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Category Management: Grounding Before TakeoffLeslie NewleeDirector Insights Capabilities2010 ALA/DeCA Worldwide Partnership SummitJune 7-10, 2010Hyatt Regency Atlanta
Special Thanks to Key Contributors Leslie Newlie- Director Insights Capabilities, Pepsico
Michelle Frost Semi-Perishables Division Chief, DeCA
Steve Lamkin- Dir. HQ Sales, Dunham & Smith Agencies
Deborah Kalas- VP Sales, Empower IT
Tommie Draper- VP National Accounts, Overseas Service Corp.
AgendaChanging Times
Category Management Evolves
The New DeCA Process
Following the Plan to Success
Q & A
With that in mind, Ill take you through some of todays Changing Times , as well as how Category Management has changed over the years. Todays shopper has changed over time, and likewise, the process in place to capitalize on category opportunities with those shoppers is all new in 2010 for DeCa as well Ill take you through the first half, Deborah will take you through your process and examples of success then well both be here for Q&AIndustry Challenges with CM ImpactEconomy Post Recession into RecoveryRise of Value Shoppers and Value ChannelsPrivate Label Will it Stay?Retailer ResponsesIntegrating Shopper Rise of Shopper Marketing
As I mentioned, I wanted to open up this session by sharing some of the latest thoughts as it relates to todays shopper those that shop YOU and your competitors daily.A few topics well look at (listed go over.)As youll see later in this session, Consumer Insights is a key piece of the new DeCa Category Management Process. Ill get us started in thinking about potential Category Implications from these broad topics Deborah will take you through the specifics of the Process itself.Leaving Recessionary Times
Many economic indicators point to Recovery but what did we learn from the recession?Some Categories ProsperedCategory Growth Rates in High Unemployment Markets Seek to maintain their $ by fixing their own car Doing their own hair and trading down cosmetics selection from department stores
Low Unemployment+20-14Source: IRI, 52 weeks ending 11-29-09+3+1+1
6Some categories had tailwinds.Some Categories Faltered
Category Growth Rates in High Unemployment Markets Avoiding expenses where possible Not following evolutions still buy bag vacuum when new models are bagless
Low Unemployment+2+1Source: IRI, 52 weeks ending 11-29-09-33-10-1+5
7Some faced headwinds
Source: TNS ShopperScape, Traditional Grocery Shoppers (excludes Trader Joes, Whole Foods, specialty grocery)
25 pts23 pts15 pts17 pts28 pts20 pts14 pts8
How Has Your ShoppingBehavior Changed this Year?Shoppers Feeling Recession BurnoutAs economic indicators will support, shoppers once on heightened alert have eased off a bit8
Macroeconomic Trends Fueling Seismic ShiftsThe Rise of theStrategic ShopperA European-LightRetail EnvironmentShift Away from Discretionary ItemsPre-Shopping for ValueShopping Frequency DeliberateTech-Enabled StrategiesTrade ConsolidationIncreasing SophisticationDrive for DifferentiationPressure for MarginRise of Discount FormatsTwo Strategic Themes Emerging9
How frequently do you do each of the following when shopping for groceries?Source: Homescan 09/2009 survey, a service of The Nielsen CompanyShopping: Planning and Price ComparisonsInteresting findings as to how U.S. households shop for groceries:
Very few will ask for assistance in the meat or produce department so retailers need to get their assortment right.Purchasing on displays are made on some & a few tripsShoppers dont like taking their kids with them on tripsShopping is about planning & price comparisons:Large percentages of households use shopping lists, use circulars or coupons, & compare unit prices.The New Age of Frugality widely publicizedThe TennesseeanMarketers put new American shopper under microscope Commentary by David Bohan May 17, 2010
1Food Away From Home2Electronics3Clothing4Media/Entertainment5Home Improvements6Alcohol7Pets/Toys/Hobbies8Financial Products & Services9Tobacco10Non-Alcoholic BeveragesTop 10 Areas Where Budgets Were Slashed
Today, you not only have to segment customers by age, gender and income, but also need to focus on how they shop.New Shopper SegmentsThe TennesseeanMarketers put new American shopper under microscope Commentary by David Bohan May 17, 2010 Shoppers 2.0
Heavy InternetBuy OnlineFrequent CouponLess Brand LoyalDeal Hunters
Price SensitiveHeavy CouponLess Brand LoyalOnline ResearchChannel Surfers
Good Deals Trump ConvenienceLoyalists
Brand LoyalRetail Chain LoyalOnline ResearchBuy Online
Macroeconomic Trends Fueling Seismic Shifts
The Rise of theStrategic ShopperA European-LightRetail EnvironmentShift Away from Discretionary ItemsPre-Shopping for ValueShopping Frequency DeliberateTechnology-Enabled Strategies
Trade ConsolidationIncreasing SophisticationDrive for DifferentiationPressure for MarginRise of Discount FormatsThe Second Theme13Shopping Shifted20082009ChangeSupermarket71%79%8Dollar Stores52%60%8C-Stores50%58%8Internet55%61%6Drug Stores68%73%5Mass/Super Center76%76%0Warehouse Club41%40%-1Pet Specialty32%29%-3Beauty Specialty25%21%-4Department Stores55%51%-4Mall43%37%-6Home Specialty27%20%-7Eat at home benefitRemove temptationDelay purchasesChannels Shopped in Past 3 Months:Source: WSL/Strategic Retail
Recovery Shift?Discount Retailer GrowthAldi Store Growth
= EstimateDollar General Sales Growth
= Estimate15Aldi and Dollar General are REAL choices even in already competitive dense marketplaces (Dallas example)
How will shoppers feel about a box full of Private Label? (ALDI) about 7% of HH have shopped there nationally and climbing. DG at about 9 and down slightly15Private Label Holding Share
Given publicity of Private Label and growth of PL Outlets Speaking of Private Label ..Private Label sustaining in Recession what about now?
