AEON President Motoya Okada has made a name for himself by employing a strategy not typically used by Japanese retailers: acquiring strategic stakes in failing, failed or vulnerable retailers and turning them around.

Okada is currently guiding Japan’s largest retailer through a period of aggressive and exciting growth. Following deregulation of the country’s retail sector in the 1990s, Japanese retailers faced a new threat with the arrival of large international grocers such as Wal-Mart and Carrefour. Okada reacted with an

ambitious expansion program, recognizing that AEON’s best defense was to combine scale, efficiency and best practice.

By adopting this approach, AEON has significantly boosted its size. The group’s diverse retail activities span hypermarkets and convenience stores, to introduction service and theme parks. By the time it acquired the Mycal chain in 2001, it had overtaken Seven & I (then Ito-Yokado) to become the country’s largest retailer in terms of net sales. Other major investments included Carrefour’s hypermarket network, following its exit from the country in 2005, and the acquisition of stakes in Daiei and Maruetsu in 2007.

Following in his Father’s Footsteps

Okada was born in 1951, the first of three sons of Takuya Okada, the company’s founder and honorary chairman. Like many top managers at Japanese retailers, Okada has gradually worked his way up the family business, earning his stripes over a period of almost three decades.

Prior to joining AEON, Motoya earned a BA in Commerce at Waseda University in 1975 and an MBA at Babson College (USA) in 1978. He started his career with Jusco Co (AEON’s former name) in 1979, working his way through various positions within the company from the shop floor upwards. By 1995 he was appointed senior managing director of Jusco before assuming the presidency in 1997. Between May 2000 to May 2001, he chaired the Japanese retail trade association - Japan Chain Store Association – where he continues to remain as vice chairman.

Ambitious Acquisition Plans Underway

AEON's principal aim is to seek economies of scale and group synergies in terms of merchandising, distribution, IT and administration. A major challenge ahead will be integrating and turning around a large operator like Daiei, at one time Japan’s largest retailer. One initiative to bolster Daiei is establishing a task force to examine the possibility of sharing distribution and information systems and jointly procuring food, clothing and other everyday goods. AEON, for example, is supplying Daiei’s stores with its own TopValu grocery private label.

A Daiei hypermarket in Japan – now part of AEON’s sprawling empire

Source: Planet Retail – www.planetretail.net

Although managing and driving forward some 100 retail banners in Japan alone remains a key priority, further acquisitions cannot be ruled out. In fact, the group is currently involved in a high profile battle for control of the HAC drugstore chain. Outside of Japan, AEON has built a sizeable international network covering nine markets. In North America, the group owns the Talbots/J.Jill clothing retailer and is challenged with improving the performance of this struggling operation.

AEON’s global ambitions are focused on Asia and, in particular, China. Despite its recent withdrawal from Taiwan, AEON is accelerating the pace of expansion in Asia, planning to more than triple outlets in neighboring countries from 54 to around 190 by 2011. The group is also exploring the feasibility of entering Indonesia, Vietnam and Cambodia.

AEON’s aggressive acquisition strategy has driven retail sales globally by 78% between 2003 and 2007 (in local currency terms) – growth deemed even more impressive given weak consumer spending in Japan, which continues to account for over 90% of global sales. At the same time, the number of stores it operates globally rose from 9,269 to 14,803.

The group's stated target is to increase consolidated revenue to USD52 billion by 2010 from USD39.5 billion in 2007, making it one of the world's top 10 global grocers. For Okado, a key challenge moving forward will be his ability to maximize the potential of AEON’s diverse range of businesses and operating markets.

Industry Affairs News

GMA to address Executive Forum to Focus on Building Consumer-Centric Organizations

GMA will share its views on product recall management and environmental sustainability during an upcoming executive forum on building consumer-centric organizations with SAP, Accenture and Vision Chain. Senior Vice President of Industry Affairs Stephen Sibert will address the audience of consumer products and retail executives at the “Building and Leading a Consumer-Centric Organization” event, August 1 at the Hotel Hershey in Hershey, PA, in which industry leaders will share their perspectives on sustaining growth and delivering the highest value to end consumers. “We are pleased to have GMA participate in this important thought leadership event, particularly to share their views on how recall management and sustainability issues are affecting CPG companies,” said Anne Argenbright, industry marketing manager for consumer products at SAP America. Other notable speakers include Harvard Business School Professor Ranjay Gulati and former Kimberly-Clark CIO Terry Assink. Attendees who are director-level and above from CPG manufacturers or retailers will receive one complimentary night’s stay at The Hotel Hershey. Contact Anne Argenbright at SAP America for more details on the complimentary room offer or Troy Beeler at GMA to find out more on GMA’s presentation.

Industry Performance

Future Forces in Food Roundtable: Global Food Supply Must Adapt to New Concerns

Senior executives from GMA member companies looked at the “future forces” impacting the global food supply, including escalating input costs, commodity inflation and sustainability concerns earlier this month in Washington, DC. More than 50 executives participated in the inaugural Future Forces in Food Roundtable, an invitation-only event to identify the trends and forces that will shape tomorrow’s business landscape for food and beverage companies. “The intimate setting was a great platform for real discussion and debate among our industry’s leaders on the forces shaping today’s global food supply,” said GMA’s Brooke Weizmann. “Participants shared insights on a broad range of topics, including how to plan for sharp increases in demand through new agribusiness technology, streamlining existing supply chains and adapting to consumers who are increasingly focused on affordability.” The discussion was lead by Bob Lawless, Former CEO and current Chairman of McCormick & Co. A transcript of the event will be available in the coming weeks. For more information about the Future Forces in Food Roundtable, contact Brooke Weizmann.

