The Branded Pantry

Bill Pearce, CMO of Del Monte Foods company recently gave some advice to his peers in a talk.  He suggested that they “spend on marketing, capital investment and innovation or risk losing your business in the next 5 years.”  He did this in the face of an environment where the management (mostly through avoidance) risk is the name of the game. 

Part of the advice was to review what was working and what was not in this new environment.  Using a historical viewpoint is a mistake because the “revenue stream now is not where the stream was 12 months ago.”    Mr. Pearce intoned that “now is NOT the time to shy away from new ideas” further suggesting that you fund them by cutting current practises that worked in the past, but look dubious now or are break-even.   “The companies that invest in innovations and roll out…new services now will reap disproportionate benefits when the economy makes a turn.“ 

Some sound advice with some innovation risk takers trying to significantly change their position.  One such company Henkel-Dial recently launched an all in one laundry sheet…Purex Complete 3-in-1.    Their effort is clearly designed to establish a new position in the laundry category.   Eric Schwartz Henkel’s U.S. Laundry V.P. Marketing told Brandweek recently that ” in the past we had been fast followers in innovation, but this is the first time we are leading with a game changing innovation. ”

Interestingly it appears that another bastion of innovation P&G, might be a bit behind the curve-ball on this one with their detergent business reported down 2-3 share points in recent quarters in the U.S.   Innovation has been the hallmark of A. G. Lafley who will turn over the day to day reigns of his company to Robert McDonald on July 1.  It is guesstimated that McDonald, who was mentored by Lafley, will continue or re-energize innovation initiatives as the company faces to an era of thrift albeit perhaps with a bit more of an eye toward making sure that compliance and execution are brought a bit more to forefront.

That may be one of the lessons we learn from innovation effortsin products, processes, advertising, merchandising and distribution.  They have to be executed well and the dollars spent on merchandising, advertising and products need to generate the same type of measurable return that you expect out of any effort.  Many of the new products we have measured with ShelfSnap, many of the Merchandising efforts,  many of the shopper marketing and in-store media efforts show the same (or lower) levels of execution and compliance as those efforts have shown over the last 30 years (see our reports on new item introductions and displays in prior blog-entries.)

Still innovation in products and in go-to-market strategies and services, has always been the lifeblood of the CPG business.  Those carry it out will end up with game changing performances that will stand them in good stead for years.  The comments from Bill Pearce remind me of the actions of another guy of similar name.  Billy Pierce was a world class pitcher for the Tigers, White Sox and Giants…who would have been an everyday, run of the mill pitcher had he not re-invented his style after 6 years in the majors adding a unique slider and change-up to his pitch portfolio.  It took two years of hard work to master…but these innovations saw him end his long career as the 5th ranking left handed strike out king of all time. 

We did a bit of work recently looking at a major retailer display program in a top 3 retailer across the stores in a top ten marketing area.  The retailer accounts for almost 50% of FMCG (Fast Moving Consumer Goods) sales in this market so, if the manufacturer is going to succeed in using display in this market, either standalone or in conjunction with other in-store media . . . they need to succeed with this retailer. 

Some interesting findings based on the ShelfSnap analysis.  The retailer took pictures of all of their displays, uploaded them to our service and we identified the products, facings, OOS, assortment etc. on the displays.  Some findings:

1.    All stores that had the display up.

2.    58% had the two brands included in the promotion that were specified . . . wow!

3.    All stores that had the display had an endcap.  Of those stores:

a.    20% had a 7 shelf endcap  (why do we care?, it affects assortment of flavors!)

b.    42% had a 6 shelf endcap

c.    38% had a 5 shelf endcap

4.    A total of 10 items were displayed across the stores displaying the Brands.  Range was between 7 and 9 items in any given store.

a.    Stores with 7 shelves had 9 varieties

b.    Stores with 6 shelves averaged 8 varieties

c.    Stores with 5 shelves averaged 6.5 varieties.