Continuing to hold share All Outlet
...and budget-varied entries
Thanks to a Core Group of ShoppersBut still purchased by a core set of Shoppers. Guess is that Aldi will appeal to the Private Label shopper, but PL cant fill all needs...Walmart Reaction Win, Place, ShowClean-store policyCategory rolesAssortment tacticsKantar Retail Forward - 2009
Retailers React In-Store Even WMT is reacting to the new shopper - and fighting to regain from Supermarket seeing small box growth, less is more approach by category and merchandising standards
According to ShopperScape, one in 10 past-month Walmart Supercenter shoppers report that theyve noticed that their store has stopped carrying products they regularly buy Walmart is responding by adding back about 300 branded SKUsKantar Retail Forward - 2009Walmart Win, Place, Show 20Understanding the Theatrics of ThriftI dont understand whats going on, but I know I can try and help my family save wherever possibleHow would I feel about my role as a mother if I just continued in my same routine?At the end of the day, all I can do is try and do my part
Develop Strategies Basedon a Broadened Definition of Value
VALUE2.0PRICEEXPERIENCEQUALITYVALUESUTILITYStrategies for Succeeding in RecoveryComing into recovery, what shopper behaviors will stick? How do we think about Value now? (Grocery growth reasons..) (Channel trends)20
Quality Brand Positioning
Waste Reduction and Convenience (Utility)
Solutions to Enhance Shopper Experience
Reinforce Core ValuesBuild Connections Beyond PRICEStrategies in 2010With recovery and an unknown on which penny-saving behaviors will stick.Retailers are moving past price to define value in their box. The rise of Shopper Marketing positions as well as concepts and partnerships is a result of the new Value equation21Appeal to Shoppers
Occasion-BasedSolutionsWaste ReductionTarget example owning movie night banking on nesting behavior seen in recessionary times to stick knowing they have the breadth of products to pull it off Shopper Marketing > Category Management
Source: Market Watch CPGMatters High Interest in Category Management, But Process is Changing: PollWhat will you focus on in 2010?Data is changing
Shopper has a voice
Old CM process was brokenProcess Enables TacticsIn fact Shopper Marketing is the #1 area of focus in 2010 with CM just behind Shopper Marketing is a definitely offspring of CM Execution through the Shopper is made possible through technology new data, household/shopper data allows value communication, and redemption possibilities to be shopper and store specific Retailers are catching on One size does not always fit all and those with Marketing capability are exercising another Executable muscle
How did we get to Shopper Marketing???? Lets start by recalling the beginning of Category Management Data is ChangingRetailers are recognizing that shopper data is their DNA and they are controlling access. Big shift from supplier-driven to retailer-driven process.
RETAIL POS DATA
Sales Growth
Share Gap
Store DevelopmentTRIP DATA
Missions
Store Layout
BundlingHH DATA
Segments
Direct Mail
Shopper SpecificCategories on each tripCategories in each householdCategories in each storeSource: Market Watch CPGMatters High Interest in Category Management, But Process is Changing: PollShopper is Critical 3rd PartyEconomy, SKU and brand rationalization coupled with consumer insights are factors changing the process.
retailerconsumersuppliershopper /AssortmentShelving/adjacencyPromotionPricingSource: Market Watch CPGMatters High Interest in Category Management, But Process is Changing: PollThe Shopper is now fully integrated in the latest plans. The third person at the desk We see that in assortment, shelving and promotion, or Shopper Marketing.Process Needs Refresh Just 4% say that CM doesnt need to change because the traditional 8-step process still works.