Supply Chain & Technology

Logistics, Supply Chain Execs to Continue Discussion on Rising Fuel Costs

Rising energy and fuel costs were top concerns among supply chain executives from manufacturers and retailers who attended a recent joint meeting of the GMA Logistics Committee and Food Marketing Institutes’ (FMI) Supply Chain Committee. The GMA Logistics committee suggested as priority activities for the remainder of 2008 developing a fuel cost roundtable and a special addendum on fuel costs to the recently completed GMA Logistics Survey. The two committees met to begin planning for the 2009 Information System, Logistics and Distribution Conference, but the challenge of rising fuel costs quickly became a hot topic of discussion. Other issues discussed included transportation collaboration and seven-day operations, with manufacturers and retailers agreeing to pilot programs as a key outcome of the meeting. Contact Michelle Marcoot at GMA for more information about the ISLD Conference, the GMA Logistics Committee and/or potential supply chain pilot programs.

Sales & Sales Promotion

New Coding System Makes Coupon Processing

More Efficient

Free standing inserts (FSIs) in the Sunday newspapers are getting a facelift, thanks to the increased use of the GS1 DataBar for Coupons. CPG companies began phasing in the new coupon coding system in January 2008. Companies will use both the UPC-A and the GS1 DataBar until 2010, when the UPC-A code will be discontinued. The GSI DataBar offers improvements in coupon offer coding and handling efficiency at point of sale. GMA members can access resources on the new coding system, including the North American Coupon Application Guideline Using GS1 DataBar (RSS) Expanded Symbols, in the “publications” section on www.gmaonline.org. For more information on the industry’s transition to the GS1 DataBar for coupons, please contact Troy Beeler.

MSM and Unsaleables Conference Websites Launched – Early Bird Registrations Discounts Offered

Interested in learning more about the co-located GMA Merchandising, Sales and Marketing (MSM) Conference and the Joint Industry Unsaleables Management Conference? Both events’ web sites are up and running at www.gmamsm.com and www.unsaleablesconference.com and include details on conference programming and hotel information. Both events are offering discounted early-bird registration fees, and a low-priced retail registration fee of $99 will be available up until the conference. Additional discounts are available to those companies that send four or more attendees. Contact GMA’s Jessica Martin for more information.

Walgreens to Speak on Preventing Damage from Split Pick Process at Unsaleables Conference

Attendees of the 2008 Joint Industry Unsaleables Conference this month will hear from drug channel leader Walgreens on identifying and preventing damages from a split pick process and The Clorox Company on root cause analysis of unsaleables during conference breakout sessions. Results from the 2008 Joint Industry Unsaleables Study will be covered during the general session. A full list of session topics is available at www.unsaleablesconference.com.

Contact: Troy Beeler

MSM Conference to Explore Economic Pressures, Evolution of Shopper Marketing
Thought leaders from Deloitte Consulting and The Nielsen Company will invite attendees of the GMA Merchandising, Sales and Marketing (MSM) Conference to an exclusive preview of a new GMA shopper marketing study. Conducted by the GMA Sales Committee, the 2008 GMA Shopper Marketing Study follows up on last year’s Shopper Marketing: Capturing a Shopper’s Mind, Heart and Wallet and will reveal retail insights on shopper marketing, return on marketing investments and organizational factors in successful shopper marketing programs.

Other sessions at the MSM Conference will include Glen Prickett, Conservation International’s senior vice president & executive director, center for environmental leadership in business, who will lead a panel of Fortune 500 Executives on ways they are forging partnerships with uncommon allies to drive sustainability initiative in their corporations. IRI’s Thom Blischok will talk about why a transforming economy calls for transforming CPG-retailer relationships. Blischok will detail the changes shaping the CPG and retail industries based on a series of research studies IRI has completed. The MSM Conference will take place September 21-23, 2008 in St. Petersburg, FL. For more information on the conference program, visit www.gmamsm.com.

Contact: Jessica Martin

Trend Snapshot

GMA’s Industry Affairs Review has teamed up with consumer research firm NPD Group to provide readers with a monthly snapshot of consumer trends and eating patterns. Check out the latest research in this space each month and visit www.npd.com for more market research.

We’re running out the door with breakfast.

Source: The NPD Group

Based on 1 year ending February 2007

SmartRevenue.com

New Report Shows Revenue Growth Depends on Exceeding Shopper Needs

Grocery marketing has come a long way from the big brand dominance of decades past, with today's marketers operating via multiple retail channels, dozens of marketing vehicles and a more savvy, information-rich consumer. A new position paper by SmartRevenue examines the benefits of using "Shopper-Centric" knowledge to build models of the most effective ways to deliver what shoppers want, when and where they want it. The model looks at the shopping trip as the confluence of all promotional activity, starting from the home and/or workplace and leading to the store shelf and the POS. SmartRevenue's paper explores how marketers can move beyond existing demand creation paradigms and begin converting data into competitively useful insights and shopper-centric strategies to increase conversion at the customer, category and brand levels. Click here for the full report.

Datebook

Sept. 21 - 23

Merchandising, Sales and Marketing (MSM) Conference

St. Petersburg, FL

Renaissance Vinoy Resort & Golf Club

Contact: Jessica Martin

Sept. 22 - 23

Joint Industry Unsaleables Management Conference

St. Petersburg, FL

Renaissance Vinoy Resort & Golf Club

Contact: Troy Beeler

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