5.    60% of the varieties were handled in all displaying stores, 10% of the varieties were handled in less than 20% of the stores displaying.

6.    The range of FACINGS (products along the shelf-edge) available to consumers ranged from 34 to 50 in stores displaying. 

 A vendor paid for this display program.  Retailers and vendors alike rely on displays like this to generate traffic, peak consumer interest and purchase and build the brand ongoing.

Was this a successful display execution?  How many varieties were planned for each store display?  Does a missing variety indicate a product distribution problem or a display execution problem?  Are disparities in assortment based on popularity of a variety or overstock of the least popular varieties?  Were these variances planned?

ShelfSnap asserts these questions should be answered.  The program should be correctly evaluated with a complete view of the execution and its impact.  To that end we have tuned our Display Execution Module to answer those questions. 

Despite recent news indicating the pace of new product introductions has shrunk dramatically in the CPG space (-51% first quarter vs. YA, according to Mintel see earlier blog), new products are an important and welcome bright spot in the consumer’s everyday life.  Particularly those that impart some special value to that particular consumer. 

 Some of the beverage manufacturers are bringing to market products that continue to give their consumer a tasty and perhaps enhanced (sports drinks) alternative to water, while at the same time recognizing that times are tough and water is less expensive that some other beverage alternatives, and tap water is free.  To that end some new smaller individual containers of beverages have emerged.  Seems like a pretty good response to the times.  However, even with a reduced current focus on new items, the introductions that ARE being made face the same challenges in “meeting the consumer at the shelf” as always. ShelfSnap tracked a multi item, new size introduction not long ago in the top traditional grocers in a top ten DMA.  Some examples of the inconsistencies:

1. The number one grocery chain, had distribution of some of the new items in EVERY store
2. The number two chain had zero distribution of these new size/flavors.  This means more that 20% of the shoppers in the DMA would not find this new item in their primary shopping location.  In these times, consumers are significantly less likely to shop multiple outlets, which means that this manufacture is starting off with less than 80% of the potential for these items that they might have hoped for.  Further, this means that media and consumer overlays are starting out 20+% less effective than they could have been.
3. The objectives from the manufacturer were to have three facings of each flavor on the top shelf.  In the first chain they hit the top shelf at 100%.  The facing/assortment performance came in at 83%
4. 25% of the stores in the top chain did not have one of the flavors at all, and an additional  25% did not have another flavor.
5. While our service evaluated the pictures of the store conditions on this category we looked at the category OOS as well.  The market leader had 6.2% of their shelf on vacation while number two had 6.7% of their space empty when the consumer was in the store .  But more on OOS in a future newsletter. 

New product introductions will spring back from the slow pace set in the first quarter.  The same old execution miscues will continue to limit their success.

 150,000 closed stores in 2008.  Projections are for MORE closed stores in 2009. 

 For those who are struggling to survive MVI reported some of the prevailing philosphies that are being carried out at retail today.    Those include:

• Building/preserving cash profit is certainly more important than customer revenue maximization.     
• Avoid building assets rather than make assets more productive.
• Fear inventory. 

I am sure that these strategies will help IF all of the competitors follow suit.   However,  the store/chain that chooses instead to take Paco UnderHill’s  advice and “never leave a dollar of earned demand on the table” would have a significantly different strategy that might offer the consumer a real difference, that should lead to more sales, more loyalty and loyalty for the right reasons. 

