult for manufacturers’ salespeople to come in with products and promotions to the store, Magnus mentions, naming Lidl as an example.

He raises a concern that these price-focused grocery store chains will take over more and more, and the joy of food will consequently be more lost for consumers roaming the stores.

The second challenge mentioned with promotions for FMCG products is that the promotions are often focused on special holidays. “No one wants to buy a Santa clause on the 25^th of December”, Magnus exemplifies. The short time frames make it difficult for retailers and manufacturers to estimate volumes, and there might be a large product surplus after the campaign.

At the same time, perspectives of sustainability, healthiness and packaging are becoming even more important for FMCG manufacturers to incorporate. “Today there’s no one who wants to pay extra for a sustainable product. Tomorrow it will be completely decisive”, he says. However, consumers are not willing to compromise on taste or sustainability, that is sustainability like shelf life, which poses challenges for FMCG manufacturers in the future.

Magnus concludes by highlighting that promotions are essential to drive brand growth, especially in the current market landscape with high inflation, but believes that the future will go back to being more brand- than only price-driven.

“The one who has the best product will win the battle regardless of how one works with promotions or distribution or whatever it might be.”