Source: Market Watch CPGMatters High Interest in Category Management, But Process is Changing: Poll
Lets Refresh our Memory
PricingBryan Harris / The Partnering GroupPromotionShelving/AdjAssortmentA retailer-supplier process of managing categories as strategic business units, producing enhanced business results by focusing on delivering consumer valueLets review each piece as it was known.For some this may be a review, but for those who only see the planogram, or the fruits of all the effort you may have thought that planogram was just a pretty picture!Category Definition & RoleBryan Harris / The Partnering Group1. Category DefinitionDetermine the products that make up the category and its most logical consumer-oriented segmentation.2. Category RoleDetermine the best strategic role for the category given the retailer portfolio.DestinationOccasionalRoutineSeasonalConvenience
First.Category Assessment & ScorecardBryan Harris / The Partnering Group3. Category AssessmentIncludes latest trends, analysis and insights on the Consumer, Market, Retailer and Supplier.
4. Category ScorecardIdentify key measures to track goals and align to the organization.
First.Category Strategies & TacticsBryan Harris / The Partnering Group5. Category StrategiesIdentify the road map for success demand-side, in-store service and supply chain plan.
6. Category TacticsDetermine the right assortment, promotion, pricing and shelving based on previous steps.
First.Plan Implementation & Category ReviewBryan Harris / The Partnering Group7. Plan ImplementationPlan and scorecard approved, communicated and action begins.8. Category ReviewThe end and beginning
Planogram Set!All 7 steps take place before the POG gets to you!DeCA Category ManagementThe Evolution of the DeCA CategoryManagement ProcessHistory Category Management Challenges At DeCA
Inconsistency in reviewing DeCA categories across buyers
Duplication of efforts between buyers and retail industry
Countless hours spent sifting through data to find key drivers
Category reviews and live sets were created, but planogram implementation wasnt executed in a timely fashion
Inconsistent method to measure planogram implementationSo, how do we change the process?DeCA and ALA Commissary CouncilThe Category Management Committee (a subcommittee to the ALA Commissary Council) developed a category management template in 2009
Goal was to emulate best category management practices from retail
Many meetings over a year to create the new DeCA template
Collaborative Process IntroducingDefine the category definition and role
Clearly address the goal of the category
Offer consistent key metrics to measure the category trends Time periods, measures, and promotional activity
Incorporate retail information for benchmarking and indexing
Optimize SKU assortment by rationalizing optimal sales drivers and key contributors within the category
The New DeCA Template35DeCA Category Plan
New in January 2 010Key Elements to Drive Category Growth:
Identifies key drivers from the category, i.e. promotional drivers, new item distribution builds
Provides information to develop the planogram
Implementing the Planogram
Planogram Implementation is DifficultBrokerDistributorCustomer ConcernsCategory PlanLive SetWith so many balls to balance, something is likely to fallPOG ImplementationManufacturerThe Importance of Executing POGsIncreases sales and foot traffic to the store, and maintains the proper balance of sales to stock ratio.
Offers the customer the products they want to purchase.
Allows the customer to receive all marketing/sales dollars for any new product launch.
If planograms are implemented on a timely basis, it gives the MBU a scorecard to evaluate their category changes.When Effective Category Management and POG Implementation Meets..
Planogram SuccessPre-Review IndexPost Review Index
Toaster Pastries160168
Household Cleaners195200
HBC-Shampoo163164
Chilled Dinner Sausage 89 93Share indexing is comprised of: DeCA category dollar share of total store vs. remaining market Opportunity AwaitsPlanogram ImplementationReset Results - Pre & Post Store AStore B
Source: Total ConUS (inc AK/HI), 6 quadweeks ending 04/06/09**Category Review Date: April 06, 2009 Toaster Pastry Category$ 208$ 4.00Store AStore B
Source: Total ConUS (inc AK/HI), 6 quadweeks ending 04/06/09**Category Review Date: April 06, 2009 Household Cleaners Category$ (2,286)$ (257)Store AStore B
Source: Total ConUS (inc AK/HI), 6 quadweeks ending 04/06/09**Category Review Date: April 06, 2009 Shampoo & Conditioner Category$ (418)$ (158)Job Well Done!!!Planogram ImplementationReset Results - Pre & Post
Fort CarsonNew River
$ 2,684$ 3, 477Source: Total ConUS (inc AK/HI), 6 Quadweeks Pre & Post 07/20,2009**Category Review Date: July 20, 2009 Toaster Pastry Category
Household Cleaners Category
Fort CarsonNew River
$ 25,079$ 6,291Source: Total ConUS (inc AK/HI), 6 Quadweeks Pre & Post 06/05/09**Category Review Date: June 06, 2009 Shampoo & Conditioner Category
Fort CarsonNew River
$ 5,626$ 3,497Source: Total ConUS (inc AK/HI), 6 quadweeks ending 04/06/09**Category Review Date: April 06, 2009 Q&AQuiz or audience questionsAppendixChart1549625684697730759821895996106111261191125613211381
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