There were some pretty good speakers and pundits (in addition to yours truely of course) at the NARMS Conference in Colorado Springs at the beginning of the month.  It snowed the Sunday afternoon before the Monday noon tee time and I think that kept a few attendees…in attendence.  That’s a good thing.   MVI, Paco Underhill and Jamie Tensor from the In-Store Implementation Share Group all had some very interesting observations about the state of the industry in these troubling times.   I think I liked this one best:  “In-stocks are paramount to shopper satisfaction.   You cannot leave a dollar of earned demand on the table because of retail conditions.”    earned demand…at least my definition is fairly simple.  The consumer for one reason or another has decided to spend his/her money on that item in your store.    MVI told us that from the consumer’s standpoint “where I am beats, where I am going” (in other words I want fewer shopping destinations for basics…so don’t make me go elsewhere!)   I would say this is pretty sage advice….recession or no recession.  Consumers come into CPG retail stores to meet and buy merchandise.  They do not come for clean stores, friendly service, lower prices or proximity.  If the products they want to buy are not predictably in the store, none of those other things matter.  If the products they want to buy are not predictably in any of the avialable stores then they need secondary sorting criteria which includes lower prices, proximity, cleaner stores or friendly service.  Offer consistent…predictable shopping results from a merchandising standpoint - head and shoulders above the competition - and you will convert AND hang onto a bunch of consumers. 

First quarter new CPG product introductions are off 51% vs. year ago, according to MINTEL  who track such things.  Hmmmmmm.  What is that a sign of …really?  Surely the new product pipeline has not shifted down to that degree so quickly.  There were some signs in early to mid 2008 of some change in new product pacing and focus…primarily related to downsizing and simplifying in order to hold prices which were under pressure from rising commodity and fuel costs.  But 51%?  Methinks not.   I suspect we have seen a slow down in introductions due to the cost of launch and the suspected mood of the consumer that “new” actually means cheaper or substitute or eliminate altogether.  Further to the retailer “new” means additional inventory, which even when offset by slotting fees or favorable terms still means costs or inventory assets…when asset avoidance seems to be the rule of the day.   Still we see new products being introduced with great vigor in the private label arena by players like Wal*Mart and Kroger….  Of course building a bigger target when consumer’s are aiming in that direction would seem to be a smart and prudent move.   What will the consumer think as they encounter new items and introductions from the retailer, while the CPG powerhouses sit on the sidelines?   It would seem that some reflection on the new product additiction that the CPG food-chain (Manufacturer, retailer and consumer) might be in order.  The backlog sitting in manufacturer development labs, test facilities and warehouses might benefit from some scrutiny and culling which might just yield a stronger 2009 “class” of new products.  This could coincide nicely with a bit of consumer enthusiasm as they start to shake off the bad news/crisis de jour blues and look for something enticing, not too expensive but out of the hum-drum to add a bit of fun to their diet.  It might also give retailers and manufacturers something to talk about other than price for a change.   However, I am not too sure that the new product proliferation pace and nature won’t also be a victim of these times.  “Clean stores”, increase PL representation, smaller formats, and the ever-popular SKU rationalization (which fly’s in the face of consumer taste fragmentation but….) will add pressure on all marketers to be “more serious” about their new offerings, at least for a time.  In some ways that is too bad.  We should have some dumb, fun choices. 

A mid-February report from the In-Store Implementation Network details the state of measuring Plano-gram compliance in the U.S.   According to the study, “. . . Thirty-five percent of the respondents on the survey indicated they have no process in place whatsoever to track plano-gram compliance.  Ninety-five percent of those that answered that they had some system in place indicated that they relied heavily on spot checks or store manager sign-offs.”  Visual random checks or POS data pull’s are also used to verify variety and authorized items. 

Not surprisingly, P&G found that once Plano-grams are set, they “drift” away from plan, often at a rate of 10% per week! 

And, of course, POG compliance is one of a long list of retail conditions ills we have detailed before, including Out of Stocks, promotion timing and execution, new product timing and execution, and the amount and cost of labor spent in store.    According to the survey “expense may be a key reason why compliance measurement has lagged.  Said one respondent: “The problem is that compliance degrades over time, requiring continuous costly surveys”.

So, in these times of financial challenge what do we as an industry do?  Four retail firms in the last two weeks announced cutbacks in headquarters staff, store staff or both.   I have had meetings with literally a half dozen manufacturing firms in the last ten days and all of them are doing the same.  Fewer hands planning and fewer hands executing are not going to improve execution, nor allow additional in-store conditions measurements. 

 If new planograms, new product cut-ins, displays, point of purchase material deployments are worth doing and worth spending against, they are worth measuring.  If they are not measured, they are not managed and no one is held accountable.  Further, if no one measures the efforts, the results cannot be properly understood.   Without the measurement, it is unknown whether remedial action should be applied to the plan or the implementation of the plan.  

Billions are spent in-store each year, and those billions are managed by proxy measurement, either sales themselves or by labor costs.  Neither of these proxies come close to doing an adequate job of measuring merchandising execution.    If they did, we would have vastly different results.   With emerging technologies such as ShelfSnap, measurement is no longer, expensive, limited by technology, inaccurate or subjective.  In short there is little excuse for not measuring the merchandising efforts as part of a new managment focus on The Last Big Untamed Cost and Profit Frontier in CPG Retail.

While lots of companies are paring back or hunkering down in today’s circumstances, others, are looking hard at both priorities and opportunities and are identifying areas where they can seize competitive advantage.  The Last Big, Untamed Cost and Profit Frontier, the management and mastery of the in-store merchandising environment lies within the grasp of those looking to seize the high ground. 

This Frontier represents the biggest single opportunity for additional sales that exists.  It represents the most significant opportunity for company efficiencies as well, both for retailers and for manufacturers.  Finally, it represents the most direct and impactful opportunity for both trading partners to create a competitive edge by managing the shopper experience toward a succeessful and predictable meeting of the consumer and the product at the shelf edge.

We last wrote about launching a business in ”times like these” in October.   The U.S. now has a new President and an economy that makes us wish for the good old days of October!   I haven’t read where start up companies , adding jobs to the economy are supposed to stand in line to get a piece of the “bailout” have you?

We have been very busy devoting a good deal of our resources in three areas:

1. We thoroughly vetted the promise of ShelfSnap.  We worked with an exacting client and a pretty demanding test of the whole system from less than ideal pictures to a very custom,  particular output.  All went swimmingly.   We proved we were cheaper, faster, more accurate and generated richer data than any of today’s in store audit techniques.   And they made us a better company for it.  At the same time we have talked with a number of manufacturers, retailers and broker/MSO’s and found pretty much everyone enthusiastic over the capability. (more…)

At the end of January Nielsen announced it’s decision to terminate both further development and the then current state of the P.R.I.S.M. service. 

PRISM was Nielsen’s syndicated service to measure in-store media in Mass, Supermarkets, Drug and Club-stores…with the intention of combining that set of measurements with its measurements of broadcast media…giving buyers a better method of comparing medium.   Reasons given were the exit of Wal*Mart from participation in the program (rumored to be starting their own service), lack of client enthusiasm for the service, a downturn in client enthusiasm for shopper marketing and trying to engage the shopper at the shelf with brand messaging,  and a tight economy. 

Of course with the demise of the service it becomes hard to tell if In-Store Advertising is shrinking more than advertising through other channels.   At any rate, it is almost that the lack of measurement may well temper the ability of service providers and marketers alike to tune this new tool-set to be most effective at converting consumers.

So why DID P.R.I.S.M. die…and why DID Wal*Mart pull out?

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A neighbor and retired Ad Exec, sent over an article from the Times the other day.  It documents cable operator efforts (specifically Cablevision) to target consumers. 

Cablevision will use a new targeting technology to route ads to specific households based on data about income, ethnicity gender, kids and pets.  They will do this in 500,000 homes generally in the NYC area.  Matt Seiler from Universal McCann- Interpublic Group stated in the article…”we have been talking about this since the beginning of time, now that we have it in 500,000 households it is real.”  Seth Haberman the CEO of Visible World was quoted as saying “TV was always big and dumb.  Now, we can be big and slightly smarter.”

But is it real….and can TV be smarter…and mostly,  does anyone care